Top 10 at 10: Ban commissions; Fortress strikes; Banks Mukhtared; Christmas robots; Dilberts

Here are my Top 10 links from around the Internet at 10am. I welcome your additions and comments below or please email your suggestions for Tuesday's Top 10 at 10 to bernard.hickey@interest.co.nz I'm beginning to feel sorry for Dilbert. 1. 'Clear fiduciary duty' - The Sunday Star Times' Rob Stock reports the Capital Markets Development Taskforce is about to recommend that financial advisers would have a 'clear fiduciary duty', which means they would act in the best interests of clients... The taskforce would stop short of banning commissions, but it seems this fiduciary duty thing is going to outlaw it anyway. I'm not sure I get it. Weren't financial advisers supposed to be looking after clients anyway? The UK is banning commissions and AMP is moving away from commissions, so why can't we just ban them? I'm glad I don't have to defend advisers.

Independent financial adviser Robert Oddy said commissions went hand in hand with some of New Zealand's most unsavoury financial practices, such as fund manager secrecy. "In my opinion people who take commissions are sales agents." He said banning commissions would be a shock to the financial planning industry but advisers like him were living proof there would be advice without them. "It would take time, but we could achieve it," he said. But Phil Macalister, publisher of the GoodReturns news website for financial advisers, said it would be a mistake to assume that banning commission would end bad advice. "Fee-based advice is no route to a Utopia of investment advice," he warned, saying consumers should be free to choose whether to go with an adviser who charged fees or one who was paid by commission.

2. Fortress strikes again - Greg Ninness at the Sunday Star Times reportsthat the 5 Mile land looks like it has been sold to Progressive for a supermarket and to Auckland developer Tony Gapes for a total of about NZ$22 million. But it seems vulture fund Fortress will get their hands on the first NZ$20 million, leaving Hanover investors with peanuts after fees. Allied Farmers is starting to look pretty good.

The Star-Times understands most of the money raised from the sale is likely to go towards paying off a mortgage owed to a joint venture between interests associated with Auckland businessman Martyn Reesby, who owns property financier Structured Finance, and US-based financier Fortress Credit Corp. It is understood the Reesby/Fortress joint venture is owed around $20m and this will probably be repaid ahead of money owed to Hanover. That would leave only about $2m for Hanover investors, but, once selling and legal costs are deducted, the amount they may actually receive could be little more than small change.

3. Real reform - I don't always agree with Rod Oram, but his column about monetary policy in the Sunday Star Times is ultimately on the money. He is saying serious structural reform is necessary and it's a good idea to debate monetary policy. I agree on both.

The Reserve Bank and its colleagues around the world are also working on other measures to regulate financial institutions through the entire economic cycle, not just the boom times. Hopefully, these will help deal with the dramatic and probably permanent increase in volatility and inter-dependence of markets. But they will only be very small steps towards the nirvana our productive sector craves: low interest rates, a comfortable currency and stability in both. The Reserve Bank couldn't deliver them even if it were loaded up with multiple goals such as growth, jobs and exchange rate stability, in addition to its core one of price stability, and it had all sorts of tools yet-to-be-invented. Quite simply, it can't fly in the face of our economic reality of being a deep deficit country. We will achieve a somewhat more stable currency only when our interest rates are down near international norms. We'll do that only when we stop needing to import so much capital. We'll do that only when we save more. We'll do that only when we earn more through exports. We'll do that only when many more companies learn how to export high value, sophisticated goods that are immune to commodity cycles. These achievements will require massive changes to business models, science and innovation, the tax regime, government finances, delivery of public services and a myriad other government and business drivers. It remains to be seen whether the government's work in many of these areas will be as game-changing as it promises. But it is hobbling itself by parking monetary policy. It is cutting itself off from the global debate about how to better run the world economy.

4. Bank who? - There's something very fishy going on in Kazakhstan that may cost banks such as Royal Bank of Scotland, Morgan Stanley, ING and Credit Suisse as much as US$10 billion. The New York Times is reporting that loans to Bank Turalem (BTA) may have been funneled via the back door to companies associated with the chairman Mukhtar Ablyazov. Mr Ablyazov has now fled the country and is living in London after the government in the oil-rich former Soviet republic took over the bank and started an investigation. I've got a feeling our Mukhtar is not living at the local backpackers in London...My favourite of his company names is 'Best Catch Trading'.

So many of these loans are now bust that many foreign banks are facing write-offs of as much as 80 percent of their value, prompting investigations into why the loans went so bad so fast, according to officials at Bank Turalem, which was taken over by the government earlier this year. Hoping to become the dominant bank in the region, BTA, as the bank is known, cast its eye well beyond Kazakhstan and lent billions of dollars to finance vast real estate projects in Russia and Ukraine, as well as offshore companies with vague business plans and no trading histories to speak of, according to executives at BTA who did not want to be identified because of the sensitivity of the matter. The money went to companies with names like Best Catch Trading and Sandown Holding, based in places as diverse as the Seychelles, the British Virgin Islands and England, that offered up little in the way of collateral, according to these executives. Among other things, prosecutors in Kazakhstan and a team of international lawyers and accountants hired by Bank Turalem are investigating whether the foreign banks may have unwittingly financed a scheme by BTA's former chairman, Mukhtar Ablyazov, to direct between $8 billion and $12 billion worth of BTA loans "” about half of the bank's loan book "” to companies that he secretly controlled, according to lawyers representing BTA as well as prosecutors in Kazakhstan. Mr. Ablyazov denies the allegations, insisting that the loans were proper and that the investigation is politically inspired because he has been a critic of the government.

