Top 10 at 10: China housing bubble extends to Australia; 100% pure mining lake; Dilbert; Jon Stewart

Here are my Top 10 links from around the Internet at 10 to 12. I welcome your additions and comments below or please send suggestions for Tuesday’s Top 10 at 10 to bernard.hickey@interest.co.nz We have no holes in our pants at Interest.co.nz 1. Slosh, slosh, slosh - Some of the liquidity pumped out of China's banking system and into China's real estate market in the last year seems to be slopping over the sides and down into real estate markets in this part of the world. Turi Condon and Bridget Carter at The Australian report that Chinese money is boosting house and apartment prices in Melbourne and Sydney. Is the same thing happening here?

ASIAN buyers are putting a fire under the country's housing markets, with capital-city sales -- particularly to Chinese buyers -- doubling in the past 12 months, according to a real estate group. Chinese government restrictions phased in from last year to dampen domestic real estate speculation had sent a wall of capital offshore, said Brian White, chairman of Ray White. Local Asian buyers had had a huge impact on the first-home buyer market last year, but that had flowed though into the upgrade and prestige markets, Mr White said. "It is a new market force and one which we had underestimated the strength of," he said. The growing trend of mostly Asian parents buying apartments, many worth more than $2m, for their children to live in while studying here was also fuelling capital-city residential markets. Ewan Morton, managing director of Sydney-based Morton and Morton, said 16 per cent of the real estate agency's sales last year were to Chinese buyers, with $21m in property changing hands. This compared with 5 per cent in 2008. "I don't see it abating," he said."The mainland Chinese are looking for purpose-built new apartments with water views . . . their kids are here studying."

2. 100% Pure mining lake - According to a reader of Ana Samways' Sideswipe on NZHerald, the picture postcard blue lake used in the 100% Pure campaign is the Blue Lake in St Bathans in central Otago, which was created by miners.... Here's what the reader said.

Don't you think that's ironic given the argument over mining versus New Zealand's "pure" reputation? Maybe this shows they can co-exist?

3. What were the trustees doing? - Brian Gaynor has written another hard-hitting column in the NZHerald about finance companies. This time he looks at Capital + Merchant and asks what was Perpetual Trust doing allowing the finance company to grant prior charges over debenture holders' securities to Fortress Capital. He also makes some good points about capitalising interest. He doesn't say it, but you have to wonder how fine the line is between a finance company 'earning' capitalising interest and a Ponzi scheme. Also, how could finance companies advertise 'first ranking debentures' when Fortress and Bank of Scotland were granted prior ranking charges?

Capital + Merchant Finance is another disgrace and questions need to be asked not just of the directors. For example, why did Perpetual Trust allow the directors of Capital + Merchant to give prior charges over many of its loans to financial institutions? Grant Thornton believes "if Fortress was included on the same priority ranking as the public debenture holders, the recoveries paid to investors of Capital + Merchant as a percentage of total debt is 26c in the dollar".

4. Brace for it - John Key has said a cabinet paper detailing a plan for the central government to help bail out leaky building owners and city councils is imminent, TV3 reports. I can't wait. Although it's good Key has killed off this nutty North Shore Council idea that leaky building spending would boost GST receipts (and therefore should be rebated to councils...) Here's the Treasury report.

Mr Key said this morning that progress had been made. "It's taken some time to go back and forth." He had seen a cabinet paper on the latest proposal and while it would not be part of today's meeting it would be discussed very soon. A North Shore City Council report last week said the Government would benefit from a big GST windfall from work done on leaky homes, but Treasury said the work would have no overall impact on GST receipts. Mr Key said the council report was flawed. "The basic proposition he (North Shore Mayor Andrew Williams) is putting up is because you spend money repairing those homes the Crown will earn GST revenue. That is correct but what in reality happens is people spend money on that and not on other things so there's no expectation from Treasury our revenue will go up. We won't get extra revenue."

5. Dodgy land dealings - Geoff Dyer from FT.com has this useful piece highlighting how local governments in China have loaded up on debt by borrowing against national parks and other useless assets.

