90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: US housing slump drags Dow, NZ$ down; Hubbard supporters write letter; Uruguayan bid battle

25th Aug 10, 8:55am by Bernard Hickey

Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that US existing home sales fell a record 27% in July to a record low annual pace of 3.83 million.

This fresh sign that the world's largest economy is headed for a double dip recession dragged the Dow 1.3% lower and pushed the New Zealand dollar down to 70.6 USc as investors globally edged away from 'riskier' currencies that depend on high commodity prices and buoyant global growth.

The oil price fell under US$72 a barrel and copper fell by the most in five weeks.

The New Zealand dollar fell to a 13 month low vs the yen of 59.4 yen as the yen is seen as least unsafe haven of the global currency scene.

Initial signs the Japanese central bank would intervene to push the yen lower have faded in recent days.

Meanwhile, back in New Zealand, investors in Aorangi Securities and other funds run by Allan Hubbard have written to Commerce Minister Simon Pound calling for him to pull the funds out of statutory management, NZ Herald reports.

They argue there is no evidence of fraud.

Meanwhile, a bidding battle is developing over Uruguay Farming Systems New Zealand as Asian investors and others hunt for hard food producing assets in an uncertain global environment.

Singapore's Olam International increased its bid for Uruguay to 70c/share from 55c/share yesterday after talk emerged of a third bidder. A Uruguayan fund is also bidding.

However shareholders who bought into the Uruguay IPO at over NZ$1 a share would still be selling for less than they bought it for.

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40 Comments

by President of P… | 25th Aug 10, 9:43am 1282686198

Land, Water, Food and Fresh Air is the new gold

and shelter... do not forget the shelter (commonly referred to as properties, i.e. somewhere to exist) and to those who think shelter is something else, then that shows more about you and your lawyer and accountant and your weasley tax avoidance schemes, pre-nups and trusts...

by andyh | 25th Aug 10, 9:06am 1282683997

Glad to see you were not 'surprised' by the dreadful US data Bernard.

As a follow up look at this - houses selling in the US at auction for $25!!!.

http://www.lansingstatejournal.com/apps/pbcs.dll/article?AID=/20100823/…

Astonishing.

by bnzeconomists | 25th Aug 10, 9:09am 1282684140

Andyh,

I'm worried about the US. Something ugly is brewing there.

Bernard

by andyh | 25th Aug 10, 9:21am 1282684866

Your not kidding. However we are not quite at the denouement.

They will no doubt launch a super duper QE2 towards the end of this year/early next (as the authorities have to drop all pretence that there is a recovery).

Things should then stagger on for a while, maybe even as far as 2012.

Anyone not taking the appropriate action to protect their financial position - well the writing is on the wall.

by andyh | 25th Aug 10, 10:16am 1282688191

A couple of things to think about maybe

a) Are you technically safer (at least until the end of 2011) with one of the smaller institutions which HAS a government guarantee (which has a clearly defined set of Treasury parameters) or with one of the bigger institutions (ie the big 4) where the implication is that they would be rescued (to big to fail) but where as of today no such precise Treasury parameters exist).

b) Do you have exposure to precious metals?

In actual fact my comment up above was meant in perhaps broader terms - such as

a) Get yourself to the non-discretionary side of the economy if you can, rather than being dependent on a job on the discretionary side

b) Get yourself out of debt

c) Get into cash - divest yourself of assets likely to depreciate in a deflationary depression (which certainly seems the initial situation we face).

by Matt S | 25th Aug 10, 10:13am 1282688014

Under your matress? ... You should note that there is not one single strategy that works for all situations. There are different strategies (in general) for different scenarios;

Run on the banks = cash under the mattress

Hyperinflation = gold/silver or foreign currencies, govt bonds, large asset debt fueled buying spree.. etc.

Just a couple of quick examples. However the key is you need to prepare well ahead of time. You have to have a strategy based on what you believe might happen, and then be prepared to put it into action. Put it this way, you probably have insurance on your car, contents, etc .. what is your insurance policy on protecting your wealth ?

