90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Dow ends down after worse than expected US jobless claims; Buffett backs Bank of America; Apple shares cope; To QE III or not to QE III -- that is the question

26th Aug 11, 8:56am 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 Dow closed down 1.5% overnight after worse than expected US jobless claims and more ructions on European markets.

See more on the markets action here at Bloomberg.

Initial claims for for US unemployment benefits rose 5,000 to 417,000 last week, which was worse than economists had expected. See more here at Reuters.

German stocks fell as much as 4% in a type of 'flash crash' on fears a ban on selling of German banking stocks may be extended. A similar ban on short selling of French, Italian and Spanish stocks was extended after the close, Bloomberg reported. The DAX eventually closed down 1.7%. See more here from Bloomberg on the German market gyrations.

US stocks were bolstered somewhat after renowned investor Warren Buffett said he would buy US$5 billion of new preferred shares in Bank of America. Shares in the bank have halved this years on worries about its level of capital backing. The shares rose as much as 26% on the news before settling up 9.6%.

See more here at Reuters and Bloomberg.

Also, Apple shares coped reasonably well with the news that company founder and maestro CEO Steve Jobs was resigning from CEO to become just Chairman, apparently for health reasons.

Apple was down 2% in late trade having initially fallen 5-7% at one stage. See more here on Apple's future without Jobs via Bloomberg.

But the real focus on markets is US Federal Reserve Chairman Ben Bernanke's speech due from Jackson Hole at 10 am US eastern time on Friday (2am Saturday NZ time).

The key question? Will he or won't he announce a third round of quantitative easing or money printing known as QE III. Some in the stock markets and gold markets have convinced themselves he will announce it.

Other analysts are not so sure. Here is a preview from Bloomberg saying he may hold back from a full QE III announcement.

Here is a preview from Reuters also being cautious about QE III.

Gold prices rose again overnight after a big slump the previous day. Euro fear abounds the German flash crash also sparked safe haven buying. See more here at Reuters.

The New Zealand dollar was solid just under 83 USc in morning trade.

No chart with that title exists.

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43 Comments

by scarfie | 26th Aug 11, 9:03am 1314306214

Wolly, give us the low down on what Bernanke is going to say tonight:)

by Wolly | 26th Aug 11, 9:06am 1314306392

Oar heck scarfie... an I promised the man to keep his emails confidential.....lemme get my bets down first ok..!

by scarfie | 26th Aug 11, 9:31am 1314307886

Isn't it crazy that the fate of the western world seems to rely on the words of one man.

Since when did a few words have the ability to sway the markets so dramatically? I don't expect him to resolve anything and the markets will continue to be volatile as any little piece of news swings them wildly.

by Wolly | 26th Aug 11, 9:46am 1314308787

If you are suggesting his 'words" mean the decisions are his too.....I think you need to look deeper Scarfie...look into the fed world bank system to see who is pulling the strings on Bernanke's back...ask Parky for advice!....

The Big B is taking advice and instruction from..........?

by scarfie | 26th Aug 11, 9:58am 1314309506

A mouthpiece yes.

Although it isn't just him, in other weeks it is other pieces of news that the markets seem to be hanging off. I guess the policy has had the ability to trend the markets in a certain direction up until now. Going forward is not so certain eh.

by Wolly | 26th Aug 11, 10:03am 1314309782

It's rock solid certain when you control the big B scarfie....billions in profits flow into the accounts on every wink and fart from the big B...it all comes down to managing him.

by iconoclast | 26th Aug 11, 11:20am 1314314414

Wolly: Come on Wolly. Spit it out. Who? What? The Brotherhood?

by steven | 26th Aug 11, 10:51am 1314312670

Yet thats what we allowed with Greenspan for decades and look at the mess we are in.....oops

regards

by Wolly | 26th Aug 11, 9:21am 1314307277

Try this AJ.....and about when you drop your cuppa cawfee..think about what English and Bollard will be asking the bank bosses for in the way of advice on policy post the election!

http://www.bbc.co.uk/news/business-14583201

If we don't see a move by Bollard to catch up with inflation before it gallops over the horizon, it could spell the end of the currency as a "safe" place to be.....and that would mean all manner of shite for the banks!

by Andrewj | 26th Aug 11, 9:25am 1314307500

This was from a commentor on a telegraph thread.

Charles Crawford

One of the greatest passages in the Bible:

Then the Lord said to Cain, "Where is your brother Abel?""I know not," he replied. "Am I my brother's keeper?"

When - and to what extent - is X responsible for Y?

This speech by President Wulff is one of the most far-reaching statements made by a European leader about Europe since the Second World War.

It says that European Solidarity has Limits. And that no EU member state can expect to run up unmanageable debts and then call on the spirit of solidarity to get others to reach deep in their pockets, the more so if the sheer extent of the losses/debts might put even the strongest member states at risk.

President Wulff helpfully reminds us of the moral dimension of money, something usually overlooked.

