Here are my Top 10 links from around the Internet at 10 to 10pm, brought to you in association with New Zealand Mint for your reading pleasure.
Many thanks for your patience today. It's been one of those days.
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
1. Now we know why - John Key's musings a few months back about being 'tenants in our own land' seemed to suggest he was willing to look seriously at tightening our foreign ownership laws.
The eventual decision to fudge it seemed strange at the time.
Now we see why he's worried about shutting the door.
He doesn't want land prices to fall.
NZHerald's Adam Bennett has the story with the key quote from Key.
"There's a balance to be had here when it comes to foreign ownership of land. If we completely ban it, land prices will fall."
"Those farmers that have a lot of debt on their property will find that they owe the bank more than their property is worth and will be forced off the land and I don't think that's healthy."
2. 'Too big to fail' - This protection for land values is something of a Key put. Cactus Kate hits the nail on the head here.
What Key is saying is that his policy is to avoid anything that does not keep land prices as high as they are even at the moment (forgetting the peaks of two years ago) to avoid negative equity situations. Same with residential housing as well we can assume because we wouldn't want the market to move up and down would we? Little wonder New Zealanders keep buying more land. There is absolutely no risk attached to it when the leading politician comes out with intentions such as that.
Where is Key's worry about negative equity when it comes to SME's? Silence. And dare I say it, most property developers have all fallen over in the recession, leaving a vast shortage of people to take the risk in the future to build new properties to support a growing population and the construction industry.
How does John Key feel about their situation? Surely if we can't let farmers get into negative equity, the same argument could be made of bailing out property developers? But I bet that doesn't happen anytime soon. They aren't as warm and fluffy and don't have their own Union.
3. Same old same old - Cactus Kate also has a good dig at the government's obsession with protecting land holders at the expense of small business owners. She points to a government lending scheme in Hong Kong for small businesses and how there's little similar here in New Zealand.
My link here is a bit self-referential, but Kate has a great point that hadn't occurred to me.
While this scheme has of course distorted the free market here it is an example of re-distributing income received in taxes from the increased wealth in the property sector into real small business who actually employ large amounts of Hong Kong people. It adds weight to Bernard Hickey's argument for land tax or a Hong Kong style stamp duty on transactions to raise funds in property boom times and redistribute it to the productive sector.
The problem in New Zealand is that the very small in numbers, but powerful Farmers Union, Federated Farmers wouldn't have a bar of it. They want all their capital gains to themselves and all their tax deductions from interest on their excessive borrowing.
If however New Zealand is going to be more that a country that sells land to itself and foreigners, SME's with all the entrepreneurs and productive talent there are going to have to be either given a hand up or have obstacles to their success removed to level the playing field up against business and individuals who merely buy and sell up chunks of land.
4. If only they could borrow - Shariah law bans Saudi Arabians from borrowing money to buy houses. Now the banking lobbyists have found their way into Saudi Arabia's byzantine legal/political/religious system to get a law change to encourage borrowing to buy houses. Bloomberg has the story. An interesting culture clash.
There might be a few in America's financial and economic system who wished Shariah law was in place a couple of decades ago in America. HT Gareth via email.
Saudi Arabia, the most populous of the Gulf Cooperation Council countries, favors a strict interpretation of Islamic law that’s overseen by religious authorities. Lending for the purpose of receiving interest payments is banned, prompting Islamic finance arrangements akin to shared ownership or payment by installments. Sixty percent of the country’s 28.7 million people are below the age of 25. Less than 1 percent of all Saudi home purchases are financed by mortgages. That compares with 7 percent in neighboring United Arab Emirates and 66 percent in the United States, Deutsche Bank estimated in November.
5. Now they're turning on each other - American banks are starting to sue each other over the fraudclosure crisis, including the Federal Home Loan bank of Chicago suing its parent (!) Bank of America.
HT Troy via email.
“The defendants did not tell the bank the truth about the loans that comprised the mortgage pools,” the lawsuit said, according to Bloomberg. While the Federal Home Loan Bank believed the securities were “safe,” “in fact the bank purchased a toxic stew of doomed mortgage loans,” Bloomberg quoted the complaint as saying.
In addition to Bank of America, defendants include Citigroup Inc., Goldman Sachs Group Inc. and Wells Fargo & Co. Representatives of the banking giants either declined to comment or couldn’t be reached immediately by Bloomberg.
6. Even Krugman is turning on Obama - Barack Obama, a man I described as a liar and a fool last year, seems to be losing the support of even his strongest backers.
Obama has bailed out his mates on Wall St at every turn and his latest decision not to impose a foreclosure moratorium was the final straw for Paul Krugman at the New York Times. HT Troy via email
As NAME ISSUE HERE has come to light, the Obama administration has resisted calls for a more forceful response, worried that added pressure might spook the banks and hobble the broader economy.
