90 seconds at 9 am: Apple Pay a hit

US consumer confidence jumps; factory orders dip; homeownership rate falls again; Apply Pay zooms; Japan retail surges; UST 10yr yield 2.28%; NZ$1 = US$0.79.3, TWI = 76.9

29th Oct 14, 7:20am by David Chaston

Here's my summary of the key news over the long weekend in 90 seconds at 9 am, including news of another really big Apple product hit.

But first, a widely respected American consumer confidence index rose 5.5 points in October to its highest level since October 2007, beating expectations handily.

Meanwhile the homeownership rate of 64.4% in the September quarter in the US was a fall to its lowest level in more than 19 years as the market shifted toward renting, and relatively tight credit retail conditions blocked some potential buyers.

Also down were September durable goods orders, although surprisingly the order backlog actually rose for American manufacturers. Those lower September orders contrasted somewhat with the October Richmond Fed survey which showed strong factory activity in the mid-Atlantic region. It reported 'robust' growth in orders, shipments and wages.

Staying in the US, Apple has said that its new Apple Pay service is already a huge hit. In just its first three days of operations more than one million people have loaded credit card details. Basic banking - the transactional part - is in for a big shake-up. However, uptake levels in New Zealand are not available yet and the service here faces other equally attractive alternatives, some of which do not involve the credit card companies.

In Japan, retail sales growth accelerated for the third straight month in September in an encouraging sign that consumer spending there could be strong enough to absorb a second GST increase scheduled for next year. The September +2.7% rise was far higher than analysts were expecting.

In Europe, Sweden has cut its main policy rate to zero overnight, but says that it does not expect to have to resort to money printing.

In New York, UST 10yr bond yields rose modestly in trade today and are now at 2.28%.

The oil price is basically unchanged at just on US$81/barrel with the Brent price still under US$86/barrel. These lower prices are seeing some large drillers reporting much lower earnings; that is the flip side to low consumer price rises and higher real incomes.

The gold price is basically unchanged from where we left it last week at US$1,229/oz.

We start today with our currency a little higher again. The NZD is at 79.3 USc, at 89.6 AUc, and the TWI is at 76.9.

If you want to catch up with all the changes on Friday we have an update here.

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

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6 Comments

by Boatman | 29th Oct 14, 11:29am 1414535361

Len Browns hare-brained Toll Road scheme has to be stopped in its tracks.

We simply cannot continue to allow Auckland Transport to ride roughshod over us when the existing Public Transport system is so shambolic that Auckland Transport Staff will not even use it !

Let me warn each of you right here and now ........... this $2 toll is the thin end of the wedge , it will become a rort in due course like the cost of parking has escalated out of control , so will the Toll .

And the dirty , noisy , aged , smelly run down Birkenhead busses with tens of millions of Kilometres on the clock and clouds of black diesel fumes dirtying your work clothes will still ply their ratepayer subsidised trade and you will continue to stand in wet cold half -shletered bus stops in the rain , getting to work with wet shoes , wet trousers and your wet woolen jersey smelling like a wet dog !

And Len brown will get into the City secure and dry in the comfort of his chaffeur drven luxury European limmosuine

Auckland City needs to live within its means , just like every single on of us who live in the City .

Rolling up eye watering debt levels consisting of $ signs with so many zero's that most of us cant comprehend , has got to stop

The waste of resources the city is responsible for is astonishing , massive salaries , the biggest fleet of vehicles in the city , often two staff members driving around aimlessly ( not even the Police can afford two to a car) !

At some point we will reach breaking point and it will all Stop

But Stop , it must

by Poission | 29th Oct 14, 11:59am 1414537191

As they are limited to how they can raise funding for transport inrastructure ( the gvt being against regional fuel levies) it may be one of the only options.

We have already seen the increase in national fuel tax to pay for aucklands roading (where already it has the cheapest fuel costs) there needs to be a higher cost of local funding to pay for Aucklanders lifestyle choice.

http://www.pricewatch.co.nz/pricewatch.aspx

by Boatman | 29th Oct 14, 1:35pm 1414542915

We can agree to disagree , but Auckland City needs to live within its means like the rest of us , and that means cutting all wasteful expenditure and increasing productuivity and efficiency to Germanic levels

by Stephen Hulme | 29th Oct 14, 1:56pm 1414544176

In Europe, Sweden has cut its main policy rate to zero overnight, but says that it does not expect to have to resort to money printing.

Statists once again driving those financing business with coupon bond issuance, recommended here yesterday, to destitution.

Let’s consider what it really means to have a high or a low rate of interest. I propose to do reductio ad absurdum. We will look at two cases (which would be pathological if they occurred) to make the point clearer.

The first case is if the rate of interest is 100%. This means that a $1000 payment one year from today is worth ½ of the nominal value, or $500 today. A payment due in two years is worth $250 today, etc. At this rate of interest, for whatever reason, “future money” is worth very little present money. In other words, the burden experienced by the debtor is a small fraction of the nominal value of the debt.

The second case is if the rate of interest is zero. This means that a $1000 payment due one year from today or 100 years from today is worth $1000 today. At this rate of interest, for whatever reason, future money is worth every penny of its nominal value today. There is no discount at all, not for the loss of use of the money in the meantime, not for the risk, not for currency debasement. In other words, the burden experienced by the debtor is the full nominal value of the debt.

Again, to emphasize, one must use the current market rate of interest not the rate of interest contracted by the borrower at the time of the bond issuance.

The lower the rate of interest, the more highly one values a future payment. The higher the rate of interest, the more highly one discounts a future payment. These statements are true whether one is the payer or the payee. The payer and payee are just parties on opposite sides of the same trade.

Irving Fisher, writing about falling prices (I shall address the connection between falling prices and falling interest rates in a forthcoming paper) proposed a paradox[4]:

“The more the debtors pay, the more they owe.” Read more

by Boatman | 29th Oct 14, 2:18pm 1414545516

Or like Japan , where the State issued massive paper debt to stimulate the economy , and Japanese were not stimulted to spend .

They increased their savings instead of spending

by Mike B | 29th Oct 14, 11:01pm 1414576911

Hi Stephen H - Like your work but disagree here.

The $NZ = US70c and Harvey Norman borrows $10 mil @8% then imports $10mil of furniture

Then $NZ goes up to = US90c and Smiths City borrow $10mil @4% and imports $10mil of furniture

Goodby Harvey Norman, or so the article goes.

What is the difference between the dollar value and interest as per the articles point

The links he gives you get a security warning so i dare not enter

"This Connection is Untrusted

You have asked Firefox to connect securely to keithweiner.posterous.com, but we can't confirm that your connection is secure.

Normally, when you try to connect securely, sites will present trusted identification to prove that you are going to the right place. However, this site's identity can't be verified.

What Should I Do?

If you usually connect to this site without problems, this error could mean that someone is trying to impersonate the site, and you shouldn't continue."

Try it

https://keithweiner.posterous.com/fractional-reserve-is-not-the-problem