Breakfast briefing: Economic data can't see what traders see

Trader sentiment in alternate reality to economic data; Fed balance sheet jumps; EU with grand plan; China takes many knocks; APRA warns banks; UST 10yr yield at 0.69%; oil firm and gold soft; NZ$1 = 62 USc; TWI-5 = 67.7

28th May 20, 7:24am by David Chaston

Here's our summary of key economic events overnight that affect New Zealand, with news equity markets may be up, but the economic news is still grim.

The May edition of the Fed's Beige Book surveys is depressing reading. It summarises all the regional Fed districts and can't find many positives at all. They say there is hope overall activity will pick-up as businesses reopen, but their outlook remains highly uncertain and most surveyed were pessimistic about the potential pace of recovery. Employment and wages were all reported negatively.

None of this will be a surprise - we have been tracking the individual Fed regional surveys for some time and this is what they have shown. Today the Richmond Fed reported on the powerhouse Mid-Atlantic states and it is reporting sharp declines still, even if they aren't as low as in April.

There is more evidence from the weekly Johnson Redbook survey of retail activity. Last week there was yet another decline - both year-on-year, and month-on-month even if the scale of theses declines are lessening.

More very large job layoffs were announced overnight, worldwide.

If you are looking for positives, perhaps a rise in American mortgage applications are what you need.

Also rising is the scale of the Fed's balance sheet. The overall level indicates just how much monetary policy support their QE machine is pumping in to keep their economy functioning. And it is massive, massive even compared with what Congress has done. It is a balance sheet that has just moved on up over US$7 tln now, up +$103 bln in the latest week reported, and up +US$2.7 tln since mid March. (It is actually up US$2.725 tln, so the rounding here - US$25 bln or NZ$40 bln - is actually almost the same as the RBNZ's own total balance sheet size.) The US Fed is on a different planet.

In the EU, they have a NZ$1.4 tln recovery plan and a NZ$2 tln budget over the next seven years, which, if approved, would deepen its economic union in a way that even the eurozone debt crisis failed to achieve.

It has not been a great 24 hours for China in the diplomatic front. The US says it is moving to remove Hong Kong's special status with them, and the Huawei extradition case in Canada has gone against them. In Hong Kong, the big money is siding with China, the Hong Kong people however are taking to the streets.

It hasn't been that great for them on the data front either, with industrial profits in April still down sharply, and their 'recovery' seeming a long way off. Default risk is rising for many large companies. From a New Zealand point of view, perhaps a silver lining is that the Chinese food sector isn't being hit as hard as most others.

China may be facing a recession in Q2-2020.

In Australia, their banking regulator is warning they are far from being out of the woods yet. They specifically warned banks not to rush to rebuild capital buffers, and to disclose to shareholders 'reliable and accurate' information of the mounting threats.

The latest compilation of Covid-19 data is here. The global tally is now 5,640,000 and up +91,000 from this time yesterday, which is rising at a faster pace than recently.

Now, just on 30% of all cases globally are in the US, which is up +17,000 since this time yesterday to 1,689,100. This is a slowing rate of increase but still more than any other country. US deaths are now exceed 99,000. Global deaths now exceed 353,000.

In Australia, there are now 7139 cases (+6), 103 deaths (+1) and a recovery rate of just under 92%. 30 people are in hospital there (unchanged) with 6 in ICU (+1). There are now 470 active cases in Australia (-8).

There were zero cases again yesterday in New Zealand, leaving the total unchanged at 1504 cases identified as either confirmed (1154) or probable (350). There is now no-one in hospital with the disease. Our recovery rate is now just over 97%, with only 21 people known to be still fighting the infection here, all isolated.

The UST 10yr yield is down -2 bps today at 0.67%. Their 2-10 curve is flatter at +47 bps. Their 1-5 curve is at +17 bps, and their 3m-10yr curve is also flatter +57 bps. The Aussie Govt 10yr yield is down -2 bps at 0.88%. The China Govt 10yr is unchanged at 2.71%. And the NZ Govt 10 yr yield is firmer, up +6 bps at 0.74%.

The gold price is basically unchanged today at US$1,713/oz.

Oil prices are softer today, by about -US$1/bbl. The US crude price is now just under US$33/bbl. The international oil price is just under US$35/bbl.

The Kiwi dollar has softened slightly overnight. We are now just over 61.7 USc. On the cross rates we are marginally higher at 93.5 AUc. Against the euro we are lower at 56.2 euro cents. That means our TWI-5 has slipped to 67.5.

Bitcoin is back up today, up +4.5% from this time yesterday to US$9,197. 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 ».

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134 Comments

by Henry_Tull | 28th May 20, 7:37am 1590608260

China news

https://www.bbc.com/news/amp/world-us-canada-52793343

A Canadian court has ruled that the case of senior Huawei executive Meng Wanzhou, who is fighting extradition to the United States, can go forward.

A judge found that the case meets the threshold of double criminality - meaning the charges would be crimes in both the US and Canada.

