Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news the New Zealand dollar hit a fresh 29 month high vs the US dollar of 79.7 USc in the wake of the US Federal Reserve's decision yesterday to print an extra US$600 billion in a second round of quantitative easing.
The New Zealand dollar also rose sharply on a Trade Weighted Index basis (see interactive chart below) after the New Zealand dollar also rose against the Australian dollar to around 78.3 Aussie cents.
Investors are being squeezed out into riskier assets in corporate bonds, stocks, emerging markets and commodites by very low official interest rates and moves to pump cash into the global banking and financial systems.
This, however, is raising fear about inflation and triggering talk of Currency Wars where countries move to control capital flow, foreign ownership of assets and eventually, trade.
Canada surprised many overnight when it blocked BHP's bid for its fertiliser giant Potash on the grounds it did not provide a net benefit to the nation of Canada.
Meanwhile, the Dow rose almost 200 points to a two year high as low interest rates and a lower dollar help boost corporate profits.
Elsewhere the European Central Bank held its official rate at 1% and said it had no plans to follow the Fed's move. The Bank of England also held its official rate at 0.5% and left its own Quantitative Easing programme at 200 billion pounds.
The Oil price rose to a six month high of US$86.5/bbl and JP Morgan and Merrill Lynch forecast it would hit US$100/bbl next year as commodity prices rose in the wake of global money printing.
In Ireland, the government there announced 6 billion euros of budget cuts in another attempt to reduce its budget deficit and convince bond investors it can get its debts under control.
But most still see Ireland having to beg for a European bailout next year as its core budget deficit is stubbornly over 11% of GDP and its bond yields continue to rise.
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And gold up 4% overnight at $1391.80.
Is this a warning of the dreaded Hyper inflation event?
"By the end of that terrible day, commodites of all stripes—precious and industrial metals, oil, foodstuffs—will shoot the moon. But it will not be because ordinary citizens have lost faith in the dollar (that will happen in the days and weeks ahead)—it will happen because once Treasuries are not the sure store of value, where are all those money managers supposed to stick all these dollars? In a big old vault? Under the mattress? In euros?
Commodities: At the time of the panic, commodities will be perceived as the only sure store of value, if Treasuries are suddenly anathema to the market—just asTreasuries were perceived as the only sure store of value, once so many of the MBS’s and CMBS’s went sour in 2007 and 2008. Of course, once commodities start to balloon, that’s when ordinary citizens will get their first taste of hyperinflation. They’ll see it at the gas pumps. " http://gonzalolira.blogspot.com/2010/08/how-hyperinflation-will-happen.htmlAll eyes on the NZX today!
Watch the inflation protected stocks rocket (as they have for the past couple of weeks). POT, CEN, AIA, VCT ... etc.
And the price of real gold - go get some Krugerrand, prepare for Weimar inflation, thanks Uncle Sam.
Wonder if Key expressed some concern over US monetary policy or just smiled?
Given that a) the US$ is crashing and b) the price of oil is jumping and its priced in US$ so therefor the price of petrol in the US is climbing rapidly and c) the US consumer is highly sensitive to the price of petrol could that idiot Bernanke please explain how this is going to help the US economy?
I dunno. If you wanted to be technical about it you could claim that the actual price of US stocks isnt actually rising, as what they are priced in (US$) is actually falling.
The problem has occurred to bigger fish than me:
''Bottom line; more QE is a massive gamble that could easily become counter-productive if it undermines international confidence in the dollar and thereby further drives up the dollar cost of oil and other commodities. Remember, this inflationary effect on commodity prices is deflationary for the economy as a whole, since it further crimps disposable income''.
http://blogs.telegraph.co.uk/finance/jeremywarner/100008489/is-the-dow-…
The “Vabanque-Strategy” of the Federal Reserve poses now a serious risk for the worldwide financial and economic stability.
Remember the 3rd of November 2010
..two interesting articles here:
http://news.xinhuanet.com/english2010/indepth/2010-11/04/c_13591391.htm
http://www.thenation.com/article/155848/end-free-trade-globalization
Hello Walter : All quiet in Kaikoura ? We're just back from 2 weeks island hopping , around Mindanao and Bohol . Germans seem to be visiting the tourist spots in great numbers .
