90 seconds at 9 am

90 seconds at 9 am: Apple sets dividend and share buy back; US stocks hit 4 year highs; NZ$ up on hope for soft Chinese landing; UPS to buy TNT Express

20th Mar 12, 8:56am by Bernard Hickey

Apple sets dividend and share buy back; US stocks hit 4 year highs; NZ$ up on hope for soft Chinese landing; UPS to buy TNT Express

Here's my summary of the key news overnight in 90 seconds at 9 am, including news Apple has finally decided to pay back some of its near US$100 billion cash pile.

Apple said it would start paying a US$2.65/share dividend each quarter and buy back US$10 billion worth of shares. This represents a dividend yield of 1.8% for Apple, which would not normally get investors excited. But this is a major shift from Apple, which has previously preferred not to pay dividends and instead reinvest its profits.

See more here at CNN Money in 'The day Apple became normal'.

Apple's announcement and hopes for more dividends from US banks after they passed stress test tests boosted US stocks around 0.6% to their highest levels since May 2008. They are now just 9.7% below their October 2007 record highs. See more here on US stocks at Bloomberg.

Meanwhile, the New Zealand dollar edged up overnight to around 82.7 USc after various comments that China appeared headed for a soft landing rather than a hard landing. IMF official Zhu Min said China would avoid a hard landing, even as data emerged that Chinese new apartment prices fell in 45 of 70 cities in February from January. See more here at Bloomberg.

Also, Reserve Bank of Australian Governor Glenn Stevens said in a speech that China's economy continued to grow and could surpass America's within a decade at its targeted growth rate of around 7.5%. This helped boost the Australian dollar slightly. See more here at Bloomberg.

Meanwhile on the mergers and acquisitions front, America's UPS has announced plans to buy TNT Express for US$6.8 billion in a deal that will see it match Deutsche Post's DHL in size in Europe. See more here at Bloomberg.

No chart with that title exists.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

28 Comments

by Wolly | 20th Mar 12, 9:06am 1332187578

Take the DOW with a grain of salt....as an indicator of the US economy it is an utter farce.

by powerdownkiwi | 20th Mar 12, 9:13am 1332188017

Agreed. What we are witnessing is a lemming-flight to supposed safety, by (largely borrowed, and largely on the basis of currently inflated valuations) capital.

Musical chairs it is. I'm betting (not!) that there is a severe Dow 'correction' before year's end.

by skudiv | 20th Mar 12, 9:24am 1332188656

Operation Twist Is Coming To An End: A Preview Of The Market Response

The Dow has been reduced to a proxy for Central Bank intervention. Nominally speaking of course. In real terms yes probably a very good indicator of the economy, notably boe's per capita.

by Vera Fayed | 20th Mar 12, 9:30am 1332189039

"Take the DOW with a grain of salt....as an indicator of the US economy it is an utter farce.". Why Wallace? Maybe you could pause your hysterical blather long enough to offer a rational analysis of just which of the 30 DJIA components are overvalued.

by powerdownkiwi | 20th Mar 12, 9:42am 1332189775

VF - probably all of them, if they rely on growth of money to fund away their debt.

If you gaph the tulip bubble, and the SS bubble etc, then overlay from say 1940, you'll see how much we have increasd 'valuations'. If we look at those bubbles, unsurprisingly, they all end up slightly lower than where they started. What will ending up slightly lower than 1940, look? Then - socially, not Dow-wise - divide the result by the population increase.

Interesting times. This time, it's different.

by Vera Fayed | 20th Mar 12, 10:59am 1332194366

PDK - are you serious? You would make investment decisions in 2012 based on overlaying a graph of events from 4 centuries and 3 centuries ago on the situation 3 generations ago.

Three generations ago most the DJIA companies had already been going 3 generations. Which one's have burdensome debt on their balance sheet? These are global firms that didn't exactly spring up overnight. Try offering a few actual in-the-present facts instead of pure conjecture. Johnson & Johnson, Proctor and Gamble etc don't need "debt fuelled growth" to keep turning a buck, (or a billion). The energy companies on the DJIA will do very nicely out of peak oil if it comes and even better if it doesn't. Most of the others look like Ok places to have spare dollars doing a days work for me.

by powerdownkiwi | 20th Mar 12, 11:23am 1332195798

Vf - sounds like a cornered cat.

"will do very nicely". Let's start with that. One presumes you mean they will become 'wealthier'. What, pray tell, is the 'wealth' rated as? I'd suggest as the ability to purchase goods and/or services. What, pray tell, are they made via? Work. What, pray tell, is needed for work to be done? Energy.

So you're describing a relative 'doing well', not an absolute. How high up the deck relative to each other, not the fact that the deck as a whole is going down.

