Here's our summary of key economic events overnight that affect New Zealand, with news the above-water calm is masking below-water furious trashing.
In the US jobless claims jumped more than expected last week, adding +947,000 to these rolls and far above the prior week's addition of +719,000. Layoff rates seem to be rising quicker. And as support programs are about to expire, this surge added to those on these programs, taking them up to 5.8 mln and 4 mln more than at this time last year.
Congressional talks continue over extending the relief programs, but no progress is being reported.
The US inflation rate was unchanged in November, still at +1.2%. But food prices rose at a +3.7% rate, petrol fell at a -19% rate, rents were up +1.9% and medical care up +3.2%.
We are awaiting the US monthly budget statement for November and will update this item when it is to hand. A -US$200 bln deficit is expected. Update: It came in at -US$220 bln.
At least US households seem to be doing well - some at the top end, anyway. Household net worth rose +US$9 tln or +8% in the third quarter from the same quarter a year ago to US$124 tln, according to a Federal Reserve report.
At the overnight ECB board meeting, no rate changes were decided. But they have scaled up its bond-buying program to €1.85 tln and unveiled a new batch of ultracheap (TLTRO and PELTRO) loans for banks.
The "Brexit dinner" didn't resolve anything; it reverted to form by setting yet another new deadline, this one Monday night (NZT). The chance of a messy no-deal split stay high.
And an annual China-Europe trade forum was quietly canceled last month, it has just been revealed, after European organisers rejected Chinese demands to ban participants critical of Beijing.
China continues to raise the temperature in its actions against Australia. It proxy media runs the attack lines raised by its Canberra Embassy.
And China has doubled-down on its wine duties for Aussie plonk.
In Australia, a Parliamentary Budget Office report sheds some light of the future of their Federal finances. For 2020-21 they will run an underlying cash deficit of -AU$214 bln. And at -11% of GDP this is around 2½ times greater than the previous worst deficit of the last fifty years. Total net debt will rise to 44% of GDP in 2023-24 they say, and the negatives will echo for decades to come with lower tax revenues and higher expense and support obligations.
Back in China, it happened. Tsinghua Unigroup has now defaulted on a US$2.5 bln bond, the latest in a string of high profile bond defaults. This one is from a company that is key to silicon chip manufacturing aimed at replacing sanctioned US supplies.
Meanwhile iron ore prices have jumped to almost ¥1000/tonne on very strong volumes, as traders see both rising demand, and the risk of disruption from the Australia:China diplomatic fracas.
Indonesia retail sales took a sudden and substantial -15% turn lower in October, and they fell again in November. This is a worrying trend, one Australia will be watching closely.
The S&P500 is down -0.2% in early afternoon trade. Overnight European markets closed mixed with Frankfurt down -0.3% and London up +0.5%. Yesterday, the very large Tokyo market ended its session down -0.2%, Hong Kong was down -0.4%, while Shanghai was little-changed. The ASX200 closed out yesterday with a -0.7% loss and wiping out the prior day's good gain while the NZX50 Capital Index closed with a small -0.2% loss and holding on to most of its earlier gain.
The latest global compilation of COVID-19 data is here. The global tally is 69,140,000 and a +670,000 rise in one day. At this rate, we will top 100 mln by the end of January. It is still very grim in Russia, the UK, Estern Europe, Brazil, Turkey and Indonesia. It does seem to be easing further in Europe generally although not in the UK, Sweden, or Germany. Global deaths reported now exceed 1,575,000 and up a very sobering +13,000 in a day as death rates spike everywhere.
But the largest number of reported cases globally are still in the US, which rose a record +239,000 overnight to 15,866,000. The US remains the global epicenter of the virus. The number of active cases is surging and now at 6,329,000 and that level is up 91,000 in just one day, so many more new cases more than recoveries. The rise in 'active cases' by about +100,000 in one day has been normalised. Their death total now exceeds 298,000 and up +4000 in one day. The US now has a COVID death rate of 897/mln, and now higher than Argentina and approaching the disastrous UK level.
