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.
26 Comments
http://www.telegraph.co.uk/finance/comment/jeremy-warner/8145531/This-b…
UK taxpayers cannot be expected to pay for all the banks’ bad debts, says Jeremy Warner in The Telegraph.The problem is that you cannot ultimately fix an underlying solvency problem by forcing a country to borrow even more. That only further reduces the chances of the debt ever being repaid. And if markets begin to believe that the countries on the periphery of the eurozone will be permanently underwritten by the rest, it will weaken the creditworthiness of the core: there is already some evidence of this in German bond yields.
In any case, constantly having to bail out the insolvent fringe will eventually become politically unacceptable among those forced to pick up the tab. In Germany, the EU’s bail-out fund is already subject to legal challenge, while in Britain, there is understandable horror at being roped into the Irish rescue. Why should our highly taxed businesses be forced to subsidise super-low rates of corporation tax in Ireland? It’s unfair and objectionable.
What revolt?
With little press coverage, it was reported that a new police intelligence operation, the Confidential Intelligence Unit (CIU), had been established in Britain. According to the only information that is available on the CIU, its remit is to spy on and organise surveillance of “domestic extremists”.
Its existence only came to light through a article in the Mail on Sunday, entitled “Secret police to spy British ‘subversives’.”
The formation of the CIU presaged a number of large scale police operations. These included the brutal police clampdown on the G20 protesters in London earlier this year, the “anti-terror” police raids on 12 students in the northwest of England on April 8 and the mass arrests of 114 environmental protesters in Nottingham on April.
Is the Australian property market going off the boil as we speak...or worse.
Here's the Australian on the news. HT Kevin via IM
REAL estate agents have a huge stockpile of unsold properties as potential buyers lose confidence.
Sales are being hit due to rising interest rates and banks tightening their lending to would-be purchasers.
Auction clearance rates in Sydney and Melbourne over the weekend were 51.7 per cent and 54.8 per cent respectively, according to Australian Property Monitors, with many vendors withdrawing their properties before they went under the hammer.
Sixty-one properties were withdrawn in Sydney, where 198 houses sold at auction -- down from 247 last week. In Melbourne 160 homes sold under the hammer, 100 fewer than the week before and far fewer than the 426 sold a fortnight ago.
In Melbourne, 331 homes were passed in at auction, indicating vendors' expectations weren't met on the day, according to Real Estate Institute of Australia president David Airey.
Mr Airey blamed the softening of the market on interest rate hikes and said buyers' lack of confidence in the market had resulted in a stockpile of unsold properties.
Here's Niall Ferguson in the WSJ on China and the history of empires: 'We are the masters now'
http://online.wsj.com/article/SB10001424052748704104104575622531909154228.html?mod=e2tw
It was the understated but unmistakable self-confidence of the economists I met that told me something had changed in relations between China and the West. One of them, Cheng Siwei, explained over dinner China's plan to become a leader in green energy technology.
China's has been the biggest and fastest of all the industrialization revolutions. In the space of 26 years, China's GDP grew by a factor of 10. It took the U.K. 70 years after 1830 to grow by a factor of four. According to the International Monetary Fund, China's share of global GDP (measured in current prices) will pass the 10% mark in 2013. Goldman Sachs continues to forecast that China will overtake the U.S. in terms of GDP in 2027, just as it recently overtook Japan.
But in some ways the Asian century has already arrived. China is on the brink of surpassing the American share of global manufacturing, having overtaken Germany and Japan in the past 10 years.
In 2007 China overtook Germany in terms of new patent applications. This is part of a wider story of Eastern ascendancy. In 2008, for the first time, the number of patent applications from China, India, Japan and South Korea exceeded those from the West.
Bernard , consider the alternatives to citizens paying for this mess:
1) Allow the banks who lent recklessly to collapse or
2) Make the Bondholders ( Western Merchant Banks, Oil producing countries , the Chinese) and Bond traders who lent the money to the banks , take a 'haircut' as Angela Merkel is suggesting. A guillotine is a more likely outcome for the bond markets
Both could have devastating unintended consequences .
Its not even a 'Hobosn's choice' scenario , more like a 'Morton's Fork'
Whatever happens its going to be unpleasant for everyone everywhere . People here would be best advised to pay down existing debt and stay out of any new debt for the foreseeable future.
I don't think Bernie has to do that 28-29.y.o. ~ they appear to be doing that all by themselves...
"(The article author) just wobbles on about how hard it was to buy a house in 1970 because of tight credit rules.
~With my wife I bought my first house in 1967 and I remember vividly what it was like in the 1970s. Getting a housing loan from the bank was extremely difficult and as a result house prices were very low because you had to assemble deposits many times current requirements.~
Did you catch that our younger readers? Credit was hard to get so house prices were very low. Thank you ....; someone in the mainstream economic media has finally come out and said it, although we know you didn't mean to.
http://delusionaleconomics.blogspot.com/2010/11/gottliebsens-colours.html
I guess we just get to hang around for our turn.
http://www.telegraph.co.uk/finance/8150249/European-Union-rescue-to-her…
Ireland's finance minister said the government was forced to request assistance in order to prevent "a collapse of the banking sector" after events turned dramatically worse.
