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Monday's Top 10 with NZ Mint: Kim Dotcom does Monaco; Global deleveraging had yet to really start; Dickens revisited at Foxconn; Europe beggars its neighbours (and us); Dilbert

Monday's Top 10 with NZ Mint: Kim Dotcom does Monaco; Global deleveraging had yet to really start; Dickens revisited at Foxconn; Europe beggars its neighbours (and us); Dilbert

Here's my Top 10 links from around the Internet at 11.30 am 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.

Watch the link to the video at #8 to find out everything you need to know about Kim Dotcom and his merry band of down/uploaders. It's in German, but the pictures (of scantily clad women, fast cars and opulent yachts) tell the story.

1. 'Approaching the Abyss'- John Mauldin writes long and well here at The Big Picture about the real problems inside Europe and why private creditors are so nervous.

The Greek deal looks set to crystallise the idea that public creditors (ie central banks) are allowed to get off without a haircut on their Greek debt while private creditors will have to take a 70% haircut.

This means creditors who thought they were senior bond holders have effectively been retrospectively relegated to second tier status everywhere else in Europe. They have effectively become second mortgagees on an asset that has been devalued.

It means they are likely to be super cautious with other struggling Southern European sovereign debt.

Portugal seems to be the next in line.

Here's Mauldin:

The market is not acting as if it expects things to go well. Yields on Portugal’s 10-year bonds climbed to 14.39% on Thursday. Credit default swaps measuring bond risk have reached 1270 points, pricing a two-thirds chance of default over the next five years.

While Portugal’s public debt of 113pc of GDP is lower than Greece’s, the private sector has much larger debts and the country’s total debt load is higher, at 360pc of GDP – much of it external debt. Jürgen Michels, Europe economist at Citigroup, says, “Without a sizeable haircut to its debt stock, Portugal will not be able to move into a viable fiscal path. We expect a haircut of 35pc at the end of 2012 or in 2013.”

2. The power of deleveraging - The Economist points to an excellent McKinsey paper on deleveraging which says we all have a mighty long way to go.

Here's the Economist:

ALMOST half a decade after the onset of the rich world’s credit bust, depressing evidence of its after-effects is visible in everything from feeble output figures to swollen jobless rolls. But for a truly grim picture, read a new report on deleveraging by the McKinsey Global Institute.

It points out that in many rich countries the process of debt reduction hasn’t even started. America has begun to pare its debt burden, although the drop is small compared with the build-up in 2000-08 (see chart).

3. Where America's middle class went - Charles Duhigga and Keith Bradsher from the New York Times have done an awful lot of digging around to find out what really happened at Apple as it outsourced production of its iPhones and iPads to China.

The depth of the reporting is excellent and shows the shift was not mostly about saving money. It was about building scale and flexibility.

The detail about the Foxconn factories seems amazing and frankly quite scary in a Dickensian sense. It's long and well worth a read.

Here's a sample on that:

Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

4. Sarkozy capitulates - Mish points to a German newspaper report that French President Nicholas Sarkozy has capitulated to bank lobbyist opponents to the Tobin Tax he has been pushing.

All depressingly familiar. The banks are in control in Europe.

Here's more detail:

The French government had abandoned its demand to impose a tax on financial transactions, also called Tobin Tax, after pressure from the country's largest banks, which have threatened to relocate their businesses in other territories, as confirmed by sources in the banking sector Germany's Handelsblatt.

According to newspaper reports, Paris would replace the tax on financial transactions by a "tax on stock negotiations", similar to that established in the UK, after having held talks with French banks.

5. Beggar thy neighbours - One of the spinoffs from the ECB's money printing exercise just before Christmas is that banks in Europe can borrow from the ECB at 1% and then invest in higher yielding bonds in currencies such as the New Zealand and Australian dollars.

That obviously pushes down the Euro and pushes up the New Zealand and Australian dollars. It's classic beggar-thy-neighbour tactics from the arch mercantilists. The mercantilists won. Eg China.

When is New Zealand going to realise it's not a fair world and we have to beggar-thy-neighbours too, before they beggar us.

Here's Bloomberg on the carry trade:

Borrowing in euros and investing in the currencies of Australia, Brazil, Mexico, South Africa and South Korea has returned 7.7 percent since the European Central Bank cut its benchmark interest rate on Nov. 3 for the first time in more than two years, according to data compiled by Bloomberg. So- called carry trades funded with yen have lost 0.3 percent and gained 0.9 percent when financed with dollars.

