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A review of things you need to know before you sign off on Wednesday; regional confidence low, insurers scrimp on paying tax, Collin leaves DMO for ANZ, Aussie retail sales impress, swaps stable, NZD lower, & more

Business / news
A review of things you need to know before you sign off on Wednesday; regional confidence low, insurers scrimp on paying tax, Collin leaves DMO for ANZ, Aussie retail sales impress, swaps stable, NZD lower, & more
[updated]

Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).

MORTGAGE RATE CHANGES
Only First Credit Union raised fixed mortgage rates today. And Westpac has become the third major to admit it is limiting mortgage lending to borrowers with less than a 20% deposit. They follow ANZ and ASB. Update: SBS Bank raised its all its fixed rates today.

TERM DEPOSIT RATE CHANGES
The Cooperative Bank raised most term deposit rates, by as much as +50 bps for some terms. Update: SBS Bank has raised most TD rates too, but has ended its tasty 4% one year rate.

DOWNBEAT REGIONS
Confidence in the economy is is moving lower across the country, with all regions reporting more pessimism than optimism in the June quarter, according to the latest Westpac McDermott Miller Regional Economic Confidence survey. Aucklanders and Northlanders were the most negative, while those in Otago perked right up with the prospect of tourists returning.

TAX-SHELTERED PROFITS
The RBNZ released some insurance industry financial data today, which showed that through March 2022 this industry rolled on with annualised before tax profits of about $1 bln. But as an industry, it only pays income tax at the average rate of 15% (unlike banks which pay NZ income tax at the maximum 28% rate). Separately, loss ratio experience is little-changed.

NZDM HEAD OF FUNDING MOVING TO ANZ
New Zealand Debt Management, the Treasury unit that oversees government debt, says Matthew Collin, its Head of Funding, Investment and Markets is leaving to take up a role as Director of Balance Sheet Trading at ANZ NZ. Matthew Appleby, currently NZDM's Principal Portfolio Manager, will take over Collin's NZDM role in an acting capacity.

SBS DIRECTOR OF 16 YEARS TO RETIRE
SBS Bank says Kathryn Ball, who has been a director since April 2006, will retire following July's annual general meeting. 

SPENDING FREELY
In Australia, retail sales rose by +0.9% month-on-month in May to AU$34.2 bln, topping market forecasts and matching the April gain. This was also their fifth straight month of growth, as the Aussie economy recovered further from pandemic disruptions. The rise from a year ago exceeded +10%, handily beating inflation. Department stores had the largest month-on-month rise, up +5.1%, followed by cafes and restaurants. Given Australian consumer sentiment is low, this free-spending is a puzzle - not too dissimilar to the same track in the US. Makes you suspect "sentiment" is now hijacked as political, whereas the spending track tells the real economic story.

SWAP RATES HOLD
We don't have today's closing swap rates yet but they may have risen again in a minor way. The 90 day bank bill rate is unchanged at 2.82% today (but still a three year high). The Australian 10 year bond yield is now at 3.76% and up +4 bps from this time yesterday. The China 10 year bond rate is now at 2.85% and +1 bp higher. And the NZ Government 10 year bond rate is now at 3.97%, unchanged but now higher than the earlier RBNZ fix for this bond which was down -2 bps to 3.95%. The UST 10 year is now at 3.17% and down -1 bp from this time yesterday.

EQUITY PRICES TURN SHARPLY NEGATIVE
On Wall Street, the S&P500 ended its Tuesday session down a full -2.0% in negative trade. Tokyo has opened down -1.1% in late morning trade. Hong Kong is down -1.7% in its Wednesday session. Shanghai is down -0.6% in their opening trade. The ASX200 is down -1.1% in mid afternoon trade. The NZX50 is down -0.7% in late trade.

GOLD HOLDS
In early Asian trade, gold is down -US$1 from this time yesterday at US$1822/oz.

