Wall Street recoils; Fed announces huge bank support; markets not reassured; ECB adds to QE; White House announcements cause alarm; China economy hurting; UST 10yr yield falls to 0.71%; oil and gold down; NZ$1 = 61.1 USc; TWI-5 = 67

Wall Street recoils; Fed announces huge bank support; markets not reassured; ECB adds to QE; White House announcements cause alarm; China economy hurting; UST 10yr yield falls to 0.71%; oil and gold down; NZ$1 = 61.1 USc; TWI-5 = 67

Here's our summary of key economic events overnight that affect New Zealand, with news uncoordinated and capricious White House policy and statements are making the virus emergency much worse.

On Wall Street, equities are in free-fall. At mid-day trading the S&P500 was down -8.5% and falling. But after lunch it pared the losses sharply and is now down 'only' -4% after the New York Fed announced new US$½ tln in short-term bank funding support. The respite was brief and they are currently down almost -7% again in mid-afternoon trade. Update: The New York Fed has raised its support to US$1½ tln. That new juice hasn't improved the equity market however which is now down almost -8% half an hour before the close. It ended down -9.5% on the day.

Overnight, European markets fell more than -11%. Yesterday, Asian markets were down between -1.5% (Shanghai) and -4.4% (Tokyo). The ASX200 dropped -7.4%, the NZX50 by -5.4%. These are all enormous moves lower and represent the end of the equity market bull run that started in 2009.

Much of the financial market gyrations of the past week don’t really make sense when lined up against one another. Something is breaking down in the workings of the financial system, even if it’s not totally clear what that is just yet.

Bond prices and stock prices were moving together, not in opposite directions as they usually do. The usual safe havens aren't acting that way. That included bonds and gold.

And there were reports from trading desks that many assets that are normally liquid were freezing up, with very low trading levels. This was not only happening for Muni bonds and corporate bonds but, more curiously, also of US Treasury bonds, normally the foundation of the global financial system.

Yesterday, the NY Fed engaged in more than US$95 bln in overnight repo activity with US Treasuries, equaling the prior day's all-time high. At the same time they purchased another US$37 bln in mortgage-backed securities and +30% more than the previous day. All up, that is another new all-time record. Liquidity support at these levels indicates extreme stress, and given the US Administration's embarrassing missteps, its likely to get worse and quickly. The growth in liquidity support seems as exponential as the rise of the virus in the US.

In an irony release, the US Fed released data that showed American household net worth rose to a record US$118 tln as at December 2019. You can be sure it has fallen hard from there now.

Across the Atlantic, the policy committee of the ECB met and left its interest rate settings unchanged. But it did announce a very major increase in its QE program.

The latest compilation of Covid-19 data is here. The global tally is now 127,900 of officially confirmed cases, up more than +5000 from this time yesterday. Most of those additions are in Italy, Spain, France, Germany and the USA all up +35% in one day. While it is true that these absolute growth numbers aren't large in proportion to the size of their populations, the sudden spurts indicates authorities there aren't or weren't in control of the spread. And mutations in the virus are growing.

The trigger to today's shocks is a White House that is flailing with incoherent policy announcements. This is the time for cooperation and coordination, hallmarks of leadership, but the Americans are acting in the reverse and the opposite of leadership. The markets sense the vacuum and vacuous 'policy'.

Expect a tide of bankruptcies and close-downs.

It's not all 'down'. In Canada, lower interest rates have sent their housing markets into a frenzy. American mortgage rates tumbled to new lows as well although there isn't the same housing market rush there.

In China, their car industry collapsed in February even if they seem to be getting on top of the virus control. The economic impacts might last longer than the virus itself.

The UST 10yr yield is down at 0.71% and an -11 bps fall from its official fix yesterday. The American rate curves are even more 'positive' today. Their 2-10 curve is positive at +32 bps. Their 1-5 curve is little-changed at +21 bps. and their 3m-10yr curve has turned up sharply, now +37 bps. The Aussie Govt 10yr is down -1 bp overnight to 0.78%. The China Govt 10yr now at 2.68% and unchanged. The NZ Govt 10 yr is up +4 bps at 1.03%.

Gold has tumbled today, another indicator that markets are reacting in weird ways. It is down to US$1,590 which is a -$58 plunge or -3.5% in one day, bitcoin-like.

US oil prices are still very low and have dropped from yesterday, down -US$1.50 to just under US$31.50/bbl and the Brent benchmark is just under US$33.50/bbl.

The Kiwi dollar will start today sharply lower at 61.1 USc and a -3% overnight devaluation. It is now at its lowest since May 2009. On the cross rates we are actually up to 97.2 AUc, a +½c rise overnight as the Aussie dollar is hurt more than us. Against the euro we relatively unchanged at 55.2 euro cents. That means our TWI-5 is now under 67 and a -100 bps fall overnight.

Bitcoin has been dumped by 'investors' today, down -22% to US$6,082. And it is now below NZ$10,000 for the first time since May 2019. The bitcoin rate is charted in the exchange rate set below.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Our exchange rate chart is here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

237 Comments

Nice call on gold & crypto. #Deflation!

The game is far from over.

Yes, Gold will go to USD 800.

Gold is holding up far better than stocks and crypto right now. When the GFC happened Gold dropped initially but then went through the roof!

Not this time. Don't get me wrong I love the physical stuff. But many traders are on the wrong side and will get burned.

We aren't even a quarter of the way into this. Once the USD starts to tumble, gold will take over. No dollar milkshake this time.
Jump into USD, the country is on lock down, not consuming very much and they continue to print dollars making them worthless. That is what we will see in a month at tops.
A big fat debt bubble. Inflation to come.
https://youtu.be/_FzuwGCXY34

Oh and we are about to see an environment of inflation, not deflation

Not agreed.

What's the line of reasoning behind that statement? Why inflation?

There's one nagging thought to support inflation - interest rates going through the roof as credit markets seize up.
Whether that would be sustained is another matter. But low-interest rates haven't worked - and arguably, have caused all this ( again, Corvid19 is the excuse, not the reason). So if CB's realise that higher interest rates might be the answer, then inflation, yes.
But that's just a thought, not an expectation.
Regardless, it's all downhill for ALL asset markets from here. Higher interest rates will destroy the price case currently made for their exaggerated levels.