While a debt crisis entering its third year has driven the region’s shares to the cheapest levels since 2004 and the sovereign bond market posted its biggest rally on record last month, euro bears say the currency won’t rebound anytime soon to wreck carry-trade profits. With government austerity measures threatening growth, ECB President Mario Draghi may have to cut rates to prop up an economy the World Bank expects to contract.

“We’re seeing a very clear breakdown in the correlation between the euro and risky assets,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “That highlights the fact that the euro is increasingly becoming a funding currency.”

6. OMG - Anna Leask at NZ Herald has the story on how Kim Dotcom built a heated lap pool at Dotcom mansion at Coatesville that he filled with imported springwater and underwater speakers.

The barest shred of sympathy I had left for the guy just evaporated.

A source told the Herald Dotcom ordered about $4 million of renovations at the mansion after moving in. "I know the whole place quite well, I did quite a bit of work on the renovations," said the source, who spoke on the condition of anonymity. "It's insane, and it gets more insane inside. When we were there we called it 'extreme home makeover, millionaire edition'."

He said Dotcom's master suite had a television at the foot of the bed believed to be the biggest in New Zealand. Off that room was an ensuite and a dressing room. A heated lap pool is just off the master ensuite, boasting underwater speakers, imported spring water and a custom ladder worth around $15,000.

7. Are we this desperate? - New Zealand encouraged Kim Dotcom to migrate to New Zealand and invest (launder) his money in our government bonds.

We were so keen to overlook his German insider trading conviction in our pursuit for foreign funds that we were apparently happy to let him launder his illegally obtained funds through our banks and our own government debt.

A simple google search would have raised enough red flags.

This 2006 video of Kim Dotcom going on a US$10 million weekend bender with his mates (and obligatory ladies sans clothing) in Monaco (via some very fast motorway trips in southern Europe) should have stopped that residency application in its tracks.

Yet it didn't.

Why?

The scantily clad ladies are around the 27 minute mark. Watch the whole thing to get a sense of who this guy is. It's in German but the pictures tell the story. The arrogance and criminality shines through.

8. More QE to come - Bloomberg reports Credit Suisse predicting the US Federal Reserve will print more money later this year.

“We do think the Fed is going to do another round of asset purchases later in the quarter, probably aiming for April,” Jersey, director of U.S. rates strategy at Credit Suisse in New York, said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “We are growing, we just don’t feel prosperous. It is a part of the job of the Fed to assure prosperity, one of the ways to do that is to kick- start housing,”

A Bloomberg news survey conducted in November found 16 of the 21 primary dealers of U.S. government securities said Fed Chairman Ben Bernanke and his fellow policy makers would start another purchasing program during the first half of 2012. The dealers’ estimated that the Fed may buy about $545 billion in home-loan debt.

“We need to get confidence up, in particular business confidence up,” Jersey said. “That would help stimulate jobs, which helps stimulate the residential housing market, and that’s what gets you out of the doldrums.”

9. Disorderly default more likely - Reuters is reporting the Greek situation could turn very ugly and very soon. Or not.

My bet is the bail out will come regardless.

But here's Reuters.

Private creditors said on Sunday they had come to the limits of what losses they could concede in a Greek debt swap, putting the ball in the court of the EU and the IMF in a tense race against the clock to avoid a messy default.

Athens needs a deal on the plan, meant to cut 100 billion euros (£129.3 billion) from its debt burden of over 350 billion, in coming days to stay afloat when a major debt redemption falls due in March.

10. Totally Jon Stewart on Newt Gingrich's open marriage.

 

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50 Comments

So what crime has this German person actually committed, besides spending lots of money and being surrounded by scantily clad ladies?
Well for starters, "insider trading" is a made-up crime that actually benefits the market by providing more accurate pricing of stocks.  Doing so is only acceptable if you are a politician or Warren Buffett.
Mr Dotcom's latest "crime" is providing free publicity for  musicians, thus offending the copyright cartel.  He sounds like a bit of a weird guy but I just don't see what everyone is up in arms about. 

