90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Portugal nearer default; US bond yields creep up; ECB warns again on rate; A$ hits record; The Whimp is back

29th Mar 11, 9:01am 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 the European sovereign debt crisis continues to bubble away with the focus firmly on Portugal.

Standard and Poor's downgraded the 5 biggest Portugese banks overnight and the Portugese 10 year bond yield hit an unsustainable record-high 7.96%. See more here at Bloomberg. There is growing talk Portugal will have to seek a bailout or risk default. See more here at Bloomberg.

Portugal's contracting economy also looks like it will have to deal with higher short term interest rates and mortgage rates as the European Central Bank warned again overnight that it is likely to increase its official rate next month. Greece is also widely expected now to default. See more here from BBC.

ECB President Jean Claude Trichet warned that inflation was durably above stability.

This all matters for New Zealand because a new bout of turmoil in global financial markets would make it more difficult and expensive for our banks and governments to roll over their short term term foreign debts, which the IMF puts at around 50% of NZ GDP.

Elsewhere, the Bank of Israel increased its official rate on inflation fears and the US bond market had a bad night after an auction of fresh 2 year government bonds was poorly received. Interest rates rose slightly. US consumer spending figures were slightly stronger than expected. See more here at Bloomberg.

There was also renewed talk that the US Federal Reserve may stop buying US government bonds soon, taking a prop out from under the market. See more here at Bloomberg.

Meanwhile, across the Tasman, the Australian dollar hit a record US$1.02 overnight after the Labor Party was wiped out in the New South Wales state election. This boosted financial market hopes that Federal Labor's plans for a carbon tax and a mining tax will struggle to be enacted with opponents now in power in Western Australia, Victoria and New South Wales. See more here at Bloomberg.

Back in New Zealand, Auckland International Airport, Port of Tauranga and Air New Zealand have joined together to warn shareholders that the now infamous Bernard Whimp may be about to send them low-ball offers directly for their shares. The companies have received requests for their shareholder lists. See more here at NineMSN.

The New Zealand dollar drifted overnight. See Mike Jones' currencies report here.

No chart with that title exists.

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44 Comments

by Kunst | 29th Mar 11, 9:15am 1301343359

I’m now convinced -the global meltdown is beginning.

Global price raises – the accident in Japan – worldwide political unrest – climate changes – Portugal, Spain, Greece – The Middle East – incapable, corrupt governments – greed.

We don't have enough brooms.with enough bristles either for the clean up.

by Neven911 | 29th Mar 11, 9:44am 1301345098

Kunst

Isn't it nice to be in a snowless verdant land though, I'm waiting for Wolly to wade in with his bravura telling us that if we followed this economic theory (or that for what it matters) we will happliy return to economic growth via equities and bond yields.

Neven

by KanucK | 29th Mar 11, 11:39am 1301351948

^ Chicken Little alert!

by Kunst | 29th Mar 11, 3:25pm 1301365525

I know Kanuck - it is hard to swallow. I’m struggling too after almost 40 years in business and a fulfilled life, but “daily business” is out of control, because of stupidity of the human race.

…and unfortunately brooms to clean are never sold out – when they should right now and urgently.

In the current environment – what we are talking here doesn’t make sense anymore – nothing really fits the picture. To make real, promising progress, we should start dealing with philosophical rather then economical, financial, political, etc. issues (values).

by Kunst | 29th Mar 11, 8:24pm 1301383498

But cheeses, please not here in New Zealand. A peaceful NZrevolution right now - would probably help to be a better New Zealand in the future.

http://www.youtube.com/watch?v=iQva_28wcwM

by Bernard Hickey | 29th Mar 11, 9:17am 1301343447

FYI from David, we've seen the highest weekly bankruptcy data since September 2010

Here's the link to our interactive chart

http://www.interest.co.nz/charts/credit/bankruptcies

cheers

Bernard

by Andrewj | 29th Mar 11, 9:20am 1301343600

Walter, Keep your head down its going to blow

On Saturday, Japan's prime minister, Naoto Kan, said the situation at the Fukushima nuclear plant was ''serious''. That might be the understatement of the century.

http://www.dailymail.co.uk/news/article-1366341/Japan-tsumani-earthquake-America-nuclear-accident-radiation-alert.html

http://www.counterpunch.org/busby03282011.html

by Andrewj | 29th Mar 11, 9:43am 1301345025

Walter, a great talk by Stoneleigh on the Automatic earth

http://theautomaticearth.blogspot.com/

by SimonP | 29th Mar 11, 10:08am 1301346480

Let me guess, maybe we should buy gold?

