Here's my Top 10 links from around the Internet at 7.30 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.
Keep an eye on Credit Agricole. See #9. The cartoon under #3 made me roll on the floor laughing. I need to get out more.
1. The problem with leverage - Ben Chu writes at The Independent that central banks and governments should be forcing banks to publish their leverage levels, not just capital levels.
He's right.
Here's the measures of leverage and capital that we've calculated for NZ banks.
It shows Kiwibank as the most leveraged at 23.4 and ANZ National as the least leveraged at 11.4.
But all the NZ banks are way less leveraged than the crazy British, American and European banks.
Chu writes below about some of them being more than 30 times leveraged.
Before they blew up...and had to be bailed out by their governments.
Andy Haldane, the Bank of England's executive director of financial stability, has produced research showing how leveraged three of the UK's largest banks were going into the 2008 crisis and how they fared in the crisis.
The table shows Barclays' capital base was leveraged around 39 times in 2007 and Royal Bank of Scotland 31 times. Both had to announce huge asset write-downs in the boom. Barclays wiped out 56 per cent of its pre-crisis equity and RBS lost 32.6 per cent and was rescued by the Government.
HSBC had a fairly conservative leverage of 21.3 and its losses in the bust were only 7.3 per cent of equity. It is also striking how quickly leverage ratios at Barclays and RBS were rising before the bust. Warning bells should have been ringing. These lessons are still to be learned by regulators. The Franco-Belgian bank, Dexia, was judged sound by the European Banking Authority in July, with capital levels of 12 per cent. But in October Dexia went bust and had to be rescued. Regulators should probably have paid closer attention to Dexia's leverage – an astonishing 60.
2. What a soft property market looks like - The Courier Mail in Brisbane reports on how deals are going bad in that property market as valuations come in less than expected.... HT Hugh.
SELLERS who manage to snare a buyer in Brisbane's soft property market are seeing their deals fall over as a new trend emerges of valuations coming in below contract prices, making it difficult to obtain finance.
Place research analyst Lachlan Walker said it was a problem that had been building since the start of the year and his agency had experienced several deals collapsing as a result.
3. Here's an interesting idea - Sam Sachdeva reports at The Press on a plan by the Canterbury Co-Operative Land Trust to develop sections for NZ$90,000 to NZ$100,000, which is about NZ$80,000 below market value. HT Hugh.
A model for elsewhere?
Residents have expressed concerns about the Government's offer to buy their homes for their 2007 rateable value, saying it will not cover the cost of buying a new section. Livingstone said the trust wanted to ensure that earthquake-hit residents could afford to buy a new home.
"A lot of people aren't in a position to take on an extra mortgage," he said. The trust would bring red-zone residents together to jointly buy land and develop it into sections.
Property developer and trustee Grant MacKinnon said selling all the sections before developing the land would cut out the developer's margin and sales and marketing costs, which could account for up to 40 per cent of a section's value.
4. What on earth is this all about? - Emma Goodwin at the Manawatu Standard reports Horizons, the Manawatu-based district council that's supposed to regulate farmers, is interested in buying some dairy farms through its investment arm.
Manawatu water ecologist Dr Mike Joy said Horizons getting involved in dairy farming had to be a conflict of interest.
"How can they be objective when making decisions about it?" Mr Joy said.
"It's like the police buying into a gang's drug business because it makes lots of money."
5. Keep an eye on this - The WSJ reports Iran says it shot down a US drone over the weekend. The Israelis are quietly blowing up sheds in Iran they think might be nuclear bomb factories. Iranian allies in Lebanon are firing off rockets into Israel.
Iranian 'students' are storming embassies. Sanctions are brewing. This one could sneak up on a few people.
Remember. Japan was throttled by sanctions during the 1930s in the wake of the Great Depression. That didn't end well when they went overseas looking for the stuff they couldn't buy. I know there's a lot more to that story, but still...
And here's one reason why - Reuters reports Iran is warning that any attempts to block Iranian oil supply would more than double crude oil prices.