So relying on central banks finally realising that the can has been well and truly kicked and it's time to try something new?

They now have no other choice.

so low interest rates caused asset inflation, now high interest rates will too?

Asset inflation? No. But retail inflation - consumption price inflation, the inflation that matters to most people, more than likely. As I say, just thoughts!

Yep, once the big lock downs start inflation will hit hard.
Even gold will go high due to supply shortages.

@Andrewj They don't understand Deflation on this blog.

Please explain it, properly (I'm serious, no sarcasm, not being argumentative, I'd really like to fully understand the logic behind it). PS of course, technically, since shares are going down, they are in deflation but that's not my understanding of deflation, I would call that a correction or crash. In my opinion, for deflation to happen, prices of assets must reduce constantly over a long period of time, like Japan?

I would add that the previous comments are referring to the confusion about whether high interest rates cause inflation or deflation.
Lower interest rates are intended to increase inflation (loose monetary policy), higher interest rates are intended to lower inflation (tight monetary policy).

The higher inflation due to high interest rates that bw mentioned is the exact opposite of what standard economics predicts.

For over a decade we've had record low interest rates and no inflation. Standard economics isn't worth the paper it's printed on.

*checks book of standard economics comebacks*

Just like Milton Friedman pointed out! Low interest rates are a sign of tight money markets (low inflation). A central bank lowering interest rates ceteris paribus increases inflation. But the first order cause of low interest rates is tight money, with central bank actions only a second order nudge.

At a fundamental level inflation and deflation are driven by a range of factors but a key one is future expectation of price. If you believe that prices in the future will be higher you'll purchase today, creating demand and inflating the price (self-fulfilling prophecy). If you believe that prices will fall you'll hold off for a better deal, reducing demand, creating over-supply and stress in the market which in turn lowers prices, which in turn leads to greater expectations of price falls...

deflation in this case is all about Oil Demand destruction (lack of viable consumers) beating Oil demand creation (the Fed/credit)…. a deflationary spiral

We cant keep commodity prices up

Andrewj - what confuses me is that we drop interest rates and increase money supply, expecting that to stimulate growth/increase price level and measure it by a CPI, which doesn't include asset values, and most of the money supply (appears) to have gone into capital values, not necessarily values of consumed items as measured by the CPI. So we keep dropping rates, looking for growth, but the growth has been occuring in things that haven't been being measured? Is this crazy?

So have low interest rates just been blowing asset bubbles? (backed by a capitalist/democratic system that has continued policies to make some people rich that own those assets such as houses?)

Correct

Also Housing was taken out of CPI in 1999 and the excuse was housing was an abode.

The real reason was clinton/rubin ended the Glass Steigel act of 1935 in 1999 meaning no seperation of banks.

Anticipating new credit creation on capital assets lead to it being removed from CPI.

Low interest rates *should* have also increased the CPI.

For example, some of my friends have spent more because of their (tax free) capital gains on housing, which should drive up the general CPI.
Also, they are paying lower interest on the house they would bought anyway, so they have more disposable income to spend (also driving up the CPI).

The standard assumption is that lower interest rates cause inflation in all goods and assets.

So the assets should then be measured in the basket of goods? CPI?

@bw credit drying up != inflation

Logic behind this argument please guwop?

Inflation is always a monetary phenomenon. (Milton Friedman I think). It is a measure of money creation or destruction. In our case credit is money, so unless it is replaced by a non credit alternative then a lack of credit will cause deflation.

Further, interest rates & the supply of money have an inverse correlation, which is what I expect you mean. Trouble for your position is that interest rates(bonds) are dropping, signalling the money expansion to follow. In a falling asset price & negative interest rate environment the surplus money swimming around will only find one safe place, gold.

Personally I expect a massive QE response and/or direct government spending, both inflationary.

Interest rates are directly related to extractive value from the economy. In a crisis they must go down.

Exactly bw. A false excuse is much better political fare than the true reason. Anyway the “correction” is likely now upon us one way the other.

- Inflationary
If goods and services become scarce due to lack of production and inability to get them to market - we will see price increases and gouging
Businesses with cut margins - increased sickness payouts and reduced turnovers - will seek to squeeze every last cent from their service -
No materials - no new builds - more pressure on accommodation - rent rises
Landlords trying to cover costs and losses in other areas - including businesses

The current interest rates have nowhere to go really maybe .5% - hardly likely to reduce any costs significantly - especially with the majority of cash in fixed rates

The last ten years have often been discussed as a financial world not reacting in the way that financial markets have for years - - we need to except that this is uncharted territory -- and we could be looking at the largest global recession since the 20's and that we could see rampant inflation currency devaluation and a total global panic - never mind pandemic -- that will decimate communities to a far higher degree than the virus

unless you are making hand sanitiser, face masks or isolation booths i am pretty much sure 99% of businesses are not thinkign of investing in stock / plant / new premisses and takign on more employees this mornign - or for a significant time yet !

Hoarders may not look so stupid in 6 weeks time!

Due to everything going on there is going to be a major supply and demand shock. This means we will have less product and services available and prices will start going up. As Central banks print money to try and paper over the problem again and there are less products available, this will also cause inflation.

Hi Adam & Guwop, (bw as well)
"Oh and we are about to see an environment of inflation, not deflation"
"Not agreed"
I have asked before, why deflation? or Inflation in AB's case but I have never heard a good answer, I'd really like to hear both your argument s for de/inflation (no sarcasm, just good solid arguments please)
Thanks all

Hi Yvil I agree with your sentiment, too many people making nonsensical comments without any rationale. I'll try to start a line of discussion;

BW makes a point about credit drying up. I think he is correct, as travel dries up, the banks will realise that a lot of goods won't be getting through to markets. This can have a two fold effect. Close to the point of manufacture the number available (stock) initially will be high, and will need to be moved so the cost will come down. Further away the goods may be in shortage, so demand may drive costs up, but this will just be a short term thing, because behind this as business's struggle, people will be wondering about the security of their jobs, so spending should dry up, leading to further drops in the price of goods.

The banks however are on a spittle now over their lending practices. they will be looking at the soundness of their loan portfolios. In the immediacy business's will see pressure to pay off any borrowing/overdraft, which some will struggle on. Following on will be the residential loan portfolio as jobs come under pressure, and people can no longer meet their commitments. Banks will be seeing an increase in risk across the board, and this will lead to an increase in interest rates, which must inevitably flow through to prices.

