Here's my Top 10 links from around the Internet at 4 pm in association with NZ Mint.
I welcome your additions in the comments below or via email tobernard.hickey@interest.co.nz.
I'll pop the extras into the comment stream. See all previous Top 10s here.
Number 7 from Jeremy Paxman is today's must read.
1. 'It's a con job' - Satyajit Das, the options expert who wrote the excellent book Traders, Guns and Money, talked in an interview with Andrew Patterson on Radio Live's Sunday Business about the European rescue deal.
He dismantles it comprehensively.
He sees another crisis coming.
There's no actual new money put into the deal.
The Germans won't add any money. Neither will the French.
There's just too much debt.
Have a listen. Well worth a click.
2. You don't say - Now business leaders in New Zealand are saying John Key's muddle through approach to restructuring New Zealand's economy and dealing with the global financial crisis is underwhelming.
A Deloitte survey of business leaders found over 80% wanted the government to signal an increase in the retirement age and make KiwiSaver compulsory.
Most also want cuts to interest free student loans and Working For Families. Fair enough.
Overwhelmingly business would like to see a coordinated plan to raise New Zealand’s economic performance. Disturbingly nearly two-thirds of businesses surveyed do not believe or are unsure that there is one. Often governments call for business to get behind their efforts to grow New Zealand’s economy – it helps if business has a clear line of sight on the pillars and levers of growth.
3. 'Quit Silvio' - Reuters reports the European crisis is taking another ugly turn as Italian bond yields rise over the unsustainable 6% mark, prompting calls from the likes of the Ferrari boss for Mr Bunga Bunga to resign (and presumably give up his immunity from prosecution.)
One of Italy's most prominent businessmen, Luca Cordero di Montezemolo, chairman of sports car maker Ferrari, said in a letter to the daily La Repubblica that Italy had reached "the point of no return" and urged Berlusconi to make way for a government of national unity.
The ECB kept up its intervention to cap Rome's borrowing costs by buying Italian bonds on the market on Monday but the risk premium continued to rise and 10-year Italian yields ended the day more than 407 basis points above benchmark German Bunds.
The jump in the yield reflected widening market skepticism about measures EU leaders agreed last week to stem the euro zone crisis and underlined Italy's position at the center of an emergency which threatens the entire bloc.
4. They're dreamin' - Bloomberg reports that European banks may raise just 10% of the fresh capital they need to stabilise their balance sheets.
Europe’s largest banks may raise just a tenth of the total capital shortfall estimated by regulators, fueling concern policy makers’ plans to bolster the region’s lenders could fail.
European Union leaders ordered banks last week to increase the ratio of “highest quality” capital they hold by the end of June, creating a shortfall of 106 billion euros ($148 billion). Of Europe’s 28 largest lenders, only eight will need to raise a total of 11 billion euros from investors, Huw Van Steenis, a Morgan Stanley analyst, wrote in an Oct. 28 report.
“Surely, no one thinks that by allowing banks to avoid raising capital in all these various ways it’s going to give investors more confidence,” said Peter Hahn, a professor of finance at London’s Cass Business School and a former managing director at New York-based Citigroup Inc. “Part of the issue for a long time has been the lack of credibility of bank balance sheets and their risk models. This isn’t going to help.”
5. 'She's gonna blow' - Physicist Mark Buchanan writes at Bloomberg that a Credit Default Swap bomb is wired to explode inside Europe.
Essentially, these unregulated over the record contracts bind institutions closer together so that when one explodes it can quickly destroy the rest.
Here's the thinking:
The AIG case illustrates an important paradox that looms again in today’s European debt crisis. Like regular insurance, credit-default swaps offer a way to spread risks, and standard thinking in economics holds that “risk sharing” of this kind should make individual banks safer, and the entire banking system more stable. It isn’t true, though, at least not always. In fact, too much sharing of risks can actually create bigger problems.
