Here are my Top 10 links from around the Internet at 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 Wednesday'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.
1. 'When the tide goes out' - When property prices fall or stop rising all sorts of nakedness is revealed by the falling tide. The NZHerald has gone big on the latest mortgage ramping fraud allegations involving a 38 year old man with name suppression (!), his mate a Barfoot and Thompson real estate agent with a penchant for Lamborghinis, and an awful lot of borrowing from BNZ and Westpac.
This was all going on during the property boom of 2006 and 2007 when it seemed like nothing could go wrong, as long as house prices kept rising... Now they're 5% below those levels from three years ago and still falling... How much more nakedness is out there?
How much more mortgage ramping has yet to be revealed as prices recede?
In one example, the pair bought a block of six flats on Auckland's Kohimarama Rd for $1.6 million. The deal went through on November 8, 2006, and 12 days later they had signed up a buyer to a $2.2 million sale. Mr Burns said the pair agreed to purchase the buyer's failing business for $100,000 so he could use the money for a deposit on the flats.
They also divided the block of six flats into two parcels of three so the buyer could approach two different banks for finance. Mr Burns said the accused then got the buyer to sign a mortgage application form and filled in fake income details, leaving out any mention of debt.
The alleged scam unravelled after both the accused and his former business partner ended up heavily in debt. "The model collapsed and both of us had no money at the end of the day," the former business partner said.
2. 'You are redundant' - China says the US Congress' latest move to pressure China into letting its currency appreciate is redundant, Reuters reported. The steam is building on this one. HT Kevin via IM.
A U.S. congressional panel's approval of a bill on China's currency is "redundant," China's vice commerce minister said on Monday, the latest salvo from China in the face of U.S. pressure on its currency policy. Vice Commerce Minister Chen Jian also told a media briefing during a visit to Taiwan that China would set policy on its currency according to its own needs.
"We'll make a decision based on our own economic development levels and the world economic situation. If it takes the yuan to appreciate for our economy to develop, we will do it even though it would have negative impact," Chen said.
"But it is redundant for the U.S. congress to pass the proposal."
Meanwhile, American legislators are likely to introduce new measures to punish China for not allowing the yuan to appreciate. The tensions are growing and are well worth watching.\
From Monday, duties of up to 105.4% will be imposed on US chicken imports for the next five years, the China's ministry of commerce said in statement. It said an investigation had concluded that US imports were hurting the domestic chicken industry.
The move is the latest in a growing trade dispute between China and the US. On Friday a US Congress committee approved a bill allowing tariffs to be imposed on imports from currency manipulating countries. The bill is aimed at China, which is accused of keeping the yuan artificially low to help its exporters.
In its statement the ministry of commerce defended its decision to impose the latest tariffs, saying there was a "causal relationship" between the "US dumping of broiler products and the losses suffered by domestic business". The tariffs are likely to have a significant impact on US chicken exporters, who rely on sales of chicken feet and wings to China
4. Ugly for Fonterra - OneNews reports Fonterra chairman Henry van der Heyden's own dairy farm near Putaruru uses premature calving or forced induction to improve production, a practice often criticised by animal welfare groups and being phased out by farmers by 2012.
Sources have told ONE News that at least 200 cows were induced on van der Heyden's farms this season. Van der Heyden said he would have to "check the numbers". Inductions are legal but the government's Code of Welfare for dairy cattle says it's "best practice" not to do them.
Because calves are born 8-12 weeks early, most of them arrive dead and those that are still alive will usually be killed.
Van der Heyden denies he is being hypocritical. "I am supporting phasing it out over a period of time," he said.
5. A slow leak in China - China watcher Andy Xie writes in Bloomberg that China's property bubble is more likely to deflate with a slow leak than a bang.
He sees land prices halving over 5 years. Sounds painful to me.
In April, I told readers I would let them know when China’s property bubble was about to burst. The market has now peaked. It will trend down gradually for the rest of the year. When expectations of a yuan revaluation reverse and capital outflows ensue, probably in 2012, the market will deflate faster.