Discusses the sea change in china since 2017.
https://youtu.be/xW8rNpe_c3M

by CJ099 | 28th May 20, 8:54am 1590612849

Ironically the US is becoming more like the China every day. Apparently the Trump Toddler and Chief wants to shutdown Social Media companies due to Twitter fact-checking him. Such a big baby! Next he'll be sectioning off the internet and sending out dodgy Youtube propaganda links. :)

BBC article quote: "The threat came after Twitter added fact-check links to his tweets for the first time. The battle between the president and the social-media companies has been brewing for a time." https://www.bbc.com/news/technology-52821304

by Logicthinker | 28th May 20, 9:13am 1590614003

As retribution, China has held two canadians hostage since December 2018. What sort of judicial system do they have in China. Obviously, nothing. No wonder the citizens of Hong Kong are fearful of their outcome. There is going to be a lot of financial movement away from China when this pandemic is over.

by Henry_Tull | 28th May 20, 9:41am 1590615682

Check out the you tube it has Elizabeth Economy, she thinks CCP will rather have Hong Kong as one, and happy to do so forsaking the HK finance centre/hub activities.

by Chris-M | 28th May 20, 9:59am 1590616792

I fear for Taiwan. China is giving up all pretence of playing nice. Imagine the power China will hold over the west if they marched into Taiwan because some of the worlds leading technology resides there. I note that the worlds leading edge chip maker, TSMC, are building a microchip factory in Arizona to give more security of supply to the west. Kind of like jumping out of the frying pan into the fire given the bullying and worryingly unstable behaviour coming out of the USA. Anything could happen there. I would be choosing somewhere more neutral and secure. Like NZ? Why are we not chasing opportunities like this. Even Australia. It has a huge surplus of land. It could carve off for example the York Peninsular and create a semi autonomous state into which the Taiwan could transfer it's people and industry and leave behind an empty Island for the Chinese.

by Roger Witherspoon | 28th May 20, 10:08am 1590617308

Apparently there was a proposal to move Hong Kong to Queensland back in the nineties, but the Aussie Labour government thought there weren't any votes in it (for them, that is).

by youngdumbandbroke | 28th May 20, 11:39am 1590622768

NZ? We couldn't defend ourselves against a strong nor'wester, let alone China

by Chris-M | 28th May 20, 12:12pm 1590624735

I think that we could if chose to
A very strong citizen army where every able bodied person was trained in national defence like Switzerland or Israel. Do you think that any country would be successful occupying another country where all the citizens were armed and trained at defeating you. Even the USA has never been able to do this in countries not even half as well organised and defended.
If we can put a satellite in to orbit around the moon, as we will soon be doing, then it should not be hard for us to develop a missile defence system adequate to destroy any invading ships.
When I think more about it. This is exactly what Taiwan should be doing.

by Lapun | 28th May 20, 12:20pm 1590625204

See what is happening in Xinjiang (East Turkistan). China does not fight fair. Main difference with America is they exert some control over existing govt and impose a military base or two - that is all. China brings in Han chinese to outnumber existing population. If willing to go to Tibet and Xinjiang just think of how many choose NZ.
Having said all that I agree - we need a large territorial army similar to Switzerland. NZ has a small population, it could be invaded by China (or even the Manila police force). Hitler could have invaded Switzerland just as Stalin invaded Finland but the world's public opinion mattered then and matters now.

by youngdumbandbroke | 28th May 20, 1:16pm 1590628591

"A very strong citizen army where every able bodied person was trained in national defence like Switzerland or Israel."

Sounds great, but NZ is nothing like Switzerland or Israel ?

by Andrewj | 28th May 20, 2:53pm 1590634432

we would have to give all the guns back

by TuaWai Smith | 30th May 20, 9:57am 1590789447

Yes, it would require an about face in public opinion in NZ it seems? That is one of the reasons the USA has retained the basic right to bear arms. It was stated by Japanese officials after WWII that one of the reasons there was not serious consideration of the invasion of mainland USA was the proliferation of privately held arms in the US would have meant they were fighting the whole armed country not just the official armed forces. Take from it what you will, it is what some officials from a maniacal, fanatical regime said.....so it gives one pause.

by FCM | 28th May 20, 7:42am 1590608524

Its a sad day when we start to compile a list of job losses on a daily basis 93k and rising...

by Basil brush | 28th May 20, 8:06am 1590609989

Where are you seeing this data reported, FCM?

by FCM | 28th May 20, 8:12am 1590610353

On Stuff

by Logicthinker | 28th May 20, 9:15am 1590614159

Its frightening from a survival perspective when people lose their jobs and livelihoods. What do they do as a consequence, commit crime.

by Ralph | 28th May 20, 9:54am 1590616465

Poverty has no good fruit.

Worse health outcomes across the board, more domestic violence, increased malnutrition, more corruption, increased crime rates.

by Independent_Observer | 28th May 20, 8:48am 1590612524

https://www.stuff.co.nz/business/300022327/12000-headlinegrabbing-redun…

by Henry_Tull | 28th May 20, 8:24am 1590611048

Its beyond sad.