Iran warned the West on Sunday any move to block its oil exports would more than double crude prices with devastating consequences on a fragile global economy.
"As soon as such an issue is raised seriously the oil price would soar to above $250 a barrel," Foreign Ministry spokesman Ramin Mehmanparast said in a newspaper interview.
The comments come as Iran strives to contain international reaction to the storming of the British embassy last week, a move which drew immediate condemnation from around the world and may galvanize support for tougher action against Tehran.
6. Free Trade deal with India? - This might be a little more difficult than the one New Zealand did with China.
India is much more wary of free trade. Here's an example. A deal to let foreign supermarket chains such as Walmart and Tesco into India has been rescinded just days after it was agreed, BBC reports.
Just days after approving long-awaited proposals to raise the limits on foreign investment, a government ally said he had been told the policy was suspended. The decision to allow chains such as Walmart and Tesco into India has sparked fierce opposition.
Critics fear the move would destroy millions of jobs and businesses. Mamata Banerjee, whose Trinamool Congress contributes 19 votes to the ruling Congress party-led coalition, said that Finance Minister Pranab Mukherjee had told her that the policy would be put on hold.
7. When credit bites back - The San Francisco Federal Reserve has written a paper documenting almost 140 years of recessions to show that bigger debt bubbles are followed by deeper recessions.
Ya don't say. HT Leith at Macrobusiness in a good piece titled 'We're all Keensians now' ;)
Here's the SF Fed.
Based on a study of nearly 200 recession episodes in 14 advanced countries between 1870 and 2008, we document a new stylized fact of the modern business cycle: more credit-intensive booms tend to be followed by deeper recessions and slower recoveries. We find a close relationship between the rate of credit growth relative to GDP in the expansion phase and the severity of the subsequent recession.
We use local projection methods to study how leverage impacts the behavior of key macroeconomic variables such as investment, lending, interest rates, and inflation. The effects of leverage are particularly pronounced in recessions that coincide with financial crises, but are also distinctly present in normal cycles. The stylized facts we uncover lend support to the idea that financial factors play an important role in the modern business cycle.
8. Cheap foreign imports - Rob Stock reports at the Sunday Star Times how the price of New Zealand carbon credits is crashing because of the importation of dodgy foreign ones.
Sigh...
Here's Rob with the details:
The price of New Zealand units (NZUs) has crashed from $22 in May to about $11 last week, stifling interest in developing carbon offsetting initiatives here, according to carbon market participants.
The price crash has been so steep that by one calculation, if the price trend continued for another 100 days, the value of NZU credits would be zero.
The reasons for the crash appear to be the unfettered ability of New Zealand emitters to import credits of dubious quality from overseas, coupled with the recent dumping of international credits by cash-strapped European industrial and utilities companies selling down their stockpiles of carbon to realise cash as the debt crisis worsens, participants in the fledgling carbon trading market say.
Big emitters here have been able to buy the UN-backed Certified Emmissions Reductions (CERs) cheaply to surrender under the ETS, gutting the price of NZUs.
9. Credit Agricole's axe sheet - Reuters reports the French bank is dumping assets in Asia.
Credit Agricole has listed 64 Asia loans worth US$1.1 billion, according to the French bank’s most recent axe sheet, obtained by Reuters. The loans currently support such companies as India’s Bharti Airtel and Hong Kong’s Sun Hung Kai Properties.
Two years ago, the bank was offering just 8 loans worth US$170 million in Asia, an axe sheet from that period shows.
“What you’re seeing is evidence of what one’s hearing: that the European banks are deleveraging and selling assets,” said Philip Cracknell, Global Head of Syndications for Standard Chartered Bank.
While axe sheets are common, it is unusual to have so many Asia loans on sale at one time and to see how widely these sheets are being distributed, with banks offering up deals to rivals they would normally want to keep out of the process.