The Government - well they are just screwed really, because they have handed control over to the banks and there is virtually no regulation that allows them to effectively manage the crisis without making it much worse in the near term!

Just theorising but that may start some discussion.

There are a lot of mis-informed comments. An economic shock such as this should, in aggregate, reduce demand, increase unemployment and lower inflation (possibly deflation). You can still get inflation in a collapsing economy though - Argentina. The inflation story is all about the response to the crisis - so lower rates, QE, budget deficits and stimulus packages etc. Make no mistake, if the central bank wants inflation, it has the power to create it.

Inflation occurs when spending from C G I or NX outstrips the productive capacity of the economy to respond. Spending does not necessarily follow from an increase in the money supply per se. Central banks can't just create inflation whenever they want. Governments through fiscal policy direct spending and tax cuts or grants to those likely to spend can. Right now the demand shock is greater than the supply shock. We need sustained fiscal stimulus.

That's not quite correct, NX isn't a closed loop and strong GDP doesn't always lead to inflation - that's a text book view.. I referenced the fiscal side as well. Of course the central bank can create inflation, it's their raison d'etre

its their raison d'etre - but they are losing the battle

as above.. We are seeing Deflation … ie Oil Demand destruction (lack of viable consumers) beating Oil demand creation (the Fed/credit)…. a deflationary spiral
We cant keep commodity prices up despite the Central banks printing to worthlessness
The nasty feedback loop is that the workers are also the consumers ... and the buying power of their wages on mass has flatlined

Make no mistake, if the central bank wants inflation, it has the power to create it.
Let's face facts:

Can we please dispense with all notions that monetary policy works? Specifically balance sheet expansion via any scale asset purchase programs. Nowhere has that been more apparent than Japan. Go back and reread all the promised benefits from BoJ’s Big Bang QQE that were confidently written in 2013. The biggest bazooka ever conceived has fallen short in every conceivable way.

Starting with the fact QQE remains ongoing approaching its seventh birthday. Over here in the real world, if you have to keep doing it there’s no way you can claim it was effective. Well, you can claim such a thing but normally you’d be laughed out of respectable society. Link

@Yvil the return on the 30-year US Treasury bond has been in a 39-year downtrend. And the current rate of the 10-year & the 30-year bond are lower than during the 2008 GFC.

The only way I see inflation come back is when Covid-19 reduces the aging population.

My answer is above your comment

Thats what happens when you have an everything bubble

Gold is up 25.5% in $US in the past year. Also, look at a gold price graph for the GFC, it went down for a while and then took off. This is far from over.

Video clip in this article is frightening. Whatever one thinks of the current situation we have a buffoon of a clown like this in such a powerful position is beyond comprehension.
https://www.bbc.com/news/world-us-canada-51840227

He'll keep bumbling around but the financial meltdown kicked into action with last night's announcement is absolutely wrecking his chances for reelection. The idiots on Wall Street are Trump cult members and Trump's gibberish gave them confidence to push the market up further. Now Wall Street morons will turn on him, assuming the virus doesn't kill him (he's had a second contact with an infected person).

The US still has no idea how widespread the virus is due to the massive delays in testing. The lack of internal lockdowns places the US at risk to rapidly turning into Italy (their travel ban is the same as Iran and Italy).

The futures were down over 4% before the announcement, so I think it was heading south already

It's like Trump has set off a bunch of fireworks in a Phonophobia support group session.

And to top off the morning... most of the water supply in Nz is not demonstrably safe to drink.

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Quit lying, most of it is safe, it's lots of smaller supplies for smaller communities that aren't run to the same standard as the major centre supplies. The bulk of the population is on good quality supplies.

You mean isn't toxified with chlorine?

God i hate town supply water, filthy stuff. I grew up on untreated rain water just as it should be

Off a roof with lead head nails by chance?

and lots of avian excrement. Yummy.
Waikato river coming from volcanic region has levels of Arsenic higher than officially safe for human consumption.

How many people have "officially" died from arsenic poisoning directly related to the Waikato?

I remember cleaning out the rainwater tank and pulling out a few skinks and the like along with the leaves. The bird poo and skinks just add nutrients to the rainwater.

I remember one year the water tasted funny so we looked in the tank - two dead possum's. Ah the good old days.

Water quality is mostly a tick box exercise. For example Putaruru water supply mostly comes from the blue spring - the stuff that's sold as Pump bottled water. It some of the purest water in the world - but because it doesn't go through X y z filters and processes it's got a very low compliance rating.

Not off a roof. Flow from a natural reservoir during good rainfall times and supplemented from bore water when conditions are dry. Being by the coast, the bore was used to fill the tank often during January/February

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I suspect it hasn't been a high enough priority for councils, after fancy meals trips to china, stadiums etc.

$30,000 leadership courses at Millbrook etc etc

Nonsense , our water is fine

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There is just that first hint of panic this morning.
It's finally sinking in that this is the correction we had to have, and it's going to stick.
No asset market is going to be immune. Not art and fancy cars, nor quasi-currencies nor gold nor any other overinflated debt backed asset market.

The market ate $0.5tln of stimulus and barely stopped to catch it's breath..

Then upped that to $1.5T shortly afterwards, didn't even touch the sides.

Gold & Silver will serve as collateral for margin calls. USD is the place to be.

Not long now till a US lock down and the dollar goes belly up!

Good luck buying groceries with gold, silver & crypto on lockdown. It's about liquidity!

There are plenty of bitcoin and gold backed credit cards...accepted as most retailers (who take credit cards) as I understand it?

I've got both. Eggs in one basket....

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House prices in NZ will continue to rise...they are immune to all market gyrations and Convid19.

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Your ttp impression needs work :)

Lol, illiquid market being immune..? you must be new here....

lol

David, can we see some analysis of liquidity and credit markets over the coming days. I don’t understand enough about what’s happening or what it means but my very basic knowledge tells me a breakdown here is what we should really be worried about.

Very simply put the repo market is where banks and hedge funds lend excess cash to other banks and hedge funds for a small gain short term. Since Oct last year the available credit in this repo market hasnt been enough so the interest rate has been rising. The fed have pumped billions in to keen this interest rate down for banks. 641 billion since Oct. A couple of hours ago the fed pumped in 500 billion more, the stock market lifted a tiny bit then tanked again.

