Monday's Top 10 with NZ Mint: Australian milk price war; Buffett upbeat; Faber sees hyper-stagflationary collapse; NAB's breakup campaign; 'Sell now to fleeing Cantabrians'; Dilbert

Here's my Top 10 links from around the Internet at 10 past 12pm in association with NZ Mint.

The cartoons are back in earnest. We must take our pleasure where we can find it.

I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz .

1. Australian milk price war - Coles Myer has launched a price war on milk in Australia.

I wish we had one here. It's causing all sorts of strife in the retailing scene.

'Foreign multinationals' are being told they need to accept lower profit margins, although, curiously, Fonterra is not named.

Here's the Sydney Morning Herald's Phillip Coorey with the political fallout, because everything eventually gets political in Australia.

We could do with a third supermarket operator here.

Dear Aldi: please come to New Zealand.

As the milk price war rages, executives from Woolworths have met the National Farmers Federation in Canberra and both parties agreed that as the price cuts are likely to be permanent, either the processors of the dairy farmers will eventually have to absorb the cost cuts.

Coles has forced Woolworths and other rivals into a price war by dropping milk prices to A$1 a litre, almost half the cost of brand milk.

Industry sources estimate that Coles is absorbing losses of between $300,000 and $400,000 a week to sell the milk. Liberal MPs, the National Party, the Greens, and independents in both houses are angered by the price war. They say the price cuts will eventually be passed on to dairy farmers already operating on slender profit margins and drive them off the land.  

2. Watch out for Europe - Jeremy Gaunt from Reuters points out that Libya is not the only concern on global financial markets right now. The European debt crisis is coming to a head again.

Although nowhere near their peaks of last year, euro zone peripheral yield spreads over German debt have widened in February. Italy has swelled by about 50 basis points and Spain 40 basis points. Significantly, Portuguese five- and 10-year yields remain above 7 percent, levels which previously forced bailouts in Greece and Ireland.

This suggests that a series of debt auctions in the week ahead will be closely watched for what they say about confidence in Europe's finances. Belgium, which has come under some pressure, auctions 2014, 2018 and 2021 bonds on Monday. Spain, one of the potential hotspots, will auction five-year bonds on Thursday, and investors will be particularly watching a Portuguese buy-back on Wednesday for signs of a fire sale.

3. Buffet upbeat - Warren Buffett has released his widely-anticipated annual letter to shareholders where he has said the doom merchants like me were wrong and he's got itchy fingers to spend his cash pile. Here's the WSJ with reaction.

The most interesting aspect for me was that Buffett was bragging about capital spending. For ardent Buffett followers, this was probably a bit of a shock since throughout Berkshire’s early days, high capital spending, specifically in the textile holdings, significantly decreased Berkshire’s returns.

The difference now is two-fold: Today’s high capital spending is in the railroad industry where Buffett expects outsized returns, and in utilities. Secondly, Berkshire is so large that the universe of potential investments has shrunk. Berkshire’s low cost of capital is a significant advantage in capital intensive industries. The challenge for Buffett and his successors is to find more companies like Burlington Northern, and fewer textile mills.

4. 'I think we're all doomed' - Marc Faber, the investor who writes the Gloom, Doom and Boom report, has sketched out the gloomiest scenario yet. Read it and weep.

“I think we are all doomed. I think what will happen is that we are in the midst of a kind of a crack-up boom that is not sustainable, that eventually the economy will deteriorate, that there will be more money-printing, and then you have inflation, and a poor economy, an extreme form of stagflation, and, eventually, in that situation, countries go to war, and, as a whole, derivatives, the market, and everything will collapse, and like a computer when it crashes, you will have to reboot it.” 

5. Worth watching - National Australia Bank (under former BNZ boss Cameron Clyne) has launched a big drive to poach by customers from the other big 3 banks. It's calling it the "Break Up" campaign. It's launched a website and everything.

NAB is offering to pay A$700 towards the early exit fee for CBA and Westpac customers switching to NAB.

Here's the fallout as reported in the Australian.

And here's the video on Youtube.

6. The bite is on - BBC reports Britain's fourth quarter GDP fell 0.6%.

And the swingeing budget cuts have yet to take effect.