Stimulus, bank rescue, China, foreclosure; it applies all along. At each point there were arguments for not acting; but the cumulative effect has been drift, and a looming catastrophe in the midterms. Or to put it another way, the administration has never missed an opportunity to miss an opportunity.
And soon there won’t be any more opportunities to miss.
7. Tensions ahead of G20 - The Currency Wars are concerning everyone ahead of crucial G20 meetings in Seoul next month, including India's Prime Minister and the Governor of the Bank of England, who has called for a 'grand bargain', the FT reports. HT John.
The G20 seems fatally split.
“I’m worried about the global situation,” Mr Singh told the Financial Times.
The Indian prime minister’s concerns about the fraying cohesion of the G20 were echoed on Tuesday night by Mervyn King, the governor of the Bank of England, who warned that tensions over exchange rates could degenerate into trade protectionism.
“That could, as it did in the 1930s, lead to a disastrous collapse in activity around the world,” he said in a speech.
Indian officials have warned that the G20 is split between debtor countries, such as the US and the UK, and creditor nations, led by China with its large foreign exchange reserves. Undervaluation of currencies and monetary easing were complicating problems and leading to a dangerous divergence of opinion among global leaders. The officials said that the group, which came together two years ago to help stabilise the global financial system, had lost its cohesiveness as it approached the summit in Seoul, the South Korean capital.
A “clash of interests and a clash of perceptions” could result in a stalemate at the summit that would impede progress towards recovery.
8. Talk about inflation - Or maybe it's just a good investment? Bryce Moller is selling his mint condition 1963 Kombi Camper on TradeMe and the bid is currently up to NZ$37,200.
That's equal to US$28,272 at today's exchange rate. Bryce sent me this original advertisement with original price in 1963 of US$2,220. He thinks it might have been a good investment. An alternative to gold?
Here's his thinking.
We were getting 1.39 to the U$US back in 1963 making the price say NZ$1600 Rough calc for IRR shows that at the current bid I have a 7% annual return over the last 47 years. If it sells for $50,000 as the CEO of Trade Me suggests (on the radio link) then my annual return is 7.8% (or 3000% over the entire period). - bit rusty on these calculations so used an on-line one, hope it's correct.
My point being with all this new money sloshing around in Western economies looking for somewhere to go be it commodities or equities or whatever, and with inflation possibly poised to roar away, physical assets such as this could be a good - and fun kind of small bet.
9. 'Money money everywhere' - Patrick Chovanec writes at Bloomberg about the boom going on in China, helping to explain the surprise monetary policy tightening in China this week. A must read I reckon.
Money, money everywhere. At least that’s what it feels like at the moment in China. Awash in luxury cars, condos and expensive jewelry, the Chinese are enjoying what looks to be an unstoppable boom. But inflation figures due to be released should give pause to those who assume China’s economy is on sound footing.
To an extent few fully appreciate, China’s astonishing growth rates these past two years have been fueled by an even more astonishing expansion of its money supply, by more than 50 percent. Until now, the inflationary consequences have been largely camouflaged in the form of rising asset prices.
High-end property prices in dozens of Chinese cities have doubled during the global financial crisis. Sales of gold bars have done the same this year. Fine pieces of jade are selling at $3,000 an ounce, up 50 percent in the past couple of months, while packets of certain types of dahongpao tea are going for $30,000 a kilogram. Art and wine auctions in China are pulling in record prices, while the Shanghai stock market surged 8.5 percent last week to the highest level in almost six months.
Asset-price inflation is tricky because it doesn’t feel like inflation. When the price of bread doubles, it feels like it’s getting harder to make ends meet. When condo prices double, it looks like smart investors are getting rich. But it’s only a matter of time before asset inflation starts working its way through the rest of the economy as broader price inflation -- and puts China’s policy makers in a serious bind.
10. Totally irrelevant video - Stephen Colbert on the expiry of the Bush tax cuts
| The Colbert Report | Mon - Thurs 11:30pm / 10:30c | |||
| Tax Shelter Skelter | ||||
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51 Comments
The Chinese are coming for our Dairy Factories.
Rumours are swirling that a Chinese company plans to buy New Zealand Dairies' Studholme milk powder factory.
A Chinese publication has reported the Inner Mongolia Yili Industrial Group is in talks with Nutritek Group, the Russian company that owns the dairy factory.
GuangZhou Daily newspaper in China reported Yili was in discussion with Nutritek about the purchase, and the possibility of a joint venture was also being considered.
http://www.stuff.co.nz/business/farming/4249131/Factory-stirs-China-interest
cheers
More on Fraudclosure from JP Morgan (!) at Reuters
U.S. banks, under fire for their foreclosure practices, face a much bigger threat from demands by investors that they buy back mortgages that fail to meet their sales description, J.P. Morgan analysts said.