This follows from a recent study by Italian physicist Stefano Battiston and colleagues (one of whom is the Columbia University economist Joseph Stiglitz, winner of the 2001 Nobel Memorial Prize in Economic Sciences). The researchers showed that too much risk sharing can make it easy for distress to spread like a virus.
As part of normal business, each institution faces occasional “shocks” -- threats to financial health stemming from loans made to failed businesses and the like. A firm’s ability to withstand such shocks reflects its financial resilience. But an institution’s sturdiness also depends on the resilience of its trading partners, because if one of them gets into trouble, its distress will spread to others to whom it owes money.
Within this schematic of the banking system, Battiston and colleagues studied the likely consequences of the sudden bankruptcy of one institution, and specifically, how what happens depends on the overall “connectivity” in the network -- the density of risk-sharing connections.
They found that when the connectivity is relatively low, if one bank suddenly goes bankrupt, the repercussions aren’t so serious; the failure causes problems for a few other institutions but doesn’t generally propagate too far. In such a case, the risk-sharing is beneficial, just as the economics textbooks say it should be. Contracts like credit-default swaps can indeed bring benefits.
However, with rising connectivity -- as webs of CDS contracts grow more dense, for example -- things change dramatically. Beyond a certain connectivity threshold, attempts to share risk actually increase the likelihood that a bank will go under.
So many pathways are created along which trouble can spread that system-wide collapse becomes more likely. The web of risk- sharing connections within which an institution operates only gives an illusion of security.
6. MF Global money goes missing - New York Times reports this could get real ugly for Goldman Sachs' former supremo and New Jersey senator Jon Corzine.
Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days, prompting an investigation into the brokerage firm, which is run by Jon S. Corzine, the former New Jersey governor, several people briefed on the matter said on Monday.
The recognition that money was missing scuttled at the 11th hour an agreement to sell a major part of MF Global to a rival brokerage firm. MF Global had staked its survival on completing the deal. Instead, the New York-based firm filed for bankruptcy on Monday.
Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse.
7. Mea Culpa - Famed British television interviewer/interrogator Jeremy Paxman has written a column in The Mail saying: "I am part of the most selfish generation in history and we should be ashamed of our legacy."
It's today's must read, I reckon.
A few years ago, an American author wrote a book about the men and women who endured the Depression and then fought in World War II. He testified to their courage, vision and resilience by calling his book The Greatest Generation.
If anyone attempted to name their children — those born between about 1945 and 1965 — the so-called Baby-Boomers, they might consider calling them The Worst Generation.
It is now received wisdom that today’s young people may be the first generation in modern history to expect to be poorer than their parents.
Earlier this month, a report suggested the young will be 25 per cent worse off than their parents when they reach the age of 65 — the so-called ‘baby bust’ generation, having accumulated £400,000 less by the time they retire.
This is my favourite bit:
The only explanation for the nation’s obsession with property prices is the Baby-Boomers’ smug conviction that, having entered the market, the only thing they need to do to become wealthy is to sit on their backsides. And who can blame them?
In 1968, when the first of the Baby-Boomers were beginning to think about settling down, 425,000 homes were built in Britain. Last year, the total was just over 100,000 — fewer than in any year since 1923. With figures like that, of course, the cost of putting a roof over your head rises.
Lucky Generation investors who followed the advice of property-porn television and got into buy-to-let schemes developed another way of taking money from the young and securing it for the old. Young people look at the out-of-reach property ladder from a swamp of debt, because by the Nineties, the former student leaders of the Lucky Generation had made their way into the Labour Cabinet.
As president of that characteristically Boomer outfit, the National Union of Students, Charles Clarke — a beneficiary of free higher education — demanded ‘adequate’ grants for students. As Education Secretary in the Noughties, he introduced top-up fees. Given control of the Treasury, the Boomers flogged public assets and frittered away the bounty provided by North Sea oil.
8. Great graphic on global population - Reuters has done a great job with this graphic. Click on the graphic for a bigger version.
