90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: US stocks down 18% since May; NZ stocks down 9%; Merkel against Euro bonds again; Gold hit US$1,850/oz

22nd Aug 11, 8:59am 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 stocks fell a further 1.5% on Friday night as fears of slowing global growth continued to fester.

The S&P 500 has fallen 18% since the end of April as growth worries have emerged.

Hewlett Packard shares fell 27% last week on concerns about its profit outlook and a massive restructure that will see it spin off its Personal Computer business.

New Zealand stocks have fallen to a lesser extent over the last 2 months, given our listed companies are more exposed to the local economy than global conditions and do not include banks.

New Zealand companies have also reported solid profits over the last week, including Telecom and Port of Tauranga.

Shares in Caterpillar and Alcoa fell sharply on worries about global growth after Morgan Stanley, JPMorgan and Citigroup downgraded their growth forecasts. See more here at Bloomberg.

Meanwhile, there were fresh signs of division in Europe with comments from German Chancellor Angela Merkel that she did not want common Eurozone bonds. See more here at Bloomberg.

The New Zealand dollar was weaker in morning trade at around 81.8 USc as investors appetites for riskier assets waned.

The Gold price rose over the weekend to a record high of over US$1,850/oz as investors sought safe haven investments. See more here at Bloomberg.

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39 Comments

by Matt S | 22nd Aug 11, 9:12am 1313961172

NZD (and all other fiat currecies) really dropping in value fast now... it takes 2263 NZ paper "dollars" created out of thin air (that aren't backed by anything) to buy 1oz of real money. I wonder how long it will take now before the NZ dollar becomes totally worthless?

by Nicholas Arrand | 22nd Aug 11, 9:20am 1313961616

Which will make everything you own, including whatever gold you have, worthless, also. After all, even you are valuing gold in terms of 'dollars'; and without that medium of exchange, the alternative is barter. I doubt the globe with 7 billion people can get on with that, these days. It was hard enough when there was 700k of us.

by Anarkist | 22nd Aug 11, 10:51am 1313967060

Actually barter featured in a miniscule portion of exchanges historically and instead most occured within a framework of recipricated gift. It worked better when the exchanges happened between people with regular intimate contact, so as to easier assess the other's trustworthiness and catch and discipline free-riders.

"The problem was, as Mauss was quick to note, there is no reason to believe a society based on barter has ever existed. Instead, what anthropologists were discovering were societies where economic life was based on utterly different principles, and most objects moved back and forth as gifts – and almost everything we would call "economic" behavior was based on a pretense of pure generosity and a refusal to calculate exactly who had given what to whom. """""

http://www.freewords.org/graeber.html

And we do have a modern historical case study to explore the ramifications and effects of a time which saw the total breakdown of banking system. That of Ireland during the 1960s and 1970s when the banks went on strike. Instead of relying on banks to play the role of credit intermediaries, a high complex credit system evolved that often coalesced around the publican (who better to assess the creditworthiness of the public?) where cheques or rather cheque balances circulated as a form of currency.

http://digitaldebateblogs.typepad.com/digital_money/2009/02/payments-without-banks.html

by steven | 22nd Aug 11, 9:43am 1313962980

"real money" LOL....If you want to look at the world from such an odd perspective, sure.....if you cant see gold is a huge bubble and bubbles burst carry on.

Inflation believer I take it?

regards

by foxysfolkfaced | 22nd Aug 11, 10:08am 1313964522

well what if you have lost faith in fiat money - namely US fiat money - being the reserve currency of the world? Its in the US constitution that money must be backed by gold/silver but that has been overlooked for 40 odd years now

im no gold bug and i hold no physical or paper gold myself - but i am tempted to have a small holding of silver oz coins

maybe the next reserve currency (China) will be backed by gold and silver

by steven | 22nd Aug 11, 10:13am 1313964816

Hi,

Too many ppl and too much fiat money to back with gold and silver IMHO....money is the lubrication of the economy....

Some precious metals if you have that capacity makes sense I think....silver or maybe platinum....which ever is relatively the smallest bubble.

regards

by Green Lantern | 22nd Aug 11, 8:50pm 1314003020

The "there's not enough gold" argument doesn't hold up. A system like Freegold would work.

by Kunst | 22nd Aug 11, 9:19am 1313961544

More trouble in Greece

Economic performance unitl July weak.

http://www.reuters.com/article/2011/08/21/us-greece-finmin-letter-idUSTRE77K1LV20110821

by steven | 22nd Aug 11, 10:09am 1313964559

Greece is stuffed....RIP...

regards

by Gummy Bear Hero | 22nd Aug 11, 12:02pm 1313971344

Greek olives are stuffed , too .... Succiliciously delicious . ...Bravo Greece .

by We Are Stuffed | 22nd Aug 11, 12:39pm 1313973567

We are stuffed.....I am We are Stuffed.