Banks could be forced to repurchase up to $120 billion of mortgages from third-party investors over five years, the analysts said, arguing this so-called putback risk "may be the biggest issue facing banks."
http://www.reuters.com/article/idUKTRE69H4GR20101018?type=companyNews
cheers
Nouriel Roubini and Michael Moran explain at ForeignPolicy how Obama can save the fragile US economy from going back into a tailspin.
Start with the one thing that everyone loves to hate: taxes. Forget the political hot potato over the size and shape of the cuts -- there's an easy way to do this. For the next two years, Obama should reduce payroll taxes for both employers and employees. The reduction for employers will lower labor costs and allow the hiring of more workers; for employees, increased take-home pay will get people spending again. It's not just about increasing foot traffic in the mall; households need to pay down the burden of credit cards, second mortgages, and other legacies of the years of easy credit.
But this tax cut can't bust the budget. How can it be funded? By allowing George W. Bush's tax cuts for people making more than $250,000 to expire while keeping in place those for middle- and low-income earners -- the vast majority of Americans.
cheers
And they also say this:
It's high time to hold U.S. financial institutions to account. The very companies that benefited from the billions of dollars of taxpayer stimulus are currently building up huge cash reserves -- in effect, overinvesting in capital at the expense of jobs. Taxing this capital would reduce the relative cost of labor and get companies hiring again.
Kate,
You're right on the money
cheers
Bernard
#1, 2, 3 - so this backbone then, is it propping NZ up, or is the rest of NZ propping it up?
If the latter, why?
If the latter, what problems is it causing to the rest of NZ Inc?
About problems:
'You cannot implement a problem – only a solution'
http://www.infonews.co.nz/news.cfm?l=1&t=0&id=53064
"We have worked with the Reserve Bank to ensure that the speed of implementation has been slowed down on their new “prudential measures” and capital asset ratio requirements of banks. While there has definitely been a tightening on availability of capital, the implementation of these new policies will now be at a far slower pace than originally planned, thus reducing even more stress among the farming community. We argued that speed on implementation was not the solution New Zealand needed."
Perhaps Conor English was referring primarily to this:
Why did we have to hike the OCR as early as RB did?
Could they have waited, if they had been able to use the solutions they had intended to use, as they wanted to use them?
Who gains and who pays?
Cheers, Les.
A dual exchange rate system?
Emerging markets with large trade surpluses are reluctant to heed calls for them to help with global aggregate-demand rebalancing by appreciating their currencies. They fear harm to their export-led development and sudden reversals of capital inflows in the future. Here one of the world’s most innovative macroeconomists suggests a way to square the circle: A dual exchange-rate system that would shield their exporters while fostering imports.
http://www.voxeu.org/index.php?q=node/5690
cheers
Here's Michael Pettis (who's always a good read on China) talking about China's surprise monetary policy hike. Read with Patrick Chovanec's piece above, it's clear China's economy is overheating, which explains the desperate moves to buy assets outside of China.
http://mpettis.com/2010/10/pboc-rate-hike-announced/
It looks like there has been a lot of unsterilized money creation in the third quarter, driven at least in part by what seems to be a pick up in hot money inflows, and the reserve hike was probably aimed at mopping up some of that money. There is some concern that today’s raising of the deposit rate might cause an increase in hot money inflows, but I am skeptical. I don’t think 25 basis points one way or the other is going to drive hot money in such a volatile economy.
I suspect the PBoC actions on minimum reserves also represent what seems to be a split among policymakers. One the one hand for many, especially in monetary circles in Beijing, loan growth is already excessive and they are very worried about the implications of yet more investment.
On the other hand many policymakers, especially I suspect provincial and municipal leaders and SOE heads, are opposed to any slowdown in loan growth that may cause a real decline in the growth rate of investment and so in GDP and employment growth. They have made it very difficult for the monetary “conservatives” to tighten their leash on new lending, and I wonder if the PBoC reserve hike, which probably doesn’t require state council approval, reflects PBoC worries.
here are very strong rumors that next year’s quota will be only RMB 6 trillion. This would be a good thing over the longer term (and may represent lobbying by the next generation of leaders), but it will automatically mean, unless we see an explosion in the fiscal deficit or in disguised lending, a sharp slowdown in growth – even more so if the trade surplus is forced down, as I expect it will be.