9. Why the Italians are toast - Here's Barry Ritholz showing why Italy is toast with bond yields over 6%,
Italy needs to refinance about 310b euros of debt in 2012. I estimate the average interest rate they are paying on this maturing debt is 2.7% (short term rates collapsed in ’09-’10). With an average debt maturity of 7 years, Italy may be paying 6%+ on the refinancing. Assuming a 350 bps additional cost times the 310b euros of maturing debt, this adds 10.9b euros of interest expense to the 54b euros of interest payments scheduled to be made in 2012.
At the same time, Italy’s 2T economy is expected to grow REAL GDP.1% in 2012 and nominal around 3%. Thus, nominally 60b euros will be added to their economy with all of the incremental gain thus going to service interest expense.
10. Totally Stephen Colbert on Shockupy Wall St.
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RBA cuts Aussie cash rate by 25 basis points to 4.5%. Will the banks pass it on to borrowers?
Statement by Glenn Stevens, Governor: Monetary Policy DecisionAt its meeting today, the Board decided to lower the cash rate by 25 basis points to 4.5 per cent, effective 2 November 2011.
Recent information is consistent with a moderation in the pace of global growth, though fears of a major downturn have not been borne out so far. The pace of US economic expansion picked up in the September quarter, but is still only moderate and leaves considerable spare capacity. China's growth has slowed, as policymakers there had intended. Output in Asia has now recovered from the effects of the Japanese earthquake, and domestic demand in the region is generally expanding. Trade performance, however, is starting to see some effects of a significant slowing in economic activity in Europe, where the prospects are for economic weakness to continue. Commodity prices, while still at high levels, have generally declined over recent months.
Financial markets have recovered somewhat from the turmoil of recent months, helped by stronger economic data in the United States and by signs that European governments are making progress in their efforts to deal with the sovereign debt and banking problems. Equity markets have gained ground and the Australian dollar has risen significantly as risk aversion has lessened. But it is likely to be some time yet before concerns about the European situation can definitively be laid to rest and the effects of the recent turmoil on confidence may result in a period of precautionary behaviour by firms and households.
Information about the Australian economy suggests moderate growth overall. The terms of trade have now peaked and will decline somewhat in the near term, but they remain very high. In response, investment in the resources sector is picking up very strongly, with much more to come. Some related service sectors are enjoying better-than-average conditions. In other sectors, cautious behaviour by households and the high exchange rate have had a noticeable dampening effect. The unemployment rate has increased a little over recent months, though it remains close to 5 per cent.
After underlying inflation started to pick up in the first half of the year, recent information suggests the subdued demand conditions and the high exchange rate have contained inflation more recently, notwithstanding continuing sizeable increases in utilities charges. CPI inflation on a year-ended basis remains above the target, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers. Moreover, with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources and related sectors in the near term has lessened. Accordingly, the Bank's current judgement is that inflation is likely to be consistent with the 2–3 per cent target in 2012 and 2013, abstracting from the impact of the carbon pricing scheme.
Financial conditions have been easing somewhat recently, with market interest rates declining a little and competition to lend increasing. But overall conditions have remained tighter than normal, with borrowing rates still a little higher than average, credit growth subdued and asset prices lower than earlier in the year. The exchange rate has been very variable over the past few months, but on the whole has remained at historically high levels.
Over the past year, the Board has maintained a mildly restrictive stance of monetary policy, in view of its concerns about inflation. With overall growth moderate, inflation now likely to be close to target and confidence subdued outside the resources sector, the Board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and 2–3 per cent inflation over time.
" ...house prices across Australia’s eight capital cities declined by an average of 1.2% over the September 2011 quarter, led by a 2.5% fall in Brisbane..." Apparantly this is the first time that ALL Aussie capital city house prices have fallen at the same time.
