Equities can't hold gains; Canada job growth impresses, EU data weak; Finland ends UBI experiment; China laps up PPPs; iron ore price leaps; UST 10yr 2.63%; oil unchanged, gold up; NZ$1 = 67.4 USc; TWI-5 = 72

Equities can't hold gains; Canada job growth impresses, EU data weak; Finland ends UBI experiment; China laps up PPPs; iron ore price leaps; UST 10yr 2.63%; oil unchanged, gold up; NZ$1 = 67.4 USc; TWI-5 = 72

Here's our summary of key events overnight that affect New Zealand, with news that a Finnish UBI trial has ended and declared 'unsuccessful'.

But first, Wall Street is ending the week -0.3% lower than yesterday although the losses are being pared back in the afternoon session. But for the week, that will be ending back where it started, unable to hold earlier gains. Earlier, European markets were also lower by between -0.3% in London to -1.0% in Frankfurt. The week closed even lower in Tokyo which was down -2.0%. Shanghai will be back on Monday after their national holiday week, but if Hong Kong is a guide, they will return with not much net change.

In Canada, employers added +66,800 jobs in January, far better than the gain of +8,000 that analysts expected. The Canadian jobless rate ticked up however to 5.8% as more people sought work. The Canadian currency rose on the news. It was also bolstered by better-than-expected housing start data.

And there was data out in Europe overnight. The German trade data actually came in a bit stronger than expected with both exports and imports rising while their trade surplus eased back a bit. But French industrial production data was weak as expected in December but not as weak as the prior month. Italian industrial production data was similar.

You may recall that Finland ran an trial program for UBI (universal basic income) where jobless people were paid a living wage. The hope was that this would give them security to find work. In the end, these people "felt happier" with the free money (that is, "wellbeing" went up), but hardly any of them looked for or found jobs. Finland has ended the trial, dubbing it "not successful".

China loves public-private partnerships (PPPs). They are reporting that in 2018, a total of 8,654 PPP projects had been registered, worth NZ$2.9 tln. The projects for which construction has started totaled 2,237, with these adding up to NZ$700 bln in investment.

The price of iron ore, especially in the key Chinese market, is rocketing higher. This is despite the China slowdown. The dam disaster in Brazil has suddenly caused a supply shortage, extended by Brazilian outrage at the miner which may further reduce shipments from more mines there while remediation work is undertaken. Brazil is Australia's largest supply rival to China.

But on the flip side, this now means there is a sudden shortage of demand for iron ore bulk carrying ships. The Baltic Dry index, which measures ship charter pricing, has plunged, now down to 2016 lows. This is a sudden -56% drop since the beginning of 2019.

The OECD is reporting that gross borrowings of member governments from the financial markets are set to reach a new record level in 2019 by exceeding US$11 tln. But the increase is confined to a few countries, particularly the United States. As QE is wound back, governments are switching to market funding sources. New Zealand is among a small group of members (including Denmark, Iceland, and Sweden) where the debt load is considered at "very low levels". If it wasn't for the US's voracious debt-funding appetite, the OECD would be reporting good overall progress in reducing this budget load.

And read this.

The UST 10yr yield is lower today at 2.63% and falling yer another -3 bps from this time yesterday. Their 2-10 curve is now just on +17 bps. The Australian Govt. 10yr yield is at 2.10% and a +1 bp rise overnight. The China Govt. 10yr yield is unchanged at 3.15% because markets there are closed of course, while the New Zealand Govt. 10yr yield is at 2.13% and a further -5 bps fall.

Gold is up +US$5 at US$1,315/oz.

The VIX volatility index is marginally higher this week and is now at 17. The average over the past year has been 17, so this level is now not that unusual. The average for 2017 was only 11 however. The Fear & Greed index we follow is unchanged and still just over on the 'greed' side.

US oil prices are unchanged today at just under US$52.50/bbl while the Brent benchmark is at US$62/bbl. The US rig count rose slightly this week

The Kiwi dollar is ending the week little changed in offshore markets at 67.4 USc. On the cross rates we are at 95.2 AUc, and at 59.6 euro cents. That leaves the TWI-5 at 72 where it has been for the past few days.