An asset that continually increasing in supply, doesn't generate cashflow nor contribute to increased productivity?

by Snarlypuss | 29th Mar 11, 10:25am 1301347537

Exactly, simon! If US$, Stg currency is no longer accepted as payment for goods and services, we have far more to worry about than how many grains of gold we have in our safety deposit box. Where ever the 'stuff' is hidden, there will be thousands of eyes; all with big sticks or better, waiting to see where you have it....and waiting take it off you. That's if the Government hasn't already taken it from you through legislation, to support their currencies. You know; like they did last time?

by scarfie | 29th Mar 11, 10:35am 1301348147

I understand that one area where holding physical gold or silver could be useful is when people try to cash in their paper gold for the real stuff. There won't be enough to go around. If leverage is involved then it could even be worse.

by Snarlypuss | 29th Mar 11, 10:41am 1301348495

What would you do if this afternoon we get... 'Central banks fix gold price @ US$1000 until 15/4/11; there-after it will be fixed at US$500..."? I doubt you'd hold anything so related @ US$1425, or wherever it is today; whether it's an ETF or the real' stuff'....I'm sure there's a flaw with that quick suggestion , but there will 'offers that cannot be refused' if metals try to get away from 'paper'.

by scarfie | 29th Mar 11, 10:51am 1301349090

I think you would get warning signs of that happening because the big players in the game would dump their first. I heard in the weekend that only four player control 50% of the worlds physical gold. Assassination would be one possible result for anyone that toyed with devaluing it.

Don't forget China and India hold vast quantities, so the control the could be exerted over the metals in the past has been much diluted.

Don't think I am making an exclusive case for the metals though. I think all asset classes are under severe threat.

Best insurance is to be resourceful and know how to survive.

by Snarlypuss | 29th Mar 11, 11:05am 1301349902

Aren't Goldman, HSBC, Morgans etc. short to the gills, silver? I seem to recall a case in the US very recently being dismissed that would have required them to re-buy their shorts ( pushing the price up) and that's why gold/silver it fell so violently a few weeks back....

"By now everyone knows about the absurd imbalance between JPM's short position in the silver futures market and the availability of physical silver...."

http://truthingold.blogspot.com/2011/03/comex-goes-extend-and-pretend-on-jp.html

by scarfie | 29th Mar 11, 11:07am 1301350050

Yes I recall that, but from my observation on how the markets seem to be working is that the law had already been priced in. The price dropping was more an unwinding of those speculative positions.

There was something last week I caught an offhand comment of with regards to reserve requirements for silver being lifted. Pushed the price up. Perhaps Bernard could help on that one?

But in the end who knows, it is all manipulated to hell.

by Dannte | 29th Mar 11, 12:18pm 1301354331

like last time???

Don't you realize that TPTB do exactly that: "Where ever the 'stuff' is hidden, there will be thousands of eyes; all with big sticks or better, waiting to see where you have it....and waiting take it off you." Sounds like the normal theft by government to me.

by Kate | 29th Mar 11, 11:19am 1301350758

A wee question for Kiwis. What happens, some time hence, if the currencies listed above become unacceptable to us in terms of payment for our milk etc?

Yes, fiat does seem to be on the way out.

I imagine the possibility in future that we will have commodity cross rates (rather than currency cross rates) - enabling a global barter economy to emerge.

Where gold is concerned, I'm in that camp that just sees it as another commodity, as opposed to a currency. If instead the world accepts/goes in the direction of a reversion to a (perhaps global) fiat backed by gold (and it will be physical gold - paper gold like paper fiat will be worthless) - then the transition from democracy to plutocracy will be complete.

by KanucK | 29th Mar 11, 11:38am 1301351881

Inflation is caused by aggregate demand growing faster than real output capacity - not by an increase in the montetary supply.

Gold is not the solution to the world's problems.

Even your precious gold will be worthless when there are no real products or services left to trade for it.

by Wolly | 29th Mar 11, 11:44am 1301352298

Simplistic blather kanuck...try repeating it to those seeing their fuel bills, rates, insurance premiums, and food bills shoot higher.....they will shove your aggregate demand in your ear.

by steven | 29th Mar 11, 11:50am 1301352626

Wolly you are being a dork.....

What ppl see in front of them is not whats really going to hurt them....losing jobs in retail....thats a huge issue...

by KanucK | 29th Mar 11, 11:55am 1301352919

Another simplistic, off-topic, populist rant/comment by Wolly... congrtats sir

by Your Landlord | 29th Mar 11, 12:06pm 1301353591

Relax Wolly, your government-paid pension is not too far away.

NB We won't hear Wolly criticising the government then will we.

by Wolly | 29th Mar 11, 12:48pm 1301356131

I can smell the money already....only right of course...paid all those taxes...thankyou Landlord...

by Dannte | 29th Mar 11, 12:25pm 1301354749

The Austrian School of monetary theory holds it is the hoarding and dis-hoarding of money that leads to inflation and deflation, and may or may not coincide with a rise in prices.