Hong Kong's residential property prices would drop by 35 percent to 45 percent over the next two years
Property prices and rents in the United Arab Emirates may drop a further 20% by next year
http://www.propertywire.com/news/middle-east/dubai-property-price-market-201110245708.html
House prices in Ireland to fall 60% from their peak
http://www.irishexaminer.com/business/analysts-house-prices-to-fall-60-171971.html
I love the smell of bubbles popping in the morning. I betch one of these bad boys that central banks try to inflate away all these bubbles.
Minimum wage flipflop anyone!......
"German Chancellor Angela Merkel Merkel went out of her way to prove she is just like the vast majority of vote-buying hypocrite politicians willing to say or do anything to advance personal agendas and get reelected."
Wolly - rigth wing shallow comment - better look at original:
http://www.spiegel.de/international/germany/0,1518,795067,00.html
and her is correct respond to the 30 years of reganomics:
http://en.wikipedia.org/wiki/Reaganomics
and thatcherism
http://en.wikipedia.org/wiki/Thatcherism
or rogernomics
Pendulummmm.....
The first piracy notices have been issued for music downloads. Seems Rhianna is a popular target.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10763131
7) J. Paxman is absolutely right. Our generation had the freedom to create a better world – we failed and as long as greed, selfishness and megalomania exists and is accepted by our generation, nothing changes until we are too old and out of power. Looking into current developments on many fronts – the world will never recover again, simply because among the powerful in societies ethic and moral requirements and standards don’t prevail.
One can only hope revolutionary events, by the next generation will push these "ugly and fat pillars" over. “Occupy Wall Street” is a good start.
Yes Kunst stocking up on Pb. and suitable delivery mechanism. All the oil, massive debt, a whole planet to exploit and destroy. Whats left for my children to exploit and destroy/manage responsibly? It's humane nature I can understand that, but now the facts are known, the outcome is clear. This needs to change, and yet our leaders have thier head in the sand. Greed is still worshiped, yet the tables turned, and maybe my generation will be able to use the comming systemic collapse to chart a new path. I hope so, I'd haet my generation to be know as generation fail.
The debt trap time bomb With Britain's households now owing £1.5 trillion in mortgages, overdrafts, loans and credit cards, the day of reckoning nears, warns Jeff Randall.
http://www.telegraph.co.uk/finance/comment/jeffrandall/8859082/The-debt…
How does that add up to per capita. NZ gross debt per capita gives my house approx 750k of debt. Ok if I owed that I could maybe pay it off before I retire, but I certainly couldn't borrow more money. What does that say about more debt fueled growth going forward, balancing the economy etc.
"In 2003, I wrote a piece for the BBC, warning of the debt trap: “British consumers are living in a never-never land of very high personal borrowings. They simply cannot carry on spending more than they are earning without a hard landing.”
Sounds like he's been harping on about it for years, smart man. The reality is blindingly obvious, yet obviously scary. You can't live beyond your means, the debt is urepayable, even unreducable without a massive recession. NZ is a bit behind the UK but every dog has its day in the sun.
Have you read this?
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100012903/i…
Matters are turning serious.
Italy’s labour minister Maurizio Sacconi has just warned that a rushed shake-up of the labour market – as demanded by the EU – risks setting off a fresh cycle of terrorism in the country.
Here is the story from Il Sole.
“We must stop creating tension over labour reform which could lead to a new wave of attacks. I am not afraid for myself because I have (armed) protection. I am afraid for the people who are not protected and could become a target of political violence that is not extinct in our country,” he said.
This is not exaggeration. The Red Brigades-PCC assassinated Massimo D’Antonna in 1999 and Professor Marco Biagio in 2002 for spear-heading labour reforms.
Opposition leader Pier Luigi Bersani praised Mr Sacconi for speaking out at last. “We are in deep trouble. If we ignite the powder-keg of social discord instead of cohesion we will do dramatic damage to the country.”
The EU has woven itself into this drama by presenting Italy with an ultimatum last week, giving the country barely 48 hours to commit to very specific and radical reforms.
