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.
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.
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