Top 10 at 10: Curious Strategic deals; SCF selling; The dumbness of gold standards; Dilbert

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 Wedensday's Top 10 at 10 (the last of the year) to bernard.hickey@interest.co.nz 1. Hmmmm - Cactus Kate has done some digging around the deals being done between Triumph Capital and Strategic Finance. She finds connections to Korda Mentha partner Grant Graham. She asks some interesting questions about the independence of receivers. Please be careful about how you comment on this.

1. What nature was the transfer and for what consideration were shares in Triumph transferred from Vardon to Emporio and Wakefield? 2. Is there a gentleman's agreement to buy-back later? 3. What proprietary information has Graham had access to as a trustee of the shareholder of Triumph, that compromises his position as KordaMentha the receiver in this and all previous projects relating to Vardon and Strategic? 4. How can we be assured he didn't have access to this proprietary information if he says there was none? 5. Should KordaMentha now recuse themselves as receiver for Strategic based projects on this (at best) appearance of conflict?

2. South Canterbury selling - South Canterbury Finance told the NZX it had sold its stake in Pyne Gould Corporation to George Kerr as it seeks to raise cash, the ODT reported. We wonder what else they could sell. Brace for it.

South Canterbury had other investments, some of which could be realised. They included bonds in Silver Fern Farms, Fletcher Building, New Zealand Post, Contact and Tower Corporation. South Canterbury also held shares in ING Medical, Nuplex, New Zealand Oil and Gas, Goodman Properties, New Zealand Refining, Restaurant Brands, AMP Office, Rakon, Vector, Goodman Property, Freightways, Renaissance, Austral Pacific, Hellaby and Allied Workforce.

3. Some good news - On the eve of Christmas ANZ National successfully raised US$1.25 billion through a three year bond issue into the 144a market in the United States that did not carry a government guarantee. This is a first for New Zealand since before global capital markets froze in late 2008. The Reserve Bank will be pleased. 4. Outrageous fortune - FTAlphaville points out Denmark's Saxo bank has come up with 10 outrageous predictions for 2010. Last year Saxo successfully predicted massive Iranian unrest, but were wrong with their other 9. This year they say:

1)Bunds yields will fall to 2.25% Deflationary forces and excessive monetary policy will lower the yield on Bunds and other sovereign fixed income when the government fixed income traders refuse to buy into the "growth story" that is being told by the stock market. We believe that the German 10-Year Government Bond could be forced from 122.6 to 133.3 by the end of 2010 in a general flight to quality. 2) VIX will fall to 14 3) CNY (China Yuan Renminbi) will be devalued by 5% vs. USD The efforts of Chinese authorities to stem the credit growth and avoid bad loans, combined with the creation of several growth bubbles could ultimately reveal the Chinese investment-driven growth as being deficient. The massive, Chinese spare capacity and the economic backdrop could be a deciding factor in devaluing the CNY vs. the USD. 4) Gold will fall to $870 in 2010 but will rise to $1500 in 2014 A general strengthening of the USD could break the back of the recent speculative element in gold. Although we are long term bullish on gold (believing it will reach $1500 within five years), this trade seems to have become too easy and too widespread to pay out in the shorter term. A serious correction towards the $870 level could shake out the speculative community while keeping the metal in a longer term uptrend. 5) USDJPY to reach 110 6)Angry American public to form third party in the US The anti-incumbent mood is approaching 1994 and 2006 levels as a result of bail-outs and general disapproval of both the big parties. A demand for real change among American voters could propel a third new party to become a deciding factor in the 2010 elections. 7) The US Social Security Trust Fund will go bust This is not so much an outrageous claim as an actuarial and mathematical certainty. The outrageous part is that social security taxes and contributions have been squandered for so long. 2010 will be the first year where outlays for the non-existing trust fund will have to be part-financed by the federal government's General Fund. I.e. the budget trick, in reality a "fund" without funds, will be visible for the first time. Part of the social security outlays will have to be financed by higher taxes, more borrowing or more printing. 8)The price of sugar will drop one third 9) TSE Small Index will rise by 50% 10) US trade balance will turn positive for first time in 34 years

5. Now that's a tax - The fallout continues for Iceland. In a desperate effort to get its budget deficit under control, Iceland has imposed a VAT (GST) of 25.5%, Bloomberg reported. It has also introduced an environmental and natural resources tax and imposed two new income taxes to replace its flat tax. 2010 will be a year of fiscal pain for governments and voters. 6. Gold standards - Randall Forysth at Barron's reckons nostalgia for the gold standard is misplaced. Studies from the Depression show that those who abandoned the gold standard first emerged faster and better from the Depression. Being able to print money this time around saved us from Depression 2.0, he says.