China has entered a property bear market that will last for five years. The average prices in larger cities are likely to decline by half or more. Land values will fall by much more. In the biggest and craziest bubble in Zhejiang Province, they may drop 80 percent or more.
Why so much? When a bubble deflates, the price must fall to where incomes and returns can support each other. In the case of China’s property market, it means rental yields -- now less than 3 percent -- must rise to 5 percent or more, and the price per square meter should be no more than two months’ average salary.
In a bubble, calling the tipping point is an art. Animal spirits, always the fuel in a bubble, are the last thing to dissipate. Receding liquidity is usually the trigger for a bubble to burst. Sometimes oversupply surpasses speculative demand, which scares off speculators. Most bubbles burst in one big pop. Some leak air bit by bit, day by day.
6. Growing, but still weaker - NYTimes' economix blog reports US GDP still remains below its late 2007 peak, which explains why most Americans think they're still in recession. New Zealand faces a similar situation in that our per capita GDP is still below where it was 6 years ago.
7. An international currency war - FT.com reports Brazil's Finance Minister as saying Brazil faces an 'international currency war' as it desperately tries to control a surging real.
The game of competitive devaluations by struggling developed countries is on in earnest and anyone with a free-floating currency exposed to rising commodity prices is exposed. That includes us.
Guido Mantega, Brazil’s finance minister, said on Monday the world was in an “international currency war”, in a further sign that Brazil is preparing measures to prevent further appreciation of its currency, the real.
Mr. Mantega, who has made increasingly aggressive comments recently about the need to control Brazil’s currency, said governments around the world were trying to weaken their currencies to promote competitiveness. “We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness,” he said, according to Reuters.
8. Diamonds are a (Chinese) girl's best friend - The Australian reports Rio Tinto, which mines pink diamonds from the Argyle mine, has done a distribution deal with the major diamond retailer in China, Chow Tai Fook, to sell to Chinese consumers, who are now the second biggest buyers of diamonds in the world.
The hunt by the new rich in the developing world for stores of value that are independent of their own jurisdictions and fiat currencies goes on. That includes dairy farms in New Zealand...
While Rio does not disclose the prices achieved for its diamonds, which are sold at private tender, its best pinks have fetched up to $1 million per carat, costing up to 50 times more than comparable white diamonds. As part of its sales pitch to China's wealthy, Rio will exhibit a collection of specially made jewellery and objets d'art, including a diamond-encrusted kookaburra called Peng Peng, which is worth about $US1.5m ($1.6m).
9. 'Foreclosure mills' - The US housing crisis is reaching some sort of meltdown point where the sheer scale of the foreclosures and the means to which banks are stooping to get their money back is overwhelming the legal and financial systems.
Yves Smith from Naked Capitalism wraps up the latest stuff around 'foreclosure mills' and robo-foreclosure man (remember the one I mentioned a few days ago?).
It seems Florida has set up special 'Kangaroo Courts' to process foreclosures and now judges are denying due process on behalf of banks.
This is a recipe for civil unrest.
HT Troy via email.
These new foreclosure-only courts are special creations of the Florida legislature, funded separately from the usual court system. They are manned by retired judges, which means in many cases they are not familiar with real estate law. But perhaps most important, the explicit objective of these courts is to clear up the backlog.
And that is coming to pass not by the Legislature having thrown enough resources at the problem (that is, having greatly enlarged court capacity to process more cases in parallel) but by pushing for faster resolution.
The problem is that an accelerated process runs roughshod over due process and allows banks to foreclose when they may not be the right party, or worse, when the foreclosure is the result of servicing error.
10. Totally relevant video - Jon Stewart reviews Barack Obama's performance over the weekend in a CNBC town hall meeting. Stewart has finally worked out that Obama promised change and did not deliver it.
| The Daily Show With Jon Stewart | Mon - Thurs 11p / 10c | |||
| Meet the Depressed | ||||
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