Flightless Kiwi economy to land with a thud
"No national leader has been as feted as Jacinda Ardern. But while she might have popular support, she is pushing the NZ economy off a cliff."

https://www.theaustralian.com.au/commentary/coronavirus-flightless-kiwi…

Take a look at the comments too, in a how others see us, awareness way.
They talk aloud about how many kiwis will get across to Australian jobs.

https://mobile.twitter.com/Adam_Creighton?ref_src=twsrc%5Egoogle%7Ctwca…

https://mobile.twitter.com/murdochsj
Finally someone sees through the endless cooing! My old pod pal, AC, nails it
@ adam_creighton
Flightless Kiwi economy to land with a thud

by Ngrrk | 28th May 20, 8:57am 1590613036

To be fair The Australian newspaper is rabidly right wing and the main source for the article was Roger Douglas. No doubt we have huge economic issues but so does Australia and the entire world.

by Te Kooti | 28th May 20, 10:28am 1590618506

Correct, JA polarises Australians - the left love her while the right actively dislike her. She has far more charisma, charm and leadership than all their politicians put together and they know that. Morrison Hillsong league fan, I mean seriously, Ardern throws shade all over them on the world stage. She's just got to execute on the domestic economy.

by Henry_Tull | 28th May 20, 10:34am 1590618876

Please don't use the word execute.

by Te Kooti | 28th May 20, 10:44am 1590619492

deliver ok?

by Foyle | 28th May 20, 10:56am 1590620189

To use the words Deliver and Ardern in the same sentence is to deny the evidence of her first couple of years in power.

by Te Kooti | 28th May 20, 11:02am 1590620574

I'm not disagreeing with you.

by Rosenstein | 28th May 20, 11:52am 1590623532

'Ardern' was in Labour and the midwife was able to 'Deliver' a baby.

by Logicthinker | 28th May 20, 1:59pm 1590631146

I don't know, watching Muller on Q & A he looked like he was conducting an orchestra with his hands and arms moving. Jack stunned him with a number of questions. Now Mark Richardson has come out damming him. Is there a window of opportunity for Simon to slip through. It looks like its antibodies party at the moment. Perhaps, Jamie Lee might be in with a chance.

by brisket | 28th May 20, 10:46am 1590619577

Yes, I know The Australian very, very well. It’s not a bad news source but its editorial line is rabidly anti- Labor, and anti-Labour by extension. I use ‘rabidly’ advisedly. It’s a great example of a media outlet that has good reporting but profoundly biased opinion pieces.

by TuaWai Smith | 30th May 20, 10:03am 1590789792

yep..just like fox entertainment in the USA. They do a reasonable job of reporting the news but use their platform to suck people into believing their right wing nationalist propaganda is also news because the uneducated masses do not have the intelligence to tell the difference between news and 'experts' opinions....

by oldbloke1 | 28th May 20, 8:36am 1590611779

I find it interesting that Murdoch's commentators are running hit jobs on New Zealand - what are they afraid of?

by Henry_Tull | 28th May 20, 8:53am 1590612796

What makes you think it's a hit piece?

by oldbloke1 | 28th May 20, 8:59am 1590613181

The headline, and the fact that it's a Murdoch paper in Australia. Perhaps they think that our government's handling of the epidemic shows up the Australian Federal government in some way?

by Henry_Tull | 28th May 20, 9:18am 1590614305

The term cognitive dissonance is used to describe the feelings of discomfort that result when your beliefs run counter to your behaviors and/or new information that is presented to you.1
People tend to seek consistency in their attitudes and perceptions, so when what you hold true is challenged or what you do doesn't jibe with what you think, something must change in order to eliminate or reduce the dissonance (lack of agreement).
A classic example of this is "explaining something away."

by oldbloke1 | 28th May 20, 9:27am 1590614829

Thank you. It's good to know what motivates your thinking.

by frazz | 28th May 20, 9:48am 1590616131

Can you explain your comment "we are going backwards" please Henry...more comms detail please..lacking in substance. Perhaps a youtube link?

by Henry_Tull | 28th May 20, 10:25am 1590618352

New Zealand has debated economic transformation along these lines for decades. But even the substantial economic reforms to open and free up the economy several decades ago have not resulted in productivity growth to the extent that many economists would have expected.

by frazz | 28th May 20, 11:13am 1590621228

hmm..this is a word wide issue not just NZ - is that your point?

by Independent_Observer | 28th May 20, 9:44am 1590615895

Would appear that somebody in Australia is worried about a young, left-wing, female getting any ideas about running for government over there!

by TuaWai Smith | 30th May 20, 10:05am 1590789933

yep...same as Murdoch owns fox entertainment in the USA and pushes the right wing nationalist propaganda there as well.

by Independent_Observer | 28th May 20, 8:43am 1590612202

Not quite sure I get his point. He says we're spending too much public money now, but then says we had to have a draconian type lockdown because we hadn't spent enough public money (on healthcare) in the past?

You can't have it both ways - can you?

by Henry_Tull | 28th May 20, 8:52am 1590612731

May be read the piece again.

by Independent_Observer | 28th May 20, 9:11am 1590613868

Think I got the slant of the article first time round thanks.

by Henry_Tull | 28th May 20, 9:25am 1590614722

Cool. Here is the thing.

First thought. The massive spending was ill directed and govt need not have make payments to lawyers and accountants...

Second thought, the woeful sum of resources, too few ventilators, icu beds, abscent contact tracing system. The resources on hand meant the lockdown was harder than if would have been had resources been on hand.

The issue I alluded to was that you somehow mixed the two separate thoughts together to produce a nonsense. A nonsense "explain - it - away".

by Independent_Observer | 28th May 20, 9:34am 1590615264

Disagree - it wasn't Labor that under funded the healthcare system for the previous decade - that was National.

