A review of things you need to know before you go home on Friday; a rate change, building consents jump, CPI updated, ANZ gives up on selling UDC to HNA, swap rates slip, NZD holds

Here are the key things you need to know before you leave work today:

MORTGAGE RATE CHANGES
No changes to report here.

TERM DEPOSIT RATE CHANGES
Asset Finance has tweaked rates for 18 months and 4 years down a bit.

INTENSIFICATION BOOST
Building consents rose strongly in November, hitting a 13-year high nationally, a 15-year high in Auckland. Apartments and townhouses drove the spike. But there are reasons to think that many are getting in before the huge distortions (capacity, costs) that will inevitably come when KiwiBuild ramps up, starving others of capability.

CPI UPDATE
Stats NZ has updated the components to the quarterly consumer prices index survey. These latest changes reflect updated spending patterns bringing in more of the sharing economy and food choices, dropping out redundant technology items. Food and housing components make up more than 40% of the CPI basket

GROWTH IN OTHER CONSTRUCTION STRONG TOO
The value of non-residential building consents were up a strong +10.5% in the year to November although the floor area was up less than +7%. That was probably due to the strong level of Government buildings for education and health. Overall, Auckland projects buoyed these numbers, observed Infometrics.

ORPHAN STATEMENT
ANZ today confirmed what everyone already know; the are not selling UDC to HNA and their agreement to do so has lapsed. Given they have signaled they don't want it, they say "we’ll continue to assess our strategic options regarding the future of UDC, although there is no immediate requirement to do anything."

IN TRANSITION
China may run trade deficits in the next five to 10 years. Zhang Yansheng told a conference in Hong Kong that China could no longer rely on exports to expand its economy as it had done over the past 30 years, because it was unsustainable and would put too much strain on ties with the rest of the world, especially as protectionism grew. “The next stage is an open economy that focuses on a balance of trade,” he said. “Expanding imports is a very significant part of China becoming a big global power.” Zhang is a former Beijing economic heavyweight.

WHOLESALE RATES SOFT
Swap rates slipped today across the board by -1 bp. The 90 day bank bill rate is unchanged at 1.87%. In China, their sovereign 10yr yield is up to 3.96% (+1 bp). The NZ Govt 10yr yield is unchanged today at 2.87%.

NZ DOLLAR HOLDS HIGHER
The NZ dollar has held on to its ½c overnight gain today and is now at 71.9 USc. On the cross rates we have made a good gain against the Aussie to 92.1 AUc and are up at 60.3 euro cents. This puts the TWI-5 holding at 74.6. That means we are now just ½c below the exchange rate prior to the September 2017 election. In contrast, the bitcoin price is now at US$13,245 a fall of -US$1200 or -8.3% on the day. Regulator clampdowns in Asia are dampening speculation among the huge Asian millennial demographic that has been mad keen on cryptocurrencies. (Just to give you an idea of the different world that bitcoin inhabits, at the NZ September election is was trading at US$4,998.)

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End of day NY time
Source: CoinDesk

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19 Comments

Looming car battery recycling challenge unaccounted for:

There is about half a tonne of lithium-ion batteries in an electric car:
https://www.theguardian.com/sustainable-business/2017/aug/10/electric-ca...

In Europe only 5% of all lithium batteries are recycled (can’t find NZ info):
http://www.foeeurope.org/sites/default/files/publications/13_factsheet-l...

At current prices lithium is not economic to recycle (this article from 2011):
https://waste-management-world.com/a/1-the-lithium-battery-recycling-cha...

Lithium-ion has been classified as a pollutant (this is a US article):
http://batteryuniversity.com/learn/article/recycling_batteries

If batteries are damaged they can give of toxic gases:
https://www.theguardian.com/sustainable-business/2017/aug/10/electric-ca...

Storing lithium batteries is a fire hazard:
https://www.ecotechservices.co.nz/services/recycling/batteries/

Landfill fires can be very hard to extinguish and can burn for years:
http://batteryuniversity.com/learn/article/recycling_batteries

To put the cherry on the cake, Morgan Stanley concluded the CO2 costs of manufacturing a Tesla car exceeds the CO2 savings of that car over its lifetime in all of it’s largest markets because the electricity is generated through coal.
https://www.marketwatch.com/story/want-to-fight-climate-change-dont-inve...

