90 seconds at 9 am

90 seconds at 9 am: EU voters want fiscal solutions without pain, and without more work; manufacturing slows in China and EU; stocks retreat; commodities lower

24th Apr 12, 8:43am by David Chaston

Here's our summary of the key news overnight in 90 seconds at 9 am, including news that global stocks are falling after weak manufacturing data and political uncertainty in France and the Netherlands has hit investor confidence. Commodities retreated as manufacturing shrank. Major US stock indexes have fallen more than 1%, and are following European markets lower.

Europe is tiring of austerity. As reduced government benefits and social services brings protesters to the streets, it remains unclear what the alternatives to austerity might be.

Budget-cutting pain is fueling support for far-left and nationalist parties, but many European leaders simply cannot afford to spend more. There is a widespread challenge to the "Merkel solution" but no clear idea of an alternative. European voters seem angry but lost for ideas on how to resolve their problems and how to get back the benefits they are losing. It's reactive, without forethought, and lacking vision. It also seems immensely selfish. It is hard to see how it can end well from here.

Euro area manufacturing showed another contraction in March, according to the latest PMI reports, as the advanced reading came in at 47.7 from 49.0 in February, lower than estimates of 49.5. China's manufacturing activity was also in contraction territory although it did show signs of improvement, but has still contracted for six straight months now.

The NZ dollar is little changed this morning. Oil prices are falling, and the gold price is soft, below US$1,640/oz

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.

42 Comments

by Andrewj | 24th Apr 12, 9:09am 1335215384

Growth will save us? You bet!

http://www.golemxiv.co.uk/2012/04/growth-will-save-us-you-bet/

by steven | 24th Apr 12, 9:42am 1335217346

A great piece, thanks Andrew, lets quote 1 bit,

"I spoke at length recently to bankers in The City who deal in investing in raising money for Small and Medium businesses. They were unequivocal – it is getting harder not easier to raise money for such investment. The big banks and big funds are looking for short term speculative returns not slow investment returns.

When you have large and growing losses from bad debts you cannot and will not recoup and recover on the basis of wise but slow investment returns. The worse your previous debt mountain is, the greater the pressure to pursue exactly the sort of high-risk speculation that got you in trouble in the first place. If it is a choice between investing in Spanish factories or buying Spanish debt or selling CDS on that debt, the ‘smart’ bonus seeking money goes for the latter every time.

The brokerage Carmel whose study I have quoted is a good example. On page 9 of their study they say,

We began buying Spain CDS in Q4 2011…[with a coupon of] 3.5% of notional per annum –effectively an option premium on the default of Spain.

Should the Spanish crisis flare up in 2012 as we expect, we can generatea 300% return on the annual premium

300%! Investing in small and medium businesses or a potential 300% speculating on Spanish default. You choose."

So the rich are worth it? like b*llocks they are, the real middle class the "Small and Medium businesses" are getting starved because of this loony activity and will pay for it from the fallout............and with that they are the employers...so the employees will suffer as thier jobs go.

This just has to be changed.

I think this will make my email archive....its a classic...

regards

by Christov | 24th Apr 12, 10:34am 1335220488

Steven ...this exactly why I started investing in small to medium business 4 years back...although not without risk , it generates reasonable returns keeping both parties happy and moving forward in the interim.

I have long held the opinion ....most of the investment talk trotted out by the Administration in regard to science and innovation is just that "talk".

There is no shortage of people looking for investment Capital with sound structural bases to launch from, but they just cannot get funds without Banks holding notes on the family home and first born......

The property obsession is never more highlighted...than going to your business freindly bank with a sound balance sheet and progressive growth in profit... only to hear no I'm afraid that just won't do at all....come back when your leveraged into a property...we'll take another look .

I realize there is risk.....but provided due dilligence is done and maintained ..the risk is probably lower than investment in your average finance company .

I'm up for like minded Angel Investors to form small funding units introducing their expertise as an advantage to the lender...or silent if satisfied the competence and commitment of the lender is of premium Quality.

by powerdownkiwi | 24th Apr 12, 10:43am 1335221014

So - it's out. The Count sells undies to dead-connectors.

by Christov | 24th Apr 12, 10:54am 1335221663

It was no secret PDK ...but then I guess you can't be everywhere ...man.

by powerdownkiwi | 24th Apr 12, 11:04am 1335222253

Small to medium.

