Tuesday's Top 10 with NZ Mint: Art auctioneers selling shares; G20 a dud; 'Foreclose on Bank of America'; A NZBN?; Inflation fears rising; Dilberts

Here are my Top 10 links from around the Internet at 10 to 1pm, 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. Is this the future of share trading? - New Zealand has to look a bit of a joke when people start using auction houses (yes those ones used to sell paintings and ye olde furniture) to sell shares, NZHerald reports

This is even more topical today in the wake of the Singaporean deal to buy the Australian stock exchange.

The New Zealand market looks well and truly left out on its lonesome, slowly withering on the vine.

Should we look to get in on the Aussie/Singapore deal?

Can we remain independent?

Should we?

All very tough questions for Mark Weldon.

I'm also curious to know what the Securities Commission thinks of shares trading on an unregulated market by art auctioneers. Here's the NZHerald.

Auckland auctioneer Webb's is aiming to sell nearly one million shares in a property investment company today in what is believed to be a New Zealand first.

Radius Properties is not listed on the New Zealand Stock Exchange and usually shares in private companies are tendered but today Webb's will auction two share parcels of 466,982 with bidding starting at 40c.  

2. An NZBN? - Rod Drury has put forward a useful idea to have a single number for businesses to deal with official bodies, similar to the ABN that Australian businesses use, Tom Pullar Strecker reports at the Dominion Post.

Mr Drury said a single business number had the potential to save hundreds of thousands of businesses a few hours a week. Business numbering systems had been implemented in many countries, including Australia, he said.

The Australian Government is understood to be pressing New Zealand on its position, arguing a system similar to its Australia Business Number (ABN) could ease trans-Tasman trade. New Zealand could go a step ahead by allowing sole traders and partnerships to voluntarily register with the Companies Office and obtain an ID number that they could use when transacting with larger businesses, Mr Drury said.

Xero is also seeking support for a common format for invoices, that in conjunction with the numbering system could make it easy for companies to routinely transact electronically within two to five 4years.

3 G20 a dud - Nic Lenoir from ICAP writes at Zerohedge about how the G20 meetings over the weekend aimed at resolving the currency wars was a dud. America has a gun to the world's head and is about to pull the trigger. Next Thursday we'll find out how the big bullet is and how fast it will travel.

Nothing was achieved, the final statement was about as non-committal as the fine print of any official document nowadays. German officials actually called out the US hypocrisy of talking down currency intervention when excessive monetary largesse has for only consequence an implicit devaluation.

So if anything we know that we can't really count on any cooperation in the future. And Japan reminded everyone it would do whatever is needed to prevent excessive appreciation of the Yen, though people still wonder where the BOJ was at when USDJPY printed new lows.  

4. Foreclose on Bank of America - Bill Black and Randall Wray say in this HuffPo OpEd it's time for the US government to nationalise Bank of America. The foreclosure fraud crisis is that serious. This is today's must read in my view.

The fraudulent CEOs looted with impunity, were left in power, and were granted their fondest wish when Congress, at the behest of the Chamber of Commerce, Chairman Bernanke, and the bankers' trade associations, successfully extorted the professional Financial Accounting Standards Board (FASB) to turn the accounting rules into a farce. The FASB's new rules allowed the banks (and the Fed, which has taken over a trillion dollars in toxic mortgages as wholly inadequate collateral) to refuse to recognize hundreds of billions of dollars of losses. This accounting scam produces enormous fictional "income" and "capital" at the banks.

The fictional income produces real bonuses to the CEOs that make them even wealthier. The fictional bank capital allows the regulators to evade their statutory duties under the Prompt Corrective Action (PCA) law to close the insolvent and failing banks. The inflated asset values allow the Fed and the administration to ignore the Fed's massive loss exposure and allow Treasury to spread propaganda claiming that TARP resolved all the problems -- at virtually no cost. Donovan claims that we have held the elite frauds accountable -- but we have done the opposite. We have made the CEOs of the largest financial firms -- typically already among the 500 wealthiest Americans -- even wealthier. We have rewarded fraud, incompetence, and venality by our most powerful elites. If the government does not hold the fraudulent CEOs responsible, who is supposed to stop the epidemic of elite financial fraud?

The Obama administration's answer is the fraudulent CEOs themselves, at a time of their choosing. For the sake of our (and the global) economy, our democracy, and our souls this willingness to allow elite control frauds to loot with impunity must end immediately. The control frauds must be taken down and their officers removed promptly. Receivership is the way to begin to reclaim our souls, our economy, and our democracy and Bank of America has the track record that makes it a good place to start. It is sufficiently large and powerful that its receivership will send the credible signal that America is restoring the rule of law and that even the most elite frauds will be held accountable.

Next we need to remove the rest of the "too big to fail" institutions -- we call them systemically dangerous institutions, or SDIs -- to reduce the global systemic risks that they pose. We are rolling the dice with disaster every day. The SDIs are inefficient, so shrinking them will reduce risk and increase efficiency.  

5. More stress tests - Will the US financial system need a new series of stress tests to cope with the uncertainty around the fraudclosure crisis? Simon Johnson at Baseline Scenario certainly thinks so. Here's why.

