Daily briefing for Friday, January 13, 2012

Daily briefing for Friday, January 13, 2012; Spiritual snobbery, misleading ads; EU Tobin Tax; advisers squirm

13th Jan 12, 11:57am by David Chaston

We'll lend, but ...
Spain’s banks, saddled with 329,000 foreclosed homes, are still willing to provide mortgages, as long as the borrower wants to buy one of their properties. That’s no help to homeowners and developers wanting to sell.

What would a European 'Tobin Tax' really mean?
Angela Merkel and Nicolas Sarkozy are pressing forward with plans to introduce a financial transaction tax in the EU - if necessary without Britain, home to Europe's largest financial center. Critics believe it will cause an exodus of the industry from the euro zone. But a closer look at the proposal suggests the worst wouldn't necessarily come true.

Big buyer?
China holds the world's 5th largest gold reserve at a bit more than 1,000 tonnes but that is well below what you would expect compared to its peers and compared to the size of its currency reserves. In fact the figure should be expected to be closer to 4,000 tonnes - but to do this China would need to buy the entire global gold mine production for the next year or acquire gold equivalent to the success of the gold ETF. Gold bugs are salivating.

Getting real
"It's a kind of spiritual snobbery that makes people think they can be happy without money."
Albert Camus

more below ...

		8 am		--- 52 week --
		Today	yesterday	high	low
		--------	--------	---------	---------
FX rates	NZ$1=US$	0.7940	0.7957	0.8822	0.7174
	NZ$1=AU$	0.7687	0.7723	0.8085	0.7276

Gold	in US$/oz	1,648	1,639	1,895	1,319
	in NZ$	2,076	2,059	2,314	1,705

Copper	in US$/t	7,689	7,641	10,147	6,785
	in NZ$	9,685	9,603	13,507	8,299

Crude oil	in US$/bl	101.15	102.94	118.70	89.69
	in NZ$	127.39	129.37	149.14	117.26

US Treasuries	30 yr bond	3.04%	3.02%	4.73%	2.88%

Dow	DJIA 30	12,435	12,426	12,919	10,402

Want to win a car?
You will need to be very patient and very lucky on SmileCity. Their ads have been ruled as misleading in New Zealand.

Empowering clients
The impending changes to Australian financial advice which includes banning commission, has their banks and other advisor groups squirming, calling for substantial revisions. Will they go ahead as planned on July 1?

What's it worth?
Our currency is pretty much sitting at a fair market value, according to the world's most famous PPP measure.

130,000 and counting
Banks worldwide are cutting jobs as stricter regulations and eurozone woes take their toll on trading income and investment banking units. It's a trend that is yet to surface here.

This is the last of the 2011-2012 summer holiday briefings. Bernard Hickey returns on Monday, and with him, his Top Ten with NZ Mint.

No chart with that title exists.

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25 Comments

by skudiv | 13th Jan 12, 6:19pm 1326431986

Forbes said Gold isn't a safe haven, buy aussie dollars, hahahaha.

by Wolly | 13th Jan 12, 6:28pm 1326432501

My best advice skudiv....research the copper gold mining companies re aus and canada, beware of any shite involvement in Africa...nail down a handful of companies with track records and proven reserves with heaps of potential ground to drill...then wait for the mighty crash to come...buy the shares at the bottom...5 times pe or less.

by skudiv | 15th Jan 12, 4:12am 1326553925

Definatly worth looking at Wolly. I may have a look, It's hard going through a companies financials though, very slow and can be confusing, especially "intangibles" and stuff. Without going and seeing whats going on, and probably even if I went and had a look. I'll have a look, if there is another takedown, it will be easier to buy the actual metals.

I can understand lumps of metal, and their proven history as a safe haven during economic crisis.

by Wolly | 15th Jan 12, 6:45am 1326563146

Agree skudiv that's why I use the market to do the looking for me. Try the Digger...an aussie outfit you pay to get their work..they do the donkeywork...

The collapse might be short and bad or long and awful...I can't say...but it will happen. Look back at share prices on stuff like OZ in the depth of the 08 plunge...that's where thing will break to at some stage...be ready to buy and do not expect the recovery to be quick.

