Thursday's Top 10 at 10 with NZ Mint: 'Grumpy Baby boomerangers'; The problem with Greece; The Compulsion debate; 'Buy Farmland' says Big Short guru; Dilbert

Thursday's Top 10 at 10 with NZ Mint: 'Grumpy Baby boomerangers'; The problem with Greece; The Compulsion debate; 'Buy Farmland' says Big Short guru; Dilbert

Here are my Top 10 links from around the Internet at 10 to 5 pm, 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 Friday's Top 10 at 10 via email to bernard.hickey@interest.co.nz. Remember that registered commenters can more easily include links out in their comments. Use the box in the right hand column to register. We're turning off unregistered comments from this Sunday September 12.

I'll pop any surplus suggestions I get into the comment stream under the Top 10.

1. The dubious benefits of compulsion - Brian Fallow has a nice piece at NZHerald on Treasury's preamble for the Savings Working Group and the big debate about making KiwiSaver compulsory.

There's three main objections to compulsion. Firstly, it makes fund managers and investment bankers rich without necessarily improving investment returns, particularly when the government may have to give some form of gurantee anyway because of the compulsion.

Secondly, it may be less effective than simply increasing government saving. Thirdly, it may simply trigger increased debt in other areas, meaning national saving is not increased.

New Zealand's level of international indebtedness puts the country in the same league as the "Pigs" (Portugal, Ireland, Greece and Spain).

"Evidence suggests compulsory schemes generally increase household saving, but not by the full amount of compulsory contributions. Households typically respond by reducing other forms of saving to some extent," it says. It is not sure how much existing KiwiSaver subsidies, which cost about $1 billion a year, contribute to national saving.

The international evidence tends to suggest such subsidies have a significant effect on how people save, it says, but only a modest effect on how much they save.

While compulsory superannuation could be positive for capital markets, it could mean pressure for the Government to provide some form of guarantee. While many countries, including Australia, have compulsory savings schemes and a means-tested "safety net" pension funded by the state, New Zealand would be unique if it were to introduce compulsory saving atop a state scheme as (nearly) universal and relatively generous as New Zealand Superannuation.  

2. 'Grumpy Baby boomerangers' - Ian Cowie at The Telegraph reports on demographic and financial trends in Britain that threaten to create some tension between the debt-ridden and jobless young and their cashed-up property owning baby boomer parents. He looks at the notion that many youngsters can't afford to leave home and are sat steaming and resentful in their bedrooms.

A small number are even hoping their parents kark it and pass on the dosh...sheesh. HT Berend via twitter.

The growing financial plight of younger adults is building tensions between the generations that may create some ugly scenes in homes across the country in years ahead. Santander – the Spanish bank that bought Abbey, Alliance & Leicester among others – surveyed 2,000 people to come to the conclusion that student debt and shortage of jobs for young people has created a generation of what it calls “baby boomerangers”.

These are adult children aged over 18 unable to leave their parents’ home who seem to be slouching on sofas across the land, resenting Mum and Dad’s good fortune. More than four in 10 of the families affected see no hope of these young adults flapping their wings and finding a home of their own any time in the foreseeable future.

Reza Atta-Zadeh, a director of Santander, says: “The term ‘flying the nest’ could soon be made redundant as the credit crunch and rising cost of living is altering the structure of Britain’s families.”  

The most disturbing research published today, suggests that one in five young adults admits to “looking forward” to a receiving an inheritance. More than one in 10 said they were relying on these future inheritances to pay off debts or provide a deposit on their first home. A ghoulish 3 per cent of the 1,300 people questioned by the website MyVoucherCodes said they would rather have the money than keep their parents alive.

3. Watch out for intervention - Nervousness in global financial markets is growing and talk is growing that central banks, possibly in Japan and Switzerland, may intervene this week to try to force their currencies down, FTAlphaville's Gwen Robinson reports.

The yen resumed its climb, advancing on Wednesday to a fresh 15-year high against the dollar of Y83.32. Meanwhile, the Swiss franc hit a record of 1.2795 against the euro – and approaching parity with the dollar for the first time in nine months – amid fresh concerns about the health of European banks.

4. The Tweed is back - The infamous David Tweed is back with his big play on investor stupidity, the Sydney Morning Herald reports.

NOTORIOUS share trader David Tweed has launched legal action against Wesfarmers to pry open the conglomerate's register. Mr Tweed, who is famous for offering to buy shares for a fraction of their actual value, is believed to be back in Australia mounting one last effort to scoop up cheap shares before changes to the law kill his business.