What is money, after all, but an expression of moral value, above all an expression of confidence about trust and integrity? Not merely now, but based on hard-won reputation for reliability in preceding generations, and echoing down the decades still to come

Who wants to be paid in North Korean or Zimbabwean or Cuban currency? No-one.

Why? Because that currency is an expression of cruelty, inefficiency, waste and stupidity. It is literally worthless for most practical purposes.

"Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow.

Those pieces of paper, which should have been gold, are a token of honor -- your claim upon the energy of the men who produce.

Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money."

Thus the urgent moral and political question for the ailing Eurozone and its feckless members:

You expect (or at least hope) that whenever you toot the European solidarity trumpet a benign and benevolent Germany will do whatever it takes to prop you up, even if you have completely failed to run your affairs sensibly.

You expect Germany to be your keeper.

Have you asked Germany recently what it thinks about that?

by Wolly | 26th Aug 11, 9:40am 1314308425

Yeah I can see the argument but recently I came across one from somebody pointing out the awful cost caused by the Nazi regime...remember that...the thousand year dream...how much was lost by how many and have they been compensated by post ww2 German effort to do so...or told to piss off.

by Andrewj | 26th Aug 11, 10:00am 1314309600

Those banks have been up to their old tricks again, this time in Iraq.

http://www.informationclearinghouse.info/article28945.htm

by Wolly | 26th Aug 11, 10:09am 1314310140

Now about that bank account we opened a few months back for ...what was his name....gar something AJ...I just cannot recall to be honest but the ten billion is sitting in that temp account and he hasn't turned up to sort of.. tell us what to do with it.........Gardaf something...dammed if I can remember...anyway just to let you know only you and I know!....I'll put you down for five big ones AJ. ...happy xmas. delete this email and torch your hard drive.

by andyh | 26th Aug 11, 10:04am 1314309853

Roubini says QE3 by Xmas (and cash will be king)

http://www.cnbc.com/id/44276918

by We Are Stuffed | 26th Aug 11, 10:47am 1314312420

Hey Andyh and Wolly.

When Roubini says he is investing in cash does he mean cash on call bank deposits?

Not the folding stuff:)

by steven | 26th Aug 11, 11:13am 1314313980

Cash or anything cash like....

by Banksterbasher | 26th Aug 11, 1:34pm 1314322491

Are you protecting yourself from the corresponding inflation that results from the QEIII debasement Steve? Bying more gold on this we dip?

by steven | 26th Aug 11, 1:40pm 1314322845

No because QE3 wont cause significant inflation, we will see deflation shortly whatever Bernankie does, he cant stop the depression thats coming....especially when teh Republican led congress is hell bent on making it so so Obama isnt re-elected.

and with deflation = cash is king so nope Im not buying, because I dont see inflation and gold is a bubble waiting to pop....enjoy.

NB If I had any, I'd sell it right now.

regards

by steven | 26th Aug 11, 11:29am 1314314967

he's also saying its past 50% chance of a recession....and no matter what Bernanke and Obama do the Republican Congress will block it....I agree with him they wont the US in as bad a state as they can get so Obama takes the can and loses the election......if I believed in God I'd say god help us all....but the Im not a fanatic fundi christian loon....they are.

and JK thinks it will be OK? he's smoking something or lying...

regards

by andyh | 26th Aug 11, 11:40am 1314315645

What Steven said - cash or cash equivalents (which in the US would be Treasuries). I suspect (as he is talking from the US standpoint) also cash which is not in the US $ (ie some foreign currency exposure). As I recall Roubini has never been that much of a fan of PM's so I doubt he is pointing to gold and silver (you see even reasonably sensible economists still have blind spots ;).........

by steven | 26th Aug 11, 1:47pm 1314323245

Short term Govn "thingies" then...6 months or less maturation....

;]

Foreign currency, just what currency isnt poked? developing countries, maybe....Brazil? Im not up on that so no.....not me....well maybe OZ dollars....I think its possible they will always be relatively stronger than us and easy to get and exchange, but does that achieve anythgin? not sure. Im in simple bank deposits what little I have, Ive sold all my shares and most of what I had used to pay down debt, did that over a year ago...thank god....

Roubini Gold and Silver, no I dont think so....

regards

by goNZ | 26th Aug 11, 2:16pm 1314325000

rather intolerant language there steven -

by steven | 26th Aug 11, 2:18pm 1314325098

No a statement of facts....

regards

by Kunst | 26th Aug 11, 12:29pm 1314318590

America - just stuffed - there is even no tail for between the legs to be scared.

by steven | 26th Aug 11, 1:48pm 1314323333

I think you mean neutered? its got that harmless bark to whimper type sound........

regards

by meh | 26th Aug 11, 1:55pm 1314323723

Getting nasty in Europe.

http://www.macrobusiness.com.au/2011/08/cry-wulff/

by Kunst | 26th Aug 11, 2:26pm 1314325604

Europe - just stuffed - there is even no tail for between the legs to be scared.

by steven | 26th Aug 11, 2:17pm 1314325023

Ambrose - We are in a Depression,

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100011689/p…

“We’re in very serious danger. The world is in a depression in the Big Three of America, Europe and Japan, a mini-depression that we have not seen since the 1930s,”

"There is very little inflation risk now from QE because M1 money velocity has collapsed “by half” and is likely to stay there."