Ministers feared the crisis might spiral out of control as markets opened for trading today after the accelerating loss of bank deposits late last week. Allied Irish Bank said on Friday that it had seen a deposit loss of €12bn (£10bn) since June and that its dependence on the support of the European Central Bank (ECB) had risen from €10bn to €27bn.
As part of that process, Ireland will scale back the size of the banks, with Mr Lenihan suggesting he would examine "which overseas and non-essential assets can be disposed" of. The announcement is likely to provoke widespread speculation of potential bidders for Irish banking assets, with many suitors likely to be hoping to take advantage of Ireland's plight to snap up businesses at firesale prices.
MUPPET KING
Gilt edge property is commercial or industrial buildings with long term leases to GOVT tenants.. Waterfront residential, well located residential in the elite parts of the main cities or good quality homes with sea views and homes on large areas of urban land that can be developed at a later date. ( all the above preferably mortgage free)
FYI all, Key told me today that he had confidence in Greg Muir in his role as chair of the Tourism NZ board, following Muir stepping down from the Pumpkin Patch board, and the Securities Commission's announcement on Hanover Finance
http://www.tourismnewzealand.com/about-us/who-we-are
Cheers
Alex
It seems momentum is building in the view that Australia is in the early stages of a significant housing price correction. Just as hype on the up side exacerbates the boom phase of a cycle, hype on the downside has the opposite effect. The psychology at play can not be underestimated. Panic starts to set in...
They really are worried there.To think that they thought their bubble would some how miraculously escape the bursting that has occured with all housing bubbles....
this will also affect us
Medical records relating to the death of government scientist Dr. David Kelly will be kept secret for 70 years, it was revealed.
The Daily Mail reported that Lord Hutton, who chaired the government inquiry that found Kelly committed suicide, had suppressed all medical records including the results of Kelly’s post-mortem examination until 2073.
The unprecedented move prompted accusations that the suppressed evidence must point to the fact that Kelly was murdered.
Kelly, a leading Ministry of Defence microbiologist and former senior United Nations weapons inspector in Iraq, had told BBC reporter Andrew Gilligan and other journalists of his concerns over the misuse of intelligence material concerning Iraqi weapons of mass destruction by the Labour government of Prime Minister Tony Blair
The Dr Kelly cover up always stank to high heaven, it was suspect from the minue they found him under a tree. Records have disappeared, and the smear campaign against one of the worlds experts who spoke out against the UK governments dossier for war against Iraq is one of the most sorded pieces in the entire pre war lies. The white wash of the Hutton report only proved that this was a cover up at the highest levels. The lies are so transparent now that it shows they no longer care to even try to sell something remotely plausible. Dr Kelly spoke out against the 45 minute possibility of attack with WMD's by Iraq, they then tried to riducule his credentials, when this raised alarm bells due to his being one of about 3 people in the world who was qualified to speak out, he was soon after found dead. This was always murder, it makes me sick to my guts. The public everywhere are so gullible its beyond repair now, IMO
This sound clip has a gremlin in the middle of it where it goes back to the start, but is worth forwarding over the double up to hear Don Nickelson the NZ's own Fed Chief.
Also a farmer gone broke, facing mortgagee sale.
Also an ex-rural banker gone selling rural realestate, imagine that!!!
http://www.radionz.co.nz/audio/national/ntn/2010/11/22/are_banks_pressuring_farmers
RE #8
http://www.silverinstitute.org/supply_demand.php
http://minerals.usgs.gov/minerals/pubs/commodity/silver/mcs-2009-silve.pdf
Looks like the industrial demand for silver has dropped, not gone up. It appears that only the demand for investment has gone up.
A drop in world production could see industrial demand fall even further, and it is the overshoot of production that is a root causes of the down cycle in economics, so this is possible. Well according to my amateur reading of late:)
How curious. The Reserve Bank of Australia apparently intervened to stop local governments releasing land to stop house prices from falling in Australia... the Australian reports.. HT Hugh
THE Reserve Bank deliberately intervened in the political debate over the property boom to stop governments releasing more land.
The bank feared the release of land would cause traffic gridlock, environmental problems and potentially a US-style housing slump.
The move, detailed by a senior RBA official in documents obtained under Freedom of Information laws, is a rare example of how Australia's independent central bank is prepared to act to protect its monetary policy decisions.
http://www.theaustralian.com.au/business/property/rba-intervened-to-ave…
As curious as their position on mortgage securitisation?
http://www.commbank.com.au/about-us/securitisation/overview-of-securiti…
Meanwhile here in NZ I see that the BNZ has already sold covered bonds but the RBNZ's public "consultation" on the matter has not even closed. When were the submissions due?
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