Not exactly - The Fed has bought (since 17/09/19), via permanent purchases, ~$305 billion securities and credited the sellers (primary dealers only) reserves accounts at the Fed.

Furthermore, the Fed has conducted temporary open market operations - RP (O/N&Term) & RRP to purchase a net amount of $262.05 billion secirities and credited the same to the primary dealer reserves accounts, as of today. Graphic evidence

Unfortunately, not all global dealers are banks and affiliated with the Federal Reserve system, hence the scramble to secure reserves in the form of sovereign debt to meet margin calls on not so pristine market trading arrangements in the eurodollar arena. Central banks are not helping by hoarding valuable, highly credit rated collateral in return for what are basically inert reserves. The result, the chaos we are witnessing now - Collateral, Friends

I've generally been supportive of Trump but he's going to have to own some of this shit storm. Poor from the start.
Enough of that though, what about NZ. Let's not wait around like prey in the spotlight. Time to shut the border, mandatory quarantine all returns. Unbelievable that we would wait any longer and risk utter chaos. Any doubt evaporates after reading first hand accounts from Italian health workers.

Did you hear Scotty from marketing telling the Aussie people that he was going to the cricket and that they should too! Unbelievable!

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Recent parliament sitting Ximon got up and thought it was his Churchill moment. "Jacinda's role is to keep people working"
JA got up and it was her Churchill moment. "No Ximon, my role is to keep people alive"

Kudos

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Oh wow, Jacinda made a quip, we best throw ourselves upon her altar.

Wake me up when deals with the corrupt racists in her cabinet or at least has a relief package to announce - should be "sometime next week"? Hopefully that's firmer than their "light rail by 2021" commitment.

Small town, is this what you are thinking of?
https://www.parliament.nz/en/pb/hansard-debates/rhr/combined/HansDeb_202...

Any mention on the how, the what?
Or are we all mind readers.

The whole of NZ on the benefit then?

Actually they were both right; Simon in the first instance and JAs in the second. What Simon doesn't realise is that since the Lange Government introduced the free market policies, which were entrenched by successive Governments, is that essentially there are nowhere near enough jobs anywhere in the country to keep Kiwis working in a crisis. Even much of what people would consider to be day to day essentials are now imported and no longer made in NZ. So until that industry is re-established, if it can be at all, JA's 'keeping people alive' will be the priority.

We are potentially going into a situation not too far unlike the great depression or immediate postwar years where we need to be able to keep a lot of people employed, but bugger all means to do so.

Great we now have a measure of how well Jacinda does now. If people doe it is Jacindas fault because she could have closed the boarders.

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5 minutes of watching Duncan Garners show this morning, I learnt that the virus is nothing to worry about, it’s just the flu. Well turn off NZ tv and watch the international stuff..... listen to the Italian doctors experiences and watch what is happening in the USA. This is coming to NZ soon. European and US stockmarkets have continued their steep declines which will have implications for many businesses here in NZ. But the masses are ignorant and the Herald continues to pump the real estate market.

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Garner is a moronic shock jock

He 's a flip flop jock. One minute he says its a pandemic, the next he's saying we are overreacting

Duncan Garner doesn't seem to know what Duncan Garner wants. On the 9th he was ranting that the government wasn't doing near enough or fast enough. Two days later he was saying everyone's gone ape when they should have remained calm and that it's only 4,000 people out of 8 billion dead so do the maths, nothing to worry about.

Having watched quite a bit of international news regarding the coronavirus, there is a clear pattern of reaction emerging. Deny, deny it’s just the flu, wash your hands, it’s here, there’s a cluster, businesses send staff home to work, schools shutdown, businesses shut down, panic on markets, SHTF.

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Duncan Garner needs to stop talking so much and listen to other people. We already have a world expert on every subject in Mike Hoskings. We don't need two of them.

people in glass houses....

My wife works in government, we've just returned from 2 months in Asia via Australia. The children and I are going into self quarantine for two weeks, but my wife has to return to work asap -because that is government policy.

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Shares, property and old porsches (cars) have been in la la land fueled by printing to avoid the reality presented during the GFC. Agree the Orange guy is not helping but blaming him for everything is wrong. Central bank policy should be front and center, but no another 1.5 trillion repo depolyed. Sigh...

Just let price discovery work itself out. Yes those leveraged to the moon, and those lending that will be ruined, but about time. The over reliance on leverage is a bane on modern times. Perhaps there will be new rules about moneylenders, as their policies have caused this.

This stock market correction is going to put the emphasis on corporate earnings. You can expect a lot of businesses to become more efficient and cut costs to get back to reality.

Some of the zombie companies will go bust as no one will be willing to fund them.

We are seeing a transformation from roll of the dice speculation to playing the odds.

Cut excessive wages of executives?

It's gonna be interesting times indeed, and I really really hope that some sort of transformation happens. But I fear that governments and central banks will do everything in their power to try to get back to 'business as usual'.

Just a few weeks back some posters on here we’re advocating that leverage was the best game in town - hmm, wonder what there thinking is now.

Leverage is the best game in town for asset classes that always go up up up!
The problem is, there is no such thing.

@Tradersam yeah like that ChCh bot The Man 2

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Just watched the news on TV3 thinking that there would be coverage regarding the stockmarket meltdown overnight but no NOTHING / no mention on the Herald either - lead article is property spruiking. Mark what’s his name is sitting with a huge smile on his face saying nothing to see here it’s just the flu! Has there been any coverage of the reports from the Italian doctors Who during triage are having to select who lives and who dies! New Zealand is shameful! Talk about heads in the sand! Unbelievable!

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Mark Richardson is about to see the impact in real terms - when it hits his Queenstown property portfolio!
If there's one place on the planet that you don't want to have your eggs - it's Queenstown.

Agree, Qtown is vulnerable

It's like those snowy ski resorts they have in Dubai, in the middle of the desert. Time for a meltdown.

I would've thought Queenstown would be pretty immune over the long term. It'll always be a bolthole and if National gets in they'll get back to trying to sell it all off to foreign buyers.

Relys on the tourist trade...maybe we are back to Dont leave home till you seen the country?