by steven | 22nd Aug 11, 9:41am 1313962860

Take a look at the lead bad banks sunce February (6months),

BofA was about $15 a share now its $7....about a 51% drop

BofScotland -56%

GA Generale Soc -58%

Most other US banks down 30% or more...

by Andrewj | 22nd Aug 11, 10:27am 1313965644

Here are the banks, from automaticearth

Ilargi: And this from August 16:

Europe on the Verge of Breaking

Bank of America: +7.93% Aug 15, but -22.4% in past month, -34.95% in past 3 months

Citigroup: +4.76% Aug 15, but -18.53% in past month, -24.71% in past 3 months

Morgan Stanley: +6.10% Aug 15, but -15.03% in past month, -25.74% in past 3 months

Goldman Sachs: +2.28% Aug 15, but -8.28% in past month,-15.79% in past 3 months

Société Générale: +2.06% Aug 15, but -28.53% in past month, -41.23% in past 3 months

Ilargi: The reason why I wanted to revisit the stats is that it's important to understand to what extent what we see happening is a structural, rather than an incidental or circumstantial turn of events. To wit:

The Domino Effect of Europe Bank Woes

by John Carney - CNBC.com

There’s also the problem with hedge funds trying to hedge exposure to European banks. The short-selling ban on European banks makes hedging exposure more difficult. One response by some hedge funds will be to short U.S. banks as a proxy.

Ilargi: I'm sure you can agree that that is funny, no matter how tragic it is.

The tragedy that's unfolding is shed in an even clearer light when we expand the stats series to include the longer term, in this case 5 years.

In the past 5 years (dating back to August 25 2006, a date I took from Google Finance), these are the loss numbers for financials, as taken at noon, August 19 2011:

Bank of America : - 86.68%

Citigroup: -94.33%

Morgan Stanley: -70.72%

Keycorp: -83.46%

Fifth Third Bancorp: -76.06%

Barclays: - 76.85%

RBS: -96.83%

Société Générale: -83.57%

BNP Paribas: 60.64%

Crédit Agricole: -81.39%

UBS: -75.27%

Credit Suisse: -52.92%

Deutsche Bank: -65.26%

The numbers are made even more poignant when we look at losses at the Dow and the S&P in the same time period.

Dow Jones: -3.97%

S&P 500: -12.81%

by Kunst | 22nd Aug 11, 11:15am 1313968500

Just a thought of my gut.

I think Friday, the 19th of August 2011 was the beginning of the fall of the financial global markets and will trigger off entire economies to break down. Daily turmoil/ events on many fronts will occur and many societies are at risks to fail. The world will change again – faster, dramatically, more violently.

This will be extraordinary - the NZgovernment needs to take urgent measures now to maintain stability.

Looking into current developments on many fronts – the world will never recover again, simply because among the powerful in societies ethic and moral requirements and standards don’t prevail.

by Gummy Bear Hero | 22nd Aug 11, 12:14pm 1313972071

Rollmops , Swiss cheese and chocolate do not mix , Walter ....... just a thought from the Gummy gut to yours .

by David B | 22nd Aug 11, 12:49pm 1313974179

I agree. Men, and women too, quickly, race to the beach with all due haste. Man the dugouts! Launch the dingys! Arm the kayaks! There’s not a moment to lose. Take your pitchforks and hammers with you. And don’t forget last year’s cell phones. They make great missiles when flung by slingshot. We need to build an impregnable wall of sea defences spanning our islands ready to take on all invaders, and a boat load of angry Samoans! In fact let’s get really nasty and throw chemically fertilised turnips at them! We’ll keep the organic ones for ourselves!

Don’t you worry; we’ll show the invading hordes a thing or two!

by Gummy Bear Hero | 22nd Aug 11, 1:48pm 1313977739

I sometimes wonder if Kunzie is Winston Peter's speech writer ! ...... Fortress NZ !!!

.... d'yer suppose Walter boggles his eyes and roams the streets of Kaikoura muttering , " we're all doomed , the world will never recover , doomed I tell ye ! " .... sort of 'like Fraser the undertaker , on " Dad's Army " ....

by David B | 22nd Aug 11, 2:27pm 1313980051

lol, I think he does!