So you can't use that as the premise of your argument for the need of a draconian style lockdown and slam the current government.

by GV 27 | 28th May 20, 9:41am 1590615706

Still put in more than the Labour government that came before them, however. I certainly recall canceled elective surgeries under the previous Labour government.

by Independent_Observer | 28th May 20, 9:47am 1590616025

Sure that is fine then - but don't make it about the current government then. Just say historically NZ government has under spent/under funded healthcare in NZ, both Labour and National, therefore tighter lockdown restrictions were put in place.

How is that?

But that isn't how the article reads - it looks like an attack on the current government - then the question becomes why the bias and what is its aim?

by GV 27 | 28th May 20, 11:09am 1590620954

The current government is the one who swept into power promising all manner of things they haven't done. Are you suggesting National be held accountable for Labour not delivering the second coming they were happy to campaign on?

by Independent_Observer | 28th May 20, 11:26am 1590621965

Do you always vote National or Act? Just trying to see if there is an element of tribalism in your views. One gets the feeling you could be a National supporter because your parents are National supporters.

I'm the first to admit the COL aren't perfect - they aren't. Happy?

(and I've voted for National in the past!)

by Ralph | 28th May 20, 10:03am 1590617017

How can spending $100B dollars leave ANY shortage of ANYTHING in the health care sector?

by Independent_Observer | 28th May 20, 10:36am 1590618974

You have to ask Dr Death wouldn't you?

Looks like as a % of GDP it took a thrashing under National - but that is probably unfair as they had bigger economic goals which I appreciate. You just can't have you cake and eat too in the argument above.

https://tradingeconomics.com/new-zealand/health-expenditure-total-perce…

by Masher | 28th May 20, 9:27am 1590614827

"Not quite sure I get his point."

by Independent_Observer | 28th May 20, 9:41am 1590615691

I got the slant of his article (some biased driven dribble) but missed what his point was...what would they have done differently and why?

by Masher | 28th May 20, 9:53am 1590616423

All in jest mate. Breathe.

by Independent_Observer | 28th May 20, 10:30am 1590618653

Well nice troll then and great contribution. Nice one.

by 8014 | 28th May 20, 9:28am 1590614881

He lost my interest with "Since she imposed the favoured pandemic solution of the left ..."

Which, incidentally, received majority support https://thespinoff.co.nz/politics/23-04-2020/public-backing-for-nz-gove…

Also "New Zealand ranks fourth last in the OECD for labour productivity growth, and last for multi-factor productivity growth" appears to have been correct in 2017. However, NZ has improved its ranking and is now ahead of Australia. Not that this got mentioned. https://data.oecd.org/lprdty/multifactor-productivity.htm

by Andrewj | 28th May 20, 8:46am 1590612390

https://www.dailyjobcuts.com/

by Fritz | 28th May 20, 9:08am 1590613706

Very sad.
While moving to level 1 probably wouldn't have prevented these job losses, it could have prevented jobs being lost here and there right now.
I will be surprised if this government executes an economic recovery well.

by Independent_Observer | 28th May 20, 10:45am 1590619524

If this is the end of the long debt cycle I'd be surprised if any government could.

by Foyle | 28th May 20, 11:04am 1590620648

That's the critical thing. Lockdown is a sunk cost. Big choice is on who can lift NZ out of the deep dark hole we find ourselves in. It for sure isn't the coalition who have failed at everything they have said they would do, have no commercial experience, and harbor deep antipathy for all the instruments of economic growth (business large and small, farming, industry) and love for all the things that kill it (regulating everything, restriction of labor markets, public sector growth, big govt intervention, increasing taxation, growing welfare...)

by scarfie | 28th May 20, 8:06am 1590609964

I had a look at this modern castle in 2015. Cost $170m to build. GFC 1 upset the plans of the owners and it was up for sale while I was there, discounted to $140m. Sale price $14m. https://missoulian.com/news/local/private-island-mansion-listed-at-m-se…

by Houseworks | 28th May 20, 8:44am 1590612291

Neverland had to be pulled... with a name like that it does not inspire confidence amongst MJ devotees
Michael Jackson's ranch pulled off the market after 5 years: PHOTOS - Business Insider
https://www.google.com/amp/s/www.businessinsider.com/michael-jacksons-n…

by Final Account | 28th May 20, 11:25am 1590621914

Whoever spent 170 mill to build that got tucked hard

by sit23 | 28th May 20, 8:11am 1590610278

Looks good.No Covid cases in hospital. Turns out Covid has special bit on it, same as HIV that stops our immune system nailing it. Could only have been put together in lab! More to blame Chinese for. USA going to hell in a handcart. Except the 1% of course. House prices may halve, according to NZRB Governor. Opportunities galore.

by Richardfromauckland | 28th May 20, 8:19am 1590610756

Opportunities for what?

by Ralph | 28th May 20, 10:05am 1590617136

Unemployment.

by oldbloke1 | 28th May 20, 8:37am 1590611828

Any scientific evidence it was put together in a lab?