Is there some reason for this electric car/Tesla bashing post? Can't see its relevance to the news above.

Also UCS found electric car lifetime emissions to be far less than ICE cars. https://www.ucsusa.org/clean-vehicles/electric-vehicles/life-cycle-ev-em.... All theoretical studies like this are subject to the authors baked in prejudice and assumptions.

As for all their biggest markets:
USA: Varies from state to state, but Tesla is huge in California where they also have high solar adoption.
http://fortune.com/2017/04/08/solar-california-electricity/. Even the USA as a whole only uses 30% coal for electricity generation at grid scale.. More natural gas than coal.
China. currently uses massive amounts of coal, true enough, but also leading the world in installing solar to try to reduce that. 112GW of installed solar generation (NZ total electrical generation capacity (all types) is <10GW IIRC)
Norway: Yeah, not a lot of fossil fuel burned in Norway to charge electric cars, like NZ they have huge hydropower resource.
UK: 9% coal, 21% nuclear, 42% Natural gas, So not great, but a long long way from "electricity is generated through coal"

Those are 4 of Teslas largest markets, not sure who else make up the other three of the top seven, but so far your statement looks like a bit of a stinker.

It is *not* my statement - it the statement of Morgan Stanley analyst Jessica Alsford.

Did you notice that in the link?

No, given that there is no link to anything written by Jessica Alsford, nor is there mention of "seven largest markets" in the article you linked. There is some quotes, only one of which is directly attributed to her, but i guess we can assume the rest are her words.

sorry, but your typical beat up job didn't burst any bubbles.

"wrote Jessica Alsford, an equity strategist at the investment bank." - third paragraph of the article attributing the quotes from Morgan Stanley.

Here she is: "Jessica Alsford is a Managing Director and Head of Morgan Stanley's Sustainable + Responsible Investment Research Team"
https://www.morganstanley.com/profiles/jessica-alsford-head-of-sustainab...

I didn't write seven markets I wrote 'largest markets', and that also is a rephrase of Morgan Stanley's word primary:

“And with their primary markets still largely weighted towards fossil-fuel power (72% in the U.S. and 75% in China) the CO2 emissions from this electricity generation are still material.”

"Is there some reason for this electric car/Tesla bashing post?"

Not that posters have to ask your permission but I found it interesting. If you find these facts to be "bashing" as you put it then that is your right of course. Sorry if I popped your fantasy balloon.

Can someone clarify if or why the manufacture of an electric car requires more CO2 emission than a run of the mill car powered by hydrocarbon? Other than the big battery what is the difference? If a big battery can be manufactured without excessive CO2 emissions then surely they are equivalent and we should all be buying the electric car (eg Tesla) because it consumes far less CO2 when in use (the efficiency of a power station producing electricity being so much higher than any internal combustion engine).

I am not sure about CO2 for a regular car, a salient quote in the Market Watch article was:

“the carbon emissions generated by the electricity required for electric vehicles are greater than those saved by cutting out direct vehicle emissions.”

My main observation was that in none of these calculations are any allowances for the recycling costs or environmental impact of large scale heavy metal batteries into land fills. And that of all the metals involved, all of which are toxic, lithium is the worst because of the fire risks.

Each electric car currently driving around in NZ has about half a tonne of these things in it.

Thanks Ralph, that's clear we are talking about usage costs. It is relevant if the electricity is produced by hydrocarbon (oil/gas/coal) but I had heard (a) that a gas/oil fueled power station is more efficient than a car engine and (b) electricity doesn't have to be produced by non-renewable hydrocarbon. However a move to all electric vehicles would more than double demand for electricity and we do not have more hydro to exploit and wind and solar are at present inadequate for the extra demand. No problem if we had the population of 1960 but our pop growth (which is encouraged by the Greens) is a big handicap.

I take your point about heavy metal in land fills - I am a little more confident they can resolve this. An interesting subject and hard to find guidance that is not biased one way or another.

Sorry, but no more hydro to exploit? Do you not realize that basically all of the south island hydropower system is built on the dry side of the southern alps? There are places on the west coast of the south island that receive 10metres of rain annually, that means you don't need a huge catchment area to funnel in a significant amount of rain. There may be no political will to exploit that rain fall, but i'd be totally amazed if there are sound insurmountable technical reasons that there is nowhere on the west coast that a hydro dam and power plant could be built. In fact a quick google shows that there are several possible sites such as Wai­taha & Mokihinui River that are technically and economically feasible if the tree huggers would allow it. And then there is all the other stuff that is feasible technically, but possibly not economic yet. Have a look at http://hot-topic.co.nz/sustainable-energy-nz-2-how-much-dam-energy-is-th... and realise that he's already discounted pretty much the entire west coast as it mostly falls in the national park category.

