90 seconds at 9 am: Bubbles

90 seconds at 9 am: Oil and gold fall; NASDAQ at 13 yr high; WTO fails again; China coal use grows; RBA talk down currency; NZ$1 = US$0.819 TWI = 77.0

26th Nov 13, 8:00am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news of ever higher equity prices.

The price of oil and gold has fallen mainly on the Iran agreement news although neither falls were large. Equities on the other hand - especially tech stocks - continued their surge higher, ignoring the talk of an early tapering by the Fed.

In the US, data from the real estate industry showed that their forward looking indicator had another fall, its fifth consecutive one. That index is now at its lowest point since December 2012.

The same group is reporting that US foreclosures are at their lowest level since 2008.

On the global front, the latest effort to get a comprehensive trade deal has failed - again. All the real trade action is in regional and bilateral deals, like the TPP.

In disturbing news from China, their coal industry is talking up their growth prospects. In 2005 they mined 2.4 billion tonnes of coal. Last year that had grown to 3.5 bln tonnes from 14,000 mines. And by 2020 they expect to mine and burn 4.8 bln tonnes. Currently, China mines half of all world production and their output is nearly four times the next largest country. China certainly is acting differently to its talk on climate change.

Here's an item of interest: New Zealand has been fingered as one of five countries where a housing bubble is underway. The others are Australia, Brazil, China and the USA.

In Australia, their Reserve Bank's active effort to talk down their currency is working. Perhaps it helps that economic prospects aren't so bright at present. The effect on us is a rising NZ dollar, now almost at 90 AUc.

The NZ dollar starts today at 81.9 USc, 89.5 AUc, and the TWI is at 77.0.

The easiest place to stay up with today's event risk is by following our Economic Calendar here »

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9 Comments

by powerdownkiwi | 26th Nov 13, 8:26am 1385407605

China's leadership is in the same cleft stick as every other kind. Every citizen has dreams of self-'improvement', and will either vote for that (democracy) or get dangerously unrestive (other).

So - while the science is clear, and the ramifications guaranteed to be dire long-term, no leadership can address the issue. They all go with cognitive dissonance - but do nothing. Unless the species gets a whole lot more savvy, quickly, it's on the way to self-annihilation.

Meantime some worry about the price of fringe land. Go figure.

by Andrewj | 26th Nov 13, 9:30am 1385411409

Hussman

http://www.hussmanfunds.com/wmc/wmc131125.htm

by Stephen Hulme | 26th Nov 13, 11:44am 1385419458

Interesting, complete capture of NZ's property market is inevitable if some analysis is undertaken of the Chinese state sectors deficits, which have apparently been monetised at much greater magnitudes than the US.

Finally, when you lose out on that purchase of a home to a Chinese buyer who bid 50% over asking sight unseen, with no intentions to ever move in, you will finally know why this is happening. Read more

by Boatman | 26th Nov 13, 9:46am 1385412375

Its time we talked our currency down too , its far too strong for our exporters and I am sure the RBNZ could find something in their box of tricks that is " bad" news for the currency.

Our exporting manufacturers are being gutted , our meat farmers are taking strain and its only a matter of time before dairy starts to feel the pinch too , and then you will have a hue and cry

While I understand that the currency price is analogous to a "share price" and currenct levels indicate good management of the economy , the fact that mineral commodity prices like gold and aluminium are falling is not a good thing for us. The currency strengthening in tandem with falling gold price.... not good for Waihi orTiwai point

by Boatman | 26th Nov 13, 9:57am 1385413052

I am happy the TPP is not sorted yet , we are inclined to give too much away in these negotiations .

From what I have read , the US demands are outrageous , and their protection of their dairy farmers ( a strong lobby ) means we wil find it impossible to get a foothold there.

In any case we dont seem to have any problem finding markets for our Dairy and food products, tourism is not lilely to be affected , and oil and gas are known value commodities so we dont need the TPP for these .

The US is hellbent on closing down Pharmac , and you have no idea how this single buying channel shelters us from price gouging by Pharmaceutical Multnationals

The issue around US demands re technology patents and intellectual property is another minefield for NZ , we will get the short straw on this one

by @tony | 26th Nov 13, 10:45am 1385415943

Dont mention Monsanto!

by antonymouse | 26th Nov 13, 2:24pm 1385429074

Interesting article in the Bangkok Post

http://www.bangkokpost.com/opinion/opinion/380511/us-tpp-is-not-in-our-interest

A couple of snippets

It seems that calling the TPP a "partnership" is a bit of a stretch. Several documents leaked by negotiators during the past couple of years show a heavy-handed United States team insisting on a list of demands that no one else seems to want. Last week, the internet site Wikileaks published a lengthy and disturbing document. It is apparently a summary of recent TPP negotiating positions. Washington comes across as more of an alpha autocrat than fair bargainer.

and

The government is often accused of harming Thailand by standing aside while so many nations negotiate, and eventually sign, free-trade agreements. This newspaper has long supported free trade, international agreements and careful, productive negotiations. But the TPP put forward shortly after Mr Obama took office shows how governments at times abuse the term "free trade" to push special agendas.

The future of the TPP is unclear. The US, naturally, wants to "wrap up details" within the next month. One hopes the proposed partners, including our neighbours such as Vietnam and Singapore, will refuse to accept the more blatant and harmful sections of this one-sided agreement.

by Boatman | 26th Nov 13, 11:50am 1385419848

Thanks for the Link , Hugh . I must admt I did not thik the LTVR rules would impact much , so I was wrong .

Its seems HSBC Bank have found a way Asian buyers can fund house purchasers in NZ by borowing in Yuan

by Anarkist | 26th Nov 13, 12:42pm 1385422946

I agree Hugh, there was a segment on Q&A I think about Chinese buyers in the Auckland property market and one guy interviewed said that Real Estate Agents often have been promising constantly appreciating house prices. I don't think they'll be so eager to invest here now that the Reserve Bank's macro prudential controls have had such early success, especially when real estate markets in London, San Francisco, and several Canadian cities still continue to deliver capital gains.

I think house prices were driven by price elastic first home buyers and speculative investors have been dogtailing them, because of the emotional basis of their buying decisions. What'll happen when people find their homes are in negative equity? Will they begin to panic sell?