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Top 10 at 10: Canadian housing bubble; China's 'Treadmill to hell'; Hotchin's unpaid bills; Crafar refusing to go; Dilbert

Top 10 at 10: Canadian housing bubble; China's 'Treadmill to hell'; Hotchin's unpaid bills; Crafar refusing to go; Dilbert

Here are my Top 10 links from around the Internet at 10 past 12. I welcome your additions and comments below or please send suggestions for Monday’s Top 10 at 10 to bernard.hickey@interest.co.nz Dilbert.com 1. Canadian housing bubble - The average house price in Vancouver hit the C$1 million mark last month. Prices there are booming, CTV.ca reports. Canadian real estate agents are orgasmic. I wonder if Chinese buying interest is a factor there too? At some stage all that easy Chinese money is going to stop overflowing into various satellite markets such as Sydney, Auckland and Vancouver.

The soaring prices have local realtors like Paul Eviston feeling good. "If you look at our market in the last 12 months, (it's) probably the hottest real estate market in the world," he said. Local housing prices jumped 23 per cent in March compared to a year earlier, according to the city's real estate board. The recovery means housing prices in Vancouver are now 3 per cent higher than they were before the recession hit.
2. Irrational market? - Who would ever think such a thing? The Globe and Mail reports some in Canada are worried about a bubble developing.
Prices for all key housing types were up more than 10 per cent across Canada in the first quarter on a national basis, according to the Royal LePage survey released Thursday But Vancouver and Toronto prices rose much more dramatically – about 20 per cent in some cases – and the head of Royal LePage Real Estate Services suggested they may have risen too far in those local markets. “House sale data from the past two year period shows tremendous variances in terms of how different cities reacted to the recession,” said Phil Soper, president and chief executive officer, Royal LePage Real Estate Services. “In Vancouver and Toronto, for instance, the dramatic unit sales fluctuations exhibit a significant degree of market irrationality: inordinately fearful when faced with poorer markets; and overly enthusiastic when the tables turned.”
3. Yuan float talk growing - The New York Times, which seems to know a lot about what's happening inside Obama's White House, is reporting that the Chinese authorities are about to quietly let the yuan/renminbi float. This would significantly ease tensions between the United States and China, which were threatening to lead to tit-for-tat trade sanctions. What might all this mean for New Zealand? It depends on what happens in China. If this hits manufacturing exporters there that might suppress demand for the raw materials going into those factories, including Australian iron ore and coal. That in turn might affect us through a slowing of the Australian economy. However, stronger Chinese consumption might boost demand for New Zealand exports, assuming our currency doesn't rise vs the US dollar. But fundamentally, we have a big trade deficit with China that would narrow if there was a freely floating currency set.
The Chinese government is preparing to announce in coming days that it will allow its currency to strengthen slightly and vary more from day to day, a move being taken for domestic policy reasons in China but likely to please the Obama administration, people with knowledge of the emerging consensus in Beijing said on Thursday. While any announcement could still be delayed, China’s central bank appears to have prevailed with its arguments within the Chinese leadership for a stronger but more flexible currency. Insisting on anonymity because of the sensitivity of the issue in Beijing, they predicted that China’s policy shift could easily come before President Hu Jintao arrives in Washington next week for discussions with Mr. Obama and other world leaders on improving nuclear security. A more market-oriented currency policy in Beijing, with a trend toward a stronger renminbi, could help the American economy in several ways, according to economists. A stronger renminbi would make Chinese goods more expensive in the United States and make American goods cheaper in China, which is currently exporting more than four times as much to the United States as it imports. Even more important, a Chinese decision to strengthen the renminbi would make similar moves possible by many other countries, particularly in Asia, that informally link the value of their currencies to the dollar. Exporters like Japan, South Korea and Taiwan are leery of letting their currencies appreciate for fear that their exports would lose out to Chinese exports in the American market.

