90 seconds at 9 am: Tepid gains

90 seconds at 9 am: US jobless claims fall, household net worth rises; ECB and BofE hold; French jobless rises; EU rejects IMF claim; NZ$1 = US$0.803, TWI = 74.7

7th Jun 13, 8:41am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news of tepid progress around the world.

The number of Americans filing first-time applications for jobless benefits fell by 11,000 to 346,000 last week, though a broader measure indicated that progress in their labour market remains slow.

The latest Federal Reserve data shows that American household net worth has finally exceeded 2007 levels and reached a new high, although not yet on an inflation-adjusted basis. It's a very big number and now exceeds US$70 trillion, 4.7 times GDP.

New Zealand achieved that same recovery in 2011, although our household net wealth is only a bit over 3 times GDP and mostly housing equity. If we also had 4.7 times GDP we would have household net wealth of over NZ$1 trillion, NZ$325+ billion more than it is today.

The ECB today took no new steps to boost the euro zone's flagging economic prospects - including no rate cut - despite forecasting an even-deeper recession this year and low inflation in 2014, putting its stimulus tools on hold. That is because it is forecasting improvements next year.

The Bank of England followed the ECB's lead (as it does these days) with the only thing of note here being that its Governor retired, to be replaced by Canadian Mark Carney.

In France, their unemployment rate rose to a 15 year high.

Yesterday we reported the IMF admission that it and the EU made mistakes in the way it handled the Greek fiscal crisis. Today, the EU rejected the IMF analysis, saying the IMF is 'plainly wrong'. A bust up between the two will make responses to future crises difficult, you would think.

Gold and oil staged a small recovery overnight with the precious metal claiming above US$1,400/oz again. The Dow fell briefly below 14,900 overnight but has climbed back in late trade.

The NZ dollar starts today at back to Wednesday's levels at 80.3 USc, 83.6 AUc, and the TWI is again at 74.7.

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17 Comments

by andyh | 7th Jun 13, 9:18am 1370553534

I thought this was a fascinating straw in the wind:

http://www.stuff.co.nz/business/money/8766725/Homes-value-slashed-by-ha…

Councils and insureres are finally waking up to the enhanced risks associated with coastal properties as climate change continues apace. One of our local councils, Tasman, recently pulled the pin on a coastal development, saying it could not take responsibility for erosion costs/sea level rises - much to the chagrin of the vendor. We also have a 'swanky' housing development on a spit which is 1-4m above sea level (Monaco); the residents seem oblivious to the sort of news a similar hazard re-assessment as done in Kapiti will inevitably bring.

by powerdownkiwi | 7th Jun 13, 9:28am 1370554114

Interesting point. Not just the rise, but the increased storm-surges. Dunedin is in a Dutch situation, much of it low-lying behind a dubious dyke. They've - rightly - upped the minimum height above MHWS that you can new-build, but they sort of ignore their existing; basically there's no answer. Just when they need the diggers......

by steven | 7th Jun 13, 9:36am 1370554592

Wellington is as well....except no dyke.

by dh | 7th Jun 13, 1:28pm 1370568512

I think the consultants for Dunedin current "seawall" made a confidential settlement with the council last August, before the current wave of sinkholes.

by steven | 7th Jun 13, 9:35am 1370554517

Interesting as there has been at least one case in the US where the developer I think sued to get the coastal development built and the state Govn "outlawed" climate change science.

So the americans answer is legislate the denial. Who gets sued in the future I wonder, class actions I suppose with the rate payer picking up the tab.

regards

by dh | 7th Jun 13, 1:40pm 1370569257

North Carolina. Generally considered to have been a bill with heavy Real Estate industry support.

http://www.earthmagazine.org/article/denying-sea-level-rise-how-100-cen…

by steven | 7th Jun 13, 9:47am 1370555240

Its being discussed.......waikanae beach springs to mind....but its been happening for a long time,

http://hwe.niwa.co.nz/event/April_1956_Wellington_Flooding

and still they build.

and the costs to protect more and more, add up.

"flood levels by up to 200mm by 2040 and up to 400mm by 2090. The upper limits apply mainly in the tidal areas at Otaihanga and Waikanae Beach."

Kapiti-erosion-risk-may-devalue-1800-homesAug 27, 2012 – ... may be devalued after a report revealed they will be at risk from erosion and flooding

http://www.stuff.co.nz/dominion-post/news/kapiti/7555304/Kapiti-erosion…

I wonder how long before properties become un-insurable, hence un-mortgaable and hence worth(less).

"The information, released at a press conference today, is likely to affect property values and insurance as it will be included in future Land Information Memoranda"

I wonder how many of the wealthy above are in the AGW denier camp?....should we feel sorry? I wonder...

regards

by Kate | 7th Jun 13, 11:33am 1370561592

I've been following the Kapiti one with interest. It is a bit of a test case under the 2010 NZCPS. The very odd thing about the forecast modelling in that one is that although prepared to forecast future SLR, the coastal scientist wasn't prepared to forecast future accretion, even though the NZCPS requires both erosion and accretion to be taken into account - and accretion has been and still is the predominant trend for the northern Kapiti beaches.