Legislation that would allow companies to refuse raiders such as Mr Tweed access to their share registers was introduced into Federal Parliament earlier this year but did not pass before the election was called. It may be another six months before the legislation passes both houses of Parliament. On Tuesday, through his company Direct Share Purchasing Corporation, Mr Tweed filed a Federal Court application to force Wesfarmers to open up its register.  

5. Michael Lewis visits Greece - Michael Lewis, the maestro author behind The Big Short, has written in Vanity Fair about the problems in Greece.

It is full of juicy detail and colour, including that the average railway worker in Greece earns the equivalent of NZ$115,000 a year. It paints a picture of a country that is deeply, structurally and endemically corrupt. The core of the corruption is tax evasion, which has eaten away at the soul of the place and people. This is a must read for anyone wondering why no one trusts the Greeks.

This issue of tax evasion is one of the reasons I think there is so much anger towards rental property investors in this country. Many rental investors, particuarly those who got in at the end, essentially did it to evade tax. It is among the most anti-social things to do. People understand where that sort of moral cancer leads. To Greece.  HT Dimpost.

Beyond a $1.2 trillion debt (roughly a quarter-million dollars for each working adult), there is a more frightening deficit. After systematically looting their own treasury, in a breathtaking binge of tax evasion, bribery, and creative accounting spurred on by Goldman Sachs, Greeks are sure of one thing: they can’t trust their fellow Greeks.

The average government job pays almost three times the average private-sector job. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. The easiest way to cheat on one’s taxes was to insist on being paid in cash, and fail to provide a receipt for services. The easiest way to launder cash was to buy real estate.

6. 'Buy farmland'  - Michael Burry, the one-eyed doctor with Aspergers made famous in Michael Lewis' The Big Short as the hedge fund manager who predicted the sub-prime crisis, is now recommending farmland, gold and small technology companies, Bloomberg reports.

Here's the video of his interview with Bloomberg. HT Gertraud.

“I believe that agriculture land -- productive agricultural land with water on site -- will be very valuable in the future,” Burry, 39, said in a Bloomberg Television interview scheduled for broadcast this morning in New York. “I’ve put a good amount of money into that.”Gold is also a favored investment as central banks issue debt and devalue their currencies, he said.

Governments haven’t adequately addressed the causes of the financial crisis and may be sowing the seeds for future problems by borrowing, he said. In the U.S., lawmakers showed they didn’t understand how to prevent another crisis when they gave the Federal Reserve and Chairman Ben S. Bernanke additional authority, he said.

7. She's still ruthless - Ruth Richardson has popped up on CNBC to say that Britain is bankrupt and the bailouts aren't working.  HT Kokila via email.

"The British government is bankrupt. I ask, where's the capital going to come from? All the Western economy governments are in a bankrupt state," she said.

Richardson dismissed the view that cutting government spending will hit growth. "I don't think this is just a cyclical problem, this is a structural problem and you don't fix it by throwing more money at it," she said. "The government doesn't need to spend at the level it does, it needs to look at the quality of that spending."  

8. More capital and less lending - The Basel III global banking rule-making process is worth watching because it has the potential to throw a cooling blanket over the entire sector, forcing the banks to raise more capital, charge higher interest rates and reduce their lending. Bloomberg reports the Basel III committee is close to a compromise deal.

Global regulators reached a compromise on capital ratios for banks that will introduce higher capital requirements over a five- to 10-year period starting in 2013, a German central bank official said. Policy makers are seeking to raise the quality and quantity of reserves held by banks to avoid another financial crisis.

Germany has been the lone holdout in the talks since July, concerned that its banks wouldn’t be able to bear the burden of tougher capital requirements.

Banks have attacked the rules, saying they will hurt economic growth as lending is curtailed. Paul Donovan, deputy head of global economics at UBS AG, said at a conference in Moscow today that the new rules were “disastrous.” Germany’s savings banks may have to cut lending by a triple-digit billion-euro amount, said Heinrich Haasis, president of a group representing such lenders. UniCredit SpA Chief Executive Officer Alessandro Profumo said increased regulation will hurt profitability.  

9. Tensions rising - Trade tensions between America and China are set to rise again as China is about to report a US$20 billion trade surplus for August, Bloomberg reported.

The U.S. House Ways and Means Committee will discuss next week China’s currency policy after Premier Wen Jiabao’s government limited the yuan’s gain to less than 1 percent versus the dollar since a June pledge for greater flexibility. With November elections looming, legislators may push a bill letting companies seek tariffs for compensation for an undervalued yuan.

