Tuesday's Top 10 with NZ Mint: New Aussie laws may block loans to over 35s; Brazil eyes tariffs on Chinese imports; Key vs Wiesel on TPPA backflip; Dilbert

Here are my Top 10 links from around the Internet at 10 to 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 tomorrow'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. How curious - New consumer lending in laws in Australia may force banks to stop lending to people older than 35. Really. This is a fascinating twist on the idea that older people shouldn't be taking on more debt.

The big issue, or course, is the exit strategy.

How will those older borrowers repay the debt if they can't sell their over-valued houses to greater fools.

This is one of the big risks of the next 20 years. How will retiring baby boomers be able to pay for their retirements without unloading their properties at high prices.

This would be one solution to unaffordable housing.

Watch this space. Here's the Courier Mail. HT Paul via email.

ANYBODY aged over 35 could be rejected and effectively barred from getting a new mortgage, even if they are just refinancing an existing mortgage, under responsible lending guidelines in the new National Consumer Credit laws. And anybody aged in their 40s or older who applies for any kind of credit can expect to be asked to demonstrate significant other assets or superannuation savings.

Under the new guidelines any mortgage applicant over 35 with little superannuation and no other investments would be rejected by banks, brokers and all other lenders for a 30-year residential mortgage, said Geoff Baldwin, the chief executive of real estate group ReMAX.

``The NCCP (credit protection Bill) is effectively discriminating against some borrowers on the basis of age,'' Mr Baldwin said. ``Lenders are running scared about this.''  

2. Key caves - Last year John Key described as far-fetched the idea that the Trans Pacific Partnership (TPPA) would open the way for US companies to sue New Zealand if they weren't happy with the 'free' trade deal with America.

This week, US trade negotiator Barbara Wiesel said that was no longer New Zealand's position, according to TPPA critic Professor Jane Kelsey.

In response to questions about New Zealand and Australian positions during a briefing to civil society in Washington on 31st January Ms Wiesel said "New Zealand had retracted the Prime Minister's statement. It is not their position."

Under standard US terms for such agreements, investors can claim millions in compensation from governments on the grounds that new regulation has adversely affect their investment.

Under a TPPA that would apply to investors from all participating countries, including our largest sources of investment, the US and Australia, Jane Kelsey said. "In other words, the Key government is happy for pharmaceutical firms in the US, Australian banks or Singapore-based Brierley Investments to sue the New Zealand government for millions in compensation if they think new laws or policies are unfair or unreasonable or erode their profitability", said Professor Kelsey.

Now, according to TPP critic and Auckland University Law Professor Jane Kelsey, the Americans believe Key has backtracked quietly on his view.

3. Key however reiterated at his Monday post-cabinet news conference he doesn't expect to be sued. Watch this space.

"We don't believe the way the provisions would be structured would allow frivolous claims and in our view, the way we pass regulations and laws in this country, it's extremely unlikely, far-fetched, that we would be sued," he said.

"It's not new for New Zealand to include these provisions in trade deals. We did that with China."  

4. Brazil's doubts about free trade with China - One of the great stories about the last decade is the growth of Brazil on the back of China as it exported iron ore and soya beans to the Middle Kingdom.

But now Reuters reports Brazil's new President is having her doubts as Chinese imports flood in and Brazil's precious manufacturing jobs dry up...HT Kokila via email.

The core problem is a torrent of Chinese imports that has quintupled in size since 2005, with disastrous effects for Brazilian manufacturers and the well-paying, highly skilled jobs that Rousseff is so focused on creating. 

"Relations between the two countries are not hostile," the official said. "But we are going to take measures to protect ourselves ... and push for a more equal relationship."

In the short term, senior government sources say that will mean more targeted tariffs on manufactured goods coming from China and tighter supervision by customs officials, as well as more anti-dumping complaints against Beijing.

New restrictions on foreign mining companies are also likely, officials say, reflecting concerns that China wants to consolidate its grip on Brazil's commodities wealth while offering insufficient access to its own market.

In a break from her predecessor, Luiz Inacio Lula da Silva, Dilma Rousseff will push for a stronger yuan currency and more access to the Chinese market for Brazilian companies like airplane maker Embraer when she visits China in April.  

5. Is China slowing dramatically? - Many people are sceptical about China's economic growth figures and instead look for more concrete figures as proxies for growth, such as power consumption.

Here Zerohedge cites figures showing power consumption growth has slumped much faster than GDP, suggesting the GDP figures aren't real. HT Nikki via email.

Assuming the electricity stats tell the true story, and that the GDP numbers are ‘for reference only’ (remember, not my words!), China’s economy experienced a dramatic slowdown as 2010 progressed.

Total power consumption (year on year) grew by a whopping 22.7% in Q1 last year but only by 5.5% in Q4. The slowdown in Q4 was in fact so dramatic that the power output dropped 6.3% quarter on quarter! There were some restrictions in place on the use of electricity in Q3 and Q4 which did have some impact, but those restrictions were dropped in November, so it cannot be the only explanation.

This chart shows just how much stimulus was pumped into the Chinese economy in late 2008 and 2009.