cheers
Ed Hugh explains why there's a big problem in the global financial system
This chart is crucial
http://1.bp.blogspot.com/_ngczZkrw340/TLnOzjmDcqI/AAAAAAAARkE/kNWy-Kkw3…
Unfortunately I think there is no obvious and simple solution to these problems. As we saw in the 1930s, once you fall into a debt trap, it can take quite a long time to come out again. You need sustained GDP growth and moderate inflation to reduce the burden of the debt, and at the present time in the developed world we are likely to get neither. In the longer term, the only way to handle the presence of some large economies which structurally need surpluses is to find others who are capable of running deficits, but this is a complex problem, since as we have seen in the US case, if the deficit is too large, and runs for too long, the end result is very undesireable. Basically the key has to lie in reducing the wealth imbalance which exists between the developed and the developing world, but this is likely to prove to be a rather painful adjustment process for citizens in the planet’s richer countries, so policy makers are somewhat relectuntant to accept its inevitability.
Basically, the structural difficulty we face is that all four major currencies need to lose value – the yen, the US dollar, the pound sterling and the euro – and of course this basically is impossible without a major restructuring of what has become known as Bretton Woods II. The currencies which need to rise are basically the yuan, the rupee, the real, the Turkish lira etc. But any such collective revaluation to be sustainable will need to be tied to a major expansion in the productive capacity of the economies which lie behind those currencies.
The report that this article is based upon can be found here
http://www.etf.db.com/DE/EN/pdf/EN/research/researchfixedincome_2010_09_13.pdf
The report is well worth a read - particularly the forecasts related to the (UK) housing market.
Re land prices. Why would land prices fall dramatically if foriegn buyers were banned? Sure certain throphy properties and large parcels like the Crafers might struggle but the vast majority of sales are between NZ citizens most often nieghbours. From memory there is a stat that 1.6% of NZ farmland is owned by foriegners presently banning them might limit future capital gains comparitively but they are not major driver of the past or current market.
Whatever the situation cant we just let the market decide? This seems a forgotten concept.
I am more concerned about them buying up processing plants - buy the processing plants and the farms will follow. Chinese aren't stupid. Next time they want to fund large farm purchases they will be more canny about who they get to front the purchase.
If they only own the land and not the processing plants they are no threat to the dairy industry. If they end up with both, and I believe it will happen if Yili get Studholme, then the dairy industry in NZ will see significant changes over time - & not good ones either. It is the ability to own vertically integrated agriculture businesses that is the real threat. Yili is a huge player in the dairy market in China, who when I was living there a couple of years ago, said back then, they want to be a global dairy player.
And now the Fed wants the US banks to buy back their fraudulent mortgages...\
Two years after the Fed bought billions of dollars in mortgage securities as part of the financial bailout, its New York arm is questioning the paperwork — and pressing banks to buy some of the investments back.
The Federal Reserve Bank of New York and several giant investment companies, including Pimco and BlackRock, have singled out Bank of America, which assembled more than $2 trillion of mortgage securities from 2004 to 2008.
Oh boy...
http://www.nytimes.com/2010/10/20/business/20bond.html?_r=1&partner=rss&emc=rss
cheers
Bernard
How can they buy 2 Trillion?
LOL.......
Buy my Bank shares anyone?
regards
Bernard, it must have been a long day to make you believe "combi vans" might be a good investment.
Compare to NZ property:
Median 1963 house price $6,352.
Median 2010 house price $350,000.
In NZ dollar terms an 8.9% internal rate of return. In US dollar terms a 7.5% internal rate of return and that's before including income from rents.
Assume no leveraging, no special tax deductions and an after tax and expenses rental income of just 3.5% reinvested at the same rate as the internal rate of return on the capital gains (ie reinvested in property) then the total return in NZD is 14.1%PA and in USD terms 12.6%PA.
If the after tax rental income was a more typical 5%, the total return would be 14.9%PA in NZD terms. A lot better than a combi!
How much better?
Well that $1600 NZD spent on the combi would on average be worth $1,086,000 - a lot better than a (maybe) $50,000 combi. You will note that most of the gain comes from the regular rental income NOT the capital gain.
$1600 NZD of 1963 gold would be about NZ$112,000 today. Still better than a combi but nowhere as good as property. What this does show however, is that you'd need shoes in your head and brains in your feet to invest long-term in gold.
@ Chris_J
Shhh... for two reasons, firstly don't let the cat out of the bag, and secondly no one in control here (i.c.nz) is remotely interested in the benefits of property over so many other things.
And what if all the punters realise most people enjoy and need to be living in a home, gosh they will all want one, added to that, with gold it's only the super mega rich that can live inside gold, and they make their money from property anyway.
BUT, i do appreciate reading a post from someone with their head screwed on the right way rather than reading all the usual BS from BH and Co.
Good on ya mate...
President or Property
And how much would have been spent on mantaining/renovating that house between 1963 and 2010? Talk about comparing apples and oranges i.e. you are not comparing the same house.