Bitcoin has jumped today, up +7.5% to US$3,611 and taking it back over NZ$5,000 for the first time in ten days. A US SEC commissioner has said he will support the launch of a bitcoin ETF. This rate is charted in the exchange rate set below.

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

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54 Comments

It's a shame that the UBI trial was unsuccessful by their measures. Perhaps there's more of on issue that in the future the majority of humans won't be useful. Perhaps that life of leisure and UBI won't be a choice when there is little need for humans to work.

A documentary to reflect on the future of human work.
https://www.youtube.com/watch?v=tQd_5as_cMY

I read all the links on that linked page and nowhere could I find any statement that the experiment was "not successful" - so not sure where that quote comes from. To my mind, the outcomes are extremely interesting, and in particular the statistical findings in relation to "quite high" and "very high" stress experienced between the control and the experimental groups.

Additionally, the statistical findings regarding the control vs experiment groups perceptions of bureaucracy involved when claiming social security benefits.

I read the whole press release as nothing but favourable findings with respect to a UBI - perhaps not as favourable as one might have expected with respect to potential to improve the prospects of finding work - but the point being - perhaps work for these people is simply very hard to find. The experiment group was marginally (very marginally) better in finding self-employment, but was paid marginally worse on the additional work they did find. That would imply to me that having greater security of income meant they were more flexible in relation to what their potential earnings would be.

All in all, I found the study findings hopeful. But I suppose if the only metric one is looking at relates to employment (as opposed to wellbeing and a sense of security) then the trial did not produce statistically significant, positive results in that regard. What that says to me is that the state needs to look further at what it might do to improve the employment prospects in its communities.

Quite correct. One of the outcomes a lot of people have been looking for with this is more opportunity to find a better job or start a business. This relatively short trial has not produced a significant result. This may differ with a larger sample size or if people receive the income for a longer period of time. People tend not to make dramatic changes or shifts in their life in a matter of months.

I see the improvement in wellbeing measures as a useful tool for the future, which is why my emphasis is on a larger proportion of the population being unnecessary or not useful for work in the future.

Re: "And read this" . . . .
David, it might pay to check your valve caps and front tyre pressure if making references to articles like this.

Interest.co.cn. oink

RT and Al Jazeera have been great additions to the World's media. I welcome the CCP's contribution and applaud the main stream Western media's impending demise.

Yes ignorance is bliss.

The Western MSM needs to change to counter this "threat". Competition in this area will be good as they have, for far too long, had a monopoly on propaganda.

Welcoming different perspectives on things is the opposite of "ignorance". Western media and entertainment has become corrupted and decadent. It needs a good purging. People are declining to read the news, watch movies or play new computer games because it is boring and preachy.

Yes comrade Smith, China and Russia are bastions of truthful unbiased reporting.

UBI was not a failure if you read the article. Yes there was almost no change in employment and total income but stress and stress related illness decreased among those on the UBI so savings were made in other ways.

The idea that everyone should work in paid employment because that is good for them is more a religious belief. Stop one day and look around at what people actually do and see if the world is better with them doing their current job or maybe at home gardening.

Think of the energy and resources needed to transport someone and then sit them in an office and all the people involved in this process and then look at the actual output. Accountants, HR, health and safety, planners, auditors and many managers a large proportion of these people could be planting some vegetables at home and sitting around talking to friends with no decrease to the output of products in New Zealand but a lot less resources used.

Please tack on coders and financial websites to your .ist.

Judging the UBI's success by counting how many people found jobs is a bit weird. I would have thought measures of creativity would be better. Were more paintings painted, more skills learned, more books, poems, songs, YouTube channels, blogs, charity work, etc?

I think it's a vestige of the old ways, is wellbeing not a measure of success? Minimal or no reduction in employment I would class as a success. UBI is meant to improve people's lives which helps create better outcomes over a longer period. The ability to stay in education for longer, the ability to take the foot off the throat has proven positive effects on IQ. I take it that Chaston was merely being provocative for clickbait purposes.

Is there any analysis on improved wages for the test group? I would have thought it obvious that a UBI would increase the reservation wage also.

Apart from the UBI the group didn't earn any more from wages or self employment than the control group.

After quickly reading the article on the UBI I am left wondering if the recipients and the control group were briefed in any way on what outcomes the researchers were looking for. Was the aim an increase in paid employment and or an increase in self employed income? Did both groups try just as hard?