In Australia, they are not getting any resurgence. There have now been 28,000 COVID-19 cases reported, and that is just +3 more cases yesterday. Now 47 of their cases are 'active' (unchanged). Reported deaths are also unchanged at 908.
The UST 10yr yield will start today softer, now at just under 0.93% and a -2 bps slip. Their 2-10 rate curve is a little steeper at +78 bps, their 1-5 curve is also marginally steeper at +29 bps, and their 3m-10 year curve is steeper too at +86 bps. The Australian Govt 10 year yield will start today back down -3 bps at 1.00%. The China Govt 10 year yield is unchanged at just on 3.31%, while the New Zealand Govt 10 year yield is down -3 bps at 0.90%.
The price of gold is lower today, down -US$6 to US$1836/oz.
Oil prices are +US$2 higher today, now at just under US$47.50/bbl in the US, while the international price is up slightly more at just under US$51/bbl.
And the Kiwi dollar is noticeably higher at 70.8 USc. But against the Australian dollar we have slipped again, now back down to 94.2 AUc. Against the euro we are little-changed at 58.4 euro cents. That means our TWI-5 is now at 72.8, at the upper part of the tight range it has been in over the past three weeks.
The bitcoin price has fallen another -1.1% today and is now at US$18,189 and its lowest in eleven days. 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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88 Comments
Well I think we can agree @ham that things are going to get increasingly unstable as the Global QE experiment does what it has done since the beginning of time and hyper-inflates fiat causing - breakdown of supply, business insolvency, skyrocketing asset and commodity prices, large scale poverty, and probably war.
From there it's a simple question of which stores of value will survive the instability. Historically gold is the go to. Other PMs also. Anything that is perishable or can be destroyed is probably best avoided. And we've never had an asset quite like Bitcoin before, so it's largely unknown. But Bitcoin certainly meets all the criteria that makes it an attractive proposition vs Gold and Cash. https://i.redd.it/pcw68csi7dv01.jpg
No it doesn't. https://twitter.com/nwoodfine/status/1214238101796638721
Further to that, Africa where network penetration is most patchy is leading the charge on adoption of Bitcoin. https://internationalfinance.com/the-rise-of-crypto-adoption-in-africa/
And if that's not enough there are bitcoin solutions in play that mimic hard currency https://opendime.com/
Any thoughts related to this take on it (note it was written in Oct)
Take a look at the stock to flow charts. They show the cyclical nature of BTC best imo. https://digitalik.net/btc/
Posted below but relevant:
Massive Bitcoin News:
https://twitter.com/novogratz/status/1337117900013006849?s=20
https://www.theblockcrypto.com/linked/87378/massmutual-bitcoin-insurance... (the article)
Insurance firm MassMutual has purchased $100 million worth of bitcoin. This needs fed approval so is a pretty big deal.
Remember, no one wants to be first, and no one wants to be last. Once the first company has made the move it makes it acceptabel for everyone else to do it also.
Knew that since last few months, third party website like propertyvalue, homes.... were been used by Real estate industry to manipulate and influence buyers.
Just like false advertisement, they should be held accountable
https://www.rnz.co.nz/news/national/432532/housing-market-insane-for-bu…
Rememeber seeing a house on the day listed was showing value between 900000 to 1000000 and after few days was showing 1000000 to 1100000.
Action by RBNZ and No action by Govetnment (No Action by Government =Action by government to support) along with Rich and Powerfull RE lobby has created havoc specially by creating frenzied FOMO and have seen FHB throwing everything and only time will tell the consequence of all this.