How about:
Insider trading
Embezzlement
Computer fraud in 8 cases
Betrayal of business and trade secrets
Assisting in computer fraud
Operating a criminal organisation and handling stolen goods in two cases,  one case in conjunction with four cases of falsification of legally relevant data, one case in conjunction with eight counts of falsification of legally relevant data
False use of titles.
Good enough?
Oh, and insider trading?
Buys $375,000 worth of shares with an unsecured loan,  announces his intention to invest €50 million in the company.  Share value  jumps by nearly 300%. Sell shares, trouser and profited $1.5 million
 
A bit different to Warren Buffett

You're right, that's nothing compared to what Warren Buffett has got away with!  He put $5 billion into Goldman Sachs right before it was bailed out.  But he's a hero so the fact he clearly had a political insider whispering in his ear is ok.
I wasn't aware of the other stuff Mr Dotcom had done, hence why I asked whether he had committed any actual crimes as opposed to made-up ones like "insider trading" and "copyright infringement".

A golden future beckons for Iranian merchants like Mohammed Fathi - and they are very worried.

Faced with piles of riyal bank notes that grow bigger but more worthless every day amid the panic over the country's mounting nuclear crisis, they are turning to the one currency that has weathered every twist in Iran's turbulent history - the sekkeh, or gold sovereigns first minted in ancient Persia in 500 BC.
http://www.telegraph.co.uk/news/worldnews/middleeast/iran/9029848/Irans-economic-troubles-mount-as-new-sanctions-are-made-ready.html

 

4 years doesn't sound nearly as impressive as "Almost half a decade."

 

America overcomes the debt crisis as Britain sinks deeper into the swamp

Britain has sunk deeper into debt. Three years after bubble burst, the UK has barely begun to tackle the crushing burden left by Gordon Brown. The contrast with the United States is frankly shocking.
 
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/903147...
 
highest ranked commenter
 

moraymint
Yesterday 09:23 PM

 

"Has a rich country ever been debauched so fast in peace time?"

No.  Not until the Marxist nutterism that describes and defines the governance of this nation was implemented by the Labour Party when it came to power in 1997. Look at the trend in the graph from that year.

The Labour Party is the party of treason.  How in God's name the likes of Blair and Brown and Balls have got away with this so far, I have no idea.

It's a moot point whether this country will ever recover from the damage caused by those 3 cretins (ably assisted in their manipulation of the media and, therefore, the voting lumpen proletariat by their traitorous pal, Alastair Campbell).

 

As I posted on Saturday:
This is brilliant.
http://www.mckinsey.com/Insights/MGI/Research/Financial_Markets/Uneven_p...
Check out Exhibit 2.
That's the report Ambrose refers to. I found Exhibit 2 very relevant to NZ, both where we have been and where we are going.

"and clearing the way for economic growth"
not on the back of this graph
http://www.indexmundi.com/energy.aspx
 

Thisd must scare the crap out of Canada
 
http://www.wtrg.com/rotaryrigs.html
 
Of the total global rig count of 3,683

2,598 are Drillng in North America

a law of diminishing returns.
They've pushed it to an uptick, no way do they reverse the trend
http://www.indexmundi.com/energy.aspx?country=us&product=oil&graph=production

On a positive note, this is what is supposed to happen if you have lower wages and corporation tax than Aus:
http://www.stuff.co.nz/business/industries/6295419/Outsauced-New-Zealand...
Got to get more of those Aussie jobs here. Far easier than messing about trying to create them ourselves (I'm not being fascetious here, I mean it).

this is a great idea, and fits JK's plan of closing the gap to Aus, instead of catching them up we can just drag them down to our wages...

It is indeed a cunning plan.

Reflecting on #5, see:
'Accountability needed on poor economic performance'
http://www.johnwalley.co.nz/169-accountability_needed_on_poor_.aspx
"In fact investment in non-productive assets classes are still incentivised by the Government – where other Governments offer R&D tax credits, grants for international marketing and fast depreciation allowances, New Zealand instead promotes land and buildings."
Liked this line -  "It is worth noting in a recent article from the Bank of England the comment was that economic forecasts exist to make astrologers look good."
Below, a presentation by Geoff Bertram to the Fabian Society in July last year, where he comments on potential options to prevent exchange rate overvaluation:
 
http://www.realeconomy.co.nz/245-geoff_bertram_some_thoughts_on.aspx
It could be done .....
 
 

Bernard heard from a reliable source two weeks ago there is a lot of our NZ Lamb in coolers in Europe unsold to expensive for the locals '' . nothing about this from controlled Media yet old-boy. rising dollar crises in Europe who will buy our Lamb
Baz

Just what happened in 1931, if memory serves me right.

Baz, I was thinking that that must be the case. Im getting out of my sheep hopefully in time. I think the global commodity boom has produced oversupply across a broad range of products.