Taxman, I think allowing only a 3.5% after tax net of all expenses return on a mortgage free property takes into account all required maintenance.
By the way those apples are both juicy and delicious.
CO, surely the owner of the land has the say to whom they sell their produce which gives them the ultimate control?
Seems to me the dairy industry is in danger of shooting itself in the foot. 50 years ago there was a dairy factory in every town which over time morphed into the beloved giant Fonterra giving you processing and logistical efficencies and international market clout. Now it seems that you are returning to the dairy factory in every town model. Have any of you dairy farmers heard of the NZ meat industry?
It is critical that processing plant and farms are kept in separate ownership. ie if we allow foreign investors to own the plants they can't also own farms. I believe that 'vertical integration' was actually mentioned by the govt when they announced their new policy on foreign ownership of farms. So long as they are kept separate then yes, the farm owner does have a say in who they supply. Maybe I spent too long in rural China. Chinese are strategists of the highest order. IMHO if they are eyeing up our processing plants that will not be the only be phase 1. They are also extremely patient in waiting for the most opportune time to strike for phase 2.
You are absolutely correct in your view of the dairy industry and we can thank the DIRA for that. Synlait have said that they will need DIRA milk to make their new dryer viable. So Fonterra is not only subsiding it's competitors it is also forced to give them the raw material which their competitors can then sell in competition to Fonterra. Unfortunately the pollies will be totally blinkered on this until it is too late. David Carter's comment that they can't make a decision on DIRA milk in time for the 2011 season is absolute bollocks.
Casual Observer.
We have been here before, and I never got substantive answers.
You still seem keen - like Fonterra - on generating a political backlash against DIRA. I am trying to work out why.
"Can you provide me with hard numbers on: The percentage of Fonterra shareholders' milk that is supplied to other processors under DIRA; How much of that milk is consumed within NZ and; The value of the subsidy you are tallking about in $ per Kg of milk solids and/or as a percentage of Fonterra's total milk payout?
Any explanation of how the subsidy arises would also be helpful.
Thanks."
The full discussion from then is here:
http://www.interest.co.nz/rural-news/foreign-backing-mataura-plant
Simply put Colin it is extreme government interference in what is a private business. We do not see the same conditions imposed on forestry, fishing, paper mills nor in fact any other industry or business in NZ, so why is it put upon the Fonterra shareholders? It is about the right of a private business to go about it's business as it sees fit.
Regarding the political situation as I have said before, why did the govt shift the goal posts? The rules were made in 2000? and everyone who has started up since then has been aware of them, so when the original trigger points were/are reached then that should be that. But no, the govt decided to bend to the requests of their ex-pollie mates and shift the goal posts. The DIRA is very much a politcal beast so as I have said before the backlash will be political. The percentage (which I understand is around 4% of Fonterra's milk) is absolutely irrelevant as is the $ value of the subsidy. A subsidy is a subsidy, is a subsidy, the size of it is irrelevant. Being compelled to supply milk to a competitor when they have their own supplier base in order to make their plants more efficient is a subsidy, for without that subsidy the competitor would be making different decisions about expansions. No wonder competitors are worried about the criteria being reviewed. Expect to see Screech make a visit to stir up the Yanks, and the Yanks come out all beligerent about Fonterra the monopoly prior to the review. (The Yanks conveniently ignoring the fact that Fonterra is in JV with some ofthe largest processors in Yankee land).
So Colin I am not going to spend my time researching the info you want. It is about the principles of freedom to do business as private company. If this is not political then give me an example of any other private company being forced by government to supply its competitors with raw product. Henry has come out and said Fonterra does not have a problem in supplying milk for domestic consumption.
If a sheep farmer like Sheep Shagger can see what the potential problem is with the fragmentation of the dairy industry, I am amazed that someone like you can't also see the inherent danger. But then I guess you are not a working farmer?
Obvious isn't it.....the property bubble in rural land and residential land/housing...is receiving the full support of the govt and the RBNZ.
Any thought that the govt is working for the people.....clearly pure crap.
The best thing to do is get out of debt....do not borrow...teach others why they need to follow your lead.
Banks benefit from public ignorance and peasant greed.
Parents can best help their children by teaching through example. If you want them to have a life that does not mean being a slave to a bank...it is up to you to show them how and why.
I think they have to support it......otherwise farmers etc go under-water and unlike a householder a business being declared bankrupt/insolvent flows through to the banks as an impact very quickly...which makes the banks insolvent....which collapses NZ's financial and transaction system...no one will be able to use eftpos.......etc...
regards
6. I dont think PK has been impressed for at least a year...however I dont see this piece as PK turning on Obama, I think you have it out of context....I think what he is saying is he's accepting Obama has cooked his own goose...
regards
For those who think hyper-inflation is just around the corner, a killer of a chart,
http://krugman.blogs.nytimes.com/2010/10/18/just-call-him-bernanke-sama/
regards
8. Talk about inflation - Or maybe it's just a good investment? Bryce Moller is selling his mint condition 1963 Kombi Camper on TradeMe and the bid is currently up to NZ$37,200.