by Roger Witherspoon | 28th May 20, 9:02am 1590613376

Lots of scary stuff here. It seems it may well have been bred to atack humans not animals. The lab appears to have been set up to do just that: https://www.dailymail.co.uk/news/article-8351113/Wuhan-virus-lab-signed…

by oldbloke1 | 28th May 20, 9:00am 1590613230

Daily Mail - scientific?

by Roger Witherspoon | 28th May 20, 9:05am 1590613544

Read the article:
Professor Nikolai Petrovsky, a top vaccine researcher who headed the Australian team, said the virus was ‘not typical of a normal zoonotic [animal to human] infection’ since it appeared with the ‘exceptional’ ability to enter human bodies from day one.

by blobbles | 29th May 20, 10:53am 1590706416

Yeah but it's such a dumb statement to make without context. Of course this one has an "exceptional ability to enter the human body from day one"! It's not like scientists go out and catalogue every corona viruses in existence with extreme vigour. The only reason they are doing that with this one is because of it's ability to do just that. That's not evidence it was made in a lab. It just means that it happened to have mutated a certain way to do that - we got unlucky. With these sorts of viruses mutating all the time, it's going to happen occasionally that they develop the ability to enter humans really well. Even at one in a billion, we can still expect these viruses to pop up reasonably often.

We have evidence that this happens - i.e. every other pandemic/epidemic in human history. I suppose the Spanish Flu was also developed in a lab because it was really good at spreading? That's where this sort of logic must take you.

You know what proves the existence of god? The asteroid that destroyed the dinosaurs was of just the right size/velocity etc to wipe them all out. Therefore god because it was done so well.

Nature is like a driver after 6 beers. Most of the time it will get home OK, but will probably have some near misses. Occasionally it will fall asleep at the wheel and take out an entire family.

by ham n eggs | 28th May 20, 9:07am 1590613625

Are you referring to the opportunities to buy multiple houses all for tenants with no incomes?

by CourtJester | 28th May 20, 10:28am 1590618485

"Same as HIV" then "Could only have been put together in lab"
Either your conclusion makes no sense, or you're implying that HIV was also put together in a lab.

by printer8 | 28th May 20, 10:50am 1590619841

sit23
"House prices may halve, according to NZRB Governor."
That is quite incorrect.
NZRB did some stress testing of banks using what they considered extreme situations; this was to test bank stability in which the 48% fall was one of scenarios and the worst case one tested.
Orr clearly stated that the RBNZ estimate is 10% and certainly not the "halve" as you quote.
In his summation, he also made comment to the press that the information be reported "responsibility" - i.e. these were simply tests of bank resilience under different scenarios.
You quoting "House prices may halve, according to NZRB Governor" is fake news.
As asked by other posters, you really need to verify your claim regarding the covid being "put together"; you are coming across as a purveyor of fake news and conspiracy theories. r

by dollar_bill | 28th May 20, 12:32pm 1590625979

Let me guess - you just found a copy of the Mikovits conspiracy video.

by profile | 28th May 20, 8:26am 1590611216

I spose $50 mill gifted to NZ MSM is going to focus more on things like PM's DYI hair dye.

The rushed Log Brokers Bill - "The period for consultation is tighter than even the emergency actions on high-powered automatic firearms spurred by the Christchurch mosque attacks."

"A powerful New Zealand First figure helped establish a forestry company that then pushed for money from two key funding streams controlled by a New Zealand First Minister.

...On 29 August it announced it had entered into an agreement to acquire Claymark Group Holdings, a New Zealand-US wood product manufacturer.

And just last week, the company said it had entered into a "strategic transaction" to purchase a 25 percent stake in Northland lumber company North Sawn Lumber and help it build a sawmill in Ruakaka."

https://www.msn.com/en-nz/news/national/nz-first-linked-forestry-compan…
https://www.interest.co.nz/rural-news/105202/farmers-and-forest-owners-…

by Ralph | 28th May 20, 10:08am 1590617301

Anything worth doing properly is worth rushing seems to be the manta.

I am not a fan of that approach.

by Lapun | 28th May 20, 12:23pm 1590625426

Handling quarantine. Don't copy a prison - it is expensive, unkind and almost encourages escapes. Copy the idea of a prison garb so the public can tell who has a risk factor. Require wearing a yellow and white striped quarantine jacket with optional national flag indicating origin and date of arrival. So a returnee from London would be carefully avoided (I'm in the high risk of fatality category). But wouldn't cross the road to avoid a Taiwanese wearing quarantine-id.
Leaving it to the public to decide the risks and the govt monitors wearing of jacket. Any better idea?

by Roger Witherspoon | 28th May 20, 9:07am 1590613665

Yellow stars, anyone? Now where have I heard about that before.

by Lapun | 28th May 20, 9:27am 1590614827

I though of that myself and implied it with the 'prisoner' remark. But my motivation is I want to visit my family in Europe when that is possible and I certainly want to return to my home in Auckland. Multiply by all the others who would like to do similar and the govt would need to build tens of thousands of quarantine cells by maybe this time next year (checkout their speed with Kiwibuild). So I return to NZ; I've been to UK & France and therefore I am a risk to fellow Kiwis. Give me the option of wearing a identifiable garment (with facemask) and restrict me from bars, public transport and large gatherings but otherwise let me live my life from my own home so long as I make it clear that I am a risk.
What is your proposal? Fortress NZ like North Korea?