6. Avoid the US at all costs - Nicholas Nassim Taleb, the author of the Black Swan book seen predicting the financial crisis, has warned investors to avoid US Treasuries and the US dollar, even more than they avoid the euro and European debt.

Bloomberg has the story.

“As skeptical as I am about Europe, I prefer it by far to the United States,” said Taleb at the conference, hosted by Troika Dialog, Russia’s oldest investment bank. The U.S. is just like Greece, only without the International Monetary Fund to enforce discipline, Taleb said

“We have a very dire situation in the United States, and every day that goes by it gets worse,” Taleb said.

“The only happy thing that can happen in the U.S. is a bond riot” where investors stop buying debt, Taleb said today. This would “force some discipline” in to the Treasuries market, he added.

“Every day that goes by, we’re spending money. We’re increasing that cumulative debt.”  

7. 'It's all about income, not regulation' - The Demographia report on housing affordability from Wendell Cox and Hugh Pavletich has caused real stir. They argue less regulation reduces land prices and helps affordability. Those in favour of heavy town planning to avoid sprawl say all that does is creat US-style sprawl.

Here a pro-planning advocate, Bill Fulton at California Planning and Development Report,  attacks the Wendell Cox view on this, saying house prices are linked just as much to incomes as they are to regulation. HT Kent via Twitter.

In 2010, the average home price in the four highly regulated metros was 38.9% higher than the average home price in the three loosely regulated metros. But – and here’s the interesting thing – the median income in the highly regulated metros was 20.6% higher than the median income in the three loosely regulated metros. Cox’s “growth management” metros have higher home prices. But they also have higher incomes.

You can’t draw a causal connection from my back-of-the-envelope analysis, but you could certainly hypothesize that about half of the additional home price (20% out of the 40%) is due to higher incomes. This would mean that somewhere between 0% and 20% would be due to stiffer regulation. There may be other factors, such as overall availability of land supply because of topography and public land ownership (a particular issue in Seattle).

I can’t say for sure, but this smells right to me. Some years ago when Rolf Pendall and I reviewed the literature on urban growth boundaries, we came to the conclusion that – to vastly oversimplify – the evidence showed that UGBs increase home price somewhere between a little and a lot. So I’ll stipulate right now: Stiff regulation adds somewhere between 0% and 20% to the price of a house.  

8. What a modern bank run looks like - We imagine bank runs involve queues of people trying to get into their bank to withdraw their cash. Or standing in line at ATMs. But as Gordon Long from Tipping Points says at Zerohedge, they look very different in modern times.

Just look at what has happened in Ireland.

Stealth bank runs are the unrecognized and perilous serpent lurking presently below the European financial surface. They prey on slower moving archaic bond vigilantes and anyone else swimming in these dangerous uncharted waters. Investors need to fully appreciate that a modern bank run looks and operates differently than what is depicted in the movies and what we most likely expect to occur! For starters, it isn't the individual depositor lining up, it's now Corporate CFOs or Treasurers at their terminal en masse! Secondly, it isn't driven by local depositors; it is now driven internationally by Corporate Finance committees! Thirdly, there are no telltale line-ups at bank doors. It is stealth, which will happen in an unexpected electronic 'flash crash' panic blur! Today, a triggering event will initiate global 'key strokes' that will move unprecedented amounts of money within hours. And here's the Council of Foreign Relations "In the midst of the financial crisis of 2008, governments helped to prevent bank runs by guaranteeing bank debts. Yet as sovereign solvency itself becomes an issue, such guarantees quickly lose their value. If Ireland provides a rule of thumb, bank runs can be expected once sovereign credit default swap yields pass 3%. The figure below shows that when Irish government CDS yields first passed 3% in early 2009, foreign deposits fled the country.

This happened again in late 2010. Now that Spanish CDS yields have broken the 3% threshold, there is reason to be concerned about the stability of Spanish bank deposits as well."  

9. Are lower fees the answer? - The real estate industry is abuzz with rumours of new entrants charging lower fees and marketing online, rather than through the expensive newspapers and glossy magazines. Here's an excellent piece from Realestate.co.nz CEO Alistair Helm at unconditional on who might enter and what they might do.

Is the industry ready, willing and able for a shakeup?

Will property buyers want it?

There's certainly plenty of made to be made (and lost).

The real estate industry in the residential sector alone accounted for total transacted sales of just under $25 billion in the last year. With an average commission of around 3.5% that adds us to close to $850 million in fees earned by the industry per annum in the depth of the property market recession. In the height of the market the figure reached over $1.4 billion.

Such revenue opportunity supports a large industry of over 11,000 sales agents working out of a total of close to 1,100 offices around the country.

These new entrants to the market that have emerged over the past couple of months share a two key things in common: 1. They focus on online marketing 2. They offer a lower fee for selling a property .

10. Totally irrelevant video - The Onion reports fans of Apple are about to chop their hands off in anticipation of the new iHand. There's a 'thumbs up' app...

Apple Fans Chopping Off Hands In Anticipation Of New iHand