Kapiti is one of those coasts with a cuspate foreland and from this area north it has been accreting for centuries. The Maori name for that cuspate area of land is Kena Kena (translated Adam's apple).

http://en.wikipedia.org/wiki/Cuspate_foreland

In fact there was so much sand built up there that the council extracted sand from that beach for 10 years to renourish another area of coast (around 65,000 cu metres taken over that 10 year period). The reason given for setting the value for accretion at nil for the entire coast is that ongoing accretion is too uncertain (according to the scientist - unable to accurately "predict") - yet of course it (accretion along this coast) is actually measureable - a 'fact' if you will.

Makes a bit of a mockery of the way the predictive sciences are being used in this case in my opinion - to be confident enough to "predict" net loss due to SLR but to not be prepared to accept the historical evidence regarding net gain. Same reason given for not taking tectonic uplift into account.

Hence, I see this as a test case for application of the precautionary principle. Can/should regulators start treating historical evidence as too uncertain to make use of yet accept 50-100 year future scenario projections from the IPCC - and then label this type of scientific modelling as a confident "prediction" of local shoreline change?

Point I'd make is that no one is going to die of sea level rise - yet tsunami threat wasn't even considered in this assessment of coastal hazards. I'm just not sure what the objective of the hazards planning is here - seems more a council trying to avoid future liability - understandbale perhaps in light of the leaky home crisis - but not necessarily what should be the focus of our attention and actions in terms of the existing built environment.

by andyh | 7th Jun 13, 11:57am 1370563047

I am sure there is a fair dollop of avoiding future liability - and in this I would totally support councils. Anyone choosing to build/buy a coastal property should not now be doing it with the idea that the local council is going bail them out in some point in the future by spending money on flood prevention etc to preserve their property. If such people are prepared to discount the warnings about extreme weather/sea level rise then they should also be prepared to discount ratepayers help to rescue them. Future councils are going to have more than enough calls on their budget to support infrastructure for those who didnt choose to build on marine cliffs, spits, marshes, estuaries etc. Wasting money in a Canute like attempt to hold back rising sea levels to protect properties built just above the strand line would be the height of folly.

by Kate | 7th Jun 13, 12:34pm 1370565289

But what do you think about the application of predictive science in the example? Are you advising regulators and scientists should discount/distort historical evidence in this respect?

Just curious as you seem an advocate of sound science.

by andyh | 7th Jun 13, 1:27pm 1370568420

You'll have to help me here because you are clearly more familiar with the Kapiti example. Did the scientists actually state that they were setting aside the accretion history (possibly on the 'all bets are off' principle - that a history based on a situation in which sea levels were stable is no longer usefully predictive under conditions under which sea levels are forecast to rise? (I am just hypothesising there, it is just one possibility that sprang to mind - perhaps you have a link to their detailed pronouncements etc?).

by Kate | 7th Jun 13, 2:05pm 1370570745

As I interpret it - the historical record of LT (long term - which was a positive, accretion, value) was set aside (i.e. set at zero for the purposes of the assessment) as a "precautionary measure" as explained here (p.16-17) and it is claimed to be standard industry practice;

Where positive rates occur, LT is set at zero, this being a precautionary measure used by the industry in recognition of the uncertainly inherent in predicting sustained seaward shoreline migration over prolonged periods of time where the underlying process is not well understood.

Full Report available here;

http://www.kapiticoast.govt.nz/Documents/Downloads/District-Plan-Review/coastal-hazards/Kapiti_Coast_Erosion_Hazard_Assessment_2012_Update.pdf

Effectively, history is not well understood but future projections of SLR are?

by Kate | 8th Jun 13, 12:19pm 1370650748

Any thoughts on the way science is being used in this case, andyh?

by powerdownkiwi | 7th Jun 13, 9:23am 1370553813

If 'an increase in household wealth' is merely the upping of the 'value' of existing housing, then it is no increase at all.

And any tracking system which thinks it is, is meaningless.

Although it probably points to the fact that there are a dwindling number of games in town; make-believe being one of the most pupular.

by Rudderless | 7th Jun 13, 9:47am 1370555262

If 'an increase in household wealth' is based on increased real-estate selling prices - just imagine the shocking effect the resulting 'Financial Repression' will have on the savings of the savers.

Mr Pozie. Where are you? We need you to sort out a few fundimentals - that keep coming to the surface.

by powerdownkiwi | 7th Jun 13, 10:30am 1370557856

Kimy - yes, and given that they aren't making more land, you could perhaps argue that it has to become more desirable with an increasing proportion of 7 billion folk wanting some, than a lesser proportion of 1 billion.

But here we are assuming that our ability to buy guns has increased because we changed a few numbers on some pieces of paper. The percentage of population/demand increase doesn't justify the rapid ramping - if all that 'wealth' was cashed-up, it wouldn't be able to buy what the owners, collectively and cogitiatively, expect.

That's a bubble. But this is driven by a lack of options, and an expectation of 'wealth' that can't be underwritten. So prices will, at some point, reduce, and likely suddenly. There won't be anywhere else to transfer the imagined 'wealth', and so it gets wiped out. As you'd expect with imagined numbers - it happened with the finance-co's falling over, remember? All those not-understanding folk who borrowed against the 'rising value' of an existing house, then 'invested' it. They weren't using something that was represented by anything, so they actually lost nothing. Hard to make folk understand, sometimes, that it didn't exist in the first place.

by scarfie | 7th Jun 13, 9:51am 1370555471

Interesting talk from the currency traders over the potential shift in trend for the NZD and other commodity currencies. But then I think something big has been brewing for a couple of months and this is just the early moves playing out.