An increase in well being because of receiving an extra 500 euros a month seems hardly worth mentioning as that would be expected.

What are the policy objectives of a UBI:
• More equitable distribution of wealth
• A more efficient tax/welfare system
• A system able to manage the employment impacts of disruptive technology (i.e. higher systemic unemployment disproportionate impacts)
• People willing to take on more marginal employment/income opportunities due to less adverse incentives such as abatement.

Anything I’ve missed?

Enabling people to take the risk of starting a business.

More voluntary work or helping the neighbours?

Not familiar with the intricacies of the Finnish welfare system, but presumably the people in this trial (being entirely selected from the unemployment benefit roll) were not capital rich, and therefore not in a position to front the capital that is invariably needed to start almost any business.

I wonder if any country will ever get round to trialling a proper UBI on a decent scale and for a minimum of five years to give it time for the region they try it in to adjust to the new reality. I imagine those that would be the one to take up entrepreneurship wouldn't be those that come from the ranks of the unemployed, but from the ranks of frustrated wage slaves who never had the courage to quit and risk it all on their passion/idea. With the security of a UBI they might make the jump.

All good points - everyone above.

So, so, so happy that the UBI experiment in Finland failed.

"The hope was that the UBI would give unemployed people security to find work. In the end, these people "felt happier" with the free money"

No s#!t Sherlock, when people get free money they don't want to work for it, what an incredible finding!

It wasn't a UBI.. it was not universal.

"On the basis of an analysis of register data on an annual level, we can say that during the first year of the experiment the recipients of a basic income were no better or worse than the control group at finding employment in the open labour market’, says Ohto Kanninen, Research Coordinator at the Labour Institute for Economic Research." No better or worse.. so blows your last sentence out of the water.

It doesn't "blow anything out off the water" it has nothing to do with my last sentence

It has everything to do with your last sentence. They did no better or worse than the control group, yet clearly if your statement of them not wanting to work if they got free money was true they would have done worse than the control group.

I'm not sure why you're happy that it failed (in the context of the defined failure). The result has wider reaching implications.

It means that people are ineffective at starting businesses when given the opportunity. Although that probably explains why QE doesn't produce productivity and is just a manipulation of GDP.

The claim of failure means that wellbeing doesn't matter. I'm fine with that definition but it seems like reasonable grounds for NZ's UBI to be scrapped. Those collecting superannuation are highly unlikely to work or start businesses, and given that wellbeing doesn't matter taking away superannuation is justifiable.

I'm happy that it failed because it is communism under a different name, i.e. you work, the government takes half your money and gives it to the person who doesn't work. I'm happy that it failed because it dis-incentivises working and rewards doing nothing, which is regressive

The RBNZ is the largest communist institution interfering in the market. Wouldn't it be best to target the damage that the Reserve Bank is doing, rather than get worried about a speculative benefit like UBI.

OK, how so?

You just described the current situation in NZ - why work if you are on the dole because you don’t end up much better off. If there was a UBI instead people would be more encouraged to work because they keep most of what they earn.

It would work well in NZ we could all be hippies ... peace man ...

My KiwiSaver seems to have made good gains lately. I moved everything to the most aggressive fund in October which was like the worst timing ever. Now i seem to have clawed back all the losses. What to do now?

When I used to play a lot of blackjack my money management system was to have a bankroll and if I lost most of it on the night but then managed to win it back I would leave the casino. If I lost the whole bankroll I would leave. If I made a profit and then lost most of that profit i would leave ensuring I least had a few dollars profit. If I made good gains I would put aside the bankroll plus 50% and keep playing. This ensured minimal losses and unbelievably after a year of compulsive-addictive playing I was $500 up. But I guess KS is not blackjack.

If you always double your bet after losing a 50/50 game you will always win. The system is full proof provided you don’t reach the limit of your bankroll and there is no limit on how much you can wager.

"Gambler's ruin" I believe that is called. Although tables do have maximum bets to stop this strategy.

Actually it’s called the martingale system. Interestingly there is a reverse of it that could work for stocks if certain conditions are true. I’ve seen gamblers favour the anti-martingale version but I’ve never been a believer in hot-streaks.