Matt

by andyh | 25th Aug 10, 10:23am 1282688603

Good points Matt.

It pays to keep an open mind on the Deflationary Depression versus Hyperinflationary Holocaust conundrum (particularly as the financial responses to both are so different) but for me the immediate picture looks to be deflation laden.

Two other things we can take from this are:

a) Stay nimble - do not entrench your financial solutions too far into the future

b) Take control of as much of your own finances as you can. The 'experts' out there mostly have feet of clay, and the financial services industry is there to make a living out of you, and is staffed largely by idiots most of whom dont see any of this coming anyway.

by Wolly | 25th Aug 10, 1:00pm 1282698056

"...dubious as to whether the bank will be able to recoup its money"....you must have laughed like hell at that one Kirsty...."its money" indeed...what a joke. I suggest you tell the bank to stuff its mortgage...plan on building the new house yourself with zero borrowed loot. You obviously have the time to do the learning. I trust "hubby" is not the "Andy Cap" type!

by David George | 25th Aug 10, 9:11am 1282684273

Some unusual activity on the US markets overnight with the very weak housing data.

Treasury bond yields at record lows under 0,5% on the two year.

Goldman talking about a new big QE

Gold moving from a big down position to a huge reversal when the housing stats came out. So it's moved against the trend you would expect from a higher dollar, lower equities, lower commodities.

Is this an early warning sign that the willingness to hold debt of any kind could collapse, Faber's hyperinflationary holocaust? Any ideas?

by David George | 25th Aug 10, 9:26am 1282685184

Sorry Anon, by "a willingness to hold debt" I meant from the point of view of a lender or holder of a debt obligation. The result of a widespread belief that the debt can't/won't be repaid - failure of faith in the monetary system.

This could trigger a desire to dump debt and money of all kinds in exchange for precious metals, commodities, hard assets. An event that could erupt in a few minutes as everyone tries to get out at once.

by Casual Observer | 25th Aug 10, 9:55am 1282686911

Could it be DonMac that overseas investors in NZFSU have the financial reserves to buy the whole company, throw out the poor management, get rid of the nepotistic supply contracts and actually get the company running profitably?

Two things I have seen repeated when academic desk jocks come up with wonderful ideas of farming offshore, are cultural arrogrance and secondly a complete lack of recognition/acceptance that you cannot simply take a NZ based system and recreate it offshsore. They seem to be completely unaware of the saying 'the difference between practice and theory in practice, is greater than the difference between practice and theory in theory'. This is especially so in farming.

I have farming friends who invested in NZSFU solely on the reputation of Craig Norgate!

by Wolly | 25th Aug 10, 9:56am 1282686966

Now and then we are allowed to see through the haze of smoke and fog...a glimpse of the govts dirty tricks behaviour....first you make a big media hype hoopla razzamatazz load of noise about encouraging savings and setting up a grand working party plan to distract the stupid media...that bit was sooo bloody easy....then you carry on with the backroom policies of encouraging the sale of NZ for hot munny....which is mostly in Asia these days....that involves making sure the RE sods are front and centre in Beijing at the grand fair...with your full support of course. Keep the media busy with the 'working party bullshit' and other distractions while doing the deed in the backroom.

That's how it goes.... isn't it John Key?

The name of the game is to keep the bubble intact...to prevent the price of property falling back to affordable levels....must not let that happen....must protect the profits of the banks...use the excuse that a collapse would harm the economy....use any bloody excuse but save the banks.

meanwhile keep Bollard in the dark...let him carry on thinking he is in charge...of something...anything...tell him he is important in the greater scheme of things...what a joke.

Months back I said the core funny rate was nothing but hot air..that the hot munny would bypass Bollard without him knowing what the hell was going on...that the munny would flow through the banks as private investment into property. That is exactly what is happening with the full support of the govt.

by Rob of the North | 25th Aug 10, 10:01am 1282687298

Kirsty

Rabobank has the highest ratings of any bank in the world and pays the same rates as all the NZ banks and is govt g/teed.

you can open an a/c online also and get a security widget to protect you.

they're paying 6.75% on 5 yrs deposit at the moment and 3.5% on call but check on here for correct rates..