10. Life's a happy place - The Conchords' Bret McKenzie and Kermit the Frog sing the theme tune for this blog. This one is especially for the Gummy Bear. He thinks I have little faith. I have a lot of faith in glove puppets and Kiwi comedians.
Because I love the Muppets and the Conchords.
30 Comments
You know Bernard ......I've had a good long think about GBH's philosphical outlook on dealing with things the way they are ...not the way some think they will be or were for whatever theory may take them in the moment
and I have concluded ...particularly after Friday's top Ten
Before you diagnose yourself with depression or low self esteem, first make sure you are not,in fact ,.........
Just surrounded by assholes.
Procrastination is the theif of time.
Hello Count : How very kind of you . Gummy ( having been in the mass media industry ) has an inkling [ good pun ! ] of some of their tricks ..... and Bernard , bless him , is a master ! They know we need certainty of the future , and so , rather than wishy-washy possibilites , they biff out absolutes for us . Sooner a certainty of death , than unknowing , maybe yes , maybe no .
..... hence the overwhelming force of the headlines and the article , " Europe into the abyss " , yikes ! ..... and folks love that . The truth , that things are fairly dicey there , but all is not lost , not yet .... no one wants to hear that . It's the truth . But it's too wishy-washy to excite people , to sell papers , and to get blogs going 19 to the dozen .
Life is good my friend . It was good today . What tomorrow brings , who knows . That's the exciting part of being open to any possibilities !
You are welcome GBH.....the here and now is what each of us has to deal with....while trends may be worthy of note....or policy change may present opportunities to capitalise....I have,in the last few years here, seen little in the way of forum debate that has had any impact on those two Market indicators.
What I'd like to see is those who profess an indepth knowledge of money, economics and finance, to show a ten point plan of how they intend to influence outcomes effecting change.
Because I see lot of geniuses here touting a superior knowledge on the shortcomings of of the banking system to the cure for property addiction and yet I see little from them in terms of proactive plans to implement the benifit of their genius.( although I think Anarkist is sincere about open forum and will probably see it through)
My point being, a lot of, if not most analytical blog professors miss opportunities during their indepth analysis and burning desire to second guess the Market........recalling only their triumphs in the negative forecast.
It is far easier to find the fault with something and enjoy moments of perverse satisfaction as it unravels...than to seize the moment and be part of the here and now.
Many of the professors here say stupid people run the world.....if that ...is....the case, then I suggest they take a crash course in "stupid",....because from where I'm standing the Professors are not making a big dent in the trend.
Happy days my good man..Viva le ReVolution
Gummy
I agree. Life's pretty good and thanks for the compliment (I think) about my masterly 'tricks'.
But I hope I'm serving a purpose.
I'm the salt you lick and the lemon you suck when you're slugging back the tequila shot.
Everyone (and I'm serious about this) has been saying for four years that this is just a blip. But it's not and the evidence is all around that something has changed.
You can write me off for being colourful and sensationalist (well and at least I don't talk about Kim Kardashian all day) but all of this stuff I find is useful as an antidote to all the soothing sounds we get every day from John Key et al.
cheers
Bernard
Life's pretty good .. having followed you both for well over a year now I have come to the conclusion that GBH is a "natural BULL" and BH is a "natural BEAR"
..... this is one natural full of bull who's never gonna touch a tequila shot again .......
Gee whizz Bernard , what a thing to say ...... I am emotionally scarred , .. scarred from that imagery of salt and lemon . .......... brrrrrrr !
"But all the NZ banks are way less leveraged than the crazy British, American and European banks."
Sure, go ahead and put the boot into the Brits and Europeans if you want, but CNBC claims US banks are down to 7:1 - http://www.cnbc.com/id/45466176
Real Leverage can be very relative to continued access to borrowed funds and at what price. Again the "NZ banks" claim is getting ridiculous when a majority of NZ banking is done via Aussie banks.
Let's keep it real all
Mark,
Hmmm. Check out the CDS spreads on those US banks, particularly Bank of America.
