Wednesday's Top 10 with NZ Mint: Remember the rent explosion forecast; John Hotchin's home detention; The iPhone deficit; Bahrain's political time bomb; Dilbert

Here's my Top 10 links from around the Internet at 10 to 7 pm in association with NZ Mint.

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

I'll add the extras in to the comments below.

And anything else that takes my fancy.

1. Let's remember these numbers - The NZ Herald reports Auckland landlords reckon rents there will spiral NZ$100-NZ$150 a week over the next year.

Auckland rents are up 3% in the last year, Barfoot and Thompson reports.

The Department of Building and Housing reports median rents for 3 bedroom houses in Auckland rose 2.6% to NZ$462/week in the last year. See our interactive chart here.

The actual historical detail shows rents in Auckland rising in line with median incomes.

Yet representatives of landlords believe that rents will rise to 80% of gross wages...

Note to self: Ask them a year how those forecasts held up.

David Whitburn, president of the Auckland Property Investors' Association, and Andrew King, vice-president of the NZ Property Investors Federation, predict Auckland rents will spiral by $100 to $150 a week in the next year. That will put many three-bedroom eastern suburbs homes and city-fringe properties in the $700 to $800-a-week bracket - about $38,000 a year.

The average wage is just under $1000 a week.

The two men said the earthquake and demand for rental housing would propel prices upwards. Severe under-building in the past decade would exacerbate the shortage. Big insurance rises after the quakes and the loss of depreciation tax breaks from the start of next month are other factors cited for the rent shock.  

2. America's Asian trade deficit - Clyde Prestowitz here at Foreign Policy muses on an Asian Development Bank paper on who actually makes the iPhone. It turns out most of the parts are most in other parts of Asia and then assembled in China.

So, in a way, the U.S. deficit with China is a proxy for what is really a deficit with Asia. That raises more interesting questions. The other Asian countries -- particularly Japan, but also Korea and Taiwan -- do not have low labor costs. Indeed, Japan and Korea are members of the Organization for Economic Development (OECD), the long time rich nations club. Furthermore, the parts they supply for the iPhone -- semiconductor chips, displays, lenses, etc. are not labor intensive.

They are capital and, above all, technology intensive. Exactly the kind of products in which the United States is supposed to be the leader. So if America actually did produce the stuff it says it is good at producing, it wouldn't have a trade deficit with Asia for which China is the proxy at all. It would have a trade surplus and 20-40,000 more jobs than it has. Why then, doesn't America make the stuff it says it ought to be good at making?

3. Poor thing - John Hotchin (brother of Mark) is in home detention in Kohimarama, Stuff reports. Very tough place. You've got to watch out for the neighbours. The views aren't nearly as good as on Paritai Drive. And I bet it doesn't even have a present wrapping room.

When is a finance company executive going to spend a night in jail?

The property, down a long drive barred by security gates and an entry phone, is listed in property records as having a tennis court and swimming pool, and is valued at $4.69m. Its owners appear to be a wealthy Remuera couple.

When BusinessDay visited the address, a late model Range Rover was parked in the drive. A man answered the entry phone and, when told of the visitor's identity, said: "There's no comment thanks."

Passing sentence on Hotchin last Friday, Justice Lang noted he owned no assets, other than a house in America, which secured loans exceeding its value. "It is virtually inevitable ... that at 51 years of age you will be declared bankrupt."  

4. Fictional oil - Economist Jeff Rubin tells BNN he thinks Saudi Arabia will struggle to increase output much.

Rubin says reports that producers in OPEC, particularly Saudi Arabia, will able to cover a shortfall in oil production from Libya are greatly exaggerated. “The four million barrels-a-day of excess capacity that Saudi Aramco claims is of the fictional variety, “ he says.

“I think that we’re going to find they’re hard pressed to make up even the Libyan shortfall because what they’re supplying isn’t the same quality of oil that Libya was supplying to European refineries."

5. Oil does still matter - Some economists reckon rising oil prices isn't so important now we depend less on oil in de-industrialised world.

However, Gail Tverberg writes at oilprice.com about how it does matter.

The single largest risk to the US economy today is an oil shock— awareness and management of this risk appear minimal.  

6. Keep an eye on Bahrain - George Friedman at Stratfor points out the key to the Middle East and the oil price is Bahrain, and the oppressed Shia population in particular. Iran could get involved. Oh boy.

The majority of its population is Shia, but its government is Sunni and heavily linked to Saudi Arabia. The Shiite population has not fared as well economically as Shia in other countries in the region, and tensions between the government and the public have long existed. The toppling of the government of Bahrain by a Shiite movement would potentially embolden Shia in Saudi Arabia, who live primarily in the oil-rich northeast near Bahrain. It also would weaken the U.S. military posture in the region.

And it would demonstrate Iranian power. If the Saudis intervened in Bahrain, the Iranians would have grounds to justify their own intervention, covert or overt. Iran might also use any violent Bahraini government suppression of demonstrators to justify more open intervention.

In the meantime, the United States, which has about 1,500 military personnel plus embassy staff on the ground in Bahrain, would face the choice of reinforcing or pulling its troops out.

7. Developer problems - Patrick Smellie reports via Stuff that Auckland's Sovereign Homes has gone into receivership.

Building industry sources estimated Sovereign to be the third or fourth largest home building company operating in Auckland, although it is not among the top 10 residential builders nationwide, identified by the What'sOn Report, a construction industry intelligence firm.

Some six Sovereign homes close to completion in the Orewa subdivision of Kensington Park, will be finished by other contractors.

8. British food riots - Sky reports an HSBC economist has warned of food riots in Britain if prices continue to rise.

"Even in the developed world I think we have very, very low wage growth, so people aren't getting more in their pay packet to compensate them for food and energy, and I think we could see social unrest certainly in parts of the developed world and the UK as well."

She went on to highlight the link between high food prices and the escalating cost of crude oil.

"More and more we are seeing that some of these foodstuffs are actually substitutes for energy itself, particularly biofuels. So I think the energy markets are a significant contributor to these food price gains."  

9. Protecting the rich? - Labour's Finance spokesman David Cunliffe argues at Red Alert that the government doesn't want an earthquake levy because National doesn't want to punish its rich supporters.

So what is Labour's stance on an earthquake levy?

Mssrs Key and English believe the rest can be borrowed – that is, placed on the international debt pile – and say that is now acceptable becasue it is a “one off”. They are so far dismissing suggestions of any additional support for Canterbury through the tax system. (Raising the EQC Levy only restores its capacity to deal with future disasters, rather than this one).

Why then was the international debt pile so huge that reducing it by slashing Government spending and prolonging the recession was necessary a month ago, but borrowing the lot is no problem now? Forgive me, but could it be that the answer is not economic but political? Could it be that reducing government expenditure pre-quake was the price of Budget 2009 and 2010’s - largely upper income – tax cuts; and that even Canterbury’s needs have been trumped by the need to protect National’s traditional voter base from even a temporary reduction in these tax breaks?

I feel unclean even thinking that. But the question has to be asked: why not expect the whole community to share part of the cost through the revenue system?  

10. Totally irrelevant video - Some young men seem to like Rob Fyfe an awful lot.