P&G and J&J do require energy, and will increasingly have to compete for same, with the folk trying to earn the dosh to buy the stickingplasters, who will be competing with....

Investment decisions? I invest almost 100% of my income, but not in ponzis. Clearly there isn't enough planet to underwrite the 'wealth' expectations, so existing asset values have to drop. Vertically. Why be part of that?

So I look to what is cheap now, and will be in contention in a resource/energy-starved world; things like alkathene pipe, blades for tools, backup tools, spares, glasshouses, seeds, and invest in them. Relative to my money, they'll never be cheaper. You have to understand what reducing amounts of work will do, and existing (already had it's energy spent) vs new (yet to have it's energy spent) stuff.

by Stephen Hulme | 20th Mar 12, 9:45am 1332189959

In a February 25, 2011 speech, Federal Reserve Vice Chairman Janet Yellen examined the results of the recent use of “unconventional policy tools” by the Fed: “Each of these policy tools tends to generate spillovers to other financial markets, such as boosting stock prices and putting moderate downward pressure on the foreign exchange value of the dollar,” she remarked.. Source

by Neven911 | 20th Mar 12, 10:35am 1332192921

Wolly, PDK et al

My take on the DOW performance would be that it is a fairly good indicator of the current state of wealth concentration via corporate driven globalisation and as such would run counter to the health of the US economy. Energy gets a better marginal utility outside the US which will cause the US to continue to struggle but given that companies on the DOW will benefit from this increased economic activity outside the US it will go up, A case of the the rich (the US) eating themselves.

Neven

by Augusta Funds Mgt | 20th Mar 12, 9:16am 1332188197

Wolly, If you look at a chart of the Dow Jones over the last 30 years, you will see that it is probably the most accurate indicator of the US economy. What did the DJIA do between 2007 and 2009? It plummeted, perfectly portraying the dior state of the world economy. It then recovered in mid 2009 reflecting the green shoots that began to appear. It then had a couple of big sell offs in 2010 and 2011 reflecting the European debt crisis. It is currently in a major uptrend reflecting the stream of positive data that is coming out on the US economy. The dow is as good an indicator of the economy as you will get. With all due respect, this comment of yours is an utter farce.

by powerdownkiwi | 20th Mar 12, 9:33am 1332189237

With all due respect, there goes a vested interest in failure not happening.

The Dow would be an indicator of an economy, if all the investors were perfectly aware of the interactions which impact all 'investments'. Such is not the case. Farcically, there as here, they're reduced to quoting 'confidence surveys', and transmutating them into 'fact'.

I feel sorry for folk who have staked their wealth/lives/futures, some may have genuinely believed that growth in money could be underwritten by the real world, indefinitely.

But they were wrong, and the pidgies are inevitably going to come home. Bit battered of wing, but home. Expect a serious flight to consolidate capital into tangible forms, a seriously chair-less game of musical chairs.

by Augusta Funds Mgt | 20th Mar 12, 9:37am 1332189470

PDK,

Firstly, I think we all have a vested interest in failure not happening.

Secondly, all I have pointed out is that historically the DJIA has proven to be an excellent indicator of the US economy. If you want to challenge history thats your business. I prefer to learn from history.

Best of luck.

by powerdownkiwi | 20th Mar 12, 9:45am 1332189917

AFM- you are alive now? Yes? Will you be dead at some point in the future? Yes? 100% sure.

Your history - having been alive thus far - is no basis for judging your potential immortality.

Just a thought.

by Augusta Funds Mgt | 20th Mar 12, 9:49am 1332190163

Not a very intelligent thought. The other way to look at it would be to say that history has taught us that everyone dies eventually, therefore we will die eventually.

Just a thought.

by powerdownkiwi | 20th Mar 12, 10:05am 1332191154

I'd have thought that the less intelligent approach was to assume that a finite planet could underwrite an exponential growth of 'wealth' forever.

On that basis, I pitched you a simple simile.

by Chris B | 20th Mar 12, 10:39am 1332193141

PDK - save your breath. See here for background on your protagonist...

by powerdownkiwi | 20th Mar 12, 10:52am 1332193936

Chuckle. Thank you. And SouthPine will buy Amalgamated Broom from whatever Quarries ........ takes me back!

by powerdownkiwi | 20th Mar 12, 9:51pm 1332233481

Of course, Gaynor may well be a nice guy, may well be sincere, may well have integrity to burn, but he's in the same boat future-wise.

by scarfie | 20th Mar 12, 10:57am 1332194229

Failure of what exactly? Of the financial ponzi scheme being perpetrated? Only those on the take would be worried about that failing.

by Augusta Funds Mgt | 20th Mar 12, 5:03pm 1332216225

Failure of the economy. People rely on it for jobs, income, livelihood. A ponzi scheme is when new investors money is recorded as income instead of new capital. I am not sure how you regard the broader economy as a ponzi scheme, but lets not get into that right now.

by scarfie | 20th Mar 12, 5:15pm 1332216933

"A ponzi scheme is when new investors money is recorded as income instead of new capital."