US housing scenario may arrive here in the next year or two??...yes?...no?

http://www.sharechat.co.nz/article/c4828fe0/while-you-were-sleeping-record-drop-in-home-sales.html

by Gummy Bear Hero | 25th Aug 10, 10:13am 1282687990

Expect " Helicopter Ben " to begin a new round of QE on Friday , this week !

by andyh | 25th Aug 10, 10:14am 1282688061

If I might make a prediction. By the end of next year, most if not all of the banks etc will have run back into the embraces of the extended government guarantee (which will then be extended again into 2012 and so on etc).

by Gummy Bear Hero | 25th Aug 10, 10:27am 1282688854

As ever " chicken-little " Bernard , you spread your doom & gloom of double-dip recessions/ depressions , woe be-tide us all , the economic sky is falling ..................

But , GDP growth is still positive , albeit sluggish . Companies are making record profits . Low interest rates are stimulatory .

..................... Note to self : Next Gummibar Dinner Party guest list : No to Roubini , Marc Faber , and Hickey . ................ Can't have the other guests being too depressed before seeing my attempt at haute cuisine .

by Gummy Bear Hero | 25th Aug 10, 11:09am 1282691382

Kermie : Only if you promise to prevent your partner from making a pig of herself .............. again !

by Gummy Bear Hero | 25th Aug 10, 3:32pm 1282707125

Got the Swedish Chef booked for the catering . Either way , your goose is cooked , Frog !

by Rob of the North | 25th Aug 10, 10:43am 1282689821

I see a bad moon on the rising ..if that's any help?

by Christov | 25th Aug 10, 2:49pm 1282704581

Get me some of what ....your....smokin......I aint seen no moon in months of rain n sleet................... bad moon ...good moon.....banksie Moon.... hell I'll take whut I can Git.

by Christov | 25th Aug 10, 2:52pm 1282704727

No that is wrong The NZD should have the bullsh*t kicked out of it by say next winter or before.

Possible trade range..........57 to 64.

by Rob of the North | 25th Aug 10, 10:58am 1282690710

Exporter above:

The Dollar will stay in a band between 73-79 cents against the greenback.for the next year or so.

But PI's out there don't panic..go the China instead.

look at this

http://money.cnn.com/video/news/2010/08/23/n_china_housing.cnnmoney/

by Christov | 25th Aug 10, 2:53pm 1282704810

Will you put your kahoonies on that............... I don't think so.

by Gummy Bear Hero | 25th Aug 10, 11:17am 1282691868

Well said !

Bernard : For Fred's sake cheer up . Have a latte at Warren&Tarquains' Salon , get a fresh boof , you'll feel so much the better for it .

by Christov | 25th Aug 10, 2:56pm 1282704967

Hay Gummy B ....... you know the rules..... no cheering up till Friday....... late aft.

Now put that umbrella back up it's raining and it smells bad.

by Gummy Bear Hero | 25th Aug 10, 3:29pm 1282706979

Should'a heard the Hickster on Radio National yesterday ( Jim Mora 4-5 p.m. ) . A little ray of sunshine he ain't .

Now , I accept that we have some heavy sledding ahead , a long slow deleveraging of debt . But Bernie is really laying it on thick . The daily " 10@10 " of doom & gloom palls . We need a little variation of the gruelling diet .

by Wolly | 25th Aug 10, 11:22am 1282692172

Somehow I doubt "we" will be better off VR..."we" will likely have been tipped into the sea have passed through the food chain to have reached the slug level.

by David George | 25th Aug 10, 5:03pm 1282712596

"stimulus arising from RWC"

Have you run the numbers on this Muzza?

We usually get 2,500,000 tourists (50,000/fortnight) a year so 85,000 rugby fans out here for two weeks is bugger all different. They'll just displace the usual visitors. No ones going to want to mingle with thousands of drunk Aussies, Poms, Yarpies and Kiwis.

