Here's my summary of the key news overnight in 90 seconds at 9 am, including news the fear about the European debt crisis returned with a vengeance overnight as open discussion about Greece exiting the euro triggered fears about capital flight inside banking systems across Southern Europe.
European stocks slumped 2-3% and yields on both Italian and Spanish bonds spiked to unsustainable levels of 5.86% and 6.24% respectively. Banking stocks were hardest hit.
European politicians and bankers are now openly talking about allowing Greece to leave the euro, raising questions about what that would mean for Greece and for the banking system in Europe. Fear about a potential overnight devaluation of Greek savings in bank accounts is causing many to wonder if the same would happen in Portugal, Italy and Spain.
Already, more than 642 billion euros of savings in euros has been transferred to bank accounts in Germany from Italy, Spain and Portugal as savers and companies wonder about what a potential breakup of the Euro might mean.
All this fear about financial crisis in Europe reduced appetites for riskier assets and currencies, including the New Zealand and Australian dollar.
The New Zealand dollar fell to a 5 month low of 77.7 USc this morning from over 78 USc yesterday.
However, the Dow fell less than European stocks, closing down 1%. Many investors are wondering if central banks will intervene again with more money printing to keep long and short term interest rates low and bolster stock markets and banking stocks.
But few worries about NZ house prices
Back in New Zealand, however, confidence about house prices surged again over the last three months, the ASB Housing Confidence survey found.
Confidence about house prices rising spread beyond Auckland and Christchurch through to the rest of the country, ASB reported. See more in this BusinessDesk article on our site.
The survey found a net 45% of respondents believed house prices would rise, up from a net 27% in the previous quarterly survey.
Here's what ASB's economist Nick Tuffley said: “More respondents now believe that house prices will rise across New Zealand, rather than just in Auckland and Christchurch where the housing shortage is more evident. Housing market activity has steadily picked up over late 2011 and early 2012, which is boosting price expectations, and this coupled with a lower supply of housing continues to gradually push up house prices."
“House price expectations in Auckland are now the highest since April 2007 – the last time housing market activity surged before OCR increases cooled the market. We expect house price appreciation will continue to be relatively strong in Auckland due to supply constraints.”
He also said: "The very strong level of house price expectations demonstrates that there is a risk of more sustained house price inflation," ASB said in the survey. "The Reserve Bank's deliberations over whether to cut the official cash rate out of concern for the high New Zealand dollar will need to be balanced against the greater risk of sparking a sharper pickup in housing-related inflation."
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26 Comments
And to top things off, Moody's has just downgraded the credit ratings on 26 Italian banks. That further hammered appetites for risk.
http://www.businessinsider.com/moodys-downgrades-italian-banks-2012-5
cheers
Bernard
End of 2012 - the world will be a different one.
The 15th of May 2012 is the beginning of a new epoch. Unpredictable events with domino effects will lead into turmoil on world markets, leading into worldwide massive changes on many fronts.
Stop our government form megalomaniac economic ambitions.
John Ward at the Slog is in a cherry mood.
ESSAY FROM AMERICA: An all-encompassing theory from Doomstead Diner
http://hat4uk.wordpress.com/2012/05/14/essay-from-america-an-all-encomp…
bad news all around.....what's new? The question is what to do with ones "savings" in a broad sense.
1. Banks deposits? real returns probably negative.....no.
2. Stocks that pay dividends? probably a good play but in N.Z. a bit difficult to access and unit trusts are, for me, undesirable...yes.
3. Property? solid and close at hand. Has a use as a home etc.....downside risk if leveraged but not bad if owned outright. Plenty of rich are buying property.....yes maybe. I think property has a psychological advantage for kiwis.
4. Sit on the sidelines and wait for opportunities? This would be my choice at the moment. We are witnessing the death of the USD standard. I personally see a remonetization of gold occuring.
Private debt has been socialized which means many years of liquidity injection with very low interest rates and endless austerity. Not a happy place for a saver. I think property has an appeal for many people in this enviroment.
Not many people alive today have any experience with the extremely difficult environment we are in. Nobody has the answers.
Job one is capital preservation. Fasten the seatbelt.