As for the power plants being more efficient than ICEs, yes, without a doubt, a modern oil or gas burning CCGT plant can exceed 50% efficiency in converting fuel energy to electrical output. The toyota prius atkinson cycle engine hits 40% thermal efficiency at its peak. So even allowing for transmission and charging losses the electric car is at worst breaking even. Now allow for all the cars out there that are not hybrids and have a peak efficiency more like 30 or 35% which they only rarely reach, so average out to about 15% efficient in the real world , and those that are not maintained.. and well, you have a huge advantage to the electric car. Certainly way better than the average car in the NZ fleet. And that based on the assumption that all the electricity is being generated from burning fossil fuel.

'the huge distortions (capacity, costs) that will inevitably come when KiwiBuild ramps up, starving others of capability'
Surely this can't be right. The coalitions promise is to build an ADDITIONAL 10,000 homes by creating new, extra capacity; not diverting existing resources.

..and an additional billion trees. If only Shane could organise adequate truck drivers would be a start. Driverless trucks will be needed to deliver the additional seedlings, workers, affordable houses etc. at this rate. Maybe HT license restrictions could be wound back to what they were when Winston was a cowboy.

Watching the crude oil market over the past few months has been a study in winding a rubber band, or a game of chicken. Each week it has been largely the same thing repeated: oil prices gently rise, backwardation in the futures curve keeps deepening, Money Managers in the futures market bet on higher oil, Dealers bet even more against them. Read more

I wonder if the affordable housing market will boom like it has in Vancouver recently? Nice affordable housing could be the next big thing.

Affordable housing is problematic in Anglo Saxon countries and when residential property is the basis for the growth in national wealth. Without a strong industrial base, the adjustment is potentially catastrophic. The situation in Japan would have been dire if it weren't for the nation's industrial output.

One of Putin’s biggest fans and a prominent businessman in the agriculture industy, Stefan Dürr has built a farming empire in Russia. Dürr emigrated from Germany to Siberia when he was a student and now has his own empire in Russia. He owns at least 200,000 hectares of land and has 60,000 cows and 4,000 employees. Two years ago Vladimir Putin personally handed him the certificate of Russian citizenship. Read more

Potential competition?

Forgive me, but I do have to smile when I read all the various comments on cryptocurrency and how to play it and which variant is/or are the sure fire winner(s),
Really, bitcoin, ethereum or ripple etc – which way to go, I have such great memories of this sort of fever.
And with that we have the 80’s – Friday night De Bretts and then up to The Exchange – again, which way to go - Equiticorp, Chase, Rainbow or Judge – in the end so many ultimate “corpse”.
I really have tried to figure out the whole cryptocurrency thing – but struggle – that could well be my failing – the future is a tough game.
Warren Buffets comments are interesting – although he looks like your favourite grandfather – he is certainly no slouch – this man knows the markets, knows what an opportunity looks like and can put a deal together that ties everyone in knots – ignore him at your peril.
But again, in the early 90’s I fiddled with the internet and merrily told all and sundry that I couldn’t see the point in it – so what do I know?

Don't worry I think you are 100% right about the InterWeb. I too fiddled with the InterWeb in the early 90's - it wasn't very user friendly (still isn't in many ways considering it is based on the same technology). I think it's "value" is over rated. There were also other services such as Compuserve or FidoNet which either no longer exist or are much reduced in visibility.

Regarding the analogy between the 80's share market and the cryptocurrencies. As noted by David above perhaps this will be the millennial's financial armageddon that will scare them like the '87 share market crash seems to have scarred some.

Custard, Ahhh - yes :-), those heady days when "Equitycorp" and alike shone in the night sky. I was surrounded by professionals whos every breath described their Chairman as irreplaceable and the companies they ran equally invincible.

On October 19, I stood in the NZX Queen street gallery watching the chalkies rub out the values. The silence in the viewing gallery was more deafening than the noise on the trading floor! That moment the belief (really) set in - it was all going to be even cheaper tomorrow!