Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news overnight that the New Zealand dollar fell under 70 USc after speculation emerged that Japanese authorities would intervene to push the Yen down versus the US dollar to protect its exporters.
The Australian and New Zealand dollars rose against the Yen, but fell against a newly strengthened US dollar.
There is a flight to safety going on in financial markets as investors shy away from the stressed European financial system and the struggling US economy. Many are flooding into the Yen and the Swiss Franc, which hit a record high overnight. The New Zealand dollar also tends to suffer when financial markets worry about risk.
There were more concerns about the European financial system after Ireland's credit rating was downgraded overnight because of worries about the public costs of bailing out failing Irish banks.
Meanwhile, the economic news out of America continues to deteriorate. Durable goods orders in the world's largest economy rose just 0.3% in July, well below economists' forecasts for a rise of around 3%.
New home sales also fell 12.4% when economists had expected no fall.
Also, former Merrill Lynch chief economist David Rosenberg, has said the American economy is now in a depression rather than a recession.
Rosenberg calls current economic conditions "a depression, and not just some garden-variety recession," and notes that any good news both during the initial 1929-33 recession and the one that began in 2008 triggered "euphoric response."
"Such is human nature and nobody can be blamed for trying to be optimistic; however, in the money management business, we have a fiduciary responsibility to be as realistic as possible about the outlook for the economy and the market at all times," he said.
Back in New Zealand, Allied Farmers has announced it has been forced to renegotiate a NZ$16.9 million loan with its bank Westpac.
It faces having to repay loans of NZ$70 million to its offshoot Allied Nationwide, which was put into receivership last week.
It will struggle to survive as it scrambles to renegotiate or repay these loans while also raising fresh capital from shareholders.
13 Comments
And on another note, the RE mob are working hard overseas to see as much hot munny as possible injected into the rural land prices, bypassing the RBNZs core funny rate controls which are looking a bigger joke as each day passes. Harcourts are in Beijing and Bayleys in the UK.
Young Kiwi who thought they might get a foot in the farming door are having that foot smashed to pulp by the govt backed scheme to hold rural land prices as high as possible...in an effort to save the banks.
David Rosenberg is no second rater:
http://www.gluskinsheff.com/us-intl/ourteam/david-rosenberg.html
He is a cradle to grave, absolute first rank Wall Street big hitter.
When folk like him start using the Depression word you know it is serious.
You can trace the path by whch the US data is coming in 'below expectations' practically every day on this site:
Red means a miss (compared to the execrable analysts 'guesses'). Rather a lot of those recently.
There are also useful graphs showing trends etc
off the track somewhat, came across this piece on longform.org about Nauru and it's adventures with money laundering and the phosphate trade:
It's 10 years old, but this line struck a cord - the journo sits with a cab driver overlooking the durty moonscape that now comprises the interiour of the island:
"He and his people, perhaps unknowingly, had sold off their motherland. It was done gradually, by accretion, and amid the joy of sudden wealth. There were probably rationalizations and explanations, and yet it was an incomprehensible thing to see it and feel it. Imagine France paving Bordeaux; Israel plowing under Jerusalem; Spain salting the Castilian plain."
Those who don't learn the lessons of history eh?
"At the moment, Gold is competing with British gilts and other G-7 government bonds, as a “safe haven” in the event of a “double-dip” in global stock markets, and a further breach in confidence in owning Greek and Irish government bonds. At the end of the day, the BoE and the Fed might be forced to start QE-2, and the BoJ could begin QE-3, in order to combat a looming threat of a deflationary spiral in their local economies. If correct, which asset class, G-7 government bonds or gold, would exhibit the most upside potential? The answer is elementary, of course."
Tell you what Steven - ask all your friends and family which of them has exposure to gold.
I recently did - not a single one.
I doubt if 1 in 100 kiwis has exposure to precious metals as an investment (other than their wedding band). The figure might well be higher in Europe and the UK but not by much.
The trade would need to get a lot, lot more crowded......
Perhaps Bernard could organise a poll to see how many of the posters on this site have exposure (though I would regard them as an untypical cross section of NZ society).
Get out the heart pills and shoot a handful before reading:
It seems I’m really a bad boy. Whenever I talk to locals, mentioning and explaining a possible worldwide “Economic Depression” scenario, other business people don't want to know even think I’m mad and too negative.
Shall I keep quiet and just talk about sunny weather ? Please advise.
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