I've also heard that on those cold still nights in winter, when a pale moon is at its fullest, if you venture outside after midnight and listen very very carefully, you can hear the distant sound of cuckoo, cuckoo, coming from the hills.

by Kunst | 22nd Aug 11, 2:59pm 1313981963

No David, but I swing the big cow bell from our hilltop pergola down to the Kaikoura village - every time New Zealand wins a team world champion chip. Next time after the American’s Cup - hopefully.

by Billy | 22nd Aug 11, 10:18am 1313965097

Does the NZ govt have any precedence of confiscating gold ?

by steven | 22nd Aug 11, 10:22am 1313965333

Doesnt matter, in extremis they can. The events of the next 20 to 30 years would probably see adequate "reason" for them to do so.....the only way to protect your gold is to make sure there is no electronic or physical record of your purchase IMHO.

regards

by foxysfolkfaced | 22nd Aug 11, 11:24am 1313969040

during the great depression only 22% of gold was actually handed in - so the the other 78% that was hidden under floorboards and inside walls was immediately worth more the day after it was finally made illegal to hold it.

it was worth $20~/oz when it was legal to hold and then the US govt fixed the price at $35/oz immdiately devaluing the cash they had just paid out to confiscate your gold

agree, do not have any records of any sort that you have gold - be careful who you tell as well......if anyone

by We Are Stuffed | 22nd Aug 11, 12:46pm 1313973999

During the great depression there were no Trademe records.

by foxysfolkfaced | 22nd Aug 11, 1:06pm 1313975174

maybe it was all done on ebay then - i wasn't around at the time

by Green Lantern | 22nd Aug 11, 8:51pm 1314003107

I lost all of my gold in an unfortunate boating accident.

by Gummy Bear Hero | 22nd Aug 11, 9:09pm 1314004171

... knocked your gold tooth out ? .... sorry to hear that ....

by Green Lantern | 22nd Aug 11, 9:33pm 1314005620

Maybe they'll start by confiscating Theresa Gattung's gold.

by HP | 22nd Aug 11, 11:36am 1313969760

I would like to think ' Gold ' is a bubble and about to burst but my close sources tell me that the Feds will somehow get the ECB to start printing $$$, which will only make Gold and silver go up. Also, the super rich are converting all their cash to either gold, silver, farmland etc. Hence we must not sell our land to overseas interests.

Calm before the storm

by Gummy Bear Hero | 22nd Aug 11, 12:13pm 1313971982

Evenly a wildly overvalued asset class such as gold , or NZ housing , can remain up longer than you can hold onto your shorts .

.... but you will be proven correct , eventually .

Who are these " super-rich " that many believe are hoarding & hunkering down for a financial storm ? ...... the Bill Gates , Carlos Slims , and Warren Buffetts of the world are maintaining their business investments . If anything , some ( notably Buffett ) are actually putting more money into equity investments .

by steven | 22nd Aug 11, 9:12pm 1314004361

Super rich out of cash, well I'd rather listen to Roubini who says they are going into cash.....but if you are that rich whats a mil or two of gold.....no biggee. Farmland, yes I suspect the paper money is trying to buy real assets at a decent clip before it disappears.

regards

by Rob of the North | 22nd Aug 11, 12:22pm 1313972520

For what it's worth Rabobank was one of the banks subjected to the EBA's 2011 stress test. This test has been conducted by the EBA in co-operation with De Nederlandsche Bank (DNB), the European Central Bank (ECB), the European Commission (EC) and the European Systemic Risk Board (ESRB).

A total of 90 banks were assessed in the stress test, which together represent 65% of the total banking system in the European Union.

One of the items assessed in the stress test is the banks' exposure to the peripheral countries of the eurozone. As disclosed previously, Rabobank's exposure to the eurozone periphery is limited. At the end of June 2011, the bank's total exposure to Greece and Portugal amounted to EUR 240 million and EUR 19 million respectively.

by Christov | 22nd Aug 11, 12:58pm 1313974692

Hello Bernard...my name is not Iain Parker...but then by the brevity of this post you have probably guessed that already.........

Joy and happiness upon you.

by Bernard Hickey | 23rd Aug 11, 9:06am 1314047198

Christov

I am joyful and happy about that. ;)

cheers

Bernard

by iconoclast | 22nd Aug 11, 1:04pm 1313975087

Bluescope Steel, the Australian parent of NZ Steel has just announced an AUD $1 billion loss and massive retrenchments. Does anyone know if NZ Steel pays royalties on the "ironsands" it extracts out of the virtual "mineral resource holes in the ground" ?

by Wolly | 23rd Aug 11, 8:59am 1314046780

Jeez...every time I open the site I see Bernard Hickey 80 and I wonder what pills he has to manage that!

by Bernard Hickey | 23rd Aug 11, 9:07am 1314047275

Good point. I need to change that comment piece.

But you're right. I'm taking my vitamins and riding my bike a lot. Hope to make it to 80. ;)

cheers

Bernard

by Wolly | 23rd Aug 11, 9:16am 1314047796

And good luck to you BH...if your luck holds...there will still be a pension waiting for you to receive it when you turn 80....

by Bernard Hickey | 23rd Aug 11, 9:18am 1314047899

Now I'm only 59! ;)

Hmmm. I'm not so sure about the pension.

I reckon the kids behind us might vote it out as soon as they get the chance.

cheers

Bernard

by powerdownkiwi | 23rd Aug 11, 9:23am 1314048227

Given what our generation has done to theirs, we'll be lucky if it's only in terms of voting that we get 'outed'. :)

Make sure you check the spelling of youth in Asia.