Deals such as this are leading analysts to look more closely at local government finances in China. Some are beginning to warn that not only is China’s debt position much worse than advertised but that the banking system could also be heading for a big problem if many of these loans turn sour. “This will eventually require a massive bail-out from the budget and the foreign exchange reserves,” says Victor Shih, an academic at Northwestern University in the US. Local governments have only limited opportunities to borrow money, but they can set up special investment companies, such as the one operated by the Chongqing Forestry Bureau, which can use public land as collateral to raise loans. Officials have privately admitted that a significant chunk of last year’s bank loans went to these investment companies.

6. Top exporter - China has overtaken Germany as the world’s top exporter, TimesOnline reports. That's not a problem, as long as its currency is fairly valued (or at least floating) so the imbalances can work themselves out over time.

China exported $1.2 trillion (£809 billion) of merchandise last year, compared with $1.12 trillion by Germany. The United States was third with $1.06 trillion. China has also been responsible for an improvement in world trade growth, the WTO said, helping to create a “light at the end of the tunnel” for the global economy. Some commentators speculate that China's continuing growth, combined with slower growth in the West, will increase pressure on President Obama to have it declared a “currency manipulator”.

7. Decade of strife - Jeremy Warner at The Telegraph warns that years of government belt-tightening will generate significant social strife in the UK. He's right. The current NZ government's tentative steps towards welfare reform and mining are just the start. Unions are also strongest in the public sector here too. HT Gertraud via email.

The threatened wave of strikes, at British Airways and Network Rail, is only a foretaste of a decade of industrial unrest to come as government departments attempt to come to grips with the overspending of the past. It is no accident that our "spring of discontent" should be happening in companies that were formerly state owned; the public sector remains a bastion of union influence and labour protectionism. More than 50 per cent of public-sector workers belong to a union, against little more than 15 per cent in privately owned businesses. Recent union rhetoric demonstrates blinkered refusal to accept the need for cuts, compromise and modernisation.

8. Canary in the mine - Even Alan Greenspan has noticed the rise in long term US bond yields last week and highlighted the dangers, Bloomberg reports.

Former Federal Reserve Chairman Alan Greenspan said the recent rise in Treasury yields represents a “canary in the mine” that may signal further gains in interest rates. Higher yields reflect investor concerns over “this huge overhang of federal debt which we have never seen before,” Greenspan said in an interview today on Bloomberg Television’s “Political Capital With Al Hunt.” “I’m very much concerned about the fiscal situation,” said Greenspan, 84, who headed the central bank from 1987 to 2006. An increase in long-term interest rates “will make the housing recovery very difficult to implement and put a dampening on capital investment as well.” The yield on 10-year Treasury notes was 3.85 percent at 3:08 p.m. in New York, down three basis points from late yesterday and up from 3.69 percent at the end of last week. U.S. interest-rate swap spreads declined to the lowest levels on record this week, reflecting investor concerns about the ability of nations to finance rising fiscal deficits.

9. Lighter pockets - It turns out Money Managers' investors with First Step are the losers again in the failure of Auckland property developer Nigel Melview's Lighter Quay development, Greg Ninness at the Sunday Star Times reports.

Melview Halsey still owns six apartments in Lighter Quay but the company's liquidator, Dennis Parsons of Indepth Forensics, said the secured debt over the properties was well in excess of their value. That's likely to be bad news for clients of Money Managers (now called MMG Advisory Partners) who, through a circuitous investment channel, are likely to have provided much of the funding for the development. There are two mortgages over Melview Halsey's apartments – a first mortgage to Real Estate Credit (formerly Torchlight Credit Fund Holdings), a vehicle set up by George Kerr's Pyne Gould Corp to take on impaired loans, and a second mortgage to Martyn Reesby's Structured Finance, which drew much of its money from four First Step funds promoted by Money Managers to its investor clients.

10. Totally irrelevant video - Jon Stewart does his thing on the Tea Party movement

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
On Topic: Scandal-List - Tea Bagging
www.thedailyshow.com
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