And the Bank of England is preparing to raise interest rates to fight off inflation. The British outlook is just plain ugly.

This is what happens when you transfer private debt to the public balance sheet and then cut public services to pay for it.

The public backlash will follow, as we're seeing with the UKUncut movement.

7. 'Sell now to fleeing Cantabrians!' - A less than subtle real estate agent from Boulgaris Realty, James Doole, sent a letter to homeowners in Remuera and St Heliers over the weekend telling them Cantabrians, Brisbanites and Indians were keen to buy property in Auckland's eastern suburbs (as they fled floods and earthquakes and poverty).

Sellers should sell now because interest rates were low and there was plenty of interest from buyers in the wake of the quake and the floods... HT Ana Samways via Twitter.

"Certainly not wanting to capitalise on the Canterbury Earthquake and naturally my thoughts are with everyone affected by this disaster; however the purpose of my letter is to inform you of the overwhelming enquiry our office has received from families on the move to the Eastern Suburbs seeking a better lifestyle. Enquiry has been generated from these three specific locations: Brisbane, Canterbury and India.

"Family are requesting property in Remuera and across to St Heliers, generally in preferred pre-schooling locations. This has sparked new life into our market and long may it last. Mortgage interest rates are at favourable and tempting levels for buyers and sold signs are visible as we drive about.

"The quarterly sales statistics will be out soon and I will keep you posted on trends and sales in your immediate neighbourhood. I won't say the obvious..."

Please don't James. It's obvious to us all what you're interested in.

8. Watch this too - Hardly anyone has noticed this in New Zealand...yet. China's Prime Minister Wen Jiabao has gone onto an online forum to announce China has lowered its growth target from 8% to 7%, BBC reported.

He also stressed the need for social harmony and said any growth must be sustainable and fair. He was also very worried about containing inflation.

The tone is interesting. Reading between the lines, it seems the Chinese leadership are very worried about social unrest in the wake of inflation.

Mr Wen said the growth rate change would "raise the quality and efficiency of economic growth" and conceded that one factor was the impact on the environment.

"We absolutely must not any longer sacrifice the environment for the sake of rapid growth and reckless roll-outs," said Mr Wen. "That will lead to production capacity gluts and deepening pressure on the environment and resources so that economic development will be unsustainable."

He said the purpose of economic development was "to meet the people's growing material and cultural needs, and make the lives of commoners better and better."

Maintaining social stability was also central to the country's foreign exchange policy, said Mr Wen, requiring a step-by-step increase in yuan flexibility so that Chinese businesses could adapt to the change.

9. And this as well - Also worth watching in America is the reaction to the reaction.

The Tea Party movement spawned a bunch of Republican-dominated governments that want to slash budget deficits by cutting the size of government.

They were quickly subverted by large corporate interests intent on reducing taxes for the rich and for companies, and to castrate what is left of the union movement. The focal point for this debate in America is in Wisconsin. A Republican governor there is trying to pass a law stripping rights from public sector unions.

This seems to have mobilised the left. The biggest protest march since the Vietnam War was held in Wisconsin over the weekend. Here's the background from Reuters.

What began two weeks ago as a Republican effort in one small U.S. state to balance the budget has turned into a confrontation with unions that could be the biggest since then President Ronald Reagan fired striking air traffic controllers nearly 30 years ago. Republicans still must push the measure through the state Senate, which has been unable to muster a quorum for a vote because of a Democratic boycott.

If the plan is approved in Wisconsin, a number of other states where Republicans swept to victory in the 2010 elections could follow. Already, other legislatures including Ohio, Indiana, Iowa, Idaho, Tennessee, and Kansas are working on union curbs. Unlike previous protests, the rally on Saturday brought out thousands of union workers not directly affected by the bill, including the state's firefighters, exempted along with police from the Republican proposal.

Dozens of private sector unions were represented as well at the event.

10. Totally relevant video - Nouriel Roubini and Ian Bremner explain the 'Fiscal Trainwreck' facing America on CNBC They also talk about a G Zero world where the G20 has given up trying to lead the world.