I guess it depends where you live, and which part of the economy you work in, that determines whether you are experiencing "inflation" or "deflation". That’s why a society can experience inflation and deflation at the same time. It is a very personal matter. Therefore the discussion about in- or de-flation or the definition thereof can confuse things. If monetary policy is stable, when prices go up in one area, they must fall in another area. We cannot have "petrol inflation" without having less money to spend somewhere else. We cannot have "food inflation" without it costing us more and having less to spend on other things. In an evenly rotating economy we always will have some prices rising and others falling. Increasing AND decreasing prices in a market economy IS THE NORM. However, it is only when we have excessive amounts of money being printed that we can have the phenomenon known as inflation, i.e. a progressive across the board increase in prices.

One doesn't need a PHD to realize that the whole world undergoes QE global. Hyperinflation will be a global tsunami.

by Roelof | 29th Mar 11, 12:40pm 1301355604

Oh come on..... How is it possible for "general prices" to rise without an increase in the money supply...?????

by Doug | 29th Mar 11, 10:23am 1301347398

When Portugal goes to the ECB, can Spain be very far behind. At some point, one of the PIIGS, probably Ireland, will tell the ECB and IMF to stuff it. Portugal's revolution is within the life span of many who are entering retirement there. They may even be the first to tell the IMF to stuff it. The IMF on the other hand recently increased their warchest from $50 billion to $550 billion. What do they know that the rest of us don't?

European Bond dealers will likely look to our Bonds for yield and safety, but if they don't then the end for us is closer than anyone thinks.

I think a great collapse is coming, but I don't see hyperinflation on the horizon, The consumer is done and dusted, and without that velocity of spending it will never accellerate to Zimbabwe, Weimar standards. If inflation shows up anywhere it will be in hard assets. The top 2% will cash out of bonds and equities and look to purchase commodities, farmland, and energy.

This Bernard Whimp guy fascinates me. He is brokering the purchase of state assets ahead of a collapse and state sale. State sales are generally give-aways to mates so the Whimp bunch are positioning themselves to be first in line to purchase a controlling share when the collapse comes, or they will ride out the privatisation transition and future jump in share price. The great question for me is who is behind Whimp and what is the hedge? Is somebody taling a massive short position on the stock, or has there been a spike in CDS against those companies (or possibly the country). Find out who is holding the CDS, or the short positions and you can pretty much figure out the who is backing the Bad Bernard.

by Kate | 29th Mar 11, 11:27am 1301351228

Yes to all that - commodities, farmland and energy. Back to the real world.

by KanucK | 29th Mar 11, 11:51am 1301352697

Fiat currency issuing countries are not at the mercy of the bond markets.

Should the day come where bonds cannot be sold privately, central banks of sovereign nations can, and most probably will, just puchase govt bonds directly.

by steven | 29th Mar 11, 12:08pm 1301353706

IMF has said it cant meet the possible demands placed on it its trillions....and its not actually $ in the war chest as such, I think its a pile of IOUs, think NZ's share was 1 or 2 billion....

I agree, Zimbabwe was simple prinitng of money that was spent....ditto Weimar.....right now the Govns are "printing" but its not money that is mostly out there in the real world, and what there is in the real world is offset by consumers not spending up to 10 fold short....ie its simply dwarfed....by deflationary forces....

NZ bonds, NZ Govn debt is pretty low...its the fallout blowup in private ie property tahts will kill us.....unless the RBNZ's idea gets put in place in time and then banks are left to sink.....accept of corse they control all business transactions eg eftpos etc....

So if the banks go belly up, how do we eat?

Hard assets and top 2%.....the top 2% I think has already started to bail if not bailed out and yes into hard assets, foreigners buying our farms is a clear example and paying silly amounts....I think

In terms of energy, the power companies ie SOEs are some of the few ones worth buying....I wonder if the pressure/idea from national is actually a bolt hole end play for some of them....selling the SOEs for 500million makes no sense, its 2 weeks borrowing.....putting 500million of good shares on the market to buy up quick to protect your money makes sense....kind of tin hat territory though.....

Also another tin hat thought.....JK said he wanted to be a financial hub and money gets to sit here not being taxed as long as its not spent here........so a bolt hole for his mates as countries confiscate $s in desperation? If you read the GDpression then i wonder how out of line that is.

regards

by Gummy Bear Hero | 29th Mar 11, 10:31am 1301347896

Bob Brown from the Aussie Greens party will block moves by Gillard's gumnut to reduce the company tax rate by a staggering 1 % , down to 29 % , by 2013 . Further he wants the top personal income tax rates to be increased up to the 50 % level .

........... A carbon tax is not enough .......... back to the caves and swamps with you all , lichen & beetles for breakfast ......