The worst of the debt mountains have to be taken out of the way over time or by huge losses before real recovery can start. It will bring recession /depression/war and misery on top of losses.

Beyond that there will be the electric revolution and the age of copper and exotic materials...and end to internal combustion and oil based economies...and end to the influence of OPEC.

You might want to risk the rare earths investments too. Also look to advanced medical hardware and medicines.

Avoid property, banks, old industries, creatures of fashion and anything said to be the future by politicians.

by skudiv | 15th Jan 12, 8:14am 1326568464

Good calls wolly. If there is a stock market crash before hyperinflation kicks in, then there will be some great buying opportunities.

by skudiv | 15th Jan 12, 4:05am 1326553537

Cheers Snippy, very interesting. When it becomes common knowlege that there is 5x more gold then silver, and Forbes recommends gold and silver as safe havens, use gold and silver to buy houses, stocks or farmland.

by Wolly | 13th Jan 12, 6:24pm 1326432266

This article is worth a read....it sorts things out....puts meat on the bones...but it does not explain how the debt trillions nightmare can be solved...indeed if anything it points to the madness having no end...

http://www.bloomberg.com/news/2012-01-12/rescuing-europe-from-debt-crisis-begins-with-men-of-mit-as-matter-of-trust.html

by skudiv | 15th Jan 12, 7:59am 1326567580

It's a big club Wolly, and you aren't in it. It's the same club they use to hit you over the head with.

by Wolly | 15th Jan 12, 10:19am 1326575978

They didn't even send me a xmas card skudiv...rotten swine....

Isn't it a laugh to realise the chch CEO is paid more in US$ than Bernanke....funny as hell. A great pointer to figuring out what is so sick about this economy.

by Wolly | 13th Jan 12, 6:51pm 1326433870

The following can only be described as a crystal clear account of the thieving farce that is the NZ economy...read it...absorb the stench if you can!

"The largest banks are in need of huge infusions of capital. Consider just Europe's banking system. We read this in Business Week. The requirement for the end of 2012 is in the range of two trillion euros, or at least $2.7 trillion.

Banks in France, the U.K., Ireland, Germany and Spain have announced plans to shrink by about 775 billion euros ($1.06 trillion) in the next two years to reduce short-term funding needs and comply with tougher regulatory capital requirements, according to data compiled by Bloomberg.

This will exacerbate the looming recession. But the banks are trapped. They need massive infusions of new capital. If they do not get this, they will be forced to sell assets. To whom?

"Asset sales are impractical in the current environment," said Simon Maughan, head of sales and distribution at MF Global UK Ltd. in London. "Every bank is selling, and no bank is buying. It just won't work. Beyond that, the magnitude of the cuts the banks are talking about is nowhere near the likely required amount of deleveraging. They need to reduce hundreds of billions more to adjust to the new world order. There has to be a recapitalization."

Who would be silly enough to offer banks the hundreds of billions of dollars in capital that they need in order to decrease their vulnerability? Only politicians. But large governments are running huge deficits, except for Germany. Who would be so silly as to loan governments money? Bankers. And so it goes.

Could there be a true banking collapse? Only if the European Central bank refuses to inflate. Will the ECB inflate? Of course. It's #1 unofficial assignment is to save the largest banks.

Bank share prices indicate in what bad shape the West's banking system really is. Everywhere, bankers have promoted bubbles, made huge losses for investors, and have lived high on the hog through government bailouts. This is not going to change. The bankers are running the show. They pocket the profits, leave little for shareholders, and call for bailouts by the government whenever their bonuses are threatened. The politicians comply.

Why should anyone expect this to change? It is not in the interest of senior managers of large banks to change it. They can deal with regulation. This stifles competition. But they will not tolerate free market competition."

http://www.marketoracle.co.uk/Article32589.html

by skudiv | 15th Jan 12, 8:07am 1326568060

Politicians and bankers have stuffed the world economy. They are printing and will continue to do so. Before Obama finsihes his first term he will have borrowed nearly as much as all the Presidents before him combined, same with Key. Whatever way this blows, this is one of the few brief times in history where owning gold and silver is the best thing to do. If you can't hold it, you don't own it.

by SimonP | 15th Jan 12, 11:06am 1326578819

Don't worry if you can't pay the mortgage, just sue the bank: http://www.theage.com.au/business/banks-face-home-loan-suit-20120114-1q…

by Gummy Bear Hero | 15th Jan 12, 1:05pm 1326585906

What " fraudulent banking practice " ? ....... if farmers are too gullible & too greedy to look after their own best interest , then that is their personal problem , not the banks .....