It was said that Corina virus should be used as opportunity to Reset but instead was used to promote and support ponzi and all in the name of economy.
https://www.newshub.co.nz/home/new-zealand/2020/12/new-zealand-housing-…
BUYERS SHOULD BEAWARE OF ALL SUCH THIRD PARTY WEBSITE AND SHOULD NOT BE USED TO MAKE DECESSION ALSO ANOTHER TREND NOTICED IS THAT NOW DAYS MANY RE AGENTS DO NOT PUT DISCLOSURES RELATING TO HOUSE ON P&S AGREEMENT BUT ON SEPERATE SO THAT BUYER HAVE NO PRIBLEM WITH BANK AND AT THE SAME TIME PROTECT THEMSELVES FROM ANY FUTURE CLAIM AND FHB ARE OVER LOOKING JUST TO GET IN PROPERTY BY PAYING PREMIUM AND ALSO PROBLEMATIC HOUSE.
RE AGENT TOO SHOULD BE DEALT AT OWN RISK AND BE AWARE OF MOST.
Not entirely correct alittle. Homes had a place with the estimated value range back in September far lower than what I then came along and bought it for so guess what ? This month the numbers caught up to what I paid for it. Any house is only "Worth" what someone else is prepared to pay for it. Its only reasonable to expect the "Estimated Price" to reflect the actual sale price, not some estimation on paper done by who knows how, probably by someone who has not even seen the house. Essentially my house price "Estimation" went up $100K in 3 months. The other issue is the RV is heading for 3 years old and a lot has changed in that time.
Yes, they caught up with what you paid for it because the website automatically updates to 'market price' reflecting the market price that you paid. But not only your place goes up to 'market price' - the whole neighbourhood rises as well in accordance with the % increase above RV that you paid. From what I understand from a REA, the site used to update these market prices every six months and they moved to every three months more recently. I wouldn't be at all surprised if they are now doing it monthly.
And they further game it as per the link to the article above. And to add to that commentary, that type of further gaming goes on for rent estimates as well.
"they caught up with what you paid for it because the website automatically updates to 'market price' reflecting the market price that you paid. But not only your place goes up to 'market price' - the whole neighbourhood rises as well in accordance with the % increase above RV that you paid"
Which is exactly what they should do when trying to estimate market prices. (Though their algorithm will be a bit more complicated than that).
No deal Brexit looms: https://www.bbc.com/news/uk-politics-55266678
Just getting messages from mate in Belfast, he's saying the supermarkets might shutdown there as they're in limbo between the EU and the UK and the big players can't be bothered dealing with it.
They'll need a tourist visa to go to go across the channel from Jan 1 and if there is no deal the EU can't fish in UK waters which means the French are going to block the ports.
Their lockdown finishes tonight but covid still sounds rampant, 15+ deaths/day in a city of 2M.
Life isn't so bad down here afterall.
Interesting nonsense from Ashburton - they claim they're "going to lose".
Actually, they were artificially overshooting (PKE, phosphate, water, fossil feedstock) and made the mistake of calling that 'normal'. Funny old thing, human psychology. Oh, and they had to get local democracy suspended to achieve their temporary overshot state, of course.
But the bigger implication, regardless of ignorance, is the fact that the 'making of money' is unsustainable if it involves resource draw-down - and Big Ag does exactly that.
Palmtree, you are terrible with numbers.
1. $57 million is evaporated farm profits (revenue less expenses) - you can run through how a productive valuation works, it knocks heaps off valuation
The other valuation effect is farm valuations assume slick operater, and 1% to 3% increasing production yr on yr.
2. Reduced expenditure $140m, taken into account in point 1.
But is the volume of cash Not spent with local suppliers.
Imagine the compensation required.
# green math genius
Like I said, run that past me again? If you knock $57million off profits and $140 million off expenses, increasing net profit by $83 million, this is seen as a negative for farmers? Surely a valuation would be based on net profit, not gross expenses? As the only part of that of that $140 million that would truly disappear, is the profit margin applied to imported fertiliser and to a lesser extent profit margins on machinery, fuel, animal health, etc, would that not actually leave more money to be spent in the community on other things? The added bonus being, drinkable water, eventually.