NZD LOWER
The Kiwi dollar is down -½c from this time yesterday at 63 USc although all of that happened last night. Against the AUD we have slipped -60 bps to 90.4 AUc. Against the euro we are down -20 bps at 59.4 euro cents. That means our TWI-5 is now down -30 bps at 70.5.

BITCOIN SLIPS SLIGHTLY
Bitcoin is now at US$20,316 and down -1.3% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.6%.

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This soil moisture chart is animated here.

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56 Comments

This downturn feels different from previous "crashes", asset prices seem to slide in a slow but long lasting way, unlike previous "crashes" that were sudden, sharp but relatively short in time.  

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9

Seems like a slow motion train wreck while you're in it, but once it's over and done with it it'll be sudden.

Refer back to the REINZ HPI numbers, Auckland being down 12% in 6 months.  Name one other asset price crash that trumps that type of fall in that time frame (excluding Crypto).  

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4

'Given Australian consumer sentiment is low, this free-spending is a puzzle'

No it's not, David. I'm betting it's prepping; they are realising what folk like you refuse to tell them.

:)

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5

Name one other asset price crash that trumps that type of fall in that time frame (excluding Crypto).  

Equities. 12% fall in 6 months is nothing.

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4

Equities dropped 30% in less than that time when covid arrived.

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5

Equities are down 20%+ in the same timeframe.

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1

Here's a story you won't read in the MSM, the best performing currency this year is the ........Russian Rouble.

That's right, despite Biden predicting it's collapse and every sanction the West can muster, The Rouble is 40% (yes 40%) stronger against Sterling than before the crisis. There were flights to Moscow from Istanbul and Russian cargo ships sailing the Bosphorus.

The West is in a terminal, irrecoverable nose dive, we should be careful who we hitch ourselves to.

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10

Packing my bags now, Volgorad in the summer sounds appealing!

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That's right, despite Biden predicting it's collapse and every sanction the West can muster, The Rouble is 40% (yes 40%) stronger against Sterling than before the crisis. There were flights to Moscow from Istanbul and Russian cargo ships sailing the Bosphorus.

Western media has been claiming that Russia has defaulted on its debt obligations. Of course, this is nonsense. The Russian state is solvent but the West won't accept payment.  

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6

The ruble is doing well because you can’t spend it. It’s value is theoretical rather than practical. 

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The ruble is doing well because you can’t spend it. It’s value is theoretical rather than practical. 

Rubbish. People use the ruble as means of exchange everyday in Russia. That is 'practical'. Furthermore, its value is being boosted by demand for Russia's commods. 

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7

Exactly JC, and this should terrify the West as the US$ status as worlds reserve currency slips. Russia may have defaulted on non-Rouble debt for technical reasons, but they have a debt to GDP ratio the envy of the West (18%). 

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7

and europe needs to buy rubles to pay for their russian oil and gas, which is exactly why the ruble has risen in value.

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3

Jesus wept does anyone look into anything.

The Ruble is strong because large amounts of suppliers and nations aren't selling to them - their imports are down 60%. So their balance of trade looks great, because they can't buy anything whilst still exporting a decent amount.

They'll be a great example of how mint it is to switch off from globalisation.

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3

Not true Hardly, it is accepted in most non-Western countries where trade continues virtually uninterupted. Turkey is neutral, I was surprised - Russians coming and going and doing trade there.

I have zero affection for them or their dictator, but equally I am no fan of the West MSM propaganda. Let's not kid ourselves, much of the world no longer needs the West.

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11

Turkey is broke and will take money from whereever they can.

Much of the world exists outside of the Western sphere of influence, but these are generally inferior places to be.

We will find out in 18-24 months time how much Russia doesn't need the West. They've just started making indigenous cars again. 1985 era technology, but still, don't believe the hype.

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2

It is mostly a nominal exchange rate. One cannot buy significant amount of USD at those rate ; Rouble ceased to be a  convertible currency.   

