90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: QEIII coming; risk on; strong US manufacturing; Russia likes Australia

27th Jan 12, 8:55am by David Chaston

Here is David Chaston's 90 seconds at 9 am summary of overnight financial news in association with Bank of New Zealand, including news that 'risk' is definitely 'on'.

A combination of rumours of a Greek bond deal and the dovish statement from the US Fed is buoying markets today. The Greek bond rumours haven't been confirmed yet, but the Fed's 'exceptionally low' interest rate promise through to 2014 has been interpreted by markets as setting the scene for the next round of money printing - that is, the long foreshadowed QE3. If Ben Bernanke does launch it, it will be controversial.

But markets like the prospect, and it signals 'risk-on'.

The Dow and S&P500 are both up strongly - in fact the Dow went through 12,800 a few minutes ago, a level not seen since 2008. Oil is higher - slightly - and gold is holding on to the $50 jump it got when the Fed made its announcement.

Also helping markets is that US durable goods orders in December were surprisingly strong, and one US manufacturer in particular, Caterpillar, has reported a very strong result and outlook for 2012.

And, the NZ$ has also held on to its higher levels and is currently at just under 82 US cents. I doubt we will see a significant fall in our currency any time soon, especially now that Russia has announced that it is ready to use the Aussie dollar as one of its reserve currencies.

In New Zealand today, we await the announcement of the OIO decision on the Crafar Farms sale. It is one that has implications wider than the specific issue, and will set the tone on foreign investment for a while, a bit like the Canadian Pension Fund / Auckland Airport decision did in the Clark/Cullen government.

No chart with that title exists.

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17 Comments

by Justice | 27th Jan 12, 8:59am 1327607975

"Dunne this morning said a global recession would force the Government to look at plugging tax loopholes, clamp down on tax avoidance and ensure the system was coherent and consistent."

ohhhh, what ever could he mean?

by Andrewj | 27th Jan 12, 9:14am 1327608866

our disaster recovery plan goes like this

http://www.youtube.com/watch?v=K-qY_b8lo-k

by Chris-M | 27th Jan 12, 9:45am 1327610701

Do we take from this, that the government has had a deliberate policy on being slack on pursuing tax avoidance. What an admission!!!! What is their excuse for not making sure that everybody pays their fair share of the tax bill.

Does this mean that while we have rules, some of them may be flexible. Where is this published and set out for every body to see? Who knows where and how this elasticity is applied? Is it just some well connected group of wealthy individuals. This is a totally unacceptable situation and boarders on corruption.

by ngakonui gold | 27th Jan 12, 9:13am 1327608826

[plugging tax loopholes]

Park the ambulance at the bottom of the cliff.

by powerdownkiwi | 27th Jan 12, 9:35am 1327610144

"Number one, see to it that the portholes on E Deck are closed".

"Very good sir, consider it dunne".

by Kunst | 27th Jan 12, 9:43am 1327610603

Problematic with this government is in stead to act – they react bringing our country into more debt and misery – unfortunately a costly exercise for most of us – almost prohibitively expensive.

The public should demand from the government a turnabout – a new economic strategy, as I mentioned many times.

by Wolly | 27th Jan 12, 9:57am 1327611453

QE3 or 4 whatever will be as much a failure as the rest of the printing...but it will light a fire under farm export prices and that will save the govt from being recognised as a failure...like all previous govts.

Time to borrow big and gamble on property again....it's the Kiwi way.

by Gummy Bear Hero | 27th Jan 12, 10:29am 1327613349

The DOW closed 22 points down at 12735 ....... US sales of new homes disappointed , 2011 was the lowest year for new home sales on record ......

...... the median price of a new home is $US 210 000 ...... a fall of 2.5 % in December , from the previous month .....

by Wolly | 27th Jan 12, 11:28am 1327616906

"the USEconomy is stuck in a weak reverse gear. The accommodation will extend until year 2014. These guys are basic liars. Even Bill Gross of PIMCO takes shots at the central bank policy or ruin. The United States will suffer financial repression (in Gross's words) if the Federal Reserve implements additional bond monetization as policy. The USFed will hold its benchmark interest rate at near 0% for at least the next three years, as a testament to central bank failure. No departure from the 0% rate can be done. The USGovt debt service requires it, demands it, and will default without it. The ZIRP and QE are worn as badges of failure and dishonor.

