Here are my Top 10 links from around the Internet at 10 to 10 am, brought to you in association with New Zealand Mint for your reading pleasure.
I welcome your additions and comments below, or please send suggestions for Thursday's Top 10 at 10 via email to bernard.hickey@interest.co.nz.
I'll pop any surplus suggestions I get into the comment stream under the Top 10.
1. Could we be pouring more bad money after/before good money - The New Zealand taxpayer may be about to pour NZ$750 million in fresh capital into South Canterbury Finance, the New Zealand Herald's Adam Bennett has reported.
Hard to believe. There arn't any named sources backing this suggestion except for Chris Lee...
But the taxpayer is already on the hook (provisioned) for over NZ$800 million for South Canterbury.
Is this extend and pretend Zombieland stuff or a prudent measure to protect taxpayer funds?
I welcome your views below
Kapiti Coast financial adviser Chris Lee told the Herald he believed the company would announce a a recapitalisation plan this week "and it will involve the Government making concessions to try and help South Canterbury survive".
Another source said "a significant development" was expected this week involving a Government-supported recapitalisation. However South Canterbury founder Allan Hubbard would be required to relinquish all ownership of South Canterbury and associated companies.
The source understood in return Hubbard would not face any charges that may arise from the current Serious Fraud Office investigation into his affairs initiated two months ago.
2. SFO backing away - The ODT is reporting supporters of Allan Hubbard saying the SFO is backing away from its fraud investigation into Allan Hubbard, citing correspondence. The drums are beating. I wonder if Adam Feeley is listening.
Paul Carruthers, who runs the website www.standbyhubbard.org, said he was aware the letters were being received by investors and believed it was evidence the SFO was stepping back from the investigation.
"The letter is clearly an indication the SFO is not investigating with the vigour it stated it would be at the start of the process.
"My take on it is that it is looking possible they won't find any evidence of fraud. Asking people to use an 0800 phone number, it's like booking a flight." Supporters and investors had been frustrated by the "complete lack of transparency" from the SFO during its investigation, Mr Carruthers said.
3. A make believe recovery - Matthew Lynn at Bloomberg doesn't believe the European debt crisis is over, despite the recent outward appearances of stability. He makes a strong case.
Here’s why we should be skeptical. First, the euro area remains as dangerously imbalanced as always. Take a look at those growth figures. In the second quarter, German gross domestic product grew 2.2 percent. Other countries didn’t do nearly so well. Greece’s economy shrank 1.5 percent, while Spain registered just 0.2 percent growth. The debt crisis has even helped Germany by weakening the euro, thereby strengthening its exports. It has hardly helped nations like Greece because they don’t export much. Instead, the euro area is more lopsided. Germans are getting wealthier, yet they are being forced to subsidize Greeks who are getting poorer. That won’t be sustainable for long.
Second, opposition to the bailouts may grow. Slovakia has understandably refused to ratify its share of the rescue package. Any political system needs to be both fair and reasonable to command support. The terms of the bailout are neither. You can’t tell relatively poor, hard-working people who have played by the rules, like the Slovaks, that they have to help out countries that didn’t, such as Greece. You might get away with it once or twice, but if the euro area is simply a mechanism for transferring wealth from the industrious to the feckless, it is hard to see it surviving. The responsible nations are going to want out at some point. \
Slovakia will no doubt be ignored. The EU doesn’t pay much attention to protests from its smaller members, particularly from Eastern Europe. But Portugal and Ireland, which will also have to help Greece, may join the protest soon. Even if they don’t, the billions in aid and loan guarantees promised for Greece and the other deficit countries can’t be taken for granted. The new government in Slovakia was elected on a platform of opposing the bailout. “Say no to the Greeks” is a great campaign theme and will surely be copied in the region.
4. You just can't win - America is trying to drive down its long term interest rates to boost the economy, but it seems this is discouraging the Chinese from buying the bonds. Woops. Here's the Bloomberg report on China's biggest ever cut in its holding of US Treasuries.