by Andrewj | 28th May 20, 8:33am 1590611595

I spent half an hour on the phone last night with my stock agent. Tis drought has really impacted the industry. Many farmers still have no feed and no stock, on top of that we have very uncertain market outlook. I was south of Hastings yesterday and it was brown, two Cesco's flying N onto brown pasture, what is the point of that? Some fert rep has made some money out a farmer, the N is not need after a drought, especially when the grass is hardly growing anyway, it's just a waste of money when money could be tight for a few years. Top dressing pilots have had the best season for years.
People are still destocking my agent said there is no market, lambs have picked up as Manawatu farmers are doing fine, tight margins in sheep. Cattle are the big unknown with the US and Brazilian kill backed up till the end of the year

I have to put a few hundred thousand into cattle when the market is doing this, and god knows what to make of the market in China could be best ever or dead in water tomorrow due to some politicians brief unthoughtful comment.

https://www.bowmanextra.com/news_paid/i-band-disastrous-cattle-markets-…

https://www.bhpioneer.com/covid-19/sd-beef-producers-reeling-from-covid…

https://www.bakercityherald.com/coronavirus/ranchers-reeling/article_49…

by Andrewj | 28th May 20, 8:44am 1590612292

How can we access risk, risk management really matters when you are putting thousands into livestock on tight margins. Job losses and Gov't shutdown of entire countries are an unknown , unknown. If you go by big companies like Boeing you would be super cautious, but I need livestock to pay the bills, so I have to jump in at some stage. Thoughts?
https://www.zerohedge.com/markets/boeing-job-cuts-expected-strike-week

by CJ099 | 28th May 20, 9:45am 1590615904

Hi Andrew, Hope this doesn't come across as a glib comment but we've all had to adapt since the impact of Covid myself included. As a live stock farmer, Have you considered diversifying a bit to market gardening? Since you already have the biggest investment which is land and the cost of fruits and vegetables is still very high here in NZ. The other advantage is that it would give you a mostly constant stream of revenue through out the year, since customers are moving away from meat products for various reasons.

Sure you would probably need to setup an irrigation system, though if you're north of Auckland then you have the advantage of little to no frost. Anyway food for thought. I would recommend looking at 'No Dig' growing with Charles Dowding since it's very productive with practically no overhead costs. Here's a link to get you started: https://www.youtube.com/watch?v=QVY4SJt4mzg

by Houseworks | 28th May 20, 11:20am 1590621632

Andrew could pivot to breeding and raising K9s and felines. Wide open spaces there in "north auckland"

by CJ099 | 28th May 20, 10:06am 1590617172

Yeah like your comments have ever been helpful HW. And by the way, you already know that I currently use this gardening method for growing crops and it is very productive, unlike you. So have you put forward any ideas to help someone no you have not!

You're just an unhelpful troll HW and that's all you'll ever be! :)

by Houseworks | 28th May 20, 11:26am 1590621968

Ok touchy, I will have you know that I got my fingers dirty this morning planting new trees, helping the planet and feeding people. So there.

by CJ099 | 28th May 20, 11:40am 1590622848

I see that you got told off from you're earlier insult to me this morning and you changed your previous comment. Though glad to hear that you've taken up gardening, it might help change you're outlook on life to something more positive. :)

by Houseworks | 28th May 20, 12:36pm 1590626169

I am not a greeny to the point where I would derail someone's development projects as some environmentalists do. I am not even a greeny but I still love flora. And yes my outlook on life and the future is extremely positive. I hope yours is also

by Andrewj | 28th May 20, 10:40am 1590619233

I am always changing and I'm hoping my children will keep looking at new ideas. Chasing rainbows, has, in my life been the biggest cause of farm failure, by the time you develop into something that was paying best at the time, you become part of the overproduction and collapse.
I live in a frosty valley which takes a lot of horticulture out, that and the huge capital investment to get to an economic size, then you have to deal with regional councils, who have locked water takes into very inefficient large scale dairy farms, you have to get consent to farm, nutrient limits etc, lots of unknowns.
I am changing, trying solar capture, ie capturing max sun. Most horticulture investment is up over 100k a hectare in fact probably up to 250k a hectare I'm watching My Farm investment in Hops with interest.

I have already invested in a disk drill and tractor it's not cheap. Im looking at this guy with interest.

https://www.youtube.com/watch?v=7S1hRzBuMz4&t=209s

by Kate | 28th May 20, 11:22am 1590621779

We've just had news of a second Covid death amongst family and friends overseas. First an aging grandfather in Massachusetts in the US, but this second so, so much harder as a middle aged father from SP in Brazil. Didn't get a chance to experience any grandchildren given a life cut short. And of course now we not only grieve with but worry for the rest of the wider family members. It really hits home to think about these friends and relatives living amongst communities of such fear and despair.

I guess my reason for sharing this is just to say we always need to count the blessing that is just being here in NZ. Hard as it will become economically for so many, I guess the best thing we can do is look to ways we can support those less well off. And everyone with land has a unique opportunity in this regard. Perhaps in your case, Andrew that could be thinking about growing for local as opposed to international markets - which might mean greater animal and crop diversity - small stocks of a bit of everything... a bit like the video clip. You know me, I've always been nuts about nuts - but berry crops are another of my favourites :-).