Ptree.
You have made the same mistake. Made the same mistake again.
As Red sees below...
The $57 m profit loss Already takes account of the $ 140m reduced expenditure.....
That $140 expenditure reduction is mentioned again because it drives the job and profit losses of the off- farm services businesses.
Best you buy a Lincoln University Farm Budget Manual.
I really hope you have nothing to do with setting Government policy in this area, but it sure looks like you do.
Question: Are you David William Parker, or just James Shaw.?
From the Report:
The impact of the NPS-FWM will be significant. The decline in profitability of farms in the Ashburton District is conservatively estimated at $57.9M. This level of profit may impact on the financial sustainability of a number of farm businesses, and is likely to accompany a decline in the capital value of farm land across the district.
The decline in profit is a result of reduced spending on the drivers of farm productivity such as Nitrogen fertiliser and stocking rates.
Farm expenditure is forecast to reduce by $139M leading to the loss of -653 employee from farms, service and support businesses in the Ashburton District.
Thinking more of the 653 FTEs (& their associates, dependents), reduced.... sacked, redundant..
Plus the farm businesses, farm systems made unviable.
We now know that loss of income causes mental illness.
Negative income shocks, such as bad harvests due to poor rainfall or job losses due to factory closures, worsen mental health.
Conversely, cash transfers and broader antipoverty programs reduce depression and anxiety in randomized trials.
https://science.sciencemag.org/content/370/6522/eaay0214.full
Made unviable by the arbitrary stroke of a pen.
Look at the comments above ptree for example, very passionate, but clueless in understanding the agreed numerical $ effects expected of his promoted actions.
# well meaning fools.
Like I said, run that past me again? If you knock $57million off profits and $140 million off expenses, increasing net profit by $83 million.
Scary article in Nature
Global human-made mass exceeds all living biomass.
In the year 2020 (± 6), the anthropogenic mass, which has recently doubled roughly every 20 years, will surpass all global living biomass. On average, for each person on the globe, anthropogenic mass equal to more than his or her bodyweight is produced every week.
If someone had made a movie with the presidency of Trump as the plot, it would have been laughed out of town. Even though it is 99.9+% sure Biden’s election win will not be overturned by any court the scary thing is not a thought could have been given by the protagonists to what would erupt if it was. Likely civil war.
So much war under Trump. "Israel and Morocco have agreed to reestablish diplomatic relations, US President Donald Trump announced Thursday, marking the fourth Arab-Israel agreement in four months."
https://www.timesofisrael.com/israel-and-morocco-to-establish-full-offi…
Profile,
I am sure you remember a post you put up recently with claims that there were no excess deaths in the US. Well, as you probably know, the story camefrom the student run John Hopkins Newsletter and has since been retracted. The Center for Disease Control and Prevention(CDC) gives a figure of over 200,000 excess deaths.
I didn't post that study. I did comment in that stream and pointed out there are excess deaths in the US. You are confusing me with the other poster in the comment stream.
Ironically healthy young people have suffered the highest excess death rates by being lock downed to protect them, from a virus that, by and large, doesn't harm them (See IFR by age below).
"The largest percentage increases [in excess deaths] were seen among adults aged 25–44 years and among Hispanic or Latino persons."
"Infection Fatality Ratio
0-19 years: 0.00003
20-49 years: 0.0002
50-69 years: 0.005
70+ years: 0.054"
https://www.cdc.gov/mmwr/volumes/69/wr/mm6942e2.htm?s_cid=mm6942e2_w
https://www.cdc.gov/coronavirus/2019-ncov/hcp/planning-scenarios.html
and yet Trump seems keen on a war with Iran.
https://www.stuff.co.nz/world/americas/300180812/us-b52h-bombers-fly-to…
https://www.nytimes.com/2020/11/16/us/politics/trump-iran-nuclear.html
Seems in one state the GOP is wondering if people are willing to die to overturn the election result - shows how crazy the world is / has become.
https://www.cbsnews.com/news/arizona-republican-party-overturn-election…
The Chinese CCP are probably doing what Xing gave us a heads up about a few months ago: searching for the social media posts of the CEOs and executives of the Oz companies. And where there are any that are critical of the CCP, their company will face consequences.