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Not true, it is traded in non-Western countries. It's no longer speculated by the West but it remains a medium of trade for Russia and China/India etc etc.

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6

if you have a large amount of Rouble in Moscow and wish to purchase USD at those rates you cannot .

Fictional rates , not freely available to the public . With more restrictions they could make it 5 Roubles to a USD .. 

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if you have a large amount of Rouble in Moscow and wish to purchase USD at those rates you cannot .

Fictional rates , not freely available to the public . With more restrictions they could make it 5 Roubles to a USD .. 

Most Russians do not hold USD cash accounts. Neither do most NZers. 

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Closed my USD accounts after MF Global debacle

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dp

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"Most Russians do not hold USD cash accounts. Neither do most NZers. "

Correct when applied to NZers , quite wrong when talking about Russians .

Many / most middle class people in big cities have USD or EUR accounts - Rouble has never really been perceived as a reliable longer term store of value. While it has been made illegal "officially" prices of major items are informally quoted in USD, 

 

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Have to agree. When doing business in Russia (and a lot of Eastern Europe, Central America, and South America) Having some USD in Cash goes a very long way to opening doors and resolving issues.

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Indeed:

Lavrov says BRICS starts preparatory process for expansion

US tries again to get Iran to accept hundreds of billions of dollars - opinion

G7 statement on Iran in relatively moderate tone; keeps door open for JCPOA talks; surprisingly, absolutely no reference linking Iran to terrorism or as threatening Israel's security; rather, welcomes Iran's normalisation process with Arab neighbours. Link

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Yes, Russia simply demanded payment in Roubles for any exported goods - thus creating demand for Roubles (and driving the value up). A bit of a masterclass in how a sovereign state with a trade surplus (in critical goods) can turn the tables. The Chinese will have been watching this closely of course - imagine if they did this with the Yuan!

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TK - this time - is right. I've been pointing out this about the Rouble/Putin, since it started.

Kissinger worked it out, it's not rocket science; whichever currency is aligned with energy, has the advantage. Putin - having understood the difference between the '67 and the '73 Arab embargoes - probably waited until fracking had shot its bold. Then called 'see you'.

There will be a lot of Western propaganda and bluster, but it looks like game, set, match. But - and it's a big but - there isn't enough planet left for any other hegemonic empire (or grouping) to get as big as the US got.

And the most mature of democracies have decided there will be a war - Sweden and Finland aligning with Nato.

Interesting times.

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Why PDK, I'm flattered... All agreed and that's why I raised it. It doesn't mean I agree with it, but we need to be Socratic and look through the West's bluster and propaganda. 

The decline of the West and rise of the Russia/China/India/Iran etc is well underway - just look at a map and see how much geography those 4 are. There are few Western economies with debt to GDP <100%, financialised, leveraged personal balance sheets, bloated Central Bank balance sheets. Consumed out, borrowed out, inflation and Green policies incoming. 

I think we do ok though.

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ROFL Putin is getting pantsed. 
 

The losses he is taking will take a decade to recover. The next stage for Russia is to become China’s client state.

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2

I actually think its the opposite, Ukraine will soon have no option but to negotiate.

Russia is grinding them down, the Donbas is lost!

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I suggest you compare Russians gains to a map of Ukraine. Military experts say the price Ukraine paid for that fraction is way too much. 

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Game, set, match is right - but for who?

The USA for all their faults used their debt wisely. They fed the consumers some scraps while using the good stuff for the Military. Granted it is not perfect, but it doesn't have to be. It only has to be better than everyone elses.

For years no-one could explain how the US justified meddling overseas or leaving carrier groups in the med under the pretense of protecting it's Citizens. But that's the thing. They weren't protecting the citizens then, they were protecting them now. They have the means to acquire resources, and the capability to defend them.