“Trade tensions may intensify, especially as the U.S. faces a slowing recovery, a high jobless rate and mid-term elections,” said Sun Chi, a Hong Kong-based economist at Nomura Holdings Inc. who previously worked for the U.S. Treasury in Beijing.

10. Totally irrelevant video - An Amazing Race competitor has an unfortunate encounter with a watermelon. Humorous in a slapsticky way. Very slappy. And sticky.

11. Totally relevant video - A UK MEP slams Europe. Sort of fun in a parliamentary car crash sort of way.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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29 Comments

Comment Filter

Highlight new comments in the last hr(s).

Many Are Still Underestimating the Damage That Can Be Done By Ireland’s Bank Troubles HT Gertraud

http://www.zerohedge.com/article/many-are-still-underestimating-damage-c...
cheers
Bernard

 Yeegads I have just come up with a munny spinner for lawyers...if the divorce circus is a cashcow when the adults get caught!...why can't the  “baby boomerangers” go after the munny as well. They could spin off a whole new chapter in English Law. Offspring spring parents in court.     Hahaha   oh dear me what a laugh. Rumpole of the Bailey would be proud of me!.

Robert Reich talks here (not hare) about the Tortoise economy. HT John Walley

http://robertreich.org/post/1088134069/the-tortoise-economy

The underlying problem is structural, not cyclical. There will be no return to normal because normal got us into the hole in the first place. And the normal kind of prescriptions can’t possibly get us out. Until the economy is restructured so more Americans share in its gains, the economy won’t make many gains. We’ll be forever trying to scale a wall that can’t be, because the vast majority of Americans lack the purchasing power to move upward.

cheers

Bernard

Looks like she hasn't learned anything either.

It's still a case of no Govt, no Govt debt.

Simple mantra for simple minds.

This is indeed a case of debt and readjustment, but for the whole species, not just western Govts.

I remember a billboard just south of Chch, the flip-side had been graffiti'd with:

"Twin Pukes - Ruth and Jenny".

Laughed till I cried.

Wish I'd had a camera cellphone.....

Re. #7 - "The government doesn't need to spend at the level it does, it needs to look at the quality of that spending." 

Amen to that.  It also applies to every level of Government in NZ, of which there are far too many.  Does a country of 4 million need Central, Regional and Local Governments plus Community Boards!

um, why don't you ask them?

FYI on the issue of tax dodging. Jenni McManus as this story at Stuff

Tax dodge designer and Securitibank founder John George Russell has lost his High Court battle against the IRD which has billed him for $138.795 million in back taxes, interest and penalties.

http://www.stuff.co.nz/business/4112922/Securitibank-founder-loses-tax-fight

cheers

sorry mark but not breaking the rules is not the same as doing the right thing.  

you can wrap it up in your libertarian idealism all you want but he played with fire and got burnt. might be time for him to take responsibility for his actions eh?

No they should pay tax based on a fair assessment and not like this person who seems to have gone to a pathelogical extreme to avaoid tax.

tax at 100%?

uh no...this is your "problem" Mark, you are an extremist, things ate for you black or white, there is no middle road...

An individual's freedom is important, but like I said that is not a balck or white thing but balanced with responsibility ie it is not paramount.

Point of my life, in DNA terms to re-produce...

increasing violence of a welfare society?

These are your words / conclusons and not mine...

If by "forced" you mean pay your fair share of tax, then yes...after all you can leave anytime you want.

Like I said you are a fundie / extremist liberatnz who simply dismisses the other 99.99% of NZs population.....You from my perspective live a parasidic nature within our society....

regards

Actually, I think the debt was corporate and private, and that the fiat paper was banks - like the Fed, which is private. I think that outweighting is one of the reasons Govts are so powerless to influence things. Ironically, that was one of the aims of the free-marketeers, one which came home to roost emphatically via the bailouts. (although to their relative advantage). That was a Govt taking on private debt.

Actually, the NZ debt that is of frightening proportion, is private too. We are the third most indebted bunch in the world, but it's private debt.

Regardless of who(m) issued the credit, I'm with you on the criminality of the doing of that. There simply isn't the underwrite left, to both maintain BAU, whilst repaying the debt. Let alone growing again from here.

Their problem (whoever the culprit!) is that sooner or later, the credit and the interest charged on it, had to be underwritten in something real.