The $numbers that are quoted, apart from booze sales, are just ridiculous. The whole thing is, typically, being massively oversold as a "huge economic benefit" so a bunch of local body dimwitts, lead by Dimwitt supreme McUlley can waste more of our money.

by andyh | 25th Aug 10, 12:45pm 1282697145

Good resume of the state of play:

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/79628…

by Matt S | 25th Aug 10, 1:39pm 1282700354

Andy, the problem I have with AEP is he always comes across as a mouth-peice for TPTB .. afterall he's not going to bite the hand that feeds..

While he calls the play in a way that appears to side with public opinion, you can always find repeating themes in his commentary to the contrary; Central banks could do better, but will save us in the end is always one he uses. Or here a direct quote FTA: "Wrongly viewing Ben Bernanke's Fed as a soft touch" as if he were a captain battling the high seas or something rather than the bummbling baffoon he really is.

The day that AEP comes out and blasts the FED, the EU, BIS and any other central banker as the criminal incompetant fools they are he has zero credibility.

by andyh | 25th Aug 10, 2:21pm 1282702917

I dont disagree with you, and I often find his underlying philosophy flawed - however he is extremely good at collating diverse data and is not afraid to paint a dark realistic picture (unlike many UK newspaper columnist who seem to be addicted to intravenous valium - that moron Anatole Kaletsky (sic) from the Times being one such specimen).

by Wolly | 25th Aug 10, 12:48pm 1282697321

"An 80-year-old returned serviceman who sold home-made alcohol from his garage in Hastings was today fined $1200 and placed under community supervision."tvnz

Misdirected enterprise but if he now writes a book about his life and how it all came about..a stream of revenue is not in doubt!

by mike | 25th Aug 10, 5:57pm 1282715855

and if he doesn't pay the fine...... what will the authorities do?

throw him into prison

i think not

by andyh | 25th Aug 10, 12:57pm 1282697864

Ireland was downgraded last night (again):

http://www.marketwatch.com/story/sp-downgrades-ireland-on-financial-sec…

Thats despite the draconian budget cuts they undertook.

I see European bond spreads are blowing out again.

by Christov | 25th Aug 10, 2:15pm 1282702546

And Here.......................Y'KNow what Bernard............ things are slowing down a little today ....so I'd like to talk about John Boys hair..............would that be ok...?

Cause you know he's dying it..... well not him, but mummy maybe.....and she's leaving the temples grey to give him that extinguished look ooops that other one with the d.....

Aaaaaaaanyhoo I personally think there is a lack of transparency here and a case to answer for misleading the public as to the ..state of the head of the nation.

It's not good enough ...I want it on Q+A ipso pronto.

by Wolly | 25th Aug 10, 2:56pm 1282704988

Smoke some of this Christov......... http://www.marketoracle.co.uk/Article22161.html

then tell me where to hide from the impact!

by Christov | 25th Aug 10, 3:15pm 1282706159

Well smoked and puffed my way through it..... and I'm sure Barry H Ferguson has a lovely degree in Quantum Math....... and could give Bernard a lecture about falling sky syndrome.

But Wally ......I simply bet on another horse and so far nothing Prechter has produced has scared the pants off me .

Yes I know I Know...... but you see bets made....that's it..... got to wait for the wheel to turn and maybe good or maybe I lose a coupla sleeves.......

by then it might be summer.

by Justice | 25th Aug 10, 6:37pm 1282718240

My US wife just had her grandfather die recently. His US property was evaluated at less than HALF of what it was 5 years ago. $700 thou down too $320 thou.

Looks like all the relatives will be working a bit longer IF they can keep their jobs

by Gummy Bear Hero | 25th Aug 10, 7:15pm 1282720514

How come McDonalds never put a slice of beetroot in their harbingers ?

by Gummy Bear Hero | 25th Aug 10, 7:40pm 1282722005

In Washington State farmers grow 400 ha. of beetroot each year for seed production , alone ! ( that is 50 % of the world's beetroot seed crop . ) ..................... Ain't Google a hoot when there's Fred-all on TV !