90 seconds at 9 am: Equities rally

90 seconds at 9 am: No OCR change expected tomorrow; NZ trade surplus surprise; stocks up; US confidence takes a hit; France 'bankrupt'; NZ$1 = US$0.837 TWI - 75.3

30th Jan 13, 8:47am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news that the NZIER shadow board - a group of nine that gives its views just ahead of the RBNZ OCR reviews - thinks the OCR should stay unchanged tomorrow they said in an emailed release. It's bias is to cut rather than raise, but at tomorrow's announcement it recommends holding at 2.5%. The 'cut' bias fell since the previous report from the panel.

The three bankers in the group have shifted slightly towards raising, the three industry members have shifted slightly towards cutting, and the three academics have shifted slightly towards raising. But these movements are slight; overwhelmingly they all favour no change.

Staying in New Zealand, yesterday's trade data surprised on the upside. New Zealand had a much larger trade surplus than expected for the month of December. We had a $486 million surplus when most experts were thinking it was going to be a $100 million deficit. More than that, the November deficit was revised down by $110 million. The main reason for the improvement was a fall in imports, mainly big-ticket ones and oil. Exports were a little higher than expected. These results didn't have a huge impact on the exchange rate, although it did firm a little.

In the US, equities have risen to five year highs, but consumer confidence fell sharply and unexpectedly. It may have been because of the impact of tax rises, especially payroll taxes. Meanwhile, house prices rose the most in six years, up 5.5% from a year ago.

In France, a minister there claimed the country was 'bankrupt' - a claim that caused a storm and a rapid backdown.

In China, data out overnight showed Chinese incomes rose faster in the countryside than in cities for a third straight year in 2012 as migrant workers boosted their pay and the government strengthened the social safety net.

In Japan, another 'surprise' from the incoming government - they are planning to cut government spending, the first such move there in seven years. Japan has a huge public debt level and is in a deflationary spiral. This latest move won't do much, but it is a signal that authorities there are more serious than previously in addressing their issues.

The New Zealand dollar starts today higher at 83.7 USc, 80.0 AUc, with the TWI down to 75.3.

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20 Comments

by Stephen Hulme | 30th Jan 13, 9:20am 1359490837

In the US, equities have risen to five year highs, but consumer confidence fell sharply and unexpectedly. It may have been because of the impact of tax rises, especially payroll taxes.

US payroll taxes are a nasty regressive impost that really impacts those earning less than $113,700 - hardly the cohort in the HFT arena.

CEPR has this to say about abolishing or at least raising the cap.

by Christov | 30th Jan 13, 9:28am 1359491287

but consumer confidence fell sharply and unexpectedly.

hmmmm, post xmas hangover more likely David, as the visa arrives to awaken them from that good cheer holiday mode, it's, oh sweet baby geesus put the brakes on now. So unexpectedly..?( to an exteme optimist maybe), add to that the punters get nervous everytime phrases like five year highs get trotted out, it's become syndromic for them to expect mini crashes at regular intervals, a fair reflection of market stability, ....although one feeds the other , does it not ..? in terms of confidence I mean.

hey BTW ....good on you for not mentioning the _ _ _ _ , or Dr Who.

by SK | 30th Jan 13, 9:36am 1359491816

Totally kick ass summary.

Even Roubini is feeling better.

No wonder BH did a runner.

by Gummy Bear Hero | 30th Jan 13, 10:37am 1359495426

Bernard spent so much time running around shrieking that the economic sky was falling , it's little wonder that some wag called him " Chicken Little " Hickey ......

...... the good news just keeps on rolling out , despite the lamentations of the gloomsterisers .....

Happy days , friend !

by Christov | 30th Jan 13, 10:47am 1359496042

Hey there GBH....I'm in the mood to punt on the confidence.....and it's is a real factor / driver in the variables...in fact it's the most overlooked by ponderous analytical investors missing boats buses trains..well the whole show really.