At an exponentially-increasing rate. And therefore we're chewing into the real, at the same rate. Which means it will run out, reciprocally. The timing of which, folk like me have been watching for years.

 Interesting times.

Just remember that Govt debt is your and my debt - and that if there wasn't welfare, you'd be paying the same for protection from the angry mob.

Mort - Ain't denial ugly - almost as ugly as intergenerational selfishness.

Some of us are indeed down the track, self-sufficient in power and transport. Somebody had to blaze the trail.

Interesting you have to off-load your insecurity (denoted by having to 'be' your car, rather than yourself) by 'blaming' others for energy shortages/price rises which we indeed forecast, and folk like you arrogantly ignored.

I like your name though. Did you enjoy Latin?

Peak oil isnt bullshit it is a geological fact.....A legal case would be great actually.......one for AGW also...ie in both cases the science would be laid out in a court of law....it would be a pretty defining moment....and the denialists pseudo-science, mis-information and lies laid bare...

It was done for smoking.....and its the same ppl....

Yes it would be great.

Wind, and tide are not in-efficient, they are actually efficient, in effect its using free energy and converting it into usable energy, all you pay for is the cost of the conversion. The economics are what I think you mean....and actually the return on energy invested is about 15:1 for these. At present coal and oil are maybe better but they are trending down to this ratio....ie the cost to produce power is increasing.

But the problem with oil and coal is their output cannot be increased the production is at or about peak output....so to have more energy we need other alternatives. The effect on your power bill from ETS etc is negligable compared to the effect of a short fall in coal and oil output....Govn tax and ETS didnt sent Oil to $147US a barrel in 2008....demand did...

regards

Good summary. Tide is the only qustion mark - it has the ability to slow down flows at venturi points - which is the only place it's any good! Given the tech logistics, I think it'll be last cab off the rank.

That and the fact that fiscal/global/trade systems are obviously going to be in a shambles at the time.

I'm off to a David Caygill lecture today - should be interesting

Oh and how will you feel or who will you blame when petrol gets to $3 a litre? what about $4a litre? It wont be ETS that's driving up the cost by that factor...its what you will pay in a competitive market because others want it as well....

Unless maybe you are American and send troops over to pop off a few local for not handing over their oil cheap enough and fast enough...and a few warships to make sure that only US bound tankers get in and out....such is coming.

And is that 4litre on HP? have you considered in as little as a 2 to 5 years that expensive luxury car might be worthless? bet not....a financial clanger around your neck...

In terms of my transport needs I indeed use public transport as much as possible that and walking...I bought my house close to public transport which gives me low cost, low carbon access to most things I want....for other things I use a small car. Also Ive turned down jobs that mean I have to use a car or make significant use of them, in fact just looking at the economics of doing such a job shows them up financially as not viable....let alone carbon foot print.

Wind at home makes no sense, solar water heating probably would, however the installation cost is outside of my financial capability at present.....not until debt is eliminated from my finances....because the shocks coming make that essential.

Carry on "mort" with your head stuck in the sand....it going to hurt you more than me I suspect....but that is of course your choice.

regards

 

Haha Steven. I smelled fear. Not an uncommon bedmate of bluster.

have a good weekend.

The masturbatory focus on the details of the car and pseudo-concern for the elderly were nice touches.

Re#6  "Buy farmland". Correct. a no brainer.

Proof Bollard is full of shit. Anyone else watch sundays Q&A interview?

 

http://tvnz.co.nz/q-and-a-news/q-interview-alan-bollard-3760907/video

Where's our 'personal debt' lie in relation though? You can't ignore that factor and put our government debt in vacuum! We are so unproductive as a country and MOST of that lack of 'productivity"  is due to us borrowing from overseas to maintain a welfare state we can no longer afford. Dump WFF's NOW!

New Zealand farm land will be the best ivestment because the Chinese can curb steel production and the use of coal but they can't curb eating. So keep farming.

Actually, if we just got Brian Edwards back, everyone would turn off anyway.

He's a bit like David Cunliffe - part of a Left - Right , Yin Yang scrap over who got which share of the cake.

Which was fine while there was enough cake.

Michael Burry, has some interesting advice. Im looking bat farmland(not in NZ) Ive looked across the Western States and found some interesting bits. I like a niche or a slight advantage over average Canada fascinated me and I may pick up some land there. I like low cost extensive operations. I found quite good land at $1000 an acre but I have great contacts in Canada and you need them in foreign lands. My friends are waiting to buy more land but only at $750 an acre. You can rent this land out at $50 an acre. Its costs you have to watch and the Canadian Govt needs a lot more money so Im thinking taxes and costs are on the way up, also the 210 days of feeding cattle in the winter is a bit of a bummer.