Splineman. I think its a system failure. Id recommend this book. He talks about a group of climbers in Oregon who are practicing for a more difficult climb, one slips and gthe all slip down over a 200ft bank some die. The system they used was always going to fail if the weak point came under pressure. I think our high cost low return over indebted dairy industry is now a major weak link along with over priced housing and an overspending government.
http://www.amazon.com/Deep-Survival-Who-Lives-Dies/dp/0393326152/ref=sr…
Its finding the weakest link, and then taking precautions. He has a new book out ive not read yet called
Why smart people do stupid things.
http://www.amazon.com/Everyday-Survival-People-Stupid-Things/dp/0393058…
Another insite from John Ward about Frau Merkel the real Angela Merkel REVEALED: - Rigid serial conformist..... http://wp.me/p18jPR-2c9 via @nbyward
Anyone being following the gold price? where have all the gold bugs gone? Ugly, ugly,ugly.
I'll bite on the gold "price". Shorts are shaking out the weak hands for sure....all paper trading and very difficult at the moment.
Central banks are buying a lot of physical but it is well swamped by paper selling....
Make no mistake gold is being remonetized and central have no choice but to keep rates low and liquidity abundant......draw your own conclusions.
As far as systemic collapse....we've moved from a gold standard.....to a partial gold standard......then on to this mess.......and the world turns.
We will end this floating exchange rate disaster soon enough.....and move on. Hopefully with proper money again.
Andrewj - I bought my gold in 2009 at US$900 per oz. At today's price of US$1,560 means that I have made a paper profit of 73% in 3 years, with very low volatility. Can you show me another investment that has done as well as this in the same time period? BTW I have no intention of selling my gold anytime soon as I am a long term investor not a trader.
Good point but more importantly gold, and commodities in general are the anti-dollar.
If you believe a strong dollar is in the future buy them and sell gold etc....if you believe the dollar, euro, etc will be devalued to meet debt obligations buy gold, land commodities.
My money is on continued low rates and abundant liquidity......
Good point but more importantly gold, and commodities in general are the anti-dollar.
If you believe a strong dollar is in the future buy them and sell gold etc....if you believe the dollar, euro, etc will be devalued to meet debt obligations buy gold, land commodities.
My money is on continued low rates and abundant liquidity......
Nasty prospect - if you haven't taken physical delivery of numbered ingots into a bullion storage facility of choice then the paper gold is probably as worthless as the paper it's priced in, if one projects into the future the reason for buying it in the first place.
But a liability for those who have secured their physical bullion is the risk of re-hypothecation and/or the US re-issuing an edict banning personal ownership of gold.
Back in New Zealand, however, confidence about house prices surged again over the last three months, the ASB Housing Confidence survey found.
ASB has cut its advertised fixed-term mortgage rates for one, two and three years in the latest move in a round of fixed-term rate cuts by the major banks.
Bernard is it in your reader's best interests to entertain disreputable carnival barkers prophesying riches in the face of facts indicating precisely the opposite?
Interest rates fall when economic growth is faltering and unemployment is rising or about to do so - hence little upward demand for borrowing and upward pressure in house prices.
The discarded in the US and their former handlers are under no illusion why the 10 year US Treasury note closed at 1.76% today.
Opps the world’s economy is stuffed, commodity prices are dropping, O dear. But never mind sweet as here because house prices are going up, I mean why wouldn’t they, they are just sooo cheap surely they must double again in the next ten years. I mean it’s only the $2 extra on medicine that kiwis can’t afford. A few hundred extra K on the mortgage, well heck that’s no worries. How stupid can NZ get.
An economist on BBC radio this morning said that in his opinion Greece should pull out of the Euro.
That way INVESTORS as opposed to LENDERS could come in and buy cheap assets and pour money into these assets
Sounds like an idea but i have no clue as to what the ramifications for Greece would be.
Bernard you will love this:
http://sorisomail.com/email/238743/o-politico-que-representa-realmente-a-populacao.html
Hey Bernard, given your well known and often expressed views on intergenerational conflict I am surprised you haven't picked up on the Grey Power leadership's apparent Damascene conversion on means testing of super. What's going on there? Has there been a bloodless coup at the top? Have GP's membership agreed to the policy change?
http://www.stuff.co.nz/dominion-post/news/6920247/Greying-tide-sweeps-New-Zealand
Ms de Meanour
Sssshhhhh.
I was hoping he might go another week or three before he wheeled out the inter-generational wedge issue.....
Although I do agree with the link. Eligibility age going up and means testing for National Super should be on the cards in the near to mid term.
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