Here are my Top 10 links from around the Internet at 10 past 11 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 Tuesday'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.
Securency is the Reserve Bank of Australia-owned money printer that prints New Zealand's plastic notes and has been accused of paying kickbacks to win deals in third world countries.
It seems it was still paying bribes to dodgy accounts in tax havens after a corruption investigation was started.
Should we be worried that our money is being printed by this company?
I bet the Reserve Bank of New Zealand aren't thrilled about it.
You want your money printer to be completely above board.
THE Reserve Bank (of Australia) failed to stop its subsidiary Securency using money-laundering techniques to funnel millions of dollars through an offshore front company up to six months after police began probing it for bribery. Confidential Securency documents reveal that the Reserve Bank firm wired $5.8 million in suspected bribe money to a mysterious company in the Seychelles in early August 2009, 10 weeks after the police began their investigation.
Late in September a further $1.45 million was wired by Securency to the tax-haven account. The documents reveal that up to $23 million in suspected kickbacks were paid by Securency to win currency contracts in Nigeria. Securency sells the material used to make plastic bank notes in more than a dozen countries and is half owned and overseen by the Reserve Bank.
2. Pumpkin Patch's inward looking culture - Brian Gaynor tees off in his NZHerald column about the 'inward looking' culture on the board of Pumpkin Patch.
No doubt the column was mostly written before Greg Muir's decision not to stand again as Pumpkin Patch chairman at this week's annual meeting, but it's still a good read.
Gaynor makes some good points about a complacent culture on some boards in New Zealand and about what happened at Hanover.
One of the major issues with Hanover Finance was the payment of large dividends, particularly $45.5 million in the 12 months before the company stopped paying principal and interest to investors in mid-2008. Muir argues there was nothing wrong with this even though Hanover Finance paid total dividends of $146.5 million in the four years ended June 2008 when it had after-tax earnings of only $110.4 million.
Unfortunately too many directors take the same view as Smith and if Pumpkin Patch isn't careful it could become more like a Tourism Holdings than a Fletcher Building. Pumpkin Patch has huge potential but it is unlikely to achieve this until the board is strengthened. Before Muir's resignation, it consisted of four present or former employees, who are not considered to be independent, and three independent directors.
3. 'Prince of Parasite drive' - Fran O'Sullivan gives Mark Hotchin a new moniker in her NZHerald column that has a certain ring to it.
The return of the Mark Hotchin - dubbed the Prince of Auckland's "Parasite Drive" - has finally prodded one of our watchdogs into saying they will make a decision before Christmas whether to lay criminal charges against directors of the Hanover Finance companies.
It goes without saying that investors - who were angered by the "partying up large" style of the fabulously thick-skinned Hotchin and playboy Eric Watson - won't be satisfied unless Jane Diplock's Securities Commission throws the book against the two Hanover shareholders.
4. Chinese diesel shortages - China is running red hot and it's causing all sorts of problems on the ground in the Middle Kingdom.
It has started rationing electricity, which is forcing factories to use their diesel generators, which is cascading on to diesel shortages, Shanghai Daily reports.One to watch. HT Reece via email.
The shortage of diesel, used by heavy-duty trucks and power generators, came as the peak demand season approaches and after the government rationed power supply to some factories to meet national energy efficiency targets. The restriction prompted some factories to use their diesel generators.
Some privately owned refiners also stopped processing as higher international crude prices make the business unprofitable, industry sources said. Xinhua news agency reported earlier this month that more than 2,000 pump stations in the country's southern and eastern regions have run out of diesel.
5. Chinese food shortages - China is moving to avoid food shortages, China Daily reports. China tightened its reserve asset requirements over the weekend, which is essentially a tightening of monetary policy without raising interest rates or its currency.
And it is looking at introducing more price controls on food.
This is what happens when the world's biggest central bank tries to blow up the world's reserve currency by inflating bubbles in other countries. HT Reece.
China will ensure adequate grain supplies to manage inflation after consumer prices advanced at the quickest pace in more than two years, with the result that more than 80 million people are expected to need food support this winter.
The government will increase packaged grain and cooking oil stockpiles ready for a timely release onto the market, Nie Zhenbang, director of the State Administration of Grain, said in a statement on the agency's website. China will also sell some vegetable oil from its stockpiles next week to stabilize prices, said the administration.