This is interesting...
We have an American Muscle car we purchased 30 yrs ago for $12K a little above the ave market value at the time.
Since then it has been used as the family car, tow vehicle shopping etc and knocked up approx 200,000 miles (320K km).. Total mileage nearly 300K from new. It got rebuilt in 1984, and 3 repaints/ body done since, new carpets etc.
In total over the last 30yrs, including the cost to purchase, tyres, suspension maintenance, batteries , the rebuilds etc..have spent 96K.
Current valuation is $65, thu being realistic in todays market $50 to $55K .
Keeping things simple thats a net of approx $40 K over 30 yrs, or $1300 per yr.
Now compare that to a fairly new 2nd hand small, 'disposable' vehicle that would be replaced approx every 5 yrs and depreciates, and include general maintenance, tyres battery etc obviously works out to far more than $1300/yr
Ah Ha you say, And American V 8 gas guzzler, near 5 times the engine size, running so much more expensive....A well maintained gas guzzler is a shade under 1/2 the little corolla type car, and a little under the economy of a modern EFI v6 5 speed big Aussie car.
Now convert the American gas guzzler to run on 100 octane fuel as it was intended to run, and the fuel is a little over 1/2 the cost of pump gas, far less emissions, it has a huge increase in power and economy is approx 25% better than a Aussie EFI computer controlled V6 engine...And doesnt depreciate....far less maintenance, and far less cost to maintain, parts far cheaper, of a far better quality., and far easier to obtain .
Would we sell it? no bloody way.
Beat this, I purchased a farm in November 1999 for 600k it had a valuation in 2007 of over 2.3 million. (Tax free)
Thats why J Key wont be able to keep farm values up, the income is not there to pay the interest. The indebted farmers cannot pay the interest. I believe that there is some cross subsidy going on, where indebted farmers are paying less interest than some with lower debts and more ability to pay.
Bought a freehold house for $13,200 in 2001 (Dunedin), turned down $145,000 in 2007. Annual market rent is almost the original purchase price. Even on the low rents I've been charging the property has returned over $60,000 in rents (not including interest earned on the rents reinvested), what's all this about property being a bad investment?
With that return you would surely be one the richest people in NZ by now? Everyone should do what you are doing then we will all have millions of dollars. Wonderful.
Well I would be if I wasn't so inherently lazy wasting copious amounts of valuable time posting pointed comments on an inconspicuous website.
By the way there's always Alpha in any market but remember as they say it's a zero sum game so not everyone hooks onto a winner!
What I will say is that I would be extremely rich by now if I hadn't broken some golden rules of real estate (which I won't divulge right now) but may have included an irrational overexuberance for potential rather than profit! WARNING! Vacant land and leverage are a toxic combo.
In the end though we're still a lot better off than having won powerball in a regular week.
Yes, but how much do you owe on it now, Chris-J? I'd just have to bet that you'd taken the equity out to buy more property. In which case, you did sell it 'to yourself' on the day that you did that first re-mortgage. It's only worth whatever the realisation price less debt, is. And if prices fall....well see ya!
Actually I paid cash for it in 2001. I did mortgage it in 2007 to collateralise a revolving credit facility but it's really been a milking machine - there's no argument about it.
The fact that I've got weekly mortgage payments that would have bought me a house 10 years ago isn't really relevant (although in saying that the cheapest house I ever bought was actually $2,500!).
My debt levels are relatively modest considering, so I would still be standing if prices halved. In saying that though, things are never easy - you've always got to expect ups and downs - however that can't keep you on the sidelines.
Fair enough, Chris. I commend you for keeping your hands of what was obvious liquidity for 6 years, during a 'boom'. I wouldn't have done! Student flats, eh! You and Howard started in the same place.
Just had a depressing talk to a rural RE agent. He thinks my farm is back to what I paid for it, its earning less, what the heck. It was a great ride but its over and now I just need to pay the man.
So, your 280% gain in asset value has been wiped out by a 74% fall returning you to where you bought. Sobering.
Yes, Steptoe, but you have to drive around in an old dunger, instead of the comfort and safety (quiet and reliable) of a modern car. Horses for courses I guess.
Safety? Seen that add, the grim reaper and the Jag...what would I prefer to be in? the tank, these new cars are not built to hit one of these.