What do you fancy NZX ASX to say July 2013....I asked Brian but he wanted me to pay him, and love him though I do, I thought hmmmm, no I'll go ask GBH.

Offshore I'm thinking coffins in Japan could be a surge bet.

Gotta nip out but I'll look in on your response later.

Stay well Mon Ami.

by Gummy Bear Hero | 30th Jan 13, 12:29pm 1359502171

Hello Count ! ...... just got back meself , dropped Gummy Junior off at the local primary school ..... unlike moi , she is getting an education ....

..... re. the ASX / NZX .... there's a clear message in the markets that munny is beginning to trickle out of cash instruments , and into stocks and property ..... all the gloomsterising has come to nought , the world didn't come to a fiscal cliff ...... we muddled through , as we usually do ...

My theory is that traditional PE ratios of 14 - 15 will go out the window , as investors chase growth and income ... PE's above 20 will be commonplace , as the inverse earnings yield of PE 20 is 5 % , still better than bank interest rates ....

..... momentum is driving markets upwards , and the first half to the year should be lucrative , my guess is more so than the second half ...

As the $A / $NZ are quite high , some munny in developing markets may give a nice equity boost , and an exchange rate gain .... Win / Win !

by Christov | 30th Jan 13, 1:18pm 1359505103

Cheers GBH, I was thinking more in specifics, you can use code if you like ....take for instance TAH ASX on it's way back through the3. teens headed to the 3.40's I believe.

a nice short stay could do you wonders.

On the steady F&P H NZX slow but solid recovery, well run and meeting targets, NDZ$ aside should put a fair bit of weight on this year.

Happiness.

by Gummy Bear Hero | 30th Jan 13, 1:33pm 1359506009

Hi Count : I'm in the Monash Pabrai school of investing ...... the hairier and pug ugly a stock looks , particularly if it's a fallen hero , the better ...

.... Allied Farmers though , is an exception ...... puggly and no sign of recovery there .

...... but remember when Restaurant Brands was slopping around 60 cents , or Hellaby around 50 cents ..... 4 , 5 , 10 or even 50 baggers are what we wanna aim for ...

by Christov | 30th Jan 13, 3:46pm 1359514019

Cheers GBH.

Maybe it was the lunch with Warren, there's a certain knack about betting against the trend these guys have, where ,when measured, either they saw the reversal coming or set the trend themselves........ I may need to sniff Monesh out ...but I fear he might say what's an NZX.

by Gummy Bear Hero | 30th Jan 13, 1:52pm 1359507161

Aussie investor's are chasing yield ; Tabcorp's 8 % fully franked dividend is as honey to the flies ...... and , TAH has paid substantially higher divvies in the not so distant past , 94 cents per share , just 4 years ago ...

.... hold on for an eventually ride to $A 7.50 at least , if not a retracement back to levels above $A 10 , once again ..... Can't see any reason for earnings not to ramp up , now that the hickeysterical wailing of the gloomsterisers is behind us ...

Aussies do love to gamble , you can bet on that , cobber !

by Christov | 30th Jan 13, 3:48pm 1359514098

True that.....me ol Dingo.

by waymad | 30th Jan 13, 9:58am 1359493138

MoM who watches actual physical data for one of the East Coast regionals, isn't all That bullish....

by powerdownkiwi | 30th Jan 13, 10:16am 1359494180

There's a simple story missed.

Brent was $114 two days ago, $116 quoted this morning. Sure, its speculation magnification at the margin - nothing gets that scarce in 24 hours, any more than the Dow reflects reality in a 1%/day move - but it indicates where the game goes anytime an uptick is anticipated.

Staniford had an interesting graph of one of the miracle US energy stories:

http://earlywarn.blogspot.co.nz/2013/01/bakken-well-stats.html#more

and

http://climateandenergynews.zparking.net/?p=733

Seems like it's happening as predicted; steep fall-off per well, exponential need to increase no's of wells to keep total flow-rate, can't maintain anyway.