Hasn't aged a bit..thanks Tim

Yes - get him off the cricket too, his snigger, snigger attitude / lets take an opposite view on everything is just depressing.

hopefully him and his other muppet mates won't be taken on by Spark now that they have the cricket rights

Waddle and Coney please

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NZ's mainstream media is awful, and there is not much decent non mainstream media. Thank god for the very few Ray's of light like this website!
Radio NZ is OK generally but very poor on economic stuff.

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Some of the best coverage of events unfolding around the world can be found here - reasoned and non-sensationalist reporting from an excellent news organisation (makes our NZ media outlets look ridiculous by comparison) https://www.aljazeera.com/live

Gave up on TV1 and TV3 news years ago its a joke and personally I came to the conclusion its heavily censored. Aljazera is where its at. They actually have reporters in the countries like Italy right now.

Yes I really like Al Jazeera too

@Veryinterested, Island mentality which we can afford. For now.

Debt and default fear.
Credit freezing up. Extended leveraged bets going to get turned to junk. Paying for gambling and extend and pretend

We are going to have to bail out the banks now because of white house stupidity and corona.

Normally being free marketers we would never bail out banks. But this is not the banks fault they were healthy and in a prudent space before this damn virus and Trump.

So for that reason we all need to pull together and give thanks to the banks by giving them what they need.

The 400 billion of fed repo funds before we even new what corona was? Just a coincedence.

The problem in 2008 was the bailout. How will another one fix everything. It's a free market economy right, then let price dis overy happen vs the artificial crap we have had to put up with. Yes a few institutions will burn down.

.."let price discovery happen …"

true
The problem being you would find without stimulus the average consumer could afford to pay $1 for a coffee while the cost of production is $2
We are collectively bankrupt - hence the need for deficits and more credit
The underlying true currency is ENERGY flows and we have been gaming it
But the ponzi cant hold indefinitely

The underlying problem is the debt driving the cost of everything. Half debt and rents, mortgages and wages could easily be moderated. The only winners is the banks and they have suckered the whole world into this situation.

@Ponzi , dont believe the anti-Trump media ..................Trump is not to blame for this .

Corona came about because people were eating things that us humans have known for centuries should not be eaten

The scriptures and teachings of almost all religions , be it the Koran , the Talmud and the Bible, none of which are new releases , have been very specific as to what should not be eaten .............and for very good reason

It's not Trump's fault, no one has said it is. His reaction has been lambasted as lacking. Haven't you done the same with Jacinda. Are you party to a media conspiracy?

Religions have also precluded eating pork and shellfish. As well as wearing briefs instead of boxers if one is a priest.

People often mention the old testament banning shellfish, but it's for good reason. It's the same reason the royals are banned from eating shell fish while on official engagements.

In historic times using a rabbi to ban it would have been the easiest way to get people to stop eating a potentially lethal food - as I'm sure algal outbreaks still occured back then especially during hot med summers.

That's just my take on it anyway.

Boatman

I was being bit sarcastic

I am a Trump guy.

The president responded to the pandemic with denial and blaming foreigners. His incompetence and selfishness will be lethal
https://www.theguardian.com/world/2020/mar/12/donald-trump-coronavirus-c...

Trumps stupidity may well lead to him catching the virus. Forbs article: Trump Will Not Get Tested After Meeting Brazilian Official With Coronavirus.
"President Donald Trump met and dined with an individual who has now tested positive for the coronavirus—but the White House said the president will not get tested for the disease". https://www.forbes.com/sites/rachelsandler/2020/03/12/trump-will-not-get...

There would indeed be some irony in this.

No need to look that far away Jacinda still shaking hands and hugging. You would think she has a duty to stay healthy to run the country but she knows best.

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Trump is a symptom, not a cause, Mr Chaston. Alle same virus.

These were, are and will be triggers. The physical problem is undeniable, here, and as Dr Krumdieck says, it's a 'wicked problem'.
https://www.bookdepository.com/Transition-Engineering-Susan-Krumdieck/97...

Finance cannot fix it, economists fly too blind to comment. As it seems, do the commenting media.

You could start by tracking realities, instead of GDP. Global stocks of resources, global sink-capacities remaining, global per-head energy available and remaining. What was it that would be telling again?

Oh, that's right. The truth.

Can't let The Rich, get poorer....

Norway just went into total shut down, perhaps stupidity is contagious

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No.................Norway is right to do this , at this time national self- interest trumps all else ................ we should be doing the same

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No, Norway has a significant outbreak already. 212 new cases in day yesterday (almost doubling from the 289 they had the day before). They are right to react hard, and they haven't just closed the borders, they closed everything except supermarkets and pharmacies. Basically 2 week lockdown while they sort out the cases they already have and prevent spread. We have no new cases for a week. We need to expand our travel bans and increase checking at the airport, but thats about it for now.

@pragmatist , as your nom-de plume suggests , you have a pragmatic approach to this ..................I beg to differ with you however .

While we only have 5 cases its a good idea to ensure we don't have new arrivals , and a travel ban should be the next step , and sooner rather than later

The give away was the word react.

With exponential growth, you got to be pro active.
Some people will have seen crop pest examples, virus lesser fungi.

It you are thinking I will wait to see what happens, you're kingswood. Crop gone.

Compounding it is asymptomatic, meaning your eyes only half work.

Comparison to flu is this. The Italian health service knows flu, it doesn't collapse under flu.

We have the Singapore example to follow. NPIs, got to smash the R0.

Heres another. Yesterday a political commentator said he liked the PMs mgt as it kept in line with the kiwi laid back approach.
Um, the virus doesn't distinguish on nice character, or identity trait

Meanwhile, workwise, I sure everyone is working to the business continuance plans that came out of the earthquake.

Prag has stuff to sell so he is trying to stop the fear.

Here's the question: Are we testing assuming no community spread (i.e. only contact with confirmed cases) or are we testing people who have the symptoms regardless? Because if you've decided to not look for community spread, you won't find it.

That testing, community testing has been called for since first week of February.
The Government, the PM and PM depart decided not to community test.

I'm posting a lot today, undoubtedly I'll have posters regret later. Unlike some posters on here I'm never completely sure of my opinion

BUT
A friend is an English teacher (TESOL) in Auckland, and he has said students have still been coming in from Korea, and Japan. Also his daughter has a child in her Kindy just return from China. Now both parents have developed flu symptoms inline with Corona symptoms. They rang help line " don't go to the medical center or ED" " ok what should we do then?" " Just wait and see how it develops".

