Top 10 at 10: Real estate agencies' big profits; NZ not in Ring of Fire; Bernanke safe; Dilbert

Here are my Top 10 links from around the Internet at 10am. I welcome your additions and comments below or please send suggestions for Tuesday's Top 10 at 10 to bernard.hickey@interest.co.nz I'm taking Monday off for Auckland Anniversary holiday. Better bloody be sunny...  If not, I'd like some of those tic tacs the doctor is handing out. 1. Ring of Fire - The manager of the world's biggest bond fund, Bill Gross, is closely watched. His monthly newsletter is a must read. This month he produces an excellent chart called the 'Ring of Fire', which points to those nations where there is a risk of default and slow growth because of high debt levels and budget deficits. We've adapted the chart to include New Zealand's numbers, which suggest we're in the safe camp with relatively low deficits and public debt. This may help explain our relatively strong currency. But we still have some big private debts? How long before some of them are dragged onto the public balance sheet? We may yet see some of that from the remaining finance companies. Gross says studies of past crises show deleveraging and slower growth are inevitable. There is no quick fix and or way to paper over the cracks and keep powering on.

These examples tend to confirm that banking crises are followed by a deleveraging of the private sector accompanied by a substitution and escalation of government debt, which in turn slows economic growth and (PIMCO's thesis) lowers returns on investment and financial assets. The most vulnerable countries in 2010 are shown in PIMCO's chart "The Ring of Fire." These red zone countries are ones with the potential for public debt to exceed 90% of GDP within a few years' time, which would slow GDP by 1% or more. The yellow and green areas are considered to be the most conservative and potentially most solvent, with the potential for higher growth.

2. Plenty profitable - Alistair Helm at Unconditional has an interesting post on how profitable real estate agency offices were last year at the pit of the recession in the housing market. It turns out average profit at the largest offices was around 22%, while even the small offices saw 19% profit. I'm surprised at how profitable they were, even after the slump in sales. Just imagine what they were making at the peak of the boom. Or is that because sales people took the hit with lower commissions? Is there room for agency offices to charge lower commissions? We're still much more expensive than in Australia.

3. Hunt for smoking gun - A Congressman called Darrell Issa is trying to hunt down documents to prove Federal Reserve Chairman Ben Bernanke over-ruled advice from his own officials to bail out AIG, Naked Capitalism reports. It may be too late to stop Bernanke's reappointment. His reappointment passed an initial vote this morning, Zero Hedge reported.

4. Greek bailout? - The New York Times is reporting European finance officials are preparing a bailout package to help Greece out of its fiscal hole and avoid a default that could tear apart the Euro.

Despite public attempts to discourage such expectations, discussions are under way, although the shape or scale of a possible bailout package has yet to be determined, according to officials in several capitals, all speaking on condition of anonymity. "Greece failing is not an option and lots of people think that we will have to intervene at some stage," said a euro-zone finance official, who was not permitted to speak publicly because of the sensitivity of the matter. "It doesn't have to happen, and we hope it won't, but it would be better than seeing a default." As a condition of any aid package, the Greek government led by Prime Minister George Papandreou, a Socialist, would be asked to provide a more detailed program to bring the country's deficit of 12.7 percent of gross domestic product under control. European Union rules call for a maximum of 3 percent of G.D.P. Officials insist that any bailout must not put into doubt the credibility of the euro itself.

5. Capital constrained - One of the reasons lending growth is struggling all over the world is that impending changes to rules set by the Basel committee on international banking regulations will force banks to put aside more capital to back their lending. They can do this either through raising more capital from shareholders or simply reducing their lending. Guess which one they'll choose. Another option for corporates struggling to get loans from their banks will be to go direct to retail investors with retail bond issues. That's what Fonterra and others are doing. Morgan Stanley's Huw van Steenis reckons Europe's big banks will need to find €83bn by 2012, or shrink their risk-weighted assets by 11 per cent, or €1,000bn, FTAlphaville reports.

We think banks would be likely to reprice loans and reduce credit further "“ we already model less than 1% loan growth for European banks in 2010. We think Basel 3 and US proposals could mean "“ unless amended "“ corporates face a higher cost of credit and need to take on more liquidity risk, as the banks are asked to shed risk.

6. 'You ain't seen nuttin yet' - French trade credit insurer Coface reckons the next global credit crunch is likely to be even more violent than the past two years of turmoil and will probably arrive within four or five years, The Australian reported.

The three credit crises since the oil shock of 1982 had each lasted two years, but they had arrived after prosperous gaps of eight years, then seven years, and then five years, and there was every reason to think that the acceleration would continue, Coface chief executive Jerome Cazes said. Analysts for Coface had already identified worrying market bubbles "that are pretty threatening", chief economist Yves Zlotowski said. "The 2010 recovery in industrial countries is fragile and it is now at high risk because of those bubbles," he said. Those threats included overcapacity in many sectors of Chinese industry, an asset price bubble already forming in overoptimistic stockmarkets and the explosion of public debt in some developed countries. Mr Cazes said the greatest danger was not that countries such as Britain, Greece and Ireland would default on their debts but that they would be forced to cut their spending before the recovery had taken hold.

7. Withdrawal method - The Federal Reserve's programme of buying mortgage backed bonds is drawing to a close. The whole world will watch what happens when the Fed stops printing money to buy toxic bonds. What will happen to interest rates then? Zero Hedge has done another big analysis on what the Fed is doing. The key is that the stimulus is ending.

The Atlanta Fed put out a report on the status of the Fed's purchases of MBS. The report confirms that 91% of the anticipated $1.25 Trillion of paper has been bought. This leaves about $110b of buying power left for the Fed. There is only nine weeks left until the anticipated time that this program will end. This implies an average of only $10b of intervention per week. The most recent purchase was for $16B. Look for that weekly number to fall pretty quickly from now on.

8. Risky business - This chart courtesy of FTAlphaville shows the markets are now judging sovereign debt risk in Europe to be almost as risky as corporate, which is profoundly shocking when you consider governments have the power to tax and corporates have to sell stuff for a living. The blue line is the risk premium for corporate debt. The red line is the sovereign risk premium.

9. Unfunded pensions - The deficit in California's State Teachers Retirement System has doubled in the last 18 months to US$42.6 billion, which means teachers will have to contribute as much as 14% more in regular payments from next year, Business Week reports. It's dawning on everyone now. Pain from a debt-fueled consumption bubble can only be delayed. Eventually the pain will come in the form of higher taxes or savings and lower consumption. HT Troy via email. 10. Totally irrelevant photo - The ultimate boy's toy. A couch that doubles as a snooker table. 11. Totally relevant video - Jon Stewart from The Daily Show on Obama's new-found campaign against the 'Too big to fail' banks.