90 seconds at 9 am with BNZ: Greek deal finally done, but haircut bigger and doubts remain; Dow over 13,000; Auckland strongest in regional survey

90 seconds at 9 am with BNZ: Greek deal finally done, but haircut bigger and doubts remain; Dow over 13,000; Auckland strongest in regional survey

Here's my summary of the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news a deal was finally done late yesterday to bail out Greece for the second time in three years.

European leaders announced the deal after 14 hours of talks that eventually saw private holders of Greek bonds agree to a 70% haircut.

The deal was done at the very last minute, given the debt restructure needed to avoid a default on March 20 had to start tonight. However, there are plenty of hurdles. Creditors still have to agree fully and European parliaments still have to agree to the bailout measures.

There also remain major doubts about whether Greece's economy can pull out of its debt-death spiral where austerity contracts the economy, thus increasing the relative size of the debt load. One official analysis leaked yesterday showed Greece's debt could blow out again to 160% of GDP from 120% if its economy does not rebound. Many believe default is inevitable.

This meant there was little celebration on European markets, where stocks fell around 0.3%.

US markets were, however, more upbeat, with signs of consumer spending strength emerging in positive results from some retailers. The Dow briefly rose over 13,000 for the first time since May 2008.

Closer to home, the National Bank regional economic performance survey showed Auckland performed best in the December quarter from a year ago, with large parts of the South Island also growing.

Auckland is benefiting from a surge of real estate activity around central Auckland and received a boost during the Rugby World Cup. Large parts of the South Island (but not the West Coast) is doing well as the Christchurch rebuild begins to gear up and dairy, beef, and lamb prices remain high.

However, the Wellington, Nelson/Marlborough and Northland economies contracted, as did Christchurch's.

The New Zealand dollar edged back from its highs overnight as any relief over the Greek deal dissipated. It was around 83.5 USc in early trade, having hit 84 USc late yesterday. Lower inflation expectations in New Zealand were also a factor, keeping expectations for any OCR hike out around the end of the year.

See more here on currencies from BNZ on our site.

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"Large parts of the South Island (but not the West Coast) is doing well as the Christchurch rebuild begins to gear up and dairy, beef, and lamb prices remain high."(sic).......and where did this gem come from Bernard?

This page gives more detail.
Hard to deny that ag prices remain high or that South Island feeling better than rest in anticipation of building surge. Hasn't happened yet, but should....

Yes some nice charts Bernard...looking at them helps...the quarterly change or the year to year change...see the thing is the regions down here are in recession but for the farm incomes and the farmers have stopped any splurge because they know what's coming..
Better guidance would come from knowing the freight sector tonnage being shifted, less the stuff trucked in to demolish chch.
I was in a major building sector retailer for nearly two hours mid day, last week, midweek and not one person came in to buy anything...NOT ONE.

Calming down? or coming down?
Greece will default simply because the country has no prospects to lift itself out of the hole. What we are seeing is life support for a patient that is essentially brain dead. The 'people' of greece will have to turn the machine off themselves in a act of mercy 

Have this with your coffee...
"the Greek 1-Year Bond Yield touched 682% today, now down to a mere 666%"

"Chief Executive Jonathan Ling said trading conditions were tough, particularly in the Australian and New Zealand residential housing.
"Consequently, all of our businesses exposed to the residential markets in both countries have experienced lower volumes and reduced earnings,'' he said."
Wow...this is some recovery...just as well Bill and John raised GST, isn't it~!

of course it could be that their over-pricing in order to support their debt isnt working as a business model any more.
Quite simple if a powertool is $400US in the US and $1600NZ in NZ and we earn less than Americans then something is seriously screwed with the industry....
Let alone the price they charge for wood, its simply becoming un-economic to DIY......