I've never heard of the group before, how can they be terrorists if they are sticking up for the rights of workers. I dare say that anyone who opposes the IMF will be labled a terrorist, while those that oppress the people to save a doomed banking system will be the heroes.
Caveat being history is written by the victors. How many police have beaten, shot, and gassed nonviolent protestors, its happening right now in America. Yet the protesetors are jailed while the police keep thier jobs.
skudiv: Perhaps you need to read up about the Red Brigades before deciding they weren't terrorists. But then again you may be of a similar mind?
http://en.wikipedia.org/wiki/Red_Brigades
http://www.historyofwar.org/articles/weapons_red_brigades.html
Terrorisim is the use of violence and or threats for political purposes. And with that in mind, I could lable a number of democratic governments terrorists. I'm all for peace, people don't fight for a new ipad, or tablet. When thier existence and way of life is threatened, and there is no other way, that is when people fight.
Guy Fawkes was a terrorist, yet how else can you oppose tyranny and oppression? I'll reserve judgment on the red brigades, just like I do with the US government assasinations.
What saves the euro will kill the union
By Wolfgang Münchau
http://www.ft.com/intl/cms/s/0/e2338886-0151-11e1-b177-00144feabdc0.htm…
Crushing debt and interest will kill the Euro.
I know, don't worry I'm sure last weeks developments, and future anouncements will amplify the magnitude, and severity of the collapse, still pleanty of time to plan ahead.
Simple fact: debts need to be repaid, and increasing the amount to be repaid makes it harder to repay. Short paper, long physical.
Looks like Goldman Sachs supremo has been stealing at MF Global
Parasites, not enough to rob legally, they have to rob illeagaly too. Sociopaths must be attracted to banking as well. These guys earn more in a year then most people do in a thousand years. String em up high, so that they learn, stop ripping off the people.
It's lazy to say that one generation is better or worse than another. Every generation faces its own unique challenges. For the generation that went to WW2, it was a very tangible case that required tremendous courage and sacrifice. For the past few decades, the challenge has been a battle with apathy and a malign status-quo. Materialism has grown like a cancer on the spirit of man, and while its violence may take place out of sight in third world countries, in sweatshops, or in degraded or exploited environments, it is no less real.
Look there's no two ways about it, Europe is shagged. Hang on, it's going to be years of struggle. Yet somehow Key keeps smiling and waving and pretending everything will be ok. Latest news on tv here is that Greece is calling for a referendum on austerity measures.....
MF Global collapse stops trading in Aussie grains
Investors in Australian grain and wool have been left unable to trade after ASX, the Australian exchange operator, suspended dealing in the wake of the collapse of commodities giant MF Global.
ASX on Tuesday ditched trading in futures in grains, including barley and wheat, and wool "until further notice" following the bankruptcy of the US-based broker, sunk by a $6.3bn holding of eurozone debt.
The measure went further than those imposed by peers, such as IntercontinentalExchange group, which runs New York soft commodities markets, and CME Group, whose exchanges include the Chicago Board of Trade, which have stopped at suspending the broker from trading.
However, MF Global is viewed as having been a particularly big player in Sydney, where it boasts top rank in terms of executed business, including 80% of turnover of wool contracts.
Wool is a particularly important commodity in Australia, the top exporter of the fibre.
http://www.agrimoney.com/news/mf-global-collapse-stops-trading-in-aussi…
Let's Consider The Possible
This may sound rather high in tin content, but you should consider that it may not be.
Let's consider the possibility that MF Global was not an isolated incident.
That is, let's presume that every bank and brokerage is trading with customer money - illegally so, I might add.
Why must we presume this? Because MF Global was given a Primary Dealer approval
@ #5
The CDS mess. Everyone thinks that the CDS crisis is going to destroy Europe. The EU might be in its death throes but the CDS is not going to be the instrument going to help nor destroy the EU. Why would I say that? Well technically owning a CDS is the equivalent of holding a chip in a casino. Shure you might be able to walk up to the pay cage and get your chip redeemed for currency but if the casino goes out of business good luck trying to redeem anything.
