Top 10 at 10: More capital for Kiwibank?; King Mark and Ivan the Terrible; Climate changing; Arnie's IOU disaster; Dilbert

Top 10 at 10: More capital for Kiwibank?; King Mark and Ivan the Terrible; Climate changing; Arnie's IOU disaster; Dilbert

Here's my Top 10 links from around the Internet at 10am. I welcome your additions and comments in the comments section below. Please send any suggestions for Monday's Top 10 at 10 to bernard.hickey@interest.co.nz My bonus is not a practical joke. Dilbert.com 1. Vernon Small at the DomPost (Stuff) reports the government is looking at its options for funding Kiwibank's growth. One way to put more pressure on the banks is to back Kiwibank with more capital to boost lending. Good idea?

Finance Minister Bill English said yesterday: "Preliminary discussions have been held about the next phase of Kiwibank's growth that's as far as it's gone at this stage."

2. Bruce Sheppard is Stirring the Pot again over at Stuff (BusinessDay) over the issue of the NZX's many perceived conflicts of interest and the performance of CEO Mark Weldon. It is a long post but well worth reading for NZX watchers. Bruce compares Weldon to a King (and Ivan the Teribble) and describes the NZX as his Kingdom of Weldonia. Here's a taste.

Fiscally King Mark has managed his kingdom well. The lords of Weldonia (the shareholders of NZX) are happy and contented with the rewards that King Mark has shared with them for their loyalty. (Dividends). The Privy Council (the board) live in awe of his splendour and power. They must marvel at his involvement with government on all sorts of issues outside of his core knowledge and competence, and revel in the thought that his influence makes him impervious to any United Nations (government and Securities Commission) intervention in his management of Weldonia. The great industrial enterprises of Weldonia (big listed companies). They are contented with their share of Weldonia's economic output, and are happy to pay their taxes as they have light handed or non-existent regulation and a free hand to behave as they wish. When they wish to stretch the limits, they simply must appeal for an audience with King Mark, cross his palm and it will be done. The small industrial enterprises are less happy (small listed companies) they are easy targets to be relentlessly hounded and feel vulnerable in Weldonia. There only choice is to migrate (to another exchange, unlisted for example). Rumour has it that NZX is looking to buy unlisted... The serfs, (the small investors) still think the kingdom is just, and believe that the justice system of Weldonia is there to protect them. (Regulation is there to protect investors?) Weldonia operates justice on a profit model, sharing those profits among themselves and the great industrial enterprises. The democratic process of Weldonia has been corrupted to ensure that the Privy Council and King Mark are beyond reproach. Weldonia is run by an absolute monarch, with a sense of justice akin to Ivan the Terrible and with the commercial mind of Elisabeth 1. The serfs and small enterprises should be very wary of NZX and remain so until a judiciary independent of NZX is established. Now clearly the serfs union, the Shareholders Association, has been concerned about this lack of independent regulation for some time. In order to convince government to act it is about numbers. So do two things, if you agree with this, send me an email in support, bruce@gilshep.co.nz, and join the NZSA.

3. This is amusing in an Australian sort of way. Citigroup has appointed Ned Kelly as its vice-president for strategy, the WSJ.com reported. Is it surprising some Americans call these bank executives banksters? 4. Property investors are returning to the market in Australia, The Age reported. HT Rob

INVESTORS are taking their first tentative steps back into the housing market after more than a year's hiatus and could be further spurred on by a change to superannuation laws. Bureau of Statistics figures out yesterday showed investor finance rose 2.4 per cent in May, the third straight month of growth. In annual terms, it was the first time investor finance had reached positive territory "” 1.3 per cent year on year "” since the property boom began to cool in January last year.