Tell you what gets right up my nose steven, when I see the logs of Oregon being dropped and just one lump the right weight being choppered out...the rest left to rot.....yarrrrrrrrrrrhhhhhhh.

the regional economic figures are awful!
Even Auckland at 2.4% is sluggifsh, and that is with the injection of the RWC 

Just to clarify - When you say that private bondholders have agreed to a 70% haircut, does that include those that hold Greek bonds issued under UK law and have CAC's?

I cant see how.....
Not only that teh ECB "re-structured" it debts to become a s senior, senior debt holder....so the way I read taht is that 70% figure is average, ie some holders like the ECB take no loss, so thers take more?

Neither can I...
My understanding is that Greek bondholders can be identified as two distinct groups - those that can be forced to take the haircut (Greek bonds issued in Greece) and those that must voluntarily accept the haircut (Greek bonds issued in the UK and have CAC's).  The latter group can only accept the haircut if they get somewhere between 66% - 75% of acceptance (ie. majority).  
Another option could be for Greece to ram the haircut down the throat of holders of Greek-law issued bonds, leaving those holding UK-law issued bonds as is.  Not sure if this is viable though? 
Maybe someone clever could enlighten?

I still dont understand why anyone would willingly lose 70% of their capital especially if the have CDS re-insurance..it makes no sense.  If someone said it to me I'd say take a running jump.....not that I would have lent to them in the first place.
Longer term who will lend?  it can only be the ECb and they wont take a haircut, not unless Greece leaves the EU....and then its 100% loss.

Steven: to answer your question: It appears that this is no longer a question of bond-holders and creditors and bankers and calling on the insurance and  letting the losses fall where they may and having a great big wash-up. Nobody knows, but it is more than likely the bond-holders are the banks, and those banks have taken out CDS with their fellow "brotherhood" banks. So Bank-A holds bonds and buys a CDS from Bank-B, but Bank-B also holds bonds and buys a CDS with Bank-C who ditto holds bonds and has a CDS with Bank-A. So it all boils down to a sh*t-fight as to how the brotherhood with all the funny names are going to divvy up their losses and which of the brotherhood families takes the biggest bath. It is an inter-necine war.

but also across atlantic.....if for instance the EU gets its way its own banks take the hit, yet if they have CDS swaps across the atlatic but cant cash them because its "voluntary"...whos laughing? well the Americans....
and of course the banks taking the hit isnt the banks, its us the voter....aka Ireland as banks foreclose we thetax payer have to bail them out.....
Hence when I look at the likes of big daddy's gambling Im sick because its my future earnings he's gambling with...and there is nothing I can do about it.

There won't be an officially declared default because that would bankrupt five of the biggest banks in the US who issued the credit default swaps. These same banks form the International Swaps and Derivatives Association, who make up the rules.
Jim Sinclair blogged about this recently.

The actual "face-value" haircut is 53%. The replacement instruments are longer dated, at a lower coupon rate, the NPV cost of that adjustment is 20%, giving a total of 73%

Amanda on TV1

I was in a shop in town and there she was on the tv. All  men all agreed, she's looking good (the sound was off) 

I should add the manager of the whiteware shop told me  times are tough, worst he has ever known. Nothing is selling and everyone in town is the same. He thinks the internet shopping is a part of the problem and he also pointed out that Tvs have got so cheap that his mark up is worth stuff all. He has to check pricespy all the time to see if he's competing. He told me he looked at a baby seat for his grand daughnter at the baby factory and the wharehouse, they were $380, he got the same, new one online for $250.Provincial NZ is strugging, who cares?

LOL he hunted down the chair bargain but complains about his tv price markup....hahaaaahaaaa
(edited for language)

Internet shopping isnt his real problem.......lets go back some years. Bond'n Bond etc opened up bigger and better shops, took prime sites in malls and killed off the little guys.....now the little guys are making a comeback.....setup a warehouse in a cheap area and sell via the internet....
I have no sympathy....
I notice that shops are still trying to sell at huge markups for some things....I think its a case of what they think the market will bear and not what it costs + a margin.....I think retailing In all areas) has a huge problem ahead of it.......50% smaller than it is today inside this decade...
He hasnt seen tough yet IMHO.

it's confusing .. can someone explain the difference between .. (article says) private holders of Greek bonds agree to a 70% haircut .. but .. Creditors still have (yet?) to agree fully

yet another dodgy going to fail deal for the EU.