Not confidence inspiring.
cheers
Bernard
Thankyou for # 10 , Bernard : I am a fan of the Conchords & of the Muppets too .
........ speaking which , why did the makers of Kermit & Miss Piggy make a muppet of Mark Sainsbury ...... if he wants to see a true master make a perfect muppet of himself he has but to look in the mirror ....
Za-zinggggggggggggggggg ! .. ah ha de haaaaaaaaaaaaaaaa !!!
Tails I win, Heads you lose
I like to look at how near to a traditional retail bank model a bank works. Do they loan more than 100% of their deposits? If they do then they are borrowing money to speculate outside of the traditional retail bank model. Equity holder decisions are almost irrelevant since short term bonus reward to employees taking risk decisions is the driver. No argument, the taxpayer with no say and no reward if risk paid off was the de facto risk taker but when OBR comes in NZ in early 2012 it will be the retail depositor who will be shuffled forward as a primary risk taker. So it's up to each depositor to decide if they are happy to be in a queue behind covered bond holders and others if the speculative return bombs e.g. foreign currency loans go sour or asset backing values drop . If you track loan to deposit ratio you can see which banks are relying heavily on parent company funds or foreign borrowing. Interesting that Kiwibank and some of the other smaller NZ banks show up much better viewed that way.
#2, ouch to a lot if kiwi's if NZ property follows Brisbane's.
#8 Carbon credits are collapsing in value because the game is up. Thanks to the second release of climategate emails.
Climategate I, the release of a few thousand emails and documents from the CRU in November 2009, revealed that the united-front clubbiness of the leading climate scientists was just a display for public consumption. The science of climate change was not “settled.” There was no consensus about the extent and causes of global warming; in their private emails, the scientists expressed serious doubts and disagreements on some major issues. In particular, the email exchanges showed that they were far from agreement about a key part of the global warming narrative—the famous “hockey stick” graph that purported to demonstrate that the last 30 years were the warmest of the last millennium and which made the “medieval warm period,” an especially problematic phenomenon for the climate campaign, simply go away. (See my “Scientists Behaving Badly,” The Weekly Standard, December 14, 2009.) Leading scientists in the inner circle expressed significant doubts and uncertainty about the hockey stick and several other global warming claims about which we are repeatedly told there exists an ironclad consensus among scientists. (Many of the new emails make this point even more powerfully.) On the merits, the 2009 emails showed that the case for certainty about climate change was grossly overstated.
More damning than the substantive disagreement was the attitude the CRU circle displayed toward dissenters, skeptics, and science journals that did not strictly adhere to the party line. Dissenting articles were blocked from publication or review by the Intergovernmental Panel on Climate Change (IPCC), requests for raw data were rebuffed, and Freedom of Information Act requests were stonewalled. National science panels were stacked, and qualified dissenters such as NASA prize-winner John Christy were tolerated as “token skeptics.” The CRU circle was in high dudgeon over the small handful of skeptics who insisted on looking over their shoulder, revealing the climate science community to be thin-skinned and in-secure about its enterprise—a sign that something is likely amiss. Even if there was no unequivocal “smoking gun” of fraud or wrongdoing, the glimpse deep inside the climate science community was devastating. As I wrote at the time (“In Denial,” March 15, 2010), Climategate did for the global warming controversy what the Pentagon Papers did for the Vietnam war 40 years ago: It changed the narrative decisively.
Read the rest here at the GWPF
Reality check....mmm......so you insist on publishing sites that follow no science, condon theft, and make up contents of emails, or take out of context.....There is a good reason no main stream papers/sites bothers with this climategate stuff.....its rubbish.
It maybe a sign of desperation...
http://www.huffingtonpost.com/kelly-rigg/the-war-against-climate-s_b_1027644.html?ref=fb&src=sp&comm_ref=falseThe skeptic case against climate change is unraveling before our eyes like someone walking away from an old sweater, thread in hand.