...... Peak oil is here , arrrrrrrrrrrrrrrrrrrrrrrrgggggggggggggggghhhhhhhhhhhhhhhhhhhhh !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[ Gummy on tour , Tasmanian trails ]

by scarfie | 29th Mar 11, 10:38am 1301348303

Gee Tasmania, make sure you make it out alive from that greeny enclave gummy. but at least they are all vegans so you won't get eaten.

by Gummy Bear Hero | 29th Mar 11, 10:49am 1301348992

....... not nearly as many banjos playing up in the hills as I'd thought ............ mile are mile of fecking vineyards , but ! ...Grapes galore . .........

... And Fonterrible have a presence in the local dairy industry . Milk $A 2 for 2 litres in Coles and in Woolies !

by scarfie | 29th Mar 11, 10:52am 1301349173

Heck you want to buy up some of that milk to bring back here and sell on trademe.

by Gummy Bear Hero | 29th Mar 11, 10:58am 1301349499

...... the lady at Woolies check-out ( Scottsdale ) warned me off buying too many 400 g. jars of Moccona........... she reckoned I'd be on " Border Patrol " on TV , for smuggling ........ it's cheaper than the 200 g. ones in NZ , and still haft more hmmmmmmmmmmmmm !

by Simfarmer | 29th Mar 11, 11:49pm 1301395783

Gummy - come visit, save me from the inbred locals in Tazzie. I only have 92 days left in this god for saken hellhole. I mean come on 7 churches in my nearest town and no PUB !!!! Fonterra has about 1/3 of the milk in Tazzie.

by Wolly | 29th Mar 11, 10:58am 1301349528

Mind you don't sit your rear end down on a Jumping Jack gummy!

by iconoclast | 29th Mar 11, 3:30pm 1301365809

GBH: Outside the front door of our local Coles they have a large billboard advertising "Coles Full Cream" milk. Next time you go into a store have a look at the labelling on the container. Yep "Full Cream Milk"

Spotted in BusinessSpectator this morning

When price cuts hurt consumers:Retail sector

Well, this milk war isn't saving us any money! My 6-year-old is on to them and for the last couple of weeks had been accusing us of watering down his milk... Well, guess what?! It wasn't us watering it down! (See Milk discount price war heats up: report, March 28.) To keep the young bloke happy, we now have to buy the more expensive milk. So is it really a price cut if you're not getting the same product? Hmmm...Dayna Gordon

by Wolly | 29th Mar 11, 10:50am 1301349055

"The new Coalition government has accused Labor of "cooking the books like never before" to hide a projected $4.5 billion hole in the New South Wales budget.

Premier Barry O'Farrell made the claim after briefings from Treasury yesterday.

"We all expected the finances to be worse than Labor had said, but frankly, it was a shock," Mr O'Farrell said.

"Treasury officials told the meeting that if the figures presented to us had been presented by the Labor treasurer to ratings agencies, we would have ended up with a review of our triple-A credit rating."....

The man expected to become the next state treasurer Mike Baird says it is clear Labor was hiding the true nature of the situation"abc

Explains why cunliffe has signed up for cooking lessons....!

by Gummy Bear Hero | 29th Mar 11, 11:04am 1301349841

...... he oughta take lessons from chef Cullen ...... Michael kept a monster hole in the ACC books completely hidden , prior to the 2008 election .

by David Chaston | 29th Mar 11, 11:01am 1301349660

Lowest trade surplus for a February in three years, according to StatsNZ data out this morning.

http://www.interest.co.nz/charts/overseas-trade/trade-balance-monthly

with the January 'surplus' revised to now be a 'deficit'.

Imports are now growing faster than exports, a new trend that has developed in the past 3 months.

by steven | 29th Mar 11, 11:06am 1301349994

Trends are not three months IMHO.....especially when you look at the graph going back some years....seems there is a spike every April? looks like a sawtooth.....what am I missing then?

regards

by Wolly | 29th Mar 11, 11:07am 1301350043

No...can't be...the tradeables sector is going to save the nation...Bill said so...!

by Elley | 29th Mar 11, 12:35pm 1301355304

And one way this might change is if NZ can provide the NZ-made goods that people want to buy at a competitive price so the need for imports drops. Can't see that happening anytime soon.

by neco | 29th Mar 11, 12:53pm 1301356423

Funny how a reduced February surplus gets spun as good news in the MSM, for example:

New Zealand Posts First Trade Surplus in Eight Months as Exports Jump 17%

http://www.bloomberg.com/news/2011-03-28/new-zealand-posts-first-trade-surplus-in-eight-months-as-exports-jump-17-.html

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10715656

http://www.stuff.co.nz/business/industries/4821090/Exports-get-dairy-boost

Seems they fail to compare months on a yoy basis; the next 3 months will be interesting since in 2010 they look to have been some of our best trading surplus months ever.