It's hard to mix spin and reality, your confusion is the result of a poorly prepared propaganda campaign.

If your not confused enough already, large parts of the south Island did well, except Chch, Nelson/Marlborough, and the West Coast.  So you have to go south of Timaru to find the large part of the South Island that is growing.  Which is the smaller part, as defined by either population or geography. 
People will believe anything because they cannot think.

That is not the Kiwi way skudiv...'thinking'. From the tiny tot stage your average Kiwi is brought up to believe that what they see in the media is honest, factual and as detailed as can be. Suckers.

Those places that are in recession obviously havn't done enough work on the cycleway yet.

Matt - has it ever occurred to you to question yourself?
Someone who poo-poo's a scenario because it 'hasn't happened yet' ( but which wasn't predicted to have happened yet)  but who on that basis assumes it won't happen at all, who then makes comments like 'awful'.
I'd have said "entirely predictable, even inevitable".
Note the second graph down, and note it well.
Perhaps you might then read up on cognitive dissonance?   

Mortgage-Belt - did you ride to work today? Did you stop at the lights or an intersection? Just wondering whether you applied your brakes. My guessing is that you turned your kinetic energy into heat energy, using some kind of friction, and that the heat dissipated into the atmosphere. I'm guessing that all the moving vehicles round you were doing the same thing - using various technologies.
Was anyone using dollar notes to slow to a stop? Would any difference in the number of dollar notes have made a difference in those vehicles slowing down, or in the amount of heat needing to be dissipated per deceleration per time?
What's the paramount, limiting discipline?

Actually, I'm working at home today. Writing an article for a conference.  So my energy requirements are low   -  however I do have CNBC on, radio on, laptop on, about to use toaster for lunch  ... so hard to keep energy zero.
Ha ha  ... yes, you do take your life in your hands biking to work. 

Snap - I've got a Friday deadline for mine (bit like Charlie Brown "I work better under pressure, and there'll be more pressure tomorrow").

US petrol prices up 7c nationwide on the week, a staggering 17c up on the week on the West coast:
US$5/gallon being talked about by summer on CNBC.
Nothing to see here folks, move along, move along........its just one of those things, no underlying reason for concern etc etc.

dont believe what you read in the paper
esakay at 2:09 PM February 21, 2012
Hype! Here in my rural California community, I can buy gas at the Vons gas station today, February 21, for $3.89/gallon and if I use my Vons club discount, I can get 10 - 30 cents a gallon knocked off that price. No, I'm not marketing Vons gas stations! I'm only reporting real prices in real time. I think the LAT is just trying to make things sound worse than they are and they are already bad enough without this newspaper pouring gas on the fire.
I noticed that most of the pump prices quoted were at Shell stations, which always are among the most expensive places to buy gasoline.

and the trend?  no matter what the discount today, the trend of the two will match...

I am really not sure what your point is andrew. The data I referenced is from a US national government body, not from a local paper. US petrol prices are rising rapidly and are at an all time high for this time of year.
When US petrol prices hit their historic all time high in late April ($4.50plus?) and have caused  US consumer confidence to crumble do please come back and tell me petrol prices are irrelevant.
Even the head of Shell USA acknowledges this is precisely what scuppered the nascent US recovery this time last year:
''We will be on our way to five dollars on a national average. This could impact the U.S. recovery. If you turn the clock back one year, we were seeing these prices in February and the economy slowed in May, June and July and it became a grave concern of the administration. People pull backed on spending. It’s essentially an invisible tax''.  (from cnbc)
This is what happens when you are on the peakoil plateau. Every economic recovery is choked off by the rising price of oil.

perhaps Hypertiger has the answer,
Posted Today, 04:03 PM

The top does all the buying and selling...with yield rates so low searching for volume...the difference needs to be made up somewhere somehow.

