David Chaston details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that there is an unbelievable rally in risk-correlated assets underway as we speak. It’s ‘unbelievable’ because there is great doubt it can last.
However, US stocks have risen sharply in Monday trading. The Dow was up as much as 2.5% at one stage, although it is off that high slightly now. US oil is much higher today, the highest it has been in three weeks.
Investors seem to be hanging their hats on the latest signs of progress in France and Germany's effort to resolve the euro zone's banking and sovereign-debt troubles. The better than expected US employment data at the end of last week in the US is helping also, along with a growing realisation that the US is not slipping back into recession.
And also helping was news from China that Beijing has intervened to help stabilise shares of the country's battered Big Four banks, pushing them higher and spurring a strong late-day rebound in the Hong Kong market. And China is letting its currency strengthen for a combination of its own policy reasons, and maybe in response to pressure from the US Congress. There are also signs in China that housing price pressures are easing, with falls in home sales during last week’s ‘Golden Week’ holiday period.
But investors seem to be ignoring more worrying European signs. The Germans and French have pushed back their debt crisis summit amid more tensions over Greece. And the Slovaks are the latest to threaten EU unity.
But such details are being ignored by investors today. Commodities are higher; the NZ$ is sharply higher overnight at 78.5 US cents. And gold is treading water still.
And finally a observation about the tolerance of investors for low yields. We have reported here before that the bid-to-cover ratio for NZ Government securities has gotten quite low recently. Well, the same is happening in Australia. After a while investors tire of yields below the inflation rate. Too much ‘safety’ causes your capital to erode, it seems. Perhaps that is another reason we are seeing see-saw demand for risk assets. Investors are flailing about on how to position themselves in this new era of the ‘great repression’.
Bernard Hickey will return tomorrow.
No chart with that title exists.
11 Comments
Chuckle - check out the video embedded in this piece of Aussie houses for sale:
Thanks Andyh. The film matches one of my clients sons situation where he lives in Queensland. He bought years ago so hes OK but some people are losing 20%
Two cases in NZ I have seen through clients with an actual 40% loss. Two bedroomers and locality issues as demand drops
I dont doubt that the guy has gone out of his way to find the worst example he can of entire streets for sale. Nontheless total figures of houses for sale in various parts of Aussie have soared, so there is some validity to the point he is making.
Do you think the houses shown are all unoccupied new builds (spec houses) or do you think there are folk living there?
It will be interesting to see if the inevitable Aussie rate cuts coming up will save their market......
According to my clients son they spec houses and those that have bought in the last 2 years have lost big time.
As to whetehr the market will be saved, no, but in line with BHs predictions not coming true, due to the timing aspect, created by stupid tweeking, it might slow down the rate of decline.
There are no bubbles from Ben Bernanke's quantitative easing he believes , just lots of foam .
... and for validity of that , stroll into any shopping mall here in the Philippines ... and it'll be mere seconds before you're assailed by glossy-pamphlet distributors , selling the latest batch of condominiums .
The scale models of the new property developments and high-rises demonstrate the massive excesses of the construction boom . Awesome models , set up on trestles , to tempt you into a low deposit , easy terms , you can't lose on property , Joe .... why buy one unit , get three and rent the other two out , simple !
.. .. All those trillions of cheapened greenbacks have to re-surface somewhere .
Remind me , Dr. Bernanke , foam is made out of what ? .... bubbles isn't it !
interview about Slovakia and the Euro
http://www.spiegel.de/international/europe/0,1518,790577,00.html
Mayday call from stricken ship. The Defence Force is responding to an emergency evacuation call from the crew of the stricken cargo vessel Rena.
http://www.stuff.co.nz/environment/5763630/Mayday-call-from-stricken-ship-Rena
A mayday call has been made and marine radio listeners have told Newstalk ZB the crew requested an Iroquois helicopter to pick up those remaining on board as it's thought the ship is breaking up
http://tvnz.co.nz/national-news/rena-crew-calls-full-evacuation-4458598
Possibly your reporting places the emphasis in reverse; what is happening in China is ultimating more important thatn what is happening in Europe and therefore positive Chinese intervention is viewed with some weight.
It is also worth remembering risk also equates return and no investor is looking for a zero or negative return.
In that light the 'unbelievable' may become more believable.
Well it's not that unusual. The Kiwi is not very liquid (not that many people buy and sell it) so it doesn't need everyone, only a few to create movement.
Remember the Fed has interest rates below inflation so the real return is negative. Not really greed to seek out a small positive return.
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