I know that doesn't help in terms of debt, but if you are lucky enough to have little, maybe it is a unique opportunity for interesting change in disguise.

All the best!

by CN | 28th May 20, 7:59pm 1590652769

"We've just had news of a second Covid death amongst family and friends overseas. First an aging grandfather in Massachusetts in the US, but this second so, so much harder as a middle aged father from SP in Brazil. Didn't get a chance to experience any grandchildren given a life cut short. "

Kate,

So sorry to have this happen to you and your loved ones. Losing a loved one is hard enough, yet to be thousands of miles away and unable to travel makes it even more so. Remember to cherish those special and heart warming memories.

Wish you and all your loved ones much peace, strength and love at this very difficult time.

by CJ099 | 28th May 20, 11:25am 1590621933

Agreed and solar capture sounds a very good solution, if you check out Charles free video he's also in a colder zone 8a, from what I remember and has very cost effective tips on how to deal with cooler climates (Since he's in the UK). Let us know how you get on, wish you all the best Andrew.

by Ralph | 28th May 20, 10:11am 1590617467

Government interference in risk management is one of its most destructive long term effects.

Poorly written laws can be fixed up eventually but denial of risk is denial of reality and reality always trumps ideology in the end. That is why so many socialist economies have gone bankrupt in the last 100 years.

by Houseworks | 28th May 20, 8:47am 1590612442

Tough times Andrew. Will be mortgagee farm sales I would think

by Andrewj | 28th May 20, 8:53am 1590612836

I don't think so banks seem very accommodating, it's super stressful for the farmer, it all has to be paid back. My daughter got a 7.8k handout from gov't and could be due for another, poor old drought affected farmers are under a lot of pressure at present.

Also indebted farmers have been on a roll, buying neighbours with the banks happy to lend on equity, if they roll you are talking tens of millions each, in some cases over a hundred million. This buying of neighbours has kept prices above what smaller family farmers could afford to pay. Land prices are high still.

by ham n eggs | 28th May 20, 9:11am 1590613911

the buying the neighbours is all part of the economies to scale / leverage story which has been the case across every industry
economies to scale allows lower production prices which allows economic growth …
But we have maxed out that route

by Andrewj | 28th May 20, 10:37am 1590619047

One of the problems is high land prices stop young innovators entering industry, big guys are just land banking. I think, even though I would be a loser, we desperately need an asset tax, restructure of councils and more tax depreciation on new developments.

I don't think any of these big farms can compete with a family run business, it's to do with their access to bank borrowings thats lets them get ahead.

by ham n eggs | 28th May 20, 11:21am 1590621669

"I don't think any of these big farms can compete with a family run business …"

Yes - it comes down to leverage
the corporates models ability to leverage is greater … which is what the financial system signals is best practice

by Masher | 28th May 20, 9:31am 1590615090

What price do you put on a loss making drought striken farm though?

by Andrewj | 28th May 20, 10:41am 1590619260

lots

by youngdumbandbroke | 28th May 20, 9:06am 1590613609

Too many farmers trust salesmen's advice and its frustrating to watch

by Logicthinker | 28th May 20, 9:23am 1590614631

Has the government got a financial plan for farmers in the Hawkes Bay. It has for Northland and Waikato with funding.

by frazz | 28th May 20, 11:17am 1590621437

Have farmers got a financial plan for their farms in the Hawkes Bay?

by youngdumbandbroke | 28th May 20, 11:46am 1590623194

No way farmers are stupid, remember?

by waymad | 28th May 20, 11:03am 1590620636

Always good to hear reports straight from - er - the horse's mouth. Actually, come to think of it, and seeing the generally clueless suggestions upthread about Things you could Diversify Into, here's another one - draft horses. Classic zero-carbon motive power......

by powerdownkiwi | 28th May 20, 8:51am 1590612687

"US deaths are now exceed 99,000".

I challenged that yesterday already. I'm not one to discuss the virus - it's merely a warning to humans which I suspect they will ignore, as were the bushfires, as is oceanic plastic soup, as is... - but I find it interesting DC has twice held his number under 100k.

https://www.worldometers.info/coronavirus/country/us/

by frazz | 28th May 20, 9:54am 1590616472

Yes I wondered that as well - 100,047 deaths

by David Chaston | 28th May 20, 10:15am 1590617749

I use the JHU tool. And I write that section at about 6:30am. Yes, it has since updated to 100,047 - and climbing. For the updated data, always click on the link I supply in the article.

by frazz | 28th May 20, 11:19am 1590621543

Thanks for the link David - I was looking and John Hopkins. Although deaths at home are not counted so real total would be well above 100k by now.

by Dale Smith | 28th May 20, 12:03pm 1590624198

Swedish epidemiologist Prof Johan Gieceske has predicted that both USA and Western Europe will top out about 200,000 each.

by Andrewj | 28th May 20, 9:05am 1590613525

China trade
https://www.stuff.co.nz/business/300021993/new-zealands-china-dilemma-y…

by Henry_Tull | 28th May 20, 10:05am 1590617121

Yep, and the trick is how to deal with CCP china that has fundamentally changed from pre-2017.