Yes you are right, I must be getting rusty after falling out of love with gambling many years ago. The martingale system will lead to ruin though as no casino game is 50/50, BJ with perfect basic strategy has a 46.36% of winning which I tried to improve upon by money management. The chances of winning in the long term was impossible however it was possible, I believe, to win in a sense by getting the casino to provide entertainment for $10 an hour which is possibly a loss for them.

Shame the system is not fool proof, lol

Am I the only one who understands that for each person not working and receiving the UBI, there are around 3 people working and giving their money to the person not working. If you are happy getting up early in the morning, braving the traffic, working all day then giving me a third of your income so that I can sleep in, play a few video games or watch TV all day, then let me know, I'm happy to give you my bank account number.

A third of the median income would net you $16,333 - and the government taxes that benefit as well, so you'd gross about $13,000 pa, or 250 pw (probably not far off what the current unemployment benefit is). So it might be difficult sleeping in in anything other than a tent.

But to each his own with respect to what a desirable lifestyle is. For me, being idle isn't something I desire.

How is that different from the dole as it exists now?

Exactly

Right, so your chief criticism is it's no more expensive than the current system, but has a massive reduced admin overhead?

Gee, you really don't understand

So put together a logical explanation...

Uh,oh, the OECD have us in the Naughty Box:
New Zealand is among a small group of members (including Denmark, Iceland, and Sweden) where the debt load is considered at "very low levels"

Clearly, this is Not Good Enough and we are NOT Pulling our Weight. The good news is that households are neck deep in the stuff so the Organisation of Extra Credit and Debt should be willing to overlook this shortfall on our part. Er, hopefully, anyway.

Oh, wait a minute, didn't Ardern and Robertson just go to Davos to get their new instructions?

(Let me see, ah yes here it is, notes read:
Could Do Better if We Tried Harder. New Zealand needs more Debt. Debt makes you work. Work makes you Free. Therefore - Debt makes you Free. Ask Aussie banks for advice.)

A lovely day for crypto. Bitcoin up 10%, some cryptos up more, as much as 30% for litecoin (apparently to a possible conversion into a privacy coin via mimblewimble protocol). One of my Genesis Vision program managers is up to 347% in 3 weeks, margin trading oil ETFs.

Another 10% and bitcon will get to the value it had at the start of this year. It needs to gain 300% to get back to the value at the start of 2018.

Your calculations are wrong. It is 3% to get back to Jan 1 stats, but many of the other currencies are well ahead. And yes it would need staggering gains to get back to its 1 Jan 2018 figure, but then again, Gold would need an incredible increase just to get back to its (inflation adjusted) 1981 price

And, your Calc is wrong, according to the data on the bitcoin chart above. I am guilty of a gratuitous roundup. The actual % needed is 7.9% to return to the value at the start of the year. Note that the starting value is the same number as the closing value of the previous period.

As to your comment about gold, nice cherry picked date. The inflation adjusted price was higher at the peak of the top of the bubble in 1981 but was lower both before and after, as per https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart

[ deleted - edited comment below ]

Current price is 3663 USD. The chart above says 3693 USD on 1 January. So actually almost the same.
Of course that is just bitcoin, some other currencies are doing much better. For example, litcoin is up 50% since 1 January. Also, I don't think picking an ATH price is cherry picking at all, just as many commentators point to how much bitcoin is down since 15 December 2017 or so.

Bitcoin was $5764 NZD on Dec 31 2018, and $5343 NZD for the most recent price on the chart. This is not almost the same price but the previously referenced 7.9% decline (which I previously incorrectly estimated as 10% when I did a quick look at the values instead of using a calculator to get the actual value). Using USD as the reference currency has the effect of currency fluctuation embedded in it, well, at least for people that live in NZ...

Air NZ need to clean up their act. Maybe focus less on making nauseating in flight videos

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=122...

Sound like the Chinese weren't exactly accommodating either, some sort of ridiculous paperwork requirement by the sounds of it, possibly that particular aircraft lacking some permit to land in China (it was a relatively new to AirNZ airframe, only arrived in the country in Sept). Not sure why they couldn't sort it out after the plane had landed if it had an approved flight plan and was the same type of aircraft that always does that flight. The joys of pointless bureaucracy.