5. Grow tomatoes - Jeff Clark at The Growth Stock Wire recounts how 'I Single Handedly crushed the dreams of the next generation' when he went to give a talk to a bunch of High School parents and their teachers about what careers they should pursue. He suggested they give up on careers and the whole capitalism thing to grow vegetables. He may be going a tad over the top here, but he has a bit of a point, which the students and teachers seemed to catch on. I sense the anti-bailout and anti-Wall St mood is building from the grassroots up in America. HT Gertraud.

It took me less than 30 seconds to crush those dreams. "Every year, I'm asked about how best to prepare for a career in finance," I started my speech. "And for the past six years, I've suggested taking courses in statistics, human psychology, behavioral finance, and demographics. Today, however, I'm going to give you the same advice I've given my children, the same advice I've given my friends, the same advice for which people pay me thousands of dollars every year..." I paused just long enough to notice the students were on the edge of their seats. The faculty, standing in the back of the room, stopped whispering to each other. The parents stopped texting on their Blackberries and sipping their lattes, anticipating the wisdom I was about to provide. "If you want to be successful in life," I said, "learn to grow a frickin tomato." I then explained to my audience how the government is devaluing the dollar, how the politicians are catering to the lowest common denominator of the population, how the "let's get everything I can for myself right now" society is leading to the destruction of this once-great country, and how if you want to take care of yourself and your family in the future... you need to learn to grow a tomato.

6. Inside the Chinese bubble - Michael Pettis is a professor at a Peking University's Guanghua School of Management and is widely viewed as one of the closest observers of China's economy who speaks publicly. Here in his latest post Pettis talks about the problems inside the banking system there and the economy. Essentially the banks pumped up their lending last year and are now starting to see more bad loans so are having to raise new equity.

There seems to be a real tug of war. On the one hand much of China's industrial and exporting sectors along with provincial and local leaders, are eager to see a continuation of the financial policies that have goosed employment and GDP growth at the expense of domestic consumption. On the other hand the macro and financial specialists are worried about the growing imbalances and their impacts on the financial sector. Professor Yu Yonding of the CASS Post-Graduate school, a former member of the Monetary Policy Committee and one of the smartest analysts on China, gave a speech in Melbourne yesterday in which he warned about China's over-reliance on exports and investment and suggested that the imbalances are worsening, not improving. I strongly recommend that interest readers check out the speech for themselves. In part the debate resolves around the issue of financial sector reform, especially of the banking system. This is an extremely important topic because most economists and analysts, including me, believe strongly that financial sector reform will be one of the most important steps forward for the healthy development of the Chinese economy. The Chinese financial system misallocates capital on an heroic scale.

7. Flee to safety - The one sure thing we all used to know about financial markets is that when there was a panic investors would flee to safety in the US dollar and US Treasuries. Interestingly, Felix Salmon at Reuters points out that the Dubai shock triggered yen buying and US dollar selling this time around.

It's clearly not good news that a severe-if-not-life-threatening shock such as this one sends the dollar down rather than up. The immense fiscal cost of the financial crisis has hurt the dollar's standing as the global reserve currency, and if I were at Treasury right now I'd be very concerned about this reaction. Not that there's much Treasury can do about it.

8. The Irish connection - Simon Johnson over at The Baseline Scenario points to a curious connection between the Dubait default and fears of a default in Ireland. Here's the argument:

The credit default swap spreads for Irish banks have widened signficantly "” even relative to HSBC, with its direct Dubai involvement. In part, this is hedge funds betting that others will want to insure against the rising risk of an Irish default, but what's the connection? The thinking is that a partial bailout "“ with creditor losses "“ for Dubai from Abu Dhabi implies something about how Ireland will be treated within the European Union (and the same reasoning is also more vaguely in the air for Greece). This may make sense for three reasons. If Dubai can effectively default or reschedule its debts without disrupting the global economy, then others can do the same. If Abu Dhabi takes a tough line and doesn't destabilize markets, others (e.g., the EU) will be tempted to do the same (i.e., for Ireland and Greece). "No more unconditional bailouts" is an appealing refrain in many capitals. If the US supports some creditor losses for Dubai (e.g., because of its connections with Iran), this makes it easier to impose losses on creditors elsewhere (even perhaps where IMF programs are in place, such as Eastern Europe). The main effect will be to strengthen the hand of Ben Bernanke in Fed policymaking discussions "“ so US interest rates will stay low for a long while. If financial intermediaries draw the appropriate lessons from Dubai, Ireland, and Greece (and Iceland, the Baltics, Hungary, etc), they will be more careful about extending credit to places that are becoming overexuberant "“ even when it is cheap to increase debt levels.

9. You've never heard of this guy - And I hadn't too until I read his obituary. But the passing of financial journalist Mark Pittman from Bloomberg should be noted. It's worth having people to aspire to and deeds to admire. I certainly have both with this guy.

A former police-beat reporter who joined Bloomberg News in 1997, Pittman wrote stories in 2007 predicting the collapse of the banking system. That year, he won the Gerald Loeb Award from the UCLA Anderson School of Management, the highest accolade in financial journalism, for "Wall Street's Faustian Bargain," a series of articles on the breakdown of the U.S. mortgage industry. "He was one of the great financial journalists of our time," said Joseph Stiglitz, a professor at Columbia University in New York and the winner of the 2001 Nobel Prize for economics. "His death is shocking." Pittman's fight to make the Fed more accountable resulted in an Aug. 24 victory in Manhattan Federal Court affirming the public's right to know about the central bank's more than $2 trillion in loans to financial firms. He drew the attention of filmmakers Andrew and Leslie Cockburn, who gave him a prominent role in their documentary about subprime mortgages, "American Casino," which was shown at New York City's Tribeca Film Festival in May.

10. Totally irrelevant video - Dancing Christmas Robots. It was the best I could do. Enjoy...I think. Synchronized Robot Christmas Dance - Watch more Funny Videos