The top raises the prices of that which people want and need in order to obtain the yield...

Food an fuel.

If tomorrow a way was found to use half the fuel now required...to avoid an implosion of the global system...prices would have to double...

The top employs the bottom to supply the top with all teh oil whoelsale...the top then marks it up and sells it to the bottom retail.

the difference between the wholesale cost and the retail price is the yield the top lives off of.

It works great...until the bottom reaches the point at which they can no longer supply the demand for yield...then the systam begins to collapse.

Rates have been dropping in search of volume for 30 years now...that trick is ending...The volume is drying up...

Now everyone is resorting to quantative easing to make up the difference for the loss of the dotted line signers...

lets say it costs $5 to produce a barrel of oil and the mark up is $20

The top requests a commercial bank to create 5 Dollars short term at whoelsale rates and then marks the oil up and sells it to a consumer who requests a commercial bank to create 20 Dollars long term at retail rates...

The difference between the whoelsale cost and the retail price is the yield...

All commodities are like this.

When the consumers reach their maximum potential to create the required amount of new debt to sustain the previously produced debt...the system collapses.

The top lives off the yield from the bottom.

The slaves produce all the power that is supplied to the masters who take their cut and supply the servants and then what is left over is supplied to the slaves.

The net producers supply the demands of the net consumers which are the masters and servants...

The reason why Gas prices are high and rising is because the bottom or slaves are not supplying the demand for yield by the top or masters and servants and the masters are raising the prices.

Period end of story.

The masters, owners, or employers of the system...the slaves and servants or employees of the system or enterprise. 

The take more than you give enterprise...The absolute capitalist enterprise the top owns and all below are employees of.

Andyh, at the bottom of you link is the gas price makeup in the States, compare it to ours here

 A moment of commenting silence please to remember and honour the people of Christchurch.

If you havn't seen the "Strictly Confidential" Troika report on un-sustainability, the most likely scenario (IMO) which is variables at historical averages sees Greek Debt at 180% of GDP by 2020.  As opposed to no policy changes 222%, and the "baseline" (read hopium based) 129%.  Markets are pricing in another default in 2 years. 

So who's in the market?  I cant see many private investors....the EU banks will be badly burned so i cant see them lending much either...that leaves the ECB who wont take any losses....so its 0 or 100% loss as their only options.
From that I cant see how Greece cant but leave the EU.....at that point of course its a 3rd world country (maybe that shoul dbe 4th)......its totally shot...it has no real income (exports), no friends and cant trade very easily.  But even that looks better than the alternative of staying in the EU, where in effect its a slave state for decades.....
The German's after WW1 had better conditions me thinks.

So I just got told the price for lamb has crashed...$70 tops now...and that those who sold for the cork popping prices have yet to see their dosh....what do you think this will mean for govts grand scheme.

Someones been fleeced?


Don't think many sheep shaggers thought the eye popping prices would continue unabated forever Wally. You could roughly calculate the tax take implication as the tax on the profit   difference between the old price and the new price, times the number sold adjusted for whether more or less are sold. . Be nice to get a good roast for the slow cooker under $20.

Yep, its gone to the dogs, I gots $180,160,140 then $108 last week,more to go, the beef schedule has been wacked too. Still its not too bad, yet.
 The good news is, I sold ewes for nearly 250 a head, good for me not so good for him.  

Ah my favourite subject, the price of sheep.... As Aj documents there has been a fairly major correction, as with wool and beef as well on top of some hefty increases in the cost of production. All and sundry seem to have taken the opportunity to ramp priceing on the newly moneyed sheep farmer. Just when we thought we could look those wealthy dairy farmers like Causual Observer  in the eye again we are having the rug pulled from beneath us. Cant be too bad though, reports from the Southern fieldays from the machinery salesman suggest it was a boomer with orders well up.

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