5. Babcock and Brown has written off its entire investment in Israel's Yellow Pages, the Australian reported. Yellow Pages was bought from Telecom by CCMP Capital Asia and Canada's Teachers' Private Equity for NZ$2.24 billion in March 2007. How much might it be worth now? 6. The US Labour Department has produced a study showing retraining may be a waste of time, the New York Times reported.

little-noticed study the Labor Department released several months ago found that the benefits of the biggest federal job training program were "small or nonexistent" for laid-off workers. It showed little difference in earnings and the chances of being rehired between laid-off people who had been retrained and those who had not. In interviews, the authors of the study and other economists cited several reasons that retraining might not be effective. Many workers who have lost their jobs are older and had spent their lives working in one industry. In need of a job right away, many pick relatively short training programs, which often have marginal benefits. Job retraining is also ineffective without job creation, a point made by several economists who have long cautioned against placing too much stock in it. Finally, workers trying to pick a new field cannot predict the future of the labor market, especially in a time of economic upheaval.

7. Mish at Global Economic Analysis picks up on the latest talk around the United States of a second stimulus plan. It seems Washington is of many minds generally. Mish has made his mind up. It would be a bad idea.

Unfortunately, no matter how senseless a second stimulus would be (and it truly would be senseless), if Obama decides "Son of Stimulus" is needed, Congressional democrats will most likely all start sounding like "Bah-Bah" Durbin. However, no one will want to call it "Economic Stimulus Two" so the bill will end up with a name like the "Economic Stabilization And Putting The Country Back To Work Program." It will do nothing but waste money.

8. Nevil Gibson at NBR has a nice summary of where the climate change debate is now and highlights growing scientific and political scepticism about paying the high costs of carbon taxes and emissions trading.

Did you stop worrying about climate change when the credit crunch and global recession got serious? Then listen up, things have changed for the better. In the past year or so since you last worried about it, the climate change debate has moved on. In fact, it is in danger of extinction as the scientific "consensus" disappears and international agencies and governments backpedal on draconian measures to stamp out use of carbon. In New Zealand and Australia, the political climate has turned decidedly frosty against moves to impose heavy costs on business or consumers.

9. Last night's auction of 10 year Treasury bonds did not go well with a lower bid cover ratio and yields rising, Bloomberg reported. People are now wondering a bit about the rally seen in the last couple of weeks which pushed bond yields down. Quantitative Easing is the elephant in the room.

Yields on Treasuries are being artificially suppressed by the central bank; otherwise bonds would yield more than 10 percent, according to Lee Quaintance and Paul Brodsky of QB Asset Management in New York. "There are powerful structural forces blocking any fundamental reconciliation of value," Quaintance and Brodsky wrote. "These forces include bond markets comprised mostly of domestic and foreign investors with incentives that place them at odds with rational credit pricing, as well as central banks with unlimited spending capacity threatening, and being encouraged by all, to intervene when necessary to provide a ceiling on yields."

10. Arnold Schwarzenegger is issuing his own form of money to get the bankrupt state of California through a budget crisis. For the last couple of weeks California's state government has been issuing IOUs to contractors and some suppliers, who have then been trying to bank them. Now the banks are refusing to accept them and recipients are trading them (at a discount) for cash and goods on Craigslist and Ebay. This has forced the Securities and Exchange commission to look at regulating their trading. Mish at Global Economic Analysis has the good oil on this rolling Clusterf**k to the Poorhouse. He's grumpy with the banks for not accepting the IOUs.

It is the California legislature, primarily Democrats, who simply refuse to balance the budget. Contractors and state employees are legitimately owed that money for services rendered. I am all in favor of axing jobs, whatever it takes to balance the budget. I am not in favor of holding businesses and consumers hostage for services already rendered while it is done. To the extent that banks' refusal to cash IOUs pressures the legislature to act, the refusal may appear to be a good thing. However, two wrongs do not make a right, and if I had a bank account at any of those places and they refused to honor IOUs from the state I would move my account to someplace who would. So should any thinking person.

Is this what an American default on its debt going to look like. A rolling series of state and municipal bankruptcies where states create their own currency? Just amazing. So much for green shoots.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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