Brilliant business plan. What's your sales pitch? "Is there anybody out there?"

by Christov | 24th Apr 12, 11:14am 1335222898

While I enjoy your flippancy....I'm not in the business of selling anything here....they find you..!

Not quite sure what your negative is on this, as the world keeps turning...and I have no problem investing in solutions that.... may.....one day relieve us of some of the problems we face energy wise or other..as the case may be.

I'll connect you if you have a genuine interest .....but they don't have a take the piss page to fulfill any other desires you may have.

by Gummy Bear Hero | 24th Apr 12, 1:38pm 1335231512

..... don't take it personally , Count .....but there are some who just don't appreciate how lucky they are to be alive , and how astonishingly lucky that they were to be born into this place & time ...

But the rest of us , even without resort to a " God " , can still give thanks for our blessings , and cry " yippppeeeee , life is good .... real good ! "

..... hang out with the folks that " get it " ...... and allow the gloomsters the freedom to shed their pall elsewhere ...

by Christov | 24th Apr 12, 1:55pm 1335232515

Cheers for that GBH.....!!! provided I do the homework I'm prepared to take the good with the bad .......and no sign of Pertecevic with his hand up my jumper.

by Amanda Morrall | 24th Apr 12, 1:56pm 1335232590

Gummy I have decided to make you an honourary yogi today. That's a lovely sentiment of gratitude.

BTW, please enlighten me, why do you call Cristov Count-- have I missed a literary reference somewhere along the lines?

by speckles | 25th Apr 12, 5:11pm 1335330713

Were you connected to a meeting in Wellington on Tuesday re energy, a quirk in quantum physics and funding, I'm a advisor to one party, was stuck out of the country by flights to make the meeting. If you are...we shall meet and find we do similar activities. If not.. good to see someone else is actually out there doing. PDK is a troll on enterprise even though his comments below suggest to me he may a little more experience with enterprise and innovation than he cares to admit.

by Christov | 26th Apr 12, 9:34am 1335389667

Not on this occassion speckles, but great to hear your involved and interested......we live in an environment that demands change, sometimes at a frenetic pace and so advances in technology need the resources to meet the demands plced upon them by the architects of a modern world.

funny enough ...Walt Disney....dreamed some of our realities.

wait for it......wait for it.........Mickey will be along any minute now.

by rastus1 | 24th Apr 12, 11:59am 1335225576

Good on you. I'd imagine this must be eminantly more satisfying than investing in rentals. Of course it requires a greater level of expertise and nounce. It is a pity there were not the same amount seminars available to joe public on how to go about this as there are on property investing. Many out there just wouldn't know where or how to start down this path.

by Christov | 24th Apr 12, 12:39pm 1335227948

Cheers ...rastus...yes it has been...as an ongoing investment ..you are presented with opportunities to invest in that suit your criteria and funds available to invest...you may reject all if you wish or shortlist a few and begin stage one of investigative dilligence......once satisfied.... then contact with the project seeking funds.....stage two of dilligence in the credibility of the business ..plan...existing books...people ...and so on.

You would have occassion to have put a fair ammount of work into a potential investment only to be spooked by ........well ..could be a number of things including previous failures through not planning recapitalisation into the business.....so there is a bit of work in it...but yes I have enjoyed the two I have been involved with over the last four and three years , and recently have just taken on another.

If not for this avenue ...many are left at the mercy of Finance companies lending at hi end credit card rates...........Sir Micheal does quite well out of it.

by powerdownkiwi | 24th Apr 12, 1:00pm 1335229255

Count - seriously, I'm told that angel investment in good ideas is drying up. Further, that good ideas can't be defended from design-theft from a rising empire. So an idea has to be proven, then flogged-off before the copiers get on the bandwagon.

Or it has to be so niche, that it's not worth someone else gearing up.

We've been the victim of such a scenarion once - I invent for the greater good now; no return expected but the betterment of the society wot I live in.

by Elley | 24th Apr 12, 1:40pm 1335231632

You're probably right about the risk of an idea being copied but when you take into account the time and cost of designing and developing a prototype for a new product and then the time-to-market, the company doing the original development would probably have enough time to establish a customer base before someone else "stole" the idea and came to the party.