Lucky I am not working otherwise there would be a very black mark down against my name! haha.
With those household net worths growing the division between the haves and have-nots in the US must be widening at an ever increasing rate. This does not bode well for outcomes unless some sort of the despised 'socialism' leaks into some of their policies.
I find it odd that the yanks have such a peculiar view of what democracy means.
I'm in Twizel with the cyclists, heading to Cromwell, trying to decide then whether to go down past Alex or to go to Queenstown and then south, any ideas?
I spent yesterday helping mate tail merinos, not like other sheep. Hot and dusty bit great team.
Lupins were interesting, great colours.
Are you on a time schedule Andrew? There is the cycle trail along the river and it goes most of the way into QT?
https://queenstowntrail.co.nz/maps-and-trails/trail-experiences/gibbsto…
Riding into QT along the main road would be a shitty cycling experience though IMO.
Once heading south of QT on the main road there isn't that much traffic, probably a lot less this year with the lack of tourist busses going to Milford as well.
Not sure what sort of bikes they're on but the TA trail catches the ferry over to Walter Peak and comes out at Mossburn, that'd be a fantastic day on the bike without a car in sight and quite possibly end up as the nicest day of their trip. (http://www.touraotearoa.nz/p/map_22.html)
Not really, wouldn't recommend for road bikes. Unless they have hard buts and are OK with lots of bumps!
No way road bikes should be doing the Mavora road from Walters peak. It's basically a gravel road. I did it last year, brilliant ride but you need fat tyres. Passable with a gravel bike but will be sore but material too.
If you are going to do the cycle trail in future then go the Queenstown way. Maybe then Riverton which I've never been to but have heard it's a great spot.
Otherwise if you have time for it, go for a drive through the cycle trail highlights Clyde, Ophir and Naseby.
Can't recommend that cycle trail highly enough, it's outstanding.
Cycling Cromwell to Queenstown on the Kawarau gorge road would be madness. Don't let them do it.
Crown range via Wanaka would be safer if you have to go to Queenstown.
But I suggest going via Alex and Gore.
The new trail through the Cromwell Gorge is worth just observing. Incredibly attractive, but some months from completion. And in about three years folk will be able to get out at Qtown airport, ride both gorges and the rail trail to Dunedin, all off road.
Stinking hot yesterday, snow on the hill this morning, welcome to Central Otago.
Be very careful on Lindis Pass, quite dangerous for cyclists, limited shoulder and cars belting along. Impatient drivers overtaking on blind corners...
The Cromwell to Clyde road is also quite dangerous for the same reason, plus with the added bonus of the annoying paint rumble strips on the side, which I am sure they are already cursing. From Alex there is a new cycleway along the river, but again not suitable probably for road bikes. There is a great cafe in Millers Flat - Faigans, if you have to wait for them to catch up.
Faigan's Cafe is closed and up for sale. Check out their Facebook site for updates. https://www.facebook.com/faiganscafeandstore/
The Chinese story is never dull. The Europeans cancelling the free trade feed with China because of Chinese bullying, the Aussies refusing to cave in to Chinese bullying, the Yanks refusing to cave in to Chinese bullying, the Indians building new factories flat out, which all build stuff at 90% of Chinese costs, the Tinghua silicon chip people going bust. That will do for the moment. I suspect China has reached the maximum height of bullying power that it is ever going to reach in this particular cycle, and is desperately trying to exert itself while it can. Poor old Mr Xi will cop all the blame as well, as he has centralised all the power around himself. Interesting times.