As you always note, it probably won't save them, but it will extend their lifestyle for a bit longer. Plus it is very clear they are looking offworld for further resources. That extra time may just be enough to ensure they get those offworld resources back here and allow them to survive where other's will perish.

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have the Russians not moved to insist that  foreign purchases of oil gas resources etc are made in roubles instead of $ or Yen  which will have had a massive booster effect -- that and the increase in the oil prices that the EU continues to pay for it! 

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Russia took a number of measures to prop up their currency including jacking up interest rates substantially and implementing capital controls. Until those measures are fully reversed it's difficult to speculate what the free floating value of the Ruble may be.

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3

Matthew Collins is Matthew Collin.

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Thank you. Quite right. Fixed now, and apologies to him.

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It would be useful if the stock market report gives some context for those of us who don't keep a spread sheet showing the % rises and falls. Perhaps where it's at for the calendar year, or some other benchmark?

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2

Daily, its the change from the prior day. On Fridays and Saturdays we give the weekly change and/or the change from the peak. Occasionally (and especially with the NZX50) we refer to the annual change.

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Google NZX50, or whatever other index your interested in, and it shows a graph of the performance, with the ability to select 1 day, 5 days, 1 month, 6 months, YTD,  1 yr and 5 yrs. You can also compare indexes.

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Bitcoin Jesus in a little bother over a margin call. Something deeper going on here. Suspect that Roger Ver has more than USD47 mio stashed away somewhere. Problem is that the exchange is now illiqiuid. Quite a comedy. 

https://www.bloomberg.com/news/articles/2022-06-28/-bitcoin-jesus-roger…

 

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"CoinFlex on Monday announced a plan to make up the shortfall triggered by the default by issuing a new token that will offer a 20% annual return."

If that doesn't convince people crypto is a ponzi, then I don't know what will.

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Ernst & Young to Pay $100 Million Fine After Auditors Cheated on Ethics Exams

The S.E.C. said the cheating involved hundreds of the firm’s workers from 2017 to 2021, resulting in the largest penalty ever imposed by the agency against an auditing firm.

https://www.nytimes.com/2022/06/28/business/ernst-young-sec-cheating.ht…

The SEC trying to look like they're doing their job. Interestingly, KPMG Aussie was nabbed for the same thing but very few people lost their jobs. 

 

 

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6

its really the perfect comment on the whole financial industry         "cheats on ethics exam"  

 

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8

Interesting that we may pick up some people due to our centrist political stance. 

https://www.nzherald.co.nz/nz/roe-v-wade-thousands-eye-up-move-to-new-z…

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2

I wonder how many other countries have run near identical stories in the past couple of days? Just dig up the same stories the MSM ran when Trump was elected, and replace the word Trump with Roe v Wade. There’s your productivity gain right there.

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Won't happen, it'll be like all the Trump won, i'm moving to XYZ noise...  99.9% noise, a flurry of web searches, but nothing much in terms of bums on planes.

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They then discover our low wages and cost of living and decide what they have might be bad, but could be worse...

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Despite all our faults, I would much rather live here than the USA…

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2

Of the many things I do each day, praying my kid comes home from school isn't one of them.

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Brilliant article by Oliver Hartwich. He may be a neoliberal, but I like him: 

https://www.nzherald.co.nz/business/dr-oliver-hartwich-the-inflation-le…

 

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Most of the articles you link end up behind paywalls.

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Much of the good stuff is. 

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Have they got back to you on your complaint? Wouldn't of thought you'd want to promote them...

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I am not that bitter and twisted! 
I still see value in subscribing to Premium because there are actually a reasonable number of good articles such as this one. And we are a country starved of good articles.

There is plenty of garbage in the Herald but the good stuff they provide is still better than any other platform in NZ in my opinion.
No they haven’t replied. I don’t really have the time or energy to take it further, it’s probably futile.

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I guess I'll have to take your word for it.

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It’s a story about the first failed experiment in printing money by John Law. The point of the article is that modern central banks are even worse. 

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