Not just nasty in Europe....

regards

by Gummy Bear Hero | 26th Aug 11, 2:35pm 1314326133

This'll make your blood curdle , Bernard ! ... Christopher Joye ( Business Spectator ) has written " Property's Fine Forecast " ... in it , he argues that residential houses in Australia will be 55 % higher in price 10 years from now .

by Nicholas Arrand | 26th Aug 11, 2:48pm 1314326880

CJ still sees Aussie as 'different' then! Quelle surprise....

http://www.whocrashedtheeconomy.com/blog/?p=1657

by meh | 26th Aug 11, 2:49pm 1314326967

He wasn't writing billboards for tui was he?

http://www.macrobusiness.com.au/2011/08/chart-of-the-day-10/

Check the link in the second comment for a comparison with the Aussie bubble.

How much does Aussie rely on the Chinese economy?

http://www.macrobusiness.com.au/2011/08/china-will-slow/

http://www.macrobusiness.com.au/2011/08/fitch-debunks-decoupling/

by steven | 26th Aug 11, 3:12pm 1314328369

He's welcome to his opinion....personally if we are only 55% down 10 years from now I'll feel like Im ahead.

regards

by meh | 26th Aug 11, 3:15pm 1314328521

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10747536

Shouldn't the headline read "Sky TV lifts profit on dominant monopoly position in the market"?

by andyh | 26th Aug 11, 3:21pm 1314328860

Merrill Lynch - probability of US recession now 80%

http://www.cnbc.com/id/44278624

Done.

And.

Dusted.

by steven | 26th Aug 11, 3:53pm 1314330804

Yep, self-fullfilling....watch them run.....FEAR....is now the game.....combined with bowel loosening moments and nightmares....

regards

by meh | 26th Aug 11, 3:31pm 1314329487

Friday Funny. Everyone needs a giggle every now and then.

http://www.macrobusiness.com.au/2011/08/crap-room-for-rent/

by Elley | 26th Aug 11, 3:36pm 1314329802

Ah ah, good one. I like the "Standing up for truth in real estate ads" at the end.

by Gummy Bear Hero | 26th Aug 11, 4:24pm 1314332673

The sheer audacity of a real estate ad which tells the truth ........ betcha it sold in just seconds ..... excellent view over that pond thing they have in Sydney.

... a never to be repeated sale ...... no , not the apartment ... .. I meant the advertising , the honesty of it all ...

by meh | 26th Aug 11, 4:17pm 1314332263

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10747597

Carter Holt asset sale fails.

by Andrewj | 26th Aug 11, 6:30pm 1314340211

Shags sheep,

Have you read this, still think the sheep market will hold up?

High street recession worst for 40 years, says Co-Op chief Peter Marks

"People are spending less on food – that's a first," said the Co-op's chief executive. He added that he and other retailers are having to cut prices radically to shift stock.

While normally around a quarter of products are on promotion, approximately 40pc are discounted at the moment, Mr Marks said. He added: "We're not into 'buy one, get one free' – we're into 'buy one, get two free'."

He added: "It has been a tough six months, the toughest I've ever experienced in my 40 years of retailing. I don't think we have come out of recession since 2008… I've operated through several recessions – this is by far the longest."

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/87234…

by steven | 26th Aug 11, 7:02pm 1314342153

So sort of a follow up to earlier comments on the head scratching over nz stats claims that food has increased....The background (full retail) price might have increased but the increase in items discounted is offsetting that? Which is a worry because in effect reailers and suppliers are absorbing an increase in costs that they would like to pass on but cant, which cant be sustainable....yet we as consumers cant sustain increased prices either....and its no where near over yet......and looking worse every day....

regards

by Sheep Shagger | 26th Aug 11, 9:43pm 1314351821

Hi AJ. Yeah frieghtening stuff alright. I do think we'll be ok though. I have a mate who is a director of one of the big meat companies and he is adamant that demand is still far outstripping demand. It concerns me that we are seeing such a large burn off in demand in our traditional markets and I am prone to waves of pessimism especially after reading this blogsite! However his reassurances of $100 plus this coming season are welcomed.

by Wolly | 28th Aug 11, 8:24am 1314476664

The brown stuff is splattering up the euro wall.

"The situation is out of control in the euro zone, …

The interbank market does not work because euro-zone banks managers have lost confidence in other banks. So they keep their cash in US$ rather than lending it to other banks that need it as they would in normal times: ECB had loaned $5 million to a bank on August, 25.

ECB had previously loaned $500 million (USD) on August 17. This caused a flash-crash in U.S. markets.

The problem is serious.

Chevallier notes that the paltry amount of money involved "shows that the interbank system is completely blocked".

http://globaleconomicanalysis.blogspot.com/