The Asian nation’s holdings of long-term Treasuries fell by $21.2 billion in June to $839.7 billion, a U.S. government report showed yesterday. Total Chinese investment in U.S. debt declined 2.8 percent to $843.7 billion, the least in a year, following a 3.6 percent slide in May. China, America’s largest creditor, is cutting back after scrapping its currency peg in June, giving it less reason to buy dollars and invest them in Treasuries.
China is also turning more bullish on Europe and Japan, purchasing bonds of both nations. The shift comes as President Barack Obama increases U.S. debt to record levels, counting on overseas investors to buy, as he borrows to sustain the U.S. economic expansion. “This may have been opportunistic,” said James Caron, head of U.S. interest-rate strategy in New York at Morgan Stanley, one of 18 primary dealers that trade with the Federal Reserve. “Look at the level of yields. If you’ve held a lot of Treasuries, you’ve done well.”
5. The problem with a high copper price - The Manawatu Standard reports that vandals (thieves) have shut down TrustPower's wind farm near Palmerston North after they broke into a transformer yard to steal copper earthing wire. Now there's a dangerous past-time. Note to Wolly. Buy the copper instead. (Just kidding)
"It's a nuisance for us more than anything. These people put themselves in life-threatening danger and caused thousands of dollars worth of damage for a few hundred dollars worth of wire, which they didn't even manage to make off with." Mr Purches said while some parts of the site have security cameras, the transformer yard didn't, and this was being reviewed.
"Because of the serious danger of entering one of these areas, it's not normally a place you need security cameras on. "You'd have to be a complete bloody lunatic to go near one, but we are reviewing this regardless."
6. It's been bigger before - China is returning to its rightful place in the world near the top of the economic output rankings, this chart below from The Economist indicates. It shows China and India being the world's biggest economies for most of the last 2000 years. Now China is the world's second biggest.
7. More Australian housing bubble worry worts - \Now Morgan Stanley is saying the Australian housing market is overvalued, The Australian reports.
In a bearish note to clients this morning, Morgan Stanley strategist chief strategist Gerard Minack warned Australia's housing "bubble" could be pricked should banks tighten credit or "loss-making" middle-class landlords start to sell.
He argues owner-occupiers are in too much debt and investors are riskily relying on capital gains to repay their loans and interest repayments, The Australian reported. Compounding the problem is "ill-advised policy", such as the government's first home-buyers grant, which has combined to make Australian houses "40 per cent above fair value", Mr Minack says. "Buying an asset that's over-priced never ends well," he said. "The real return on residential property over the next decade is likely to be negative, in my view."
"Owner-occupiers have played a game of financial chicken, competing for property by taking on increasingly imprudent amounts of debt. "Investors have become Ponzi borrowers -- Hyman Minsky's term for borrowers who rely on capital gains to repay debt and interest -- in the belief that housing is a sure-fire long-term investment. History shows that it isn't."
Ya don't say...
8. 'So it does get in' - Remember that ad where the manicurist Madge uses Palmolive to soften a customer's hands? "You know you're soaking in it," she says. "So it does get in".
Now we have a Nielsen survey commissioned by Realestate.co.nz that shows the government's tax changes are really having an impact on property investors attitudes to investing. Alistair Helm at unconditional has the full story and this instructive chart. The wonderful 'It does get in' video is below that.
When it came to asking about buying intentions of the 1,225 survey respondents, it showed that their intention to buy an investment property had slumped by 40% in a year. Last year 1 in 4 of all those surveyed said that their intention was to buy an investment property. Just 12 months later when this survey was undertaken in May/June of this year that intention had slumped to just 1 in 7 – just 15%; the lowest level seen in the past 4 years of this annual survey.
9. Totally relevant video - I know we have many property investors that read our site. So I thought I'd put up this video showing a very reasonable investment property up for sale in San Francisco. Only US$47 million. Negative gearing anyone?
10. Totally irrelevant video - I hate painting, which I'm sometimes instructed to do by my good wife.
This painting video, however, looks like fun.
Virgin Atlantic plane livery time-lapse movie from johnson banks on Vimeo.
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