Pondering the effect on NZ tourism of the high $Kiwi . Also wondering , if steven & powerdownkiwi are right about peak oil , the effects upon NZ when both tourism & agriculture are impacted by soaring oil prices .
Anything 'like this on your mind too , Kunzie ?
Roger - Germans are everywhere.
Before “peakOil” catching up on us - I think we have to deal with many other events. It seems to me in stead of making sustainable progress we are day in day out literally just “cleaning up” our planet – our home.
In my opinion a double dip recession or worse is inevitable.
Sorry to hear that you agree with Chicken-Little Hickey . The only double-dip I believe in is two scoops of Kapiti ice-cream in a waffle cone !
Interesting to view the NZ Herald online , a few days ago , and on the same page was news of the shutting down of the US iconic car , the gas guzzling muscle Pontiac range ; and the picture and announcement from Nissan of their new fully electric car . A sign that the times are changing ............. And given the picture of the electric Nissan , not totally for the better !
I believe in many other cool, sexy double dips too. Did you read the two links I provided above ?
http://www.youtube.com/watch?v=en3gg0_Sv3E&p=D670021D551169CE&playnext=1&index=31
More heat on the Aussie banks - http://www.businessday.com.au/business/banks-tax-dodge-sparks-outcry-20…
FYI Here's our interactive chart of official data on rents.
Median NZ rent flat at NZ$300/wk since Feb 08
Auckland median 3 bedroom rent up from NZ$440 to NZ$474 in last year
Auckland 2 bedroom rent up from NZ$310 to NZ$320 in last year
http://www.interest.co.nz/charts/real-estate/rents-median
cheers
Bernard
Some months back there was much hoopla about how Iraq was going to save the oil markets and was miraculously going to be a bigger producer than Saudi by 2017.
In very short order the reality has hit home:
http://www.ft.com/cms/s/0/def69f28-e76c-11df-b5b4-00144feab49a.html#axz…
One of the few economists who "gets" peak oil - Jeff Rubin former Chief Economist at CIBC World Markets has been saying for a least a year we are headed for $US100 + oil a barrel.
And as the NZ Parliament Report The Next Oil Shock pointed out last month, another supply crunch is likely to occur soon after 2012, and high oil prices will be sustained in the future because low-cost reserves are rapidly depleting. It also warns that the world and NZ's economy could suffer recurrent recessions as the price fluctuates.
Q? when are NZ's mainstream economists going to wise up to global oil depletion and when is our media going to start some robust debate on this issue? Because hell will freeze over before the two main parties acknowledge and start talking openly about the implications
Yep - Clint Smith (whoever he is) did well. Not only do our politicians now have no excuse, but neither do our media.
You should see my last email on the subject to the Editor of the ODT!
3 years since I went in to the office of their 'Business Editor', pointing out that oil supply rates underwrote growth rates.
Yawn.
In the final analysis all we can really expect from the powers that be in NZ is an almighty 'HOOCOODANODE' a few years down the track as the system unwinds. Or some acute disappointment that strangely 'the market' wasn't able to offer a solution (if I recall the Jonkeys latest brief pronouncement. on the matter).
It is astonishing though - in the last 12 months or so we've had red flags from sources as diverse as the US military, a high powered UK government panel, the German Army, a group of Kuwaiti academics, a NZ parliamentary researcher (I could go on but its getting tedious) and yet.........
In the meantime do what you can to future proof yourself. By merely living in NZ you are already ahead of 99% of the rest of humanity.
yep a most underrated threat that is on our doorstep
One of the reasons I am glad to be renting in a centrally located Auckland house - minimal private car use required = maximum protection against oil price rises
Having said that the likely continued strong NZ dollar will buffet us relatively significantly
Imagine what the pump price would be now if the NZ dollar was much weaker
@andy rodgers asks but who is buying US Stocks?
In April it was reported that Goldman Sachs accounted for 80% of the total turnover on the NYSE for the March quarter. With that size of presence in the market it is easy for one operator to "tick" the price to wherever they want to take it. They can buy and sell to themselves which lone-retail-investors cant do. Buy at $1.00 Sell to sister operator at $1.10, buy it back at $1.20, sell it at $1.30, buy it back at $1.40 and so on ad-infinitum. Net volume zero. PS. Goldman Sachs are also a Market-Maker and the above is what Market-Makers do.
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