South America is another area with potential but my Family in Chile have repurchased their farm 3 times in the last 80 years off various socialist Governments and that’s in a stable country.

France I enjoyed most and its way cheaper than home, the problem is French tax law. What a place to live, the joy of life. Im looking at a share farming deal with some great French friends. Im meant to be in Solvakia   next week but Im still settling my daughter into Uni  in the States so will do another trip before X-mas.

People like Michael Barry underestimate the costs and complexities of Agriculture. Its not an easy game to play. Its full of risk and poor returns, you need to love the land and animals. Machinery is often a necessary evil. The weather can ruin you especially in countries like Poland.

 Low cost is the only way to go and that’s why NZ is a write off with costs at %87 of income and the Kyoto obligations our politicians have volunteered  us for, pretty much are the  death  kneel. Also our Govt needs more revenue and the power and taxes just keep on rising irrelevant to income or aforability.

  If there is one thing I like to point out it’s that we have lost our competitive edge and when commodities fall its really going to hurt NZ. Also don’t underestimate the amount of land in the world,10,000 miles in the States is an eye opener. Also politicians have little understanding of the complexities in business or the risks and John Key made his money off someone else, he was not a manufacturer or producer, a few years in the real world would have been good for him.

 The ability to increase production in Eastern Europe is something to watch, keep an eye open, land isn’t like shares as house owners will find out, the market can deal vicious blows if the buyers get wary and farms can take years to sell, while you lose money every year as Rabo and Westpac are learning with Crafars.  If wheat stays up %60 then next year will be bumper harvest and the prices will tank. Its all well producing lamb that retails at $20 a kg in the States but how many people do you think can really afford this?

 Housing and the economy here is a bloody mess. I talked to Woman with 3 houses a solo Mum.  She owes 800k on them, 400k above valuation as well as 100k of credit card debt which she used to finish doing up one of the houses. The bank used to hassle her but now she hasn’t heard a thing for several months. She has paid no interest for 2 years, lives in one of the houses and collects rental which she keeps and lives off. This cannot go on someone in the bank has a lot to confess to. Socialising losses like this is a really bad Idea and penalizes the prudent and rewards the risk takers-sounds like home. Before you invest today work out the size of the tax increases to pay for this political madness, then ask who’s going to pay!

By the way my farm fingers hate netbook keyboards,fat  fingers small keys.

Thank for your post AJ, interesting as always. 

Michael Lewis has missed something about Greece. I have lived a few months in Greece, on the Aegean but on an Island. The importation of large numbers of Albanians to do all the work has brought an ugly racial issue into Greece. Mostly Muslim and hardworking with large families these people are starting to change the ethnic mix of Greece,helped by a huge fall in the birthrate amongst indigenous Greeks. This is starting to form potential and explosive racial  tension amongst Greeks which could erupt into ugly confrontation should the economy collapse.  I dont know how widespread the Albanians are but where I lived the Greeks enjoyed the beaches while the Albanians built their tax free beach houses. 

Christchurch earthquake: Farmers up in arms

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10672376&ref=rss

"The Government came under pressure last night from farmers unhappy that earthquake damage to their farms is not covered by insurance."

I wonder how this will pan out? 

Farmers want a bailout,hell, why not. What a  pity that its come to this,haven't they got a bulldozer, Nanny state to the rescue

AJ makes some good points above, however I think he underestimates the comparitive advantages that NZ agriculture has. Its not only about the land. Its climate and/or access to water(a big one), a stable political enviroment,  efficent infrastructure, disese free status and the backing of the "product of NZ" branding. We are not out to feed the world we aspire to be the provider of top end food to the affluent.

Sheep Shagger,  dont overestimate our advantages. We have a generous climate but disease free can change at anytime and the affluent have turned to effluent in many peoples mind. Stable politics normally means, debts and spending under control. I don't think you can say that about NZ. I wouldn't farm sheep up here as the mountain lions would get fat as my flock dwindled. However you look at it, a correction in land values and a reduction in costs would go along way to towards securing a better future for all in NZ, except those with excessive debts based on their incomes.

And the IMF has just sold US$403 million worth of gold (10 metric ton) to Bangladesh.

http://www.zerohedge.com/article/imf-resumes-direct-gold-dumping-sells-10-tons-shiny-metal-bangladesh

cheers

Bernard