Impassioned adherents of the gold standard gloss over the inability to counter deflation. Modern democracies simply will not tolerate the Dickensian unemployment and suffering brought on by debt deflations, however, which is why the Federal Reserve was created during the Progressive Era that also had previously brought anti-trust laws and the beginnings of other government regulation of business. For all its faults, the floating dollar monetary system permitted policy makers to react aggressively to the worst economic crisis since the 1930s and prevent the Great Depression 2.0 this time. Now, the challenge is to heed the message of the soaring gold price, but not mechanistically, as the gold standard would demand by raising interest rates. The problem is on the fiscal side from trillion-dollar deficits as far as the eye can see. A change in the monetary system will do nothing to address that disaster.

7. More fallout - Canterbury Mortgage Trust may pay out just 88% of the NZ$251 million lent it by 4,500 investors, Marta Steeman reports at The Press. However, it may also pay out 100% within 3 years...

The trust warned investors in its annual report that it had made a worst-case scenario provision of $46.7m for bad loans. That meant investors might get only 88 cents in the dollar back. However, the property market had improved since the $46.7m calculation so it still hoped to return 100 per cent of principal. That was reiterated in yesterday's letter, which said "directors remain hopeful that full repayment of your capital can take place within the three years originally indicated - that is by the end of 2012". The trust was marketed as a low-risk investment that was conservatively managed and all lending was secured by first mortgage. But several of the major loans that got into trouble this year were advances to Christchurch property developer David Henderson or his entities.

8. Immigration Ponzi scheme - The Economist has an excellent article pointing out that America's strength is its ability to welcome in migrants. Maybe a migration surge is what we need too to solve our looming dependency ratio problem.

President Obama promises immigration reform: stricter border controls but also a path to citizenship for those in the country illegally. George Bush promised the same thing, but Congress blocked him. Mr Obama has his work cut out to avoid that fate; and although he is the son of a Kenyan Harvard student, he has done little to make the system less cumbersome for skilled migrants. The stakes are high. Immigration keeps America young, strong and growing. "The populations of Europe, Russia and Japan are declining, and those of China and India are levelling off. The United States alone among great powers will be increasing its share of world population over time," predicts Michael Lind of the New America Foundation, a think-tank. By 2050, there could be 500m Americans; by 2100, a billion. That means America could remain the pre-eminent nation for longer than many people expect. "Relying on the import of money, workers, and brains," writes Mr Lind, America is "a Ponzi scheme that works."

9. Higher interest rates - One of the big themes for 2010 will be rising interest rates. Moody's captures this in its outlook for 2010, as reported by Zero Hedge. New Zealand's debt raisings next year will be much more expensive. Bill English can't be too complacent going into the 2010 budget.

As the global economic recovery attains a more solid footing, 2010 will at best see a "normalization"and at worst a severe tightening in government financing conditions. Long-term interest rates may increase more rapidly than expected because of an over-reaction to economic news, which we believe will be mildly positive overall. Moreover, the slow unwinding of "quantitative easing" will accelerate this credit repricing process. The end of exceptionally low financing conditions will expose the true cost of the crisis on government debt affordability across the world. Aaa governments will probably not have the luxury of waiting for the recovery to be secured before announcing and perhaps also implementing credible fiscal consolidation programs. As most governments simply cannot afford another financial crisis, they will attempt to ring-fence their balance sheets from selected contingent liabilities. This could in some cases create disorderly market conditions.

10. Totally irrelevant video - HT to Andrew Wilson for passing on this Christmas lights video. Some Americans obviously have way too much time on their hands. Must have cheap power too.... Amazing Grace Techno - Computer Controlled Christmas Lights from Richard Holdman on Vimeo.