Quiet, yeah concede that to a certain extent, when one plants the foot yep one hears the V8 chop down, and go...but acceleration is so quick one is just cruising with in a sec or 2
Comfort...Yep concede that the Yanks had no idea how to build a comfortable bucket seat, hence why my originals are stored away and a set of 1988 Subaru omega seats in the front...bolt straight in
Reliable, nope dont concede that one..oil change and grease Easter and labour weekend.....I changed a tie rod end last yr.....$22, couple tyres about 3 yrs ago, oh battery last christmas....no computer electric windows, sensors, expensive air cleaners to screw up....Couple rear suspension bushes when rebuilt the diff last yr....diff had done near on 300,000 miles and just needed a couple bearings.....set of brake pads 5 yrs ago and wheel bearings (2nd set in 30 yrs....
Thats a hell of a lot cheaper and reliable than a modern car
An old Dunger...a dunger that will pull more heads than any modern car and for the milage....worth around 80 times more.
There is no reason an old 40yrold car when maintained like when it came out of the factory is not reliable, and they where more reliable less maintenance for longer than any modern car.
And it has less emissions on the 100 octane fuel.
Even if QE11 prints more paper..the problem still is "Where are the banks going put it?"What industries are waiting for investment?.Their only option is to gamble, on the unknown future technologies...Conservative bankers wont do it, without,a Presidential decree.That means a "Command economy."..Germany has started to put in Hydrogen gas stations.Thats why its the Power house of Europe...But I just cant see the "Old men of oil"..declining into history like "King coal" did before.They will fight to the last Petro dollar..before they bow down to the inevitable.The future must be "Gas stations with solar panels for roofs" splitting water with zero polution, and zero cost.The money saved on oil imports could be used to redefine work. But it probably wont happen.
The only notable success with stimulus is where a Govn sends the voter a cheque...or invests in infrastructure to keep jobs. Both of those had to be done a long time ago before voter confidence turned negative....now if you send a cheque it will be saved or used to clear debt...we are now staring at The Second Long Depression....(1870s)
Hydrogen stations? URL pls? hydrogen is a 1 to 1 conversion process at best...the best shot at a bridgeing technology is batteries...its fairly cheap and fairly simple. Im not even convinced hydrogen will ever be viable. This isnt why germany is a powerhouse....
Petrol stations are history IMHO....notice the major petrol companies are selling them off as fast as they can...why? because its a PR nightmare for little gain...
The future is a local one with a lot more exercise....panels on house roofs, maybe but EVs will more likely be charging overnight from wind and tide, however most ppl and I suspect thats 70% of households who today have a car simply wont have one.
Zero polution, you are looking at the spilting process itself and not at the process to make panels, or supply electricity to the point of conversion it will never be zero cost or zero emission...If you have a fancy cell and not doing it with externally supplied power, well the cell will cost the earth and the area of the cell/panel needed to collect that much energy makes it a non-event oh and getting rid of the excess oxygen can be tricky....As an example in california there are some hydrogen cars, but the car costs smany hundreds of thousands way out of the cost affordability of me (for instance), the re-charge station is only big enough to fill that one car (every 2 days I think it was) and cost millions...The best guess I have seen is the hydrogen car is 20 to 30 years off, if ever....and its a very big if.
The money saved on oil imports wil be used to put in alternative plant and then some....pretty good data on what happens to an economy when the energy input gets to about 6% of GDP, it goes into recession. So cheap energy is a thing of the past....but to keep going we will have to use energy so pay that 6%, so perma-recession...but itgets worse...we also pay another % to build replacement(s) that adds up to a world of hurt...
regards
Regarding Hydrogen - reason it is a contender, is that its competition, petroleum is so inefficient. Do you realise how many barrels of oil must be produced to end up with 1 barrel of 91? So your 1:1 comment is a bit misleading.
how about this? i wonder what the degree of spin is on this...
http://www.wired.com/autopia/2010/10/hydrogen-highway-one-station-closer-to-reality/
Lots (of spin)....if nothing else think of trying to scale this out to the daily use of the USA...I'd love to see the economics...without that its hard to comment...
But some thoughts...
First Q, what is the actual cost of the fuel per KG...ie are they selling it at a profit or a loss....
Second Q how many fills can the station do per day? how many fills does a normal station do? I suspect the station costs quite a bit more than conventional stations and cant do as many tanks....so there would need to be more stations......
Then the economics have to be compared to battery technology...my thought on that was its costing $50 for 350miles....sounds considerably more per km....battery technology is actually cheaper than petrol per km today....its the cost of the vehicle that hurts.
This piece lays it out quite well....
http://www.wired.com/autopia/tag/hydrogen/
and this piece points to the probable timescales.
http://www.wired.com/cars/energy/news/2008/05/hydrogen
regards
huh?
You are very wrong...and on many levels....its not misleading at all...