For those who have ever put the skeptic arguments to the test, it has always been clear that their criticisms rarely stand up to even the most basic level of academic rigor. But last week's release of the Berkeley Earth Surface Temperature (BEST) study delivered a decisive blow to the edifice of climate skepticism.
Interesting that they claim they are educational.....yet academia has proven beyond reasonable doubt we have global warming and just as importantly its significant. So educational it wont be....regards
I have to agree Steve...climate-gate is a wild goose chase. Those emails are only demonstrating the scientific method and not any conspiracy to hide anything. Even as a skeptic I can’t take those email seriously since they are probably taken out of context. If you want to advance the debate then come up with a better testable hypothesis and not some silly conspiracy theory.
EDIT: BTW- The NZ carbon credit market is collapsing because it was easy to game…
Oh I agree the carbon credit looks more and more like one huge scammable fiasco. Its principle was sound so they said, to put a cost on carbon emmissions so businesses could cost it and alter their businesses to work with it, this seemed fine until the finance/money sector go to it....oh look the bankers yet again....
Classic case where theory works until it meets practice....sadly whats left is regulation / legislation, I kind of expected that for some months.....If I was a conspiracy theorits It actually almost looks like inventing carbon credits was a successful delaying tactic of actually avoiding having to do something constructive.
However I suspect nothing/little will happen.....the deniers will win, at least initially by default because no one will be able to afford to move to renewables.....however when oil becomes cripplying expensive we will see GDP collapse overnight....I think its going to be very ugly....and more than a few dead ppl....
regards
Please explain exactly how "the finance/money sector" is responsible for the reduction in the price of carbon credits? Where exactly is the scam?
There is nothing inherently wrong with paying somebody else to reduce carbon emissions rather than doing it yourself. On the contrary, if they are able to save more carbon than you can for the same amount of money, then it is environmentally superior for you to give them the money to do it with.
interesting developments in Isreal, they have developed super drones
http://www.jpost.com/Israel/Article.aspx?id=169313
10. Wayne
Maybe there is a simpler explanation here: there are still a few sane people in government in Iran who realize the quest to acquire the bomb to attack Israel and the Great Satan in the name of the Mahdi (12th Imam) is just going to get a whole lot of Iranians killed and a country – that could easily be wealthy, happy, peaceful and well liked – trashed from border to border.
They’ve got the Jews against the wall – and that is no safe place for any Arab state to put the Jews. It’s only massive pressure from Washington that has kept the Israelis from flattening Iran already.
Lest anyone should doubt that Israel could perform such a feat you should be well aware of what kind of weapons the Jews have at their disposal. The Iranians are trying to acquire what is basically advanced versions (much smaller and more efficient so they can be mounted on a missile) of what we used at Hiroshima and Nagasaki.
The Jews have been deep inside of our weapons engineering departments for decades and what they have built is basically duplicates of our very best weapons. NOT old-style single stage fission bombs but modern 2-stage fusion weapons that are hundreds and thousands of times more powerful – and they have somewhere between 200 and 500 warheads on various platforms (all based on our designs). Israel probably has about the same arsenal as China on much better delivery systems – fighter-born, cruise missiles, land and maybe sea-based multiple warhead missiles with ranges in excess of 5,000 miles. They can pretty much hit anyone anywhere on earth – just like us.
If the Jews become convinced that only they can protect themselves from Iran, they will act … and God help the Iranians, as what we did to Japan to end WWII will look like a love tap in comparison. Iran may or may not be able to destroy Israel even if they get off the first shots, but, there won’t be an Iran as a viable, civilized nation – just a remnant of ragged survivors crawling thru radioactive debris.
It appears that there may be some folks in Iran who actually think that just maybe getting and using nukes isn’t a part of Allah’s path to victory over the Jews – just a massive leap into the grave for their people. This is the whole best use for nuclear weapons: they are a fate so terrible that it forces saner people to find better ways than war to settle their differences…and why we and the Russians managed to survive our conflict.