No wonder Lagarde and Obama are both hollering climate change. They've got to get the world onto 'something else' without scaring the horses. The Ed over at NBR gets it; on Mora's last 'Panel last year, his 'best news of the year' was that the US was to become self-sufficient. Fat chance.

by Gummy Bear Hero | 30th Jan 13, 10:39am 1359495589

Didya see that discovery near Coober Pedy , by Linc Energy ( ASX : LNC ) of a 100 to 230 billion barrel oil reserve ?

........ OMG , there's so much of the stuff in the ground we'll never use it all .....

Better make it compulsory that everyone owns a Hummer , methinks !

by andyh | 30th Jan 13, 11:02am 1359496975

I sometimes wonder about you GBH. A modicum of research on your part would have told you that what Linc claim to have found is oil shale (kerogen). This is not remotely like crude oil, its actually organic material which was never subject to sufficient heat/pressure to cook into oil.

To covert kerogen into oil requires retorting in situ. But lets hand it over to the experts shall we: In March 2011, the United States Bureau of Land Management called into question proposals in the U.S. for commercial operations, stating that "There are no economically viable ways yet known to extract and process oil shale for commercial purposes.

Linc's share price has been pumped up off the back of this nonsense, and no doubt someone has got rich off this. But really........

Meanwhile away from La-la land. Brent has risen 10% in a few months and is now pushing $115. At the same time the Eurozone, the UK and Japan (which comprise 40% of the global economy) are in recession. Petrol prices in the US have started to climb again. So 'all' that tight oil the US is producing, all this talk of US energy independence, its having absolutely zip effect on the global price of oil. Just imagine what the price would be if the Eurozone etc were NOT in recession - $130? $140? Just enough to tip the world right back into recession, thats how high.

by Gummy Bear Hero | 30th Jan 13, 12:39pm 1359502791

From Linc's 2012 annual report , the top 20 shareholders control nearly 60 % of the total stock issued ......

..... which places a squeeze on the market , when demand outstrips scrip supply ..... hence the tripling in the share price , from 75 cents to $ 2.47 within a month ....

Kerogen or not , that single field contains 3000 times as much oil as NZ's total known oil reserves !!!!!

..... where's the keys to the Hummer got to ???? ...... think I'll take the green one out for a spin today ... .... we're in the munny , lotsa luvverly munny ..... yeeeeee -------haaaaaaaaaaaaaa !!!

by andyh | 30th Jan 13, 1:07pm 1359504458

A cursory glance at a 5 year chart for Linc clearly shows that this is the 3rd pump and dump expedition the company has been subject to. Back in 2008 the shares traded at nearly $5 following similar 'excitement'.

Make sure you bail out in time Gummy before this one plunges again. By next year it will trading back at around $1.

And all that kerogen will still be sitting there - and none of it will have transformed into useful oil in the meantime.

by Gummy Bear Hero | 30th Jan 13, 1:27pm 1359505653

If you overlay Linc's 10 year chart with the small cap stocks chart , or with the energy index , there forms a neat alignment ......

...... sadly for Gummy , I'm not linked in , Aussie is an expensive place for businesses to operate , my energy plays are in Africa and in Europe ..... although Aussie medical stocks are shooting out the lights as they say , one of mine has performed well , the other so-so ....

Ah well , back to la-la land with me ....

by starfish1 | 30th Jan 13, 12:30pm 1359502257

http://www.bloomberg.com/news/2013-01-29/u-s-mint-silver-coin-sales-in-january-climb-to-a-record-1-.html

This says it all about the faith in the US dollar and inflation hedge.

by Mike B | 30th Jan 13, 4:13pm 1359515581

"In France, a minister there claimed the country was 'bankrupt' - a claim that caused a storm and a rapid backdown."

Typical, hide the truth. As i have been saying all the GDP and other data is rigged so you cant trust it