Remember the Green Shoots of USEconomic recovery in 2009? The Jackass dismissed it as nonsense. Remember the Exit Strategy later in 2009? The Jackass dismissed it as nonsense. Remember 0% was for just six to nine months, an emergency policy? The Jackass dismissed it as nonsense. Remember how Quantitative Easing was to be temporary in 2010? The Jackass dismissed it as nonsense. Remember how the 0% accommodation was to last until 2013, announced early this year? The Jackass dismissed it as nonsense. It is all the stuff of cows and bulls propelled from hind quarters, piling on the meadow in lumpen form. Tragically, the reality is more simple. The 0% rate (ZIRP) and the heavy hand of monetized bond purchase (QE) are permanent or else the system falls apart and collapses. Such an admission would send the USDollar, the Euro, and all major sovereign bonds to the woodshed for processing in a pit filled with excrement, where they will ultimately end up. The tragic fact from the world of economics, is that 0% and bond purchase kills capital, diminishes the economy, puts business asunder, ruins jobs, and causes federal deficits to grow. They are not stimulus, but rather financial formaldehyde."

http://www.marketoracle.co.uk/Article32828.html

by Roelof | 27th Jan 12, 1:09pm 1327622999

Well said Wolly... Seems counterintuitive ..but..yes.. for Capitalism to function properly there really does need to be a realistic .."Cost of Capital".

What we have now is actually the Destruction of Capitalism... NOT ...the rescue of Capitalism..

It is really sad to see just how lacking in Wisdom and Intelligence our Leadership is.

The GFC was a Paridigm shifting event...and now almost 5yrs later ... they are still clinging to the "old ways"

cheers Roelof

by Wolly | 27th Jan 12, 1:15pm 1327623356

I only posted it roelof...someone else knocked it up.

by Roelof | 27th Jan 12, 1:39pm 1327624740

Oh.!! Here was I thinking u were sage, wise and a Genius ..!!! :)

by Wolly | 27th Jan 12, 6:08pm 1327640937

Bollard set to leave the RBNZ so the news flash reports..can't blame him...he probably wanted to move along prudent lines and is sick of being told what he will do by govt....

and who will replace him...why Spencer likely as not...the man who wants to "play the game"

could be worse I spose...the Poms are set to get Mr Bean when Merv leaves the BoE

by Wolly | 28th Jan 12, 5:55pm 1327726514

Gerry....you are a fool.

"Canterbury Earthquake Recovery Minister Gerry Brownlee said the offer was made on the basis that the residents would be well- treated."

http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/6328414/Govt-to-buy-out-rest-homes-too

by Wolly | 29th Jan 12, 7:34am 1327775680

"Iconic reopened on December 31 after temporary repairs were completed and signed off by structural engineer Simon Gifford, of Lewis and Barrow, on behalf of his colleague, Chris Gordon.

Mark Ryburn, an Opus engineer seconded to the council, reinspected the building on February 9.

He had concerns about the building, expecting it was yellow or red-stickered, and recommended the council investigate.

However, Ryburn's report was not followed up and the council closed the file the morning of the February quake." stuff

Where are the manslaughter charges....hello......hellll lowwwww...anyone out there...?

by Roger Witherspoon | 29th Jan 12, 10:29am 1327786150

The degree to which central banks around the world are printing money is unprecedented.

The first eight charts below show the balance sheets of the largest central banks in the world. They are the European Central Bank (ECB), the Federal Reserve (Fed), the Bank of Japan (BoJ), the Bank of England (BoE), the Bundesbank (Germany), the Banque de France, the People’s Bank of China (PBoC) and the Swiss National Bank (SNB). Noted on the charts are significant events or growth rates.

Shown is the size of each respective balance sheet in its local currency. Note that all are exploding higher as every chart goes from the lower left to the upper right. Most are still making new all-time highs. If the basic definition of quantitative easing (QE) is a significant increase in a central bank’s balance sheet via increasing banking reserves, then all eight of these central banks are engaged in QE.

Very interesting, definitely one for inclusion in Bernard's next Top Ten Links:

http://www.ritholtz.com/blog/2012/01/living-in-a-qe-world/

My own take is it is when the rate of credit creation slows then the world stock markets crash. Interesting that China is the most vulnerable, followed by Germany.

by Roger Witherspoon | 29th Jan 12, 11:52am 1327791131

First, there’s the “Profiteers’ Party”. It comprises the businesses that benefited from the patronage system of the last thirty years, in particular construction firms. They had their heyday in the run up to the Olympic Games of 2004, when the State lavished them with lucrative construction contracts.

But the members of the Profiteers’ Party also include the businesses that supply state agencies with goods, for example, firms that provide medical equipment and pharmaceutical supplies to public hospitals. Greeks are only now beginning to understand the extent to which money was squandered. Until recently the hospitals themselves were responsible for the purchase of pharmaceutical supplies and medical equipment. The Ministry of Health has now centralized the purchase of pharmaceuticals online; given previous expenditures, it made 9,937,480€ available. It now turns out that the drugs cost only 616,505€, or just 6.2% of the previous amount!

Great article about Greece

http://sxchristopher.wordpress.com/2011/12/26/petros-markaris-the-light…