90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: European turmoil deepens as Anglo Irish downgraded; Gold hits record and US Treasuries rally again

28th Sep 10, 8:47am by Bernard Hickey

Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with BNZ, including news that Moody's has downgraded Anglo Irish Bank's credit rating by three notches, sending new shivers through global financial markets.

Anglo Irish has been the festering sore at the heart of the Irish financial system, forcing multiple government bailouts.

Ireland may eventually have to spend 35 billion euros or 20% of GDP to rescue Anglo Irish.

Irish and Portugese government bond yields rose to fresh highs vs German bonds and the euro fell.

US Treasuries also rallied again as investors sought safe havens. The 2 year US Treasury yeild fell to 0.42%, just above its December 2008 low of 0.41%.

Gold rose to a fresh high of US1,300/oz as investors worried about competitive devaluations and money printing in various economies sought safe haven assets that are not dependent on fiat money currencies, or that benefit from commodity price inflation.

The Australian dollar rose to a fresh 2 year high and the New Zealand dollar edged higher with it, although New Zealand has lagged Australia in recent days as our economies and interest rates appear to be diverging again.

New Zealand's 10 year bond yields fell below Australian yields for the first time in two years as our economic growth outlook moderated at the same time Australia's accelerated.

Meanwhile close to home, the Canterbury Chamber of Commerce warned that 150 small businesses in Christchurch could fail in the next six weeks in the wake of the earthquake, costing 500 jobs, the Press reported.

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7 Comments

by Donald MacRonald | 28th Sep 10, 9:17am 1285618650

with the amalgamation of my lihir gold into newcrest mining shares plus all the other Oz gold stocks i punted on a few years back and latterly... i think i might just feel the need to go into the city today and buy something frivolous.....go gold!

by Philly | 28th Sep 10, 10:07am 1285621675

D MacR: I wouldn't go spending unrealised profits on gold yet. It is only worth wot you get the day you sell it. No other value has any tangible meaning. The Economist and other reputable analysts predict that gold is peaking shortly and may soon lose its mojo

http://www.economist.com/node/16536800?story_id=16536800&CFID=144188278&CFTOKEN=10187812

Note the 2nd chart: the bulk of recent demand hasn't been for traditional uses such as jewellery, but for investors - you & I. That makes it look a little like a bubble - ie people think they are going to make on it (understandably), so are piling in. The other reason is the reason I bought some a few years ago: fear of debasement of currencies and economic turmoil.

The Economist is assuming "As the world economy returns to business as usual, the gold market may also return to some semblance of normality .....As long as the world economy remains uncertain and investors fear inflation and sovereign default, gold will keep its allure. Eventually, however, the price will weaken."

What you (& I) are banking on is that things won't return to normal. However, we may be wrong. If we are right, we are keeping it for security in an ongoing crisis - so will need it. If we are wrong, you will never have those $$ that you think you have.

So think before you spend!

Cheers

by noponies | 28th Sep 10, 9:38am 1285619902

The B.O.E second in charge was on the tele tonight extolling all and sundry who had savings to spend them...unbelievable. Heres the link. http://www.channel4.com/news/bank-of-england-savers-should-eat-into-cash

by Doug | 28th Sep 10, 10:04am 1285621450

Questions: How high can the Kiwi dollar rise? If there is a competitive devaluation of the major currencies, could we see our dollar hit new highs? And when. If our number one export is agricultural in nature our number two would have to be debt. Has anyone out there a strategy for someone with US assets in Treasuries?

by Matt S | 28th Sep 10, 10:16am 1285622209

Its in a countries' best interests to have a lower currency during a time of crisis, so we are seeing the EU, US, SCB, and Japan trying to out compete each other to lower their currency relative to others.

For example if the Euro devalues then the USD$ starts looking too high, so they in turn devalue the dollar. The Yen then looks high and affects Japan's exporting economy so they try and intervene. And on and on it goes.

Problem for us is that the RBNZ are asleep at the wheel, and even if they were awake they are powerless or too inept to act. In relative terms the kiwi appears to start 'rising' against other currencies. Same with the Aussie dollar. The main stream media then try and sell this to the public with words like "fair value" or "strength' when the kiwi rises as though it were a good thing, when in fact the exact opposite is true.

If your looking for a strategy .. buy gold.

by Matt S | 28th Sep 10, 10:04am 1285621455

so.. Moody's sent shivers through global financial markets, while the Aussie dollar rose to 2 year highs on increasing "risk appetite" .. or to quote FTA “It’s still a risk-on story that you’re looking for, and any data that signals the world is doing better will help propel the Aussie higher,” .

I'm just waiting for the rabbit to be pulled out of a hat trick.

by Wolly | 28th Sep 10, 4:40pm 1285645246

Here we go... again....(herald)

"The Christchurch earthquake could prove to be the catalyst for a recovery in the property sector, but any upturn will be slow and patchy and homeowners should expect things to get worse before they get better.

"I would say if you were a person who was sitting in rental accommodation before the quake waiting for property prices to get to their lowest possible point, you're probably now thinking you should buy before prices rise."

....and you would be an idiot of the highest order...because they have a shite way to fall yet...so don't be a fathead who listens to RE agent BS....hang on to your munny.