Also, if everyone thought that way, not much would get invented. I guess your approach is not a bad way of thinking: you'd view any return on your inventions as a bonus. Myself, I think being copied would be a good sign: the idea has to be pretty good for this to happen! *actively brain-storming for new brilliant ideas*

by Christov | 24th Apr 12, 2:10pm 1335233435

Cheers PDK....there's certainly some truth in what you are saying.....and no guarantees anyones gonna make you rich and famous.....but dilligence covers a lot of ground from ...what is it I understand ...and don't understand when investing....to having some ability to fully understand the legal constraints of what you are getting into or seeing to it your contracts are formed by those who do.

Would I invest in just an idea.....? any answer to that would probably be dishonest because ...we've all said hey I thought of that ages ago or hey I was thinking that would fly....but did nothing about it...and so..well you know.

I guess i got tired of saying that and decided to put some money where my mouth was....funny thing is ...conservatism creeps in while your hand's groping for the wallet...Ha !

It's a great big world ..and sometimes niche is A-OK with me....it's not a coke share for sure but the returns are steady ......

by Gummy Bear Hero | 24th Apr 12, 2:23pm 1335234230

..... my hour is up , Count ..... should I apologise to PDK & steven because I'm happy today ?

Lawd knows , Bernard will be back soon , and the daily dose of his gloomsterising should bring me back down to the swamps of Malthusianing , loathing & self-despair .......

Hang in there PDK & steven , I'll be back into your " zone " in May ..

by Christov | 24th Apr 12, 2:35pm 1335234902

Stay Happy ...Stay Well...Mon Ami......I'll look in on the lads till... your next hour comes round...

by robby217 | 25th Apr 12, 3:27am 1335281243

You have highlighted the quite excellent point that bankers have actually forgotten how to underwrite loans and assess a business properly. In otherwords bankers have forgotten how to be bankers and actually allocate capital, rather than speculate on property.

But of course that is inevitable as many of the older banking skills, like maintaining a relationship with business customers has decayed, judgement is replaced by automaton rules and proceedures that can be followed by graduates in the backoffice.

by Andrewj | 24th Apr 12, 9:10am 1335215421

The Liquidity Mirage And The Collateral Crunch

http://www.zerohedge.com/news/boes-andy-haldane-channels-zero-hedge-rev…

by meh | 24th Apr 12, 9:59am 1335218351

Has Financial Sector grown too big?

http://www.zerohedge.com/article/ecb-has-financial-sector-grown-too-big

All too late though methinks.

by steven | 24th Apr 12, 9:20am 1335216046

Funny they are complaining now, just wait..........I agree David, its going to get a lot worse........

I dont quite understand why they dont want to understand they are on deep doo doo due to their own ways... Its like they are maxed out on their credit cards and it will take years to pay down...meantime the interest rate on the CC makes it hard to get leverage in paying back.......like duh.....

So consider the situation isnt even stabilised yet, 4 years on.....lets assume this year we get the magic stability (fat chance) and start to see recovery ie growth of 4~5% year on year (and that rate intrinsically carries with it a higher inflation rate)....the debt will take at least another 4 years to clear and I bet its 2 or 3 times that as a timeline so really this is going to be a 20 year event......and the voters are sick of it now? oh dear........

and we havnt even factored in the costs of BBs retiring, which suggests "recovery" wont start until the BB OAP costs have gone, ie they are mostly dead....

or Peak oil.....

regards

by Kiwi | 24th Apr 12, 10:13am 1335219237

"it remains unclear what the alternatives to austerity might be."

Maybe the Banks should be held responsible for making the bad loans. The percieved problem with that though is that the Banks are too big to fail. If the Banks failed then the big global ponzi would collapse. Then a lot of people in powerful positions would probably lose their power. I guess this could be a reason why this particular solution remains unclear.

by Christov | 24th Apr 12, 10:52am 1335221529

The implications Kiwi...all bear the hallmarks of insulation...a return to Nationalist identity...relieving all persons not of valid staus, their citizenship....accepting if the Sh*it is to hit the fan ...it be their own Sh*t and Fan to deal with (as gruesom as it will be) rather than the austerity required to make up the Shortfall across the E.U...... shortfall ...Hah...a vaccuous chasm..!

It's pretty much a get thee away from me PIGS....and take that Interferring Money Fraternity with you.

by powerdownkiwi | 24th Apr 12, 11:08am 1335222522

Then it lasts forever.

Saudi Arabia becomes a zero-exporter bu 2030. All finite resources have been depleted meantime, all pollutant readings will have increased, as will population. The penny should have well and truly dropped by then.....

by martinv | 24th Apr 12, 2:48pm 1335235728

Or perhaps by that stage the reason given by the governments and the media for the hardship experienced by the general population will be that we're in World War III.

by spirk | 24th Apr 12, 12:25pm 1335227112

Thanks NZ Heads.