Jacinda made a quip today along the lines of 'it's my job to keep people alive' yep with the stay home attitude and we won't test that is unlikely to happen.

:) that in itself is very suspicious. You have 5 and then it stops. At least 2 of these people have moved about quite a bit and been in contact with quite a few people before going into quarantine. I really hope that things are fine. But if they are, that will be due to sheer luck as the government (to be fair like most other places) seems absolutely incompetent as what to do. Have they tracked everyone who has been in contact with these people and put them under quarantine? If no, then it is down to absolute and sheer luck that there are no more cases (or in a scary version, there are asymptomatic careers out and about and people who are yet to show serious problems to prompt them seeking medical advice, then be tested and identified).

Since the break out, thousands of people has come in to NZ with no screening. We are absolutely lucky if the virus has not get a hold here (yet at least). Like winning a lottery ticket.

Without community testing who knows?

During the Spanish Flu the localities that did better were those that went the whole hog. Closed everything early. Schools, sports, public transport - you name it. Takes cojones I know as the pressure from business is immense. See the pressure NZ is on atm from businesses to reopen full links with China. No, no, no.

I'm surprised Interest.co hasn't mentioned Andrew Hooker has been killed in a motorcycle accident.

Yes very sad. He was a good bloke.

Taxinda , and her coalition of losers and coterie of tax-us -to-death- devils , should get off their backsides, show some leadership, and impose stringent travel restrictions for the next 30......... days from everywhere .

Air New Zealand and the Auckland Airport shares can be suspended , along with Sky City ( if they choose ) , but its time to put our self interests and peoples well-being first .

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Soyman to the rescue? ...I am glad we have some sensible people at the helm at the moment. Just look at USA when you have a fool making it up as he goes.

Focus frazz.
Do you think travel restrictions may delay virus spread?

Why just Europe Henry and not UK? Your a fool for sticking up for this narcisstic con man. It's a time for world leadership to work as one..not blame the"foreign virus".

All those big heads working together?? It will never happen they can't get past their own ego's. Jacinda in the fray wanting to shake hands and give them a hug and they will be yeah righ bugga off.

Boatman, I'm confused by your rhetoric. It would seem you are pro capitalism, 'right wing' as we often refer to it and there is nothing wrong with taking that ideology. However, the view from the opposition and other business leaders is to prioritize the protection of industries with many calling for, as an example a relaxation of travel ban from China in an effort to kickstart tourism and trade. By doing this we increase risk of more diease transmission. That begs the question, can we have our cake and eat it too?

I think Boatman is possibly a stale, pale, male (much higher risk of dying from corona) so is now in self preservation mode. I have no problem with that. We're seeing rapid movement into the lower levels of Maslow's heirachy.

Yes, his possible race and age are the important thing here.

Who knows who/what Boatman self identifies as at moment.
Question. Does a travel ban have merit?

Boatman is a white retired ex banker living in West Auckland...and not taking visitors at the moment.

A lot of right wingers are vehemently against government interventions unless it's to save their asses. Bailing out people who would otherwise be bankrupt (aka benefits) are from the devil, but bailing out failing businesses (farms and banks for example) is a *MUST*. A prime example of double standards.

yes double standards are inherent in the right.
eg. David Seymour of ACT hates planning rules but is happy for restrictive rules to be preserved in his Epsom electorate

This will win Trump his second term. The American voting public are just as stupid and xenophobic as he is and will absolutely love his show of force. Probably no more posts from me for the day I'll be too busy snapping up panic induced bargains on the equities markets...

Good luck ( seriously!). No one knows where The Bottom and those 'bargains' is. But if another 20% down from here happens, I won't be surprised. At 10% per day - that's Wednesday to be a buyer!

@4th estate ............... I am no expert , but I would not be buying anything today , last of all shares , bonds or financial instruments .......or even property for that matter .

The bottom in not yet visible from these silly l highs that QE took asset prices to

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You're brave to be trying to catch a falling knife... report back in a month how many fingers it cost you.

I think he was taking the piss actually PM

Part pisstake, partly true, happy shopping!

Well the other choice is the Dem's who despite whining and repeatedly trying to remove Trump and failing, look like a pack of fools that can't actually impliment despite their constant dribble that Trump is doing this that and the other thing. They have shot themselves in the foot and showen everyone that they can not deliver. It must be a 'left' thing!

The trade war has already put a lot pressure on the world economy before covid-19. The bug is just a catalyst. Wondering where this development will lead us to...

how long until the RBNZ delays the extra capital requirements they just leveled on banks because they need to keep the tap on?

The RBNZ will likely do nothing rash at all , there is no reason for them to do anything until the dust settles

The new bank capital requirements are due to be phased in from July...over seven years. 

Too little too late, if these were already in place the banks would be in a much stronger position right now.

@morphyoss it is also too late for bank deposit protection

Trump in part got elected due to the crony capitalism around the globe. He is no better. But Trump's failings might usher in Biden and a more crony socialism for corporates and capitalism for us. How can anyone blame Trump entirely when this system was rigged long before his administration. He will get blamed and the wall street dems will transfer money power totally away from the people . Welcome to serfdom people.

THE IDES OF MARCH FALLS ON A SUNDAY THIS YEAR

Beware of a Black Monday or something else sinister .

Maybe Europe will see Trump as Caesar ...........

The British playwright William Shakespeare takes this incident from Roman history and freezes it forever in literature. In Act 1, Scene 2 of "Julius Caesar,” Shakespeare writes about a meeting between the dictator and a “soothsayer,” someone who can predict the future.

“Beware the Ides of March,” says the soothsayer.

Caesar asks, “What man is that?”

And Brutus, Caesar’s loyal friend answers, “A soothsayer says to (bids you) beware the Ides of March.

Caesar does not listen to the warning. He should have. In Act III, Scene I, Shakespeare’s famous line seems to show that Caesar is asking for trouble.

Caesar says to the Soothsayer, “The Ides of March are come.”

The Soothsayer answers, “Aye, Caesar, but not gone.”

Caesar’s friend Brutus will be among the attackers who kill him on the Ides of March.

When he sees that Brutus has turned against him, he says, “Eh tu, Brutus?” This means “You too, Brutus?”

This expression is widely used in Western culture when someone is betrayed by a friend.