4. 'Heads must roll' - John McCrystal, who has written books with Gareth Morgan, has a long and well written piece in May's North and South magazine on Hanover Finance. It's due to hit the stands next week and is well worth a purchase. It's not online. McCrystal covers all the bases well and introduces a few new snippets, including this gem on Mark Hotchin's past.
He seems to have realised quite early in his career that there are two classes of creditor: on the one hand, there are those whom you must pay in order to avoid un-desirable consequences – such as the sub-contractors responsible for getting projects under way and substantially completed, or banks and others with deep pockets and good lawyers; and on the other hand, those who, for one reason or another, can’t or won’t take legal action and who can therefore be ignored– such as those doing fiddly, finishing work and those who can’t afford or simply can’t be bothered taking the matter to court, due to the high cost of legal proceedings and the level of aggravation involved. This, at least, was the impression of a number of the (part-paid) tradesmen working on Hotchin’s lavish holiday home on the outlandishly opulent Waterways canal development at Pauanui on the Coromandel Peninsula in 1997. The same contractors formed the view that such tactics helped subsidise Hotchin’s lifestyle that included holidaying in the Yasa was in Fiji while building the aforementioned holiday home. Curiously, at the time Hotchin also had a personal credit rating that meant he would have struggled to get finance approval to buy a washing machine on hire purchase, thanks to the string of debts he owed — everything from unpaid phone bills to defaults on child-support payments.
McCrystal concludes, rightly I think, that the Securities Commission should take a chunk of the blame.
As Brian Gaynor has blogged, all the documentation involved in Hanover’s initial moratorium and then in the Allied Farmers deal had the legal status of an offer document and was subject to Securities Commission oversight, and made claims as to the value of the assets involved. There was every reason to doubt the accuracy of the valuations supplied by Hanover, and perhaps even the Declaration of Solvency the company was required to supply prior to offering the moratorium to investors and yet no one looked behind it – not the independent auditors, and more relevantly, not the regulator. Auckland barrister Paul Dale, who has had experience in representing investors in a class action against a failed finance company in Australia and who took the unsuccessful action seeking an injunction to stall the vote on Hanover’s moratorium, points to the stark difference between the regulator there and our own Securities Commission. “In Australia, the regulator goes in to bat for the investor. The regulator does the investigation, and the regulator takes action. Who represents the investor here?” Who indeed. If nothing else comes out of the latest chapter in the history of the Securities Commission’s dereliction of duty, heads must surely roll.

5. 'Treadmill to hell' - Renowned US fund manager James Chanos has told Bloomberg that China's property market is a bubble that may burst as early as this year.
The world’s third-biggest economy may need to keep up the pace of property investment because up to 60 percent of its gross domestic product relies on construction, said Chanos. The bubble may begin to “run its course” in late-2010 or 2011, he said in an interview on “The Charlie Rose Show” that will air on PBS and Bloomberg TV. China is “on a treadmill to hell,” said Chanos, who said in January the nation is Dubai times a thousand. “They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.”
6. The new gold? - The Daily Telegraph asks if platinum is the new gold in this useful piece.
All the talk of metal investing in recent months has focused on the safe haven and inflation hedge of gold. Yet other metals, notably platinum and palladium, are gaining interest from investors. Two main factors are driving these metals to premium prices: demand from the Asian market and the global need for catalytic converters. Half of all cars need these converters and that will ensure demand remains strong. Prospects of a global economic recovery and the tentative signs that the motor industry is getting back on its feet are boosting the price of the white metals once again.

7. The rest of Europe's wreckage - The New York Times has a very useful interactive graphic showing the other problems in Europe, besides Greece. Well worth a click. 8. Totally relevant video - Jim Grant, a bit of a hero of mine, completely eviscerates Alan Greenspan in this video. 9. Stubborn bugger - Alan Crafar is nothing if not stubborn. He is refusing to leave his Dairy farm despite demands from receiver Michael Stiassny to get out. Stiassny is even offering to pay the rent on a house in town for 6 months to get the old bugger out. But the deadline is the end of today, Radio Live reports. We shall see.
Receivers KordaMetha have offered to pay the embattled dairy family to rent three properties in Rotorua for six months – if they leave their Reporoa farm. But Alan Crafar says after working on the land for 40 years, he has no intention of leaving the farm. “We’ve spent our whole lives and our family’s whole lives being concerned by this job, doing this job for our whole lives, basically. “We’ve produced hundreds and hundreds of millions of dollars for the country.”
10. Totally irrelevant video - This is a great graphic-video showing air traffic patterns globally. Our little part of the world looks particularly busy. It is a 24 hour observation of all of the large aircraft flights in the world, condensed down to about 2 minutes.

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