Actual use, hydrogen lacks the carbon atom that gives the 91 fuel its "punch" therefore for the same amount of energy output, you need more hydrogen by mass / volume...so you need a bigger tank...to go the same distance. Also of course petrol is sold per litre....so with hydrogen it will mean you need to buy more litres....(or mass take your pick) to get the same work.
Petroleum is about the most dense fuel in nature when considered or measured against its availability.... Consider, it was algae based so we had a huge area to trap sun and millenia as the time scale to do it....It then got laid down and squashed and heated to concentrate it into crude.
To make hydrogen we take electrical power and convert it to hydrogen....in a test tube that is a one to one process so 1 watt of electrical power in == 1 watt of hydrogen. To do something with it however we need to compress the hydogen into a liquid, the energy to do that and the pressure involved are significant....we then have to transport it in way more expensive trucks, decant it and let the average user fill their own tank....all challenges.
Crude oil, we dont make crude oil, so that 1:1 is very important.....with crude oil we pump out a free liquid, so the costs are to find it, drill it, transport it, refine it and use it....at no stage do we make 91 petrol.....the rate of this is somewhere in the region of 30 or 20 to 1 the same ratio for hydrogen is 1:1 but that doesnt take into account the energy input efficiency....which isnt good.
All the hydrogen process is is a way to convert a static energy such as from a power station to transportable energy, ie one that can be consumed on the fly as you drive...
Given these restriants its likely that most of us who can afford cars 10~20 years from now will be using batteries...the likes of Bill Gates will be in a hydrogen powered Ferrari sure....
Sorry but the reality is the science and engineering limitations make hydrogen un-realistic for decades, if ever. if nothing else there are cheaper technologies such as batteries, hence ppl like me will be at best on battery cars, though i susepct I will be walkimg or using public transport and so will 70%+ of us.
regards
Here another link for people interested in alternative "Green Energy" solutions:
Correct Steven
As the octane goes up the BTU per kg increases but the BTU per volume reduces because the Sperfic gravity reduces.
And example of this is you have a car thats meant to run on 96 octane and decide to 'save money' and run it on 91....
The power drops off and the mpg increases slightly (Power= efficiency and economy = effifiency) althu running on the higher octane costs more to fill the tanl your cost per mile is still cheaper
Older cars one can adjust the timing curve as when the octane increases the speed of explosion across the chamber to peak pressure is longer, hence requiring a change in the curve not always the overall timing...with modern computer controlled EFI systems the programing in many cases is designed for the higher /lower compression and octane .In saying that in many cases they can also 'learn' to run the different fuels as in EFI (injection) propane/LPG systems.....Which also makes them not a suitable for duel fuel
A well setup system on a 5.7 L V8 approx 30/35L of LPG approx $35 will get you 100 to 110+ miles (160/170 kms)
Um but thats a bigger and heavier car so we need to compare like with like.
If you look at the hydrogen cars though its a Rav4.....so we need to look at the petrol mileage on one v the US cost...$50US a tank translates roughly into $75NZ and you should be able to get a RAV4 350miles on a tank....and a tank fill on a TRAV4 is about $75....but I think US gas is cheaper...
um, say $3USD a US gallon...16 gallon tank.....16 x 3.....= $48 a tank...so its apparantly a similar cost....ho hum, it "just" happens to add up to a similar cost...
The price of a RAV4 petrol v hydrogen fuel cell looks at least double though, $22KUS v $50kUS by 2015.....Im going to assume inflation corrections have been cancelled out....
Battery powered....that 100miles you quote is easily doable by a battery car.....looking at the MiEV its again twice the cost of the petrol version, but electricity used per KM is a lot lower...
To quote something off the cuff,
"The Volt should cost less than 2 cents per mile to drive on electricity, compared with 12 cents a mile on gasoline at a price of $3.60 a gallon. This means a trip from Los Angeles to New York would cost $56 on electricity, and $336 with gasoline. This would be the equivalent to paying 60 cents a gallon of gas"
Hence why for town cars I cant see hydrogen making sense....there is a mark up even over a EV and there doesnt seem to be a savings cost on the fuel...For myself I'd love a MiEV....
regards
The “peak oil” scenario creates good alternative solutions depending in which environment people live. So maybe we see “car manufacturers” of the future even here in NZ.
http://www.scienceinschool.org/repository/docs/issue16_solarcars.pdf
The US government should take over and write off all underwater loans, take over the properties and bring it under a National Housing Corporation, lease them back to the owners for reasonable rent for a fixed period of say 10 years or so, undertake maintainence. The mortgage-holders should be asked to write off 50% of the loans and get 50% form the Government by way of Government bonds paying 1% interest, the bonds to count for their capital.
Any takers ?
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