Quoted on.. Friday 13th ! And Full Moon has just passed over the markets. It's all coming together, isn't it.

Another black friday on the markets, and to think we had black monday this week too.

Fridays of late have shown the biggest drops.
Let them fall, so we start again.

Y'all here are so focussed on credit-driven markets like housing and shares. The global debt markets are a much better indicator of what's to come.

@guwop Could you expand on your thoughts for us , the Bond markets are many-fold bigger than the equity markets ............I also have a bad feeling about the debt markets

Could you elaborate a bit more?

Sure, the majority of the world's debt and 88% of the trade -and capital transactions is nominated in USD. 62% of the Central Bank reserves are nominated in USD. The USD is the backbone of the world's creditmarket and the return on the 30-year US Treasury bond is the best indicator for economic expansion and contraction. The return on the UST 30-year has been in a 39-year downtrend and will eventually go negative. This makes indebted nations starve for (euro)dollars. There is an acute shortage of USD. QE was an asset swap and it has NOT resulted in the availability of more USD for those in debt. All this is deflationary for the US Dollar and thus, the world.

Interest rates are the price of money. If interest rates are dropping it says the supply of money is expanding and in plentiful supply. https://www.investopedia.com/ask/answers/040715/how-does-money-supply-af...

We are swimming in money, it has just found its way into asset price inflation. ie: Inflation not deflation.

The crisis in the eurodollar it is from the lack of consumer demand, mainly in the West. Too much going to debt servicing on those overpriced assets.

No. When the interest rates on the defacto debt market barometer, the 30-year UST, are dropping this means that the big money is fleeing into the world's safe haven, the USD.

And they keep printing it till it's a $1000 for a loaf of bread?

Dow closes 10% down after the $0.5tln injection.

Excuse me, I'll just be popping to the cash machine.

Yep, me too.

Cash will be phased out because of Virus risk. Just saying.

Yep, I can see that happening.

Squirts of hand sanitiser gel will be the currency soon

"equities in freefall'.................. look this was going to happen eventually , and Covid 19 is simply the spark that set it off .

For years I have been concerned with the asset -price bubble and associated debt balloon that has been caused by money printing , QE , stimulus packages, central bank " cutting " , ridiculously cheap money ...........or whatever you want to call it .

It was against all economic orthodoxy , and the consequences were never thought through , nor were they even understood .

I held the view , and still do , that the day of reckoning is coming for that stupid policy which cannot be unwound .

That time is now

Forget economic orthodoxy. Try fact.

https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdf...

Those MTOE, those barrels, have been burnt. They're gone. And they were the best of the rest; we're down to fracking. Economics doesn't count that; the stupidest manifestation of the avoidance was Julian Simon, who said something like 'copper is in out heads'. If you count resources properly, the last ten years were all draw-down, done at increasing rates. It was also about pollution-avoidance, so the count was doubly-wrong.

You're right, untested concept which creates support but if not removed - creates dependency

No fed chairs had the balls to do what it should, which was remove Stimulus when the economy was stable enough to support itself
Now the fed has shot nearly all it bullets, exploded it's balance sheet and has been bottle feeding the banks for 11 years and the debt + buybacks has exploded pushing the market to dizzying heights based on shaky fundamentals

It's not going to be pretty but good old taxpayers will foot the bill again, and it will rinse and repeat

You're right, untested concept which creates support but if not removed - creates dependency

No fed chairs had the balls to do what it should, which was remove Stimulus when the economy was stable enough to support itself
Now the fed has shot nearly all it bullets, exploded it's balance sheet and has been bottle feeding the banks for 11 years and the debt + buybacks has exploded pushing the market to dizzying heights based on shaky fundamentals

It's not going to be pretty but good old taxpayers will foot the bill again, and it will rinse and repeat

Should I change my Kiwisaver scheme to cash or is it a bit too late to bother?

Question is more whether you will need the funds within the next 1-2 years.

Make that 6 - 8 years.

Its so easy to change online so if you're concerned just do it now. You can always change back

Sky news
+3 SA
+6 VIC

See the PPE kitted medics
https://youtu.be/yQ0-Sr3v1l0
Saying a vacc 18mths away.

How long till a flood of property listings hit the market and drive prices down???

If the virus isn't contained within NZ then just look for the deceased estates.

And rest homes being turned into emergency houseing.

@Becnz Property is too illiquid to matter.

Hopefully before summer. Wouldn't mind a discount bach

Gold is selling off to cover margin calls. Same thing happened in 2008. It will come back strongly in due course.

There is still a LOT of debt to be paid off.

That's what we are for

The people will pay the debt...

Gold is being used to plug the gap - did this happen in '29, anyone? There was a stampede to cover backsides then.

But when it gets to that stage, all bets are off. Where do you fly to?

And the debt is unrepayable - probably has been for a decade, ex a re-valuation.

If this really is the big kahuna then gold will go into backwardation. Had this conversation with my Dad last night. What happens when next time you rollover your $100k (fictional) term deposit they offer you -0.5%? Stocks are falling, bonds are zero or negative. He is retired so won't be buying a rental. Housing probably going to be in freefall anyway. At that point you might want gold so try to buy it. Who is going to give you gold for your $100k at that point? What the hell are they going to do with the the $100k that isn't different to the problem you are finding with it?

If bond rates are at zero or negative then existing bonds become more valuable. You don't want inflation insurance (gold) in this scenario.

The new issue of bonds at negative interest rates will soon dwarf the existing market. Well for a time anyway. Sooner or later defaults on debt kick in and true deflation with it. Those bonds are only of use to you if you bought them at a higher interest rate. The driver is yield, the constant search by any pension or hedge fund for it. When yields are negative you have to sell your assets to get income. You live off capital not income, that is where the world is headed. Do you sell your gold? or your negative yielding assets first? If you want to buy a safe asset do you buy a negative yeilding one? Or something that holds its value first?

Ultimately PDK is right, this is an end of growth scenario. Interest rates are falling because there isn't enough growth to pay the interest rates. Hasn't been for 30+ years, the trend in interest rates you so rightly observe. We are going negative on interest rates for the same reason, inability to pay higher ones with the resources and growth left available. In a negative interest rate scenario the gloves are off, it is really guesswork as to what happens. But it is certain that if you are not getting a return on your investment then you have to live off the capital.