I agree. The winter is coming simply adjust and be ready

by meh | 24th Apr 12, 12:48pm 1335228522

It may be a long cold winter though, the likes one has never experienced before.

Spring and Summer may be at levels way below previous experiences as well.

by powerdownkiwi | 24th Apr 12, 12:52pm 1335228732

Exactly. I agree with NZHTF quite often, but by 2023, we're well into the sinking lid.

by spirk | 24th Apr 12, 2:21pm 1335234093

MEH

I disagree. Yes a tough winter but once the summer comes with new technology (exsting but hidden/not developed) and humanity getting sense at least for a while it will be really good. We can make it really good now but there's too much crap around. Winter will clear it. Socialism isnt the answer as BH advocates, maybe a good socialist system in the next summer but we have to fix up the stupid shit thats around now

by Stephen Hulme | 24th Apr 12, 1:49pm 1335232190

The talk of the OCR going up or being held is just a joke.

The OCR stays low and likely to go lower.

There is no guess work.

I believe the peripheral Eurostates believed interest rates within their borders would converge and remain the same as Germany's.

They have had a rude reawkening as shall New Zealand. As a derivative of the USD our currency and it's financial characteristics have closely mimicked the underlying. But not forever. We shall also be cast aside when it suits.

by Gummy Bear Hero | 24th Apr 12, 1:20pm 1335230407

I can only laugh at the clog heads in the Netherlands ...... who up until now , demanded rigorous austerity from the weaker Eurozone nations , Greece , Ireland & the like ......

...... but when the bureaucratic blow-torch was aimed directly at themselves , their government coalition fell apart ...

But congratulations to the minor party , the right wingers , who said that enough is enough ... give it back to the electorate to decide if we're gonna agree to slash government spending in such a sharp manner , within such a narrow time frame ..

by speckles | 25th Apr 12, 5:31pm 1335331897

Do a lot of work in Netherlands, their Goverenments always fall apart, nothing out of the ordinary. They have a very generious welfare system. Great depth of business underwrites it unlike here.

by Gummy Bear Hero | 24th Apr 12, 1:47pm 1335232066

From just conventional drilling alone , America contains 26 % of the world's recoverable oil supplies ... and that figure rises considerably if we include shale oil deposits .....

...... there is no energy crisis .... merely a crisis of politicians holding back progress ......

" Peak oil " is just a figment of the sad Malthusianists tortured souls ...... " tortured " because they have been so terribly wrong on every prediction they have made in the last 200 years ..

( sorry NZ H to F , Gummy fat-fingered & posted this here by Miss Take )

by steven | 24th Apr 12, 1:59pm 1335232749

You really are clueless......and gullable....

regards

by Gummy Bear Hero | 24th Apr 12, 2:04pm 1335233086

..... oh no I'm not ! ...... I'm clueless and gullible ........

Crikey Dick & Jane , I'm not a sea-gull , steven ..

by Gummy Bear Hero | 24th Apr 12, 2:06pm 1335233207

...... there is a looming shortage of caves , candles and tofu .... I think that we've passed peak mud , already .......

by powerdownkiwi | 24th Apr 12, 1:56pm 1335232575

GBH - kindly explain what EROEI means, and what it means in relation to net energy gettable from 'shale'. Also what you think the threshold EROEI required to support BAU is.

Also kindly mention what recoverable supplies there are left, compared to what were available, at max point.

Also kindly point out the maximum projected flow-rate, or indeed a yardstick years-ahead/barrels/day would do.

Or be seen as a spinner of drivel.

I don't mind if you need to keep yourself deluded, I do mind that you attempt to delude others.

by steven | 24th Apr 12, 2:02pm 1335232963

Im sorry but you are asking questions way way above GBH's IQ...and either side of his blinkers....

spout drivel is all he has done for 4 odd years now.......

regards

by Gummy Bear Hero | 24th Apr 12, 2:08pm 1335233298

........ 4 years ? ..... yipppeeee ..... it's my anniversary ....

... either Elley or Amanda got a chocolate cake at the ready ?

by speckles | 25th Apr 12, 5:37pm 1335332238

And the part of the story is blocking the Christchurch players...so many angles to this one...

Who dominated the market re conferences before all this went down.