..... next you'll be advocating for obese people to sue MacDonalds for selling them fatty food !

We all come blessed with free will . And we are free to exercise it . Don't blame others if you make poor choices , suck it up , learn from the experience , and move on ... keep on truckin' , as they say ...

by Gummy Bear Hero | 15th Jan 12, 6:43pm 1326606185

You just lost your wager , Iain ...... the Gummy fortune was built upon prudent investing in common stocks listed on the ASX , during my time in Australia ... and on the NZX during my Kiwi experience .....

..... and I didn't borrow a penny , absolutely no leverage , no bank money involved .... GBH doesn't believe in debt , but that's my personal choice , what others choose to do is their responsibility ........

It's kind of ironic Iain , that you're the one with a bank loan , not me ! .... keep on truckin' , friend ...

by Gummy Bear Hero | 15th Jan 12, 11:59pm 1326625181

.. Truth be told , I took out a home loan with the ASB .......... held it for about 3 years . Thought I should test run this mortgage business that everyone was raving over ...... but it was not for me , so I cashed up some assets , and paid the loan off .....

..... isn't that the prudent thing to do ?

How long have you held your mortgage , Iain ?

[ .. bear in mind , the Gummster went bush in Australia ( oil & gas ) , and built up a sizeable asset base before getting married ... which seemed a good idea at the time , and with hindsight , still does ..

... you keep grasping at straws to denigrate me Iain , why is that ? ... I loathe unions & governments, and never gained one iota from either of them , didn't want to ... also , no inheritence , and no winnings , zippo .. ]

by skudiv | 16th Jan 12, 7:53am 1326653625

And to think Gummy, if you had swapped your stocks for Gold about 12 years ago, you could buy 10x more stocks today. Hindsight is a wonderful thing, but now you know, when the Dow index will buy you 81oz of gold or 8000oz of silver, it's a pretty good time to swap stocks for gold or silver. The inverse when 1oz of gold will buy a share in the Dow, its a good time to swap your gold for shares.

This is a ratio I will be keeping an eye on. Forget notional value, the stock market has lost about 50% of its purchasing power against the CPI since 1999, and a lot more compared to gold, oil, houses, wheat etc.

by moa man | 15th Jan 12, 8:36pm 1326612978

Iain, you worry too much about banks. Work hard enough, be smart enough, and you can find youself in the position of being the lender to banks, they don't like it much when you tell them you don't like their t/d or fx rates, and simply move your funds to get a better deal elsewhere. I dislike banks probably more than you do. Banks are not are a charity, never have been and never will be. Only a fool would would take advice from a bank. They are there to serve their interests, and so they should. They are a business. If more people took that onboard, instead of thinking banks are some sort of public service,then the finances of the general public would be in a better place.

by Gummy Bear Hero | 16th Jan 12, 9:14am 1326658459

Exactly ! ... well said . The banks are no more than a financial tool to use if you choose to , but it's not compulsory ...

by Kunst | 16th Jan 12, 9:23am 1326658986

Roger - we are all different. Most people are happy with a job and work hard to make an income, but stay away of investments or dealing with commodities of many different reasons – ethical reason could be one.

by Gummy Bear Hero | 16th Jan 12, 9:40am 1326660041

..... you don't need to tell me Walter , I fully understand ..... give the message to Iain , he lectures us long & hard about the evils of the banking industry , but has the temerity to have a loan himself ! ...... Tsk tsk ......

Commodities you say ? ....... Gummy invests in businesses , in publicly traded companies . And if they pay a divvie , we re-invests that ....... you'd be surprised how the compounding effect builds a small stash into a large pile over a quarter of a century , even in the thrall of a Hickey market .......

by scarfie | 16th Jan 12, 2:09pm 1326676158

But even by lending to them you are facilitating the Ponzi scheme when they turn around and lever it by 9x. Make a bit of a joke of the spread really, when it reality it is 9x greater in their favour.