November 29, 2011 - 4:50 am Link to this Comment | Reply
Of maybe the Iranians just want a bomb to protect themselves from the Americans and anybody else who wants their oil...
regards
@ #8
I was looking strongly at the carbon market here in NZ. After modeling it in several ways I found that it was easier to be outside the market and take advantage of the foreign exploit but couldn’t sort out a way to short the NZ credits to take advantage of it.
The thing with free trade is that it's great if you have the worst standard of living on the planet. You import comparativly higher wages, and you don't have to import foreign goods. When you have the highest standard of living you import the cheaper wages and the cheaper foreign goods. Developed economies wages are going down, EM wages are going up, and most importantly to me the quality of goods has deteriorated rapidly in the past decade. Especialy in electronics.
And good luck to the Canterbury Cooperative land trust...if they can avoid internal thieving rorts the only problem they face will be the parasites out to protect the land valuation bubble...and that means the banks will go all out to cause as much trouble as possible for the CCLT...as much as possible!
Do not be shocked to discover legal challenges and red tape tangles aplenty.
Something that deserves to be repeated over and over and over:
It shows Kiwibank as the most leveraged at 23.4
Of course they could have also pointed out Kiwibank as having the worst Capital Adequecy ratio as well.
Any media critical of the banks and financial institutions role in the GFC really should point out the similarities between Fanny Mae / Freddie Mac and New Zealands KiwiBank position...
I dont think they compare...and at the end of the day Fanny and Fredie played a minor role in the GFC...
regards
.and at the end of the day Fanny and Fredie played a minor role in the GFC
In that I agree with you - however that's not how many media commentators continue to portray it; however the implicit Government guarantee that was entered into as soon as the US interfered in their lending decisions (which led to their over-expansion into subprime) is exactly the same situation as Kiwibank here.
Alliance group motivated by the likes of Sainsbury's looks to inpliment ETS ahead of ETS rollout:
http://www.nzfarmersweekly.co.nz/article/9126.html
Carbon footprinting is on the march with Alliance Group commercialising its hoofprint programme ahead of the proposed Emissions Trading Scheme for agriculture.
The first farmers to adopt the sustainability marker will be Alliance's Sainsbury's producer group but all going well it will be rolled out to all of the company's shareholder suppliers
Just as importantly, hoofprint would help protect farmers' access to the most valuable outlets, primarily retail and food service in United Kingdom, Europe and the United States.
Bernard, this carbon credit idea sounds similar to another stupid idea from America.
Some years ago, can't remember when or if a city or State in America. You may be able to find the details. Anyway, there was a building heigh restriction. If you were a church or other building that had no plans to go higher then you could sell your unused heigh to another building that wanted to go higher.
Only in America (and NZ if some got their way)
Maybe they will start trading these height limits internationally cos it's all madness.
Peter Dunne and John Key have finalized the details of their new retirement plan.
Due to the current financial situation caused by the slowdown of the economy, your Government has decided to implement a scheme to put workers 50 years of age and older on early retirement. This scheme will be known as RAPE (Retire Aged People Early).
Persons selected to be RAPED can apply to the government to be eligible for the SHAFT scheme (Special Help After Forced Termination).
Persons who have been RAPED and SHAFTED will be reviewed under the SCREW program (Scheme Covering Retired Early Workers). A person may be RAPED once, SHAFTED twice and SCREWED as many times as the government deems appropriate.
Only persons who have been RAPED can get AIDS (Additional Income for Dependents & Spouse) or HERPES (Half Earnings for Retired Personnel Early Severance). Obviously, persons who have AIDS or HERPES will not be SHAFTED or SCREWED any further by the government..
Persons who are not RAPED and are staying on, will receive as much SH!T(Special High Intensity Training) as possible. The government has always prided itself in the amount of SHIT it gives out. Should
you feel that you do not receive enough SH!T, please bring this to the attention of your local MP. They have been trained to give you all the SH!T you can handle.
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