Some of you may feel that is a bad analogy but I assure you this is exactly what will happen. The first few customers will be able to redeem their chips for cash but soon the casino paying out will then go under quickly itself and the mob will have to turn to casino down the street to redeem their chips there, if they even own the right chips. This will continue quickly till within hours everyone is out of cash and the pay windows close for good.
This is my biggest grip against Michael Lewis's 'The Big Short’, sure there were plenty of people in his narrative that made money buying CDS’s during the last crisis but that crisis was contained and the counter parties were given the monies to pay off the few people holding chips. I don’t think Lewis or his various protagonist understood just how lucky they were to collect on those CDS’s
My point is there won’t even be enough during the next world wide Margin Raid that will occur to even pay those holding chips of any denomination. So although the CDS mess may start a chain reaction it’s going to be a reverse chain on those holding now worthless CDS paper because there won’t be anyone around to cash those chips in.
Anyone that has ever been thought small claims court in the US might understand this analogy. Sure you might win a decision in small claims court but often the process of collecting is more expensive than the claim itself.
I think the argument goes that if its not possible to insure bonds through CDSs bond yields will have to rise. Not sure if that will "destroy Europe" but Italy will certainly be toast.
My main point is that even the CDS market will collapse during this next go around. Those that weren’t standing next to the pay window and are unable to collect on the CDS will quickly call their friend down the street who is standing next to the pay window at the casino down the road and try and sell them at any price in a fire sale till the last of the dumb money wises up.
No currency, bond yield, or CDS will be safe from this storm.
Morning Bernard.....how are things..? kill any old people overnight did we....?
I post this again as I cannot understand you lack of response to either Les Rudd or my comment ..yet you chose to respond to an Emailer that posted the most outrageous drivel stating all we(older Folk) do is get pissed and play pokies...... are you for real here man...? I mean even repeating that pile of puke.
While I respect your opinion on the matter Bernard.....and your obvious resentment in the name of fairness...one brush does not tar all.
You use inflamatory language when this particular hobby horse of yours gets up from it's last whipping to death ( the Lazarian effect I suspect) such as deserve...seem happy... Blame......what do you want us to do ...out with it ..!
A lot of us that I know agree with you that the coming generations are paying for the shortsightedness of successive Aministrations failure to see a growing aging population.
That is not the fault (blame) of the Boomer pursee but the Administrations that got the numbers wrong on a projected basis.
So what do you want....Us to reject the pension when offered.....?
Push the retirement age out ...yes! good for me but I'm in good health...again one size does not fit all.
Forward your constructive ten point programme to redressing the shortcomings of previous superanuations or the lack thereof to National Party H.Q. and hope like hell they haven't run out of dunny paper.
Yours respectfully as always .
Les Rudd on the Matter.
by Les Rudd | 01 Nov 11, 3:21pm 0
Bernard - can you give us a breakdown, by INDUSTRIAL/ECONOMIC SECTOR, of "Babyboomers [who] didn't pay capital gains tax to pre-fund their superannuation costs and seem happy to lump the costs onto those still working when they retire ."
In other words, which sector/s have contributed least in this regard, because of the intent rule?
Who are the biggest culprits?
Cheers, Les.
Extract from PHD holder with a persecution complex..! that you chose to respond to and thank....?
The country is broken by giving retired people the vote and paying retired people a pension while the first 18 years these young people do not get a vote. in some democracies only the soliders got to run for politics. my point is our most productive potential is forgotten and ignored at the expence of the persons in the last 18 month of life.
So a new national university is only half the problem. Politics is about rewarding unproductive activities. IE the R18 RSAs get our old people pissed and plunder their money on pokie machines while young people do not have access to their experience in meaningful ways like apprentiships. The nation is educationally bankrupt.
I want to scream at the top of my lungs and drag my finger nails down the black board to draw attention to the broken system but it is just ignored.
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