6. Russia buys more gold - Casey Research reports Russia's central bank bought another 600,000 ounces of gold in October and has added 4.6 million ounces of gold to its reserves since the beginning of the year.
China and Russia have both been building up their gold stocks as they search desperately for any asset that is not made of US paper.
Yet the Reserve Bank of New Zealand has no gold and no plans to buy it...
From what I remember of Russian gold production in 2009... it looks like they're buying everything that they're digging out of the ground... and maybe a bit more. This is basically an 'up yours' gesture from Russia to the west's central and bullion banks. The Chinese government is doing exactly the same thing, except they do it in secret. One has to wonder when their next big announcement of an increase in gold reserves is going to come... and how much it will be.
7. Surprise, Surprise - Wondering why China has an inflation problem? FTAlphaville points to some SG research showing what happened to credit growth. The chart below tells the story.
Here's Dylan Grice from SG.
So long as China’s credit growth continues at its current pace, aided by the liquidity the Fed is flooding world markets with, and encouraged by artificially low interest rates, the primary risk EMs face today remains that of a bubble. This might sound a very bullish note on which to end. It isn’t. And let me be crystal clear about why: a bubble is not a bullish scenario. It’s not bullish for the EM economies themselves, their citizens or for the world as a whole. The fact is all bubbles end in tears.
The innocent bystanders who go to work not realising that their jobs derive from unsustainable demand suddenly find they’re out of work, through no fault of their own. The investors who believe the hype – generally but not exclusively naïve retail investors – get completely wiped out, or worse find themselves in debt after leveraging into the story. Those who are sceptical, but play along thinking they’ll exit before everyone else are rarely successful. And investors who refuse to participate as the bubble inflates face business risk and career risk. Go to Ireland and ask them how they feel about bubbles.
They’ll tell you a bubble is a curse, not a blessing.
8. The squeeze on silver - Chris Martenson talks here to Silver expert Ted Butler about the allegations of manipulation in the silver market that is now being investigated by authorities. Butler triggered the investigation.
Ted Butler is one of the pre-eminent commentators on the silver market. In addition to his decades following the metal, he's spent years raising suspicions about silver’s suppression by a few large banks taking on egregiously large short positions.
The current CFTC action is a direct result of Ted’s activism. In the podcast below, I conducted an in-depth interview with Ted focusing on the most important aspects that anyone interested in silver needs to know now. In short, Ted predicts the imminent end to the manipulation will ultimately send the price higher - much higher.
The podcast covers: Why silver has such a compelling value story; The coming silver supply crunch; The argument behind the allegations of silver price manipulation; Drivers behind the recent price action in silver; Why price volatility will increase; The expected outcome of the CFTC’s investigation, and, why Ted thinks it will be "a bombshell for the silver market"
9. How the Babyboomers will drive Australian house prices (down) - Leith van Onselen, an Australian investment banker, has written in depth at his Unconventional Economist blog about how Baby Boomer selling is likely to pressure Australian house prices lower. This is today's must read.
Most mainstream economists and property 'experts' do not accept that changing demographics will adversely affect Australia's asset values, in particular housing. In the case of housing, they instead espouse Australia's strong 'underlying' or 'pent-up' demand, arguing that projected high rates of growth in the 25 to 34 year age bracket will lead to high rates of household formation and, therefore, continued house price appreciation.
This way of thinking can be seen clearly in a recent Goldman Sachs' report. Goldman focuses on the projected growth in the 25-34 age group, but ignores the rapid projected growth of the 65+ age group.Yet it is this group (the Baby Boomers) that holds nearly half of Australia's housing assets and it is they that will reduce their asset holdings over time to fund their retirements, depressing prices.
Make no mistake, the shift of the Baby Boomers from the wealth accumulation phase into the draw-down phase will put lasting downward pressure on asset prices, just like the BIS said. So-called strong underlying demand from 25-34 year-olds is highly unlikely to offset this effect.
10. Totally irrelevant video - The 'junk searches' going on in American airports and the reaction to it are fun to watch. I'm not looking forward to it. I'm flying to Los Angeles after Christmas.
Here's the Canadian version.
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