Careful AJ....Bernanke is about to expose his ongoing printing game and that'll put life into commodities     This is expected as Obama need the markets juiced this year...it will also drive the Dollar down v the euro...the insiders are gearing up right now....also if the price of lamb and beef did slump...just shoot the older stock and fill your own freezers...what else can you put on the land?
 
 

Wally, its creating gluts. I dont know how much lamb you can store but eventually you get to meet the market.  

Be wary AJ be very wary....who wants you to believe there is a lamb glut....there is your answer!

so Baz is actually undercover for the meat board, a double agent, thats a double stock agent.

The name of the game is to get more stock to the works...to do that requires a drought or a bit of fear....easy to figure out.....some reports from dodgy journos about Lamb unsold and stacked to the roof in the freezers....load of old BS.

AJ is right Beef and Lamb schedules are taking a hiding, its sell sell sell, price is going down...down .... down..25cent and 20 cents out of the lamb and beef schedule this week, lotsa stock looking for works space.......

Stevel, ive got a great friend in London she tells me things are not going well, if she tells me things are not well then things must be really bad. She told me her husbands business is surviving because of a few very wealthy people in London outside of that small circle no one has any money. The bottom can no longer fund the top.

Andrew therein lies a great problem not only for the uk but also other western countries like nz and aus. The wealthy are prospering but the middle class are struggling. The modern western economic model is based on a large middle class spending and getting indebted. The model is faltering

Faltering or failing?
>>>
hypertiger
 
 
savers of what?

It's all debt...your incomes are all composed of debt...and all you are saving when you reduce your cost of existance lower than your income to produce a surplus is debt.

and your income exists because of spending...if everyone chose to become savers...then who would sustain the spending required to support the income of the savers?

are you saving food...or fuel or other raw materials...or just claims on them?

and if the food runs out...then what have you saved...a claim on something that doesn't exist?

banks take savings and supply them to others to then spend under the condition that the people doing the spending supply more back to the bank then they were given.

well the only way people can obtain more than they give is by increasing their demands...one manifestation of this is rising prices.

buy something whoelsale...mark it up and sell it retail...

The difference between the whoelsale cost and the retail price is the yield...

If so called savers think that putting surplus debt in a bank keeps it from being spent...then they are being hammerd by their lack of knowledge of how banking systems work.

banks must have more deposits than withdrawls or they collapse.

The deposits per day have to be greater than the withdrawls.

lets say on any given day the average net withdrawl rate of a bank is $10,000

lets say the interest rate is 5%...so then a bank would need to have $200,000 of loans earning interest due on that day to cover it.

to cover that day...to break even...the bank would need to have $200,000 out on loan with the payments due on that day...so that the balance of withdrawls and deposits = zero.

but that doesn't account for the interest owed to the so called savers or the revenue the bank requires to sustain operations.

lets say the banks can't get enough people to sign on the dotted line at 5%...lets say they can only obtain the volume they require at 1%

then they would have to create $1,000,000 of credit and get consumers to sign on the dotted line and agree to pay it back for every day of the year in order to meet the average net withdrawl demand or $10,000

What thappens if consumers reach the point where they can no longer sign on the dotted line to support this money making scheme?

it collapses.

and it's inevitable... 

It's all glutter politics.

"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."--Frederic Bastiat

Hey you...move along please...no gawking ok...
"Oceanfront Homes for 65% Off
In apples, rot starts at the periphery and spreads to the core. In real estate, rot starts in condos and vacation homes, then slowly encompasses city after city.
Please consider Investors snap up coastal property bargains in Queensland.

While prices soar in some coastal towns close to mining centres, astute buyers are managing to secure ocean- front homes in traditional tourist locations for $500,000 or more off peak prices as vendors cave after years of trying to sell.
One buyer scored an oceanfront unit in a marina development at Cardwell, halfway between Cairns and Townsville, for $157,000 - almost $300,000 less than it sold for in 2006. The unit had been on the market for three years.
A penthouse with ocean views in the same development sold for $570,000 less than its 2007 sales price"
 
http://globaleconomicanalysis.blogspot.com/

Building ocean front apartments in Cardwell is like to putting same on Stewart island.  One day it may be a good idea...but not now.

In # 3
Should have told the Apple Exec that it may have been even better had he got a boat load of niggers (darkies) from African, all complete in chains. Just like the good old days. And just think, after the job is done he can sell his niggers