I have a negative return of 20%+over the last week with a s-load of Milford managed funds, makes -0.5% look good

It is no longer about growth, but about preservation of capital. Actually has been for quite a while to be honest.

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Time to lock us down internally and externally. We're one of the only countries left that has the luxury of implementing a society-wide stay-at-home initiative (like others have had to take) before such time as the emergency is upon us. Let's see if we can prevent the emergency. At the moment we are just carrying on with BAU watching as it gets cancelled everywhere else.

Nail on the head.

I think a lockdown externally would be best, but internally is a lil premature at the moment. Not saying we should not plan for it as soon as we have a dozen confirmed cases...

The time to do it is before that happens as we all know it is going to happen. Create more of an issue to clean up and risk it spreading through the community??? I dont think so.
Anyway not really worth talking about as Jacinda hasn't got the kahuna's to make that call.

NZD/AUD headed towards 0.98 fast.
Adrian must be about to come out onto the RBNZ front lawn....Unless he feels 1.000+ is inevitable?

TWI is diving, we won't need it, passing parity with the AUD has been inevitable for some time.

Good point. It's the vibe, though!

remarkably this wall st selloff is just taking the dow back to the March 17 highs

Just shows how ridiculously inflated they have become

Agreed. If you want to see a real test of the mood of the US, the Pebble Beach auctions are happening next weekend.

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Corona is going to break out in NZ within a month. We are not doing enough tests and we are not taking enough measures. We are criticizing US for their inaction but honestly NZ is not doing anything either. It's gonna bite us in the ass in time, and it's going to bite us hard.

Welcome Kevin. Agreed mate, I would rather see us be proactive rather than reactive. Why not tone down everything now when we have no cases instead of later whilst dealing with an outbreak. Would place less pressures on our health system and relatively less of an impact economically..

Stay away from gyms as the grips on the equipment are virus and bacteria havens. Finally a good excuse!

Market’s burning, Market’s burning.
Protect the Ponzi, Protect the ponzi.
Print n Repo, Print n Repo.
Juice the market, Juice the market.

The next line is probably something about bending over and kissing your over leveraged arse goodby.

please explain the headline -- Was Jacinda stupid to stop Chinese students coming back ? Is Austria stupid for closing its Italian Border - why is protecting your country from further outbreaks started by individuals coming from outbreak countries Stupid -

Personally i think we should have closed off all flights and travelers from Italy, and South Korea a long time ago - and not be relying on them to self isolate -- after all if you come her for a three week holiday you are hardly going to sit in one hotel room for the first two weeks!

In all honesty - this Market fall / Crash - is just a very very long overdue correction- after it has been artificially stimulated since the GFC in 2008 with cheap printed money - this is the can finally bouncing back of the wall at the end of the road!

Yea it is just another failed attempt to bash Trump. Interest should really stop that behavior.

All governments outside of East asia deserve a lot of stick for their lax handling of this epidemic during this growth phase, as every week that they sit on their hands just makes the eventual death toll many times higher. That includes Trump who has been slow - though not sure how much power he really has - other than border control as US is a Federal system means quarantining is a state level decision. During an epidemic every action is denounced as being excessive at the time, and wholly inadequate in retrospect. NZ and Australia are in no position to be criticizing anyone.

Yes his daily idiotic behaviour makes him too easy a target...we should just watch as USA falls to its knees.

Wrong Headline... Overnight news do not equal causality

Has anybody noticed this decline is the steepest decline on record - EVER... worse than anything since the 1800's when records began, yahoo is stating last night was the worst 1 day decline since 1987

Also, the total points declined in the US market are basically on par with the points declined during the entire GFC!! in a mere 16 days of trading

There is something broken in the system and it has not been made public yet and everybody is scrambling for the exits

I suspect it has something to do with the repo market as the fed is injecting 1.5 TRILLION into it every week You don't do that unless there is a massive dislocation

Bernankes experiment failed... free money does not fix a problem, it just creates new ones

There was a query by someone about Ximons attempted Churchillan moment and where it was.
Here it is on TVNZ Wed night news (around the 9:05 moment)

https://www.tvnz.co.nz/shows/one-news-at-6pm/episodes/s2020-e71

The guy is not a student of history - close it down now.

(and if the Gnats want to remain relevant change him out with - well just about anyone would be an improvement)

I went past the petrol station this morning. Regular 91 cost $2.04 per litre. At to days oil price and exchange rate the total margin from barrel to pump is about 70 cents per litre which is well beyond extortionate. It is at least 40 cents per litre fro where it should be.
Last year Z Energy made $1.4 billion profit which is totally obscene. At the prices that they are charging now, that profit will be well and truly eclipsed.
Once again our useless government is just silently sitting on it's hands. They were full of empty rhetoric a few months ago when they released yet another toothless report. Now when the market abuse is so blatant, where are they. mute; once again: even worse, paralysed, still.

Yes CM - I mentioned yesterday with a link that Victoria was averaging A$1.20 which is - well near as dammit $1.20 NZ. Of that 46 C is govt tax and the rest of 74 is cost plus profit.
NZ fuel at $2.04 (what - using GASPY apart from Gull up our way its all $2.12 (North AKL)) has taxes just under a dollar - lets call it a dollar. The rest of $1.04 is cost plus profit. It seems that after removing govt taxes we are paying 40% more for our fuel than the Vics. It took me about 5 mins to get this info, both the Nats (Collins) and the COL have taken two terms to get no answer from the fuel companies with no result

Both countries use Shane Jones "psuedo students" as employees so the only diff is that perhaps Oz gets benefits from volumes that we don't

A1.2/litre less 46 cents tax = A$0.74/litre. Converted to NZ$ NZ$0.77/Litre. plus 74 cents taxes = $1.51/litre. Plus GST = NZ$1.74/litre. OK, 30 Cents per litre per litre lower than here. I suspect that at A$1.2 per litre the Australians are paying too much and their price will come down further, closer to $1.1 per litre.
Northland. You should be paying less than the rest of NZ. The refinery is on your doorstep and fuel does not require the coastal shipping that we require in Tauranga.

In terms of not stealing from future generations, you should be paying a near-infinite amount, and fully mitigating your burning of it.

BTC at $5000 USD now. Any bitcoin fanatics willing to comment on that?

Yes, all trading in crypto will be halted and the price goes to Zero.

The question is what will the banks do with the money given to them.

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