You have conveniently left out the bit about new investors money being used to pay returns to existing investors. Which is exactly the way currency introduced as credit bearing interest works.

Why should an economy fall over just because the money supply does? People still need to eat, so the economy will contine regardless of the parasites that live off the proceeds of the current one(ie people that produce nothing), and given the link above it sounds like you can be counted amongst those ranks.

by Wolly | 20th Mar 12, 5:28pm 1332217733

"Firstly, I think we all have a vested interest in failure not happening." utter garbage.

In truth 'we' all have a need to see the failure of any load of BS company whatever the name...it is because the badly run entities, including govt depts kept alive using taxpayer bailout money stolen from saver and the future generations, that we are in so much shite today.

The DJIA is a farce in that it does not present a truthful view of the state of the US economy.

The only people who have vested interest in the bailout policies are the fatcat slobs that butchered the banks for bonuses and dumped fortunes into every lying politicians electoral purse.

by Augusta Funds Mgt | 20th Mar 12, 9:45pm 1332233146

Wolly / Scarfie,

It's been one hell of a recession but we seem to have pulled through. QE is not ideal I agree, but a full meltdown was averted and we are all the better for it. Including you guys. And this has all been perfectly reflected in the performance of the DJIA.

Thanks for the chat , I enjoyed it.

by skudiv | 20th Mar 12, 10:08am 1332191318

As an Indicator, I would look and assume that the US economy has gone nowhere for the last 13 years? In real terms it looks a lot worse. Since US GDP has risen 45% since 2001 I'd consider looking for an indicator that has achieved a similar result. Most debt measures follow a similar trajectory. The most useful charts are M1, M2 and M3.

by Les Rudd | 20th Mar 12, 2:22pm 1332206577

AFM - you have just witnessed an example of the 'God Complex':

"I see the God complex around me all the time in my fellow economists. I see it in our business leaders. I see it in the politicians we vote for — people who, in the face of an incredibly complicated world, are nevertheless absolutely convinced that they understand the way that the world works.”

http://www.ted.com/talks/tim_harford.html

I think we all suffer from it, to a degree, but with the chronic cases, please, please don't start challenging with fact and data - it will go nowhere and you will have wasted your time.

by Wolly | 20th Mar 12, 4:46pm 1332215201

"The Government appears to have ruled out further intervention in Christchurch's worsening rental housing crisis.

The solution is best left to the market, Earthquake Recovery Minister Gerry Brownlee says.

He said it was up to the companies profiting from the Christchurch rebuild to provide accommodation for staff.

"The idea that the Government would set up a big work camp somewhere in the city I think is just a little bit too much of a stretch," he said. stuff.co

Gerry sees accommodation as no more of a problem than forming a square edge...the beds will pop up like mushrooms...no worries....and if they cost the contractors heaps, we know who will end up paying heaps plus gst. Isn't there a spare old prison near chch and how about the govt renting a used Italian liner for a year or three and stuffing it in the harbour...hell they might even make a few bob.

by Wolly | 20th Mar 12, 8:08pm 1332227284

"The school system is ''failing some students'' and could be improved by lifting class sizes by two or three students and using the savings for improved teacher quality, Treasury Secretary Gabriel Makhlouf says." stuff.co

Treasury has been failing NZ for decades and it still is. It would be improved if we cut it in half and reduced the bloated salaries...the savings could be used to improve teacher quality.

This highly experienced teacher may have just 2 years and 9 months left before being asked to shove off.

I have but 24 years and some months experience teaching teenagers mostly at year 9 and 10, so I don't know very much about it....but I am guessing that trying to help twenty 14 year olds discover the pleasure of learning how to learn something new...is likely to be more successful than trying to do the same with 34 in the room. The average class size is near 30.

by Wolly | 20th Mar 12, 8:18pm 1332227909

Now..as to how to invest the savings from slashing Treasury in half and the bloated salaries by 30%...we can start off by cutting class sizes so that no class is larger than 26...let's toss in some quality air conditioning of the sort the Treasury secretary enjoys in his plush office...every school room needs one where temps often exceed 30 and humidity 98%....if there are savings left over some schools that are desperate for specialist help in several areas might get the staff they need...have we used all the money up?....that's too bad...let's slash Treasury in half again and whop another 30% of the fat bloated salaries.