Pre 2017 thinking doesn't apply now.

by Audaxes | 28th May 20, 10:45am 1590619501

Sanctions are the new diplomacy - check out the growing number of nations Trump has sanctioned because they do not jump when instructed.

by Fritz | 28th May 20, 9:16am 1590614183

80% of nz households in or close to a financial crisis

https://i.stuff.co.nz/national/300022299/cracks-appear-in-coalition-as-…

by Kezza R | 28th May 20, 9:27am 1590614829

Winston trying to stay in the game.

by Foyle | 28th May 20, 11:09am 1590620993

... While the SFO investigation of NZF foundation continues to throw up dodgy-dealings.

by Ralph | 28th May 20, 10:13am 1590617620

The tip of the iceberg?

"Already one-in-10 New Zealand households had missed a mortgage or rent payment since the crisis began"

by Conrad | 28th May 20, 10:59am 1590620357

Wow, that's pretty frightening. The subprime mortgage crisis in 2008 saw about a 16% default rate in the US.

by Kezza R | 28th May 20, 11:55am 1590623735

That is with the money flowing. Wait till those dollars stop and reliaty bites.

by Houseworks | 28th May 20, 9:53am 1590616388

Company Shareholdings were tumbling now rising. A friend of mine pointed out that a 33 percent fall equates to 50 percent gain to get back to the original price. Hes a smart guy my friend. One person loses a third but the next person potentially picks up a half

by Audaxes | 28th May 20, 9:39am 1590615582

Also rising is the scale of the Fed's balance sheet. The overall level indicates just how much monetary policy support their QE machine is pumping in to keep their economy functioning.

The numbers just don’t add up. Even if you treat this stuff on the most charitable of terms, dollar for dollar, way too much of the hole almost certainly remains unfilled. That’s the thing about “stimulus” talk; for one thing, people seem to be viewing it as some kind of addition without thinking it all the way through first.

You have to begin by sizing up the gross economic deficit it is being haphazardly poured into – with an additional emphasis on “haphazardly.”

Everyone forgets the last time when the government tried this, impressing markets and the media with its huge numbers, that after it was over its proponents complained how it wasn’t big enough. Paul Krugman most of all (seriously, in November 2009, after it was over, he wrote Obama’s plan was awesome but it wasn’t “nearly enough”). If you don’t know how big is the abyss, if you can’t even size the thing up properly while it’s unfolding, how can you even attempt to call it “stimulus?” Link

by Casual Observer | 28th May 20, 9:44am 1590615876

Significant changes coming to Aussie dairy industry. But will it be enough to save the industry and farmers from themselves?
https://www.dairyreporter.com/Article/2020/05/26/Australian-farmers-and…

by Casual Observer | 28th May 20, 9:46am 1590615990

Australia's largest producer of certified organic dairy goes in to voluntary administration. https://www.dairyreporter.com/Article/2020/05/26/Organic-Dairy-Farmers-…

by Andrewj | 28th May 20, 10:42am 1590619343

everyone wnts organic, but very few want to pay the extra.

by frazz | 28th May 20, 11:23am 1590621830

Czarnikow, a global supply chain, pricing and financial services company, said a survey shows the plant-based dairy alternatives industry is estimated to grow from $15.8bn in 2019 to $35.8bn by 2026.
https://www.dairyreporter.com/Article/2020/05/04/Pandemic-sees-spike-in…

by Casual Observer | 28th May 20, 1:12pm 1590628344

Alternative including plant based doesn't necessarily mean dairy free. https://www.foodingredientsfirst.com/news/next-gen-fermentation-produce…
http://madewithmotif.com/

by ham n eggs | 28th May 20, 11:55am 1590623712

ultimately prices HAVE to come down (in real terms)
not go up
otherwise as we hit resource limits, economic growth doesn't work

by Casual Observer | 28th May 20, 12:53pm 1590627221

Word on the street is southern farmers supplying winter milk to a corporate processor with the liquid milk South Island contract for GF, have had their price cut from $9/kg 2019/20 to $6.30/kg for milk supplied this winter. So price has come down for the producers, but will that translate to price drops in the supermarkets ham n eggs? My guess is, no.

by Andrewj | 28th May 20, 2:56pm 1590634591

they need to own the distribution, like the old days with milk tokens and vendors

by bw | 28th May 20, 10:09am 1590617361

“Why would anyone expect stocks to price rationally?...Central Banks have been buying US$2.4 billion in financial assets per hour for the past eight weeks."
https://business.financialpost.com/investing/central-bank-asset-purchas…

by CourtJester | 28th May 20, 10:32am 1590618757

Pretty insane number. 40 people turned into millionaires *per minute*. No wonder the stock market doesn't make any sense at all.

by Independent_Observer | 28th May 20, 10:39am 1590619144

You just have to wonder how sustainable this practise is going to be...really feels like complete desperation to prevent a collapse of the whole system.

by Squishy | 28th May 20, 10:25am 1590618324

The reserve banks are obviously doing their best but where is the inflation data to support their policy decisions?

by blobbles | 28th May 20, 10:48am 1590619706

The only place you can find inflation is in financial asset prices. You are just looking in the wrong place!

It's only been going on for over a decade, but they really need more data to say if the next lowering of interest rates or money printing program will result in inflation...

by Ben72 | 28th May 20, 11:35am 1590622524

https://i.stuff.co.nz/business/121653300/employment-fell-by-record-3750…