Tuesday's Top 10 with NZ Mint: Ponsi sees oil price slump on tighter CME margins; NZ's surprising inequality; Margin debt at bubble levels; AMI CEO in Bermuda; Dilbert

Here's my Top 10 links from around the Internet at 6.40 pm  in association with NZ Mint.

I'll pop the extras into the comment stream. See all previous Top 10s here.

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

The Gini charts at number 3 are fun.

1. 'It worked' - Bloomberg reports that the Fed's QE II programme of money printing worked to pump up markets.

Well yes...

But what else has it done?

It pumped up commodities inflation that sparked riots across North Africa and the Middle East.

It caused most of America's allies and trading partners to protest that America was beggaring thy neighbours to inflate its way out of its debt, using its reserve currency privelege to do it.

But here's Bloomberg's report anyway:

Ben S. Bernanke’s $600 billion strike against deflation is paying off, as stock and debt markets rise, bank lending grows and economists forecast faster growth.

The Standard & Poor’s 500 Index has gained 13.5 percent since the Federal Reserve chairman announced on Nov. 3 the plan to buy Treasuries through its so-called quantitative easing policy. Government bond yields show investors expect consumer prices to rise in line with historical averages. The riskiest companies are obtaining credit at the cheapest borrowing costs ever and Fed data show that commercial and industrial loans outstanding are rising for the first time since 2008.

“Looking at market indicators, you have to be convinced it’s been a success,” said Bradley Tank, chief investment officer for fixed-income in Chicago at Neuberger Berman Fixed Income LLC, which oversees about $83 billion. “When you get into periods of aggressive central bank easing, and we’re clearly in the most aggressive period of easing that we’ve ever seen, the markets tend to lead the real economy.”

Here's the other point of view, also reported in the article:

The Fed’s policy of pumping cash into the financial markets risks longer term damage, according to Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co., which oversees $85 billion. He compared the Fed’s current policy to the one it adopted following recession of 2001-2002, when policy makers slashed its target rate to 1 percent in 2003 to spark the housing market and the economy.

“It was a failure,” Bittles said. “I don’t think it’s very healthy to artificially boost stock prices. What are the long-term consequences of that? We don’t know. The Fed did this with housing back in the last decade, and the unintended consequences were a disaster.”

2. Calming things down - The decision last week to hike margins for silver traders helped trigger a 25% fall in sliver prices. Now the CME has hiked the margin for trading oil. Oil has fallen in initial trade. Here's CNBC on the story. HT Stephen via email.

I love the name of the chartist quoted here.

While Kilduff does not expect a massive selloff in oil as seen in silver , Chartist Ed Ponsi, Managing Director of Barchetta Capital Management, warns the move could trigger prices to move below $100.

“Anything that sells off as hard as oil sold off last week, it's usually not over. When you have selling that ferocious and of that velocity, that means there's usually more to come," said Ponsi.

3. We're not as equal as we think - These charts at 'Offthecharts.com' on income equality are fascinating and show New Zealand doing not nearly as well as we think.

We're in the ugly basket along with America, the UK and Ireland.

4. The problem with low interest rates - Here FTAlphaville cites an interesting chart showing the amount of margin debt is back at Nasdaq bubble levels...

Will we ever learn?

Margin debt — the amount that speculators borrow to buy stocks (or other assets for that matter) — is rising quickly.

As Roche noted back in April — via a point raised by David Rosenberg at Gluskin Sheff — “current levels of margin debt are now consistent with the Nasdaq bubble and just shy of the levels seen before the credit crisis”.

5. Just imagine how fast our phones will be in 20 years time - It seems the iPad2 is so fast it would have been on list of the world's fastest super computers until 1994, TUAW reports.

The single-processor tests of the iPad 2 matched the Linpack results of the four-processor version of theCray 2 supercomputer (pictured). Back in 1985, the eight-processor version of the Cray 2 was the fastest computer in the world.

Yeah, the iPad 2 is a 21st century device, but its comparable benchmarks to supercomputers of the past are still pretty impressive when you consider it's thinner than a notebook and is cooled by plain old air. Most of the old supercomputers it rivaled required specialized cooling, custom-built enclosures and raised flooring. Just think: in 20 years or less, the power of today's fastest supercomputer could be in an iPhone.

6. Mercantilest juggernaut - Bloomberg reports China's trade surplus was much bigger than expected. It seems nothing can stop the Chinese from building up the biggest pile of US dollars the world has ever seen and then using it to buy stuff all over the planet.

We wonder what John Key thinks of this. Apparently he is super keen to sell the Crafar Farms to the Chinese. That would trigger a new rush of family silver selling to the country with all the money. This will be the dominant election issue in my view, particularly if the government itself sells New Zealand's biggest dairy farming group (Dairy Holdings) to the Chinese. Yes it could happen.

Here's Gareth's excellent story for the background.

The rebound in China’s surplus to its highest this year may add pressure on the world’s biggest exporter and holder of foreign-exchange reserves to address imbalances and reduce inflation through steeper yuan appreciation. U.S. Treasury SecretaryTimothy F. Geithner and China’s Vice Premier Wang Qishan pledged yesterday to tackle currency conflicts between the world’s biggest economies.

“This number will likely add to the pressure from Washington for Beijing to allow faster currency appreciation,” said Brian Jackson, a Hong Kong-based strategist with Royal Bank ofCanada. “But more importantly it should persuade Chinese policy makers that a stronger yuan can be tolerated by the economy and is warranted as part of their efforts to curb price pressures.”

7. Betting on failure - The world's biggest bond vigilante, PIMCO's Bill Gross, has increased his short position on US Treasuries, Bloomberg reported.

Pimco’s $240.7 billion Total Return Fund had minus 4 percent of its assets in government and related debt, versus negative 3 percent in March. Cash and equivalents, the largest component, rose to 37 percent of holdings from 31 percent. Mortgage bonds declined to 24 percent from 28 percent, the Newport Beach, California-based company said on its website.

“We sold Treasuries and we bought other bonds,” Gross said in a May 6 interview with Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.” Pimco expects “a mild bear market in bonds. Inflation I think is the ultimate factor. It threatens, in my view, to move slightly higher.”

8. AMI CEO out of country for a month - NewstalkZB reports AMI CEO John Balmforth is traveling to Bermuda and Europe without the knowledge of the government and taxpayer.

This is all beginning to sound a lot like South Canterbury Finance where the existing management used the government guarantee to do their own thing and the government ended up footing the bill.

9. David Koch says it is so, so it really is - Anyone who watches the Australian business and media scene knows that David Koch is an unusual and inflential fish. He is a personal finance journalist who became a breakfast television host. It would be like me taking over from Petra Bagust. Not a likely or attractive prospect.

Now he has said he thinks Australia's housing market is overvalued. Now it is really in Australians' faces. Here's the take on it from Delusional Economics over at the increasingly excellent Macro Business blog.

Here's Koch:

The property downturn is just beginning. Over the past three years we’ve been suggesting readers direct spare cash towards paying down their mortgage and thereby increasing their home equity. The fear has always been that when times are tough in property, banks tighten their lending criteria and target borrowers who are highly geared.

There’s nothing more frightening than being a forced seller in a falling property market. Those of you who have heeded that advice should be well-positioned to ride the slide.

Every boom is followed by a bust and every bust is followed by a recovery. The property downturn will end eventually. It’s just a matter of timing. But given present conditions, any pick-up will be a long way off.

10. Totally Stephen Colbert on Atlas Shrugged