It was time to get out about two years ago, and many did.
I think this cycle of Chinese bellicosity will continue til Xi leaves.
It will be an interesting test of the internal dynamics of the CCP, whether they can force him to step down peacefully. I believe there will be a *large* number of influential people in China who are unhappy with the current trajectory of Chinese external relations.
The Essex Boys: How Nine Traders Hit a Gusher With Negative Oil
"In a mockery of the norms of commerce, the Vega crew had ended up being paid both for the futures they’d sold when oil was positive during the day and for those they bought via TAS. That, combined with the profit from the spread trades, resulted in a total take of $660 million for the nine biggest earners, according to the trading data. Demetriou, who’s 31; Pickering, 25; and Younger, 22, pocketed in excess of $100 million each, while Roase made about $90 million. Commins took home $30 million or so. Even his son, George, who’s in his early 20s with little apparent trading experience, made $8 million.
...“It’s funny how if it was BP or Goldman Sachs that made the money, no one would bat an eyelid, but when it’s a bunch of working-class lads, people say they’re cheating,” says one trader who knows them, expressing a widely held sentiment. “I say good luck to them.”
https://www.bloomberg.com/news/features/2020-12-10/stock-market-when-oi…
Reminded me of Michael Lewis's Liar's Poker.
Or this guy who lived with Mum - and then ultimately ended up being sentenced to home detention.
"Navinder Sarao is a self-taught stock market trader who helped cause panic in US markets in 2010 from a bedroom in his parents' home in Hounslow, West London.
He was arrested in 2015 for his part in the "flash crash"- in which financial markets briefly plummeted in value. In this case it lasted less than an hour, wiping almost $1tn off shares before markets recovered."
https://www.bbc.com/news/explainers-51265169
Sanctions are costly and are apparently a feature destined to shape our economic fortunes on the near forecast horizon.
Brussels’ anti-Russia sanctions policy costs EU economy 21 bln euro annually
Europe is likely to put up with US sanctions to fight China, expert says
Massive Bitcoin News:
https://twitter.com/novogratz/status/1337117900013006849?s=20
https://www.theblockcrypto.com/linked/87378/massmutual-bitcoin-insuranc… (the article)
Insurance firm MassMutual has purchased $100 million worth of bitcoin. This needs fed approval so is a pretty big deal.
Remember, no one wants to be first, and no one wants to be last. Once the first company has made the move it makes it acceptabel for everyone else to do it also.
I'm not so sure - if MassMutual has an asset base of 235 billion then this is a tiny FOMO punt rather than a serious strategic investment. It might be enough to pump back to 19.5K+ with news of FED involvement, but bearish consequences to BTC are far greater if the FED reject it for any reason. Otherwise wake me up when a serious fund or investment bank is diversifying with a 5% hedge of their holdings in Bitcoin. That's the likely hallmark of the next moon IMO.
Absolutely it is just dipping their toes in the water. But if every other Insurance company decides to also dip their toes in, that is a shit load of capital head into a very small market.
And when they see it performing so well they will regret not buying more and then FOMO kicks in..
Im not worried about a short term pump (still want it to drop to 15-16k) but long term demand.
Pfft fed FUD wouldn't even drop the price a hundred bucks these days, were all hardened bear market veterans :P
Well I'm sure you have seen MicroStrategy issuing $550m in senior notes to buy more bitcoin. They might even crack a full billion dollars in Bitcoin this year.
Damn Labour and their tax and spend (wastefully) philosophy!....
No new taxes huh? Stuff is reporting otherwise - FBT tax to increase to 63.93% for all employees!!
https://www.stuff.co.nz/national/politics/300180688/employee-perks-coul….
And planning on doing nothing for housing... "because everyone expects a house price increase"
First few months and there are a few promises broken already...
He's not even worth making the pun of.
https://www.rnz.co.nz/news/political/432651/trevor-mallard-s-legal-disp…
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