It is hard to know how the precise numbers for losses will end up, so much uncertainty remains about the basic parameters of the foreclosure problem. A lot of smart people are looking for ways to sue the big banks – in particular to force them to take back (at face value) securities that were issued based on some underlying degree of deception. This is a fast-evolving situation in which every day brings potentially significant news, but our baseline view is that the losses are in the range of $50 billion to $100 billion – that is, these are “new” losses not yet recognized by banks. (Our downside scenario, with perhaps a 10 percent probability, is that the losses are much larger.)

Most of this is so-called putbacks to the banks from Fannie Mae and Freddie Mac, meaning that the banks are forced to take back on to their books the underlying securities (and absorb the associated losses) if there was significant misrepresentation in the original documentation. In almost all scenarios, these additional losses will remain an order of magnitude smaller than the trillions of dollars in credit losses that brought down the global financial system in 2008-9. Still, these latest losses are not helpful to confidence in big banks, and the continuing uncertainty – which is entirely the banks’ own fault – will make their managements more cautious about extending new credit.

The best approach would be a fresh set of stress tests, resulting in the requirement that Bank of America and perhaps other banks need to raise a specified dollar amount of capital (not hit a particular capital-asset ratio, as that would just result in further dumping of assets), and reassuring the market that other banks have sufficient capital, including under the augmented Basel III requirements.  

6. Revalued to 1 pound - The Daily Mail reports a British buy-to-let (rental property) investor got a bit of a shock recently when his bank revalued a property down from 86,000 pounds to 1 pound. This is what happens when you have an economy and banking system under stress. HT My good wife via email. Mr Rooney (not that one) had 33 other such properties...

Paul Rooney, 42, spent £10,000 on a new kitchen and conservatory after he bought the two-bedroom Victorian end-of-terrace for £86,000 near Durham in early 2007. But the businessman was stunned when he applied for a mortgage on the property with Nationwide and valuation officers who visited the house gave it a £1 price tag.

Mr Rooney claimed that he was being 'hammered against the wall' by banks' refusal to mortgage the house in the hamlet of Holmside, Durham.

He had hoped to add the property to his portfolio of 33 other buy-to-let properties he has with his business partner Keith Widdrington.

7. Pressure on Australian banks - Australian Opposition Finance Spokesman Joe Hockey has pushed for a reshaping of Australia's big banks into something smaller and lower growth with more competition. How long before our political system starts to take on the banks here?

The full speech is well worth a read.

In 2009 I backed a call for a so-called “Son of Wallis”—a new financial system inquiry. Wallis was completed in 1997 and was predicated on the “efficient markets hypothesis”, which has proven to be an imperfect regulatory assumption. Even Professor Harper, who I have a high regard for, one of the main authors of the original Wallis Inquiry report, has supported calls for a Son of Wallis and highlighted the frailties in the existing system.

Since the major banks have “become the system” following the Financial Crisis, it is hard to understand how they can expect to perpetually grow at a rate higher than that system.

Let’s encourage APRA to investigate whether the major banks are taking on unnecessary risks in the name of trying to maximise short-term returns that conflict with the preferences of those that backstop the system, namely taxpayers.

8. Demand and Supply - Demand for oil has certainly not kept up with the pace of the supply of new super tankers if oil transport costs are anything to go by. Bloomberg reports shipping rates for oil have collapsed. It suggests there isn't quite as much economic activity around as some might have expected. HT Troy via email.

Supertanker owners are facing the longest stretch of unprofitable rates in 17 years as the supply of new vessels increases nine times faster than demand for oil. Shipping companies are making $3,826 a day for a single voyage, 88 percent below the $30,900 Frontline Ltd., the biggest operator, says it needs to break even.

Morgan Stanley estimates the tanker fleet will expand almost 13 percent next year and the International Energy Agency says oil use will grow 1.4 percent. Ships ordered before rates plunged from $177,036 in July 2008 are swelling the fleet of about 526 supertankers. Owners have responded by cutting average speeds 9 percent since March and anchoring 24 percent more vessels since January, ship- tracking data compiled by Bloomberg show.

9. A spark for all that tinder - Bond markets have started to think that all this money printing might actually generate some inflation. Bloomberg reported prices for Treasury Inflation Protected Securities (TIPS) indicated a negative real yield for the first time at a debt auction overnight.

This shows investors are beginning to worry about inflation. Finally.  And what might happen when someone throws a match onto all this petro-soaked paper that's being printed by the Northern Hemisphere's central banks? HT David via email. Here's the thinking.

“It signals people’s expectation of the Fed being able to create some inflation with the QE program,” said Alex Li, an interest-rate strategist in New York at Deutsche Bank AG, one of 18 primary dealers required to bid at Treasury auctions. “With nominal rates so low, in order have high TIPS breakevens you’ve got to have negative real yields on the five-year.”

10. Totally irrelevant video - This is David Bowie song featuring Trent Reznor of Nine Inch Nails called I'm Afraid of Americans.

It's the song that anyone holding a US dollar is singing right now because the US Federal Reserve has a gun to the head of the rest of the world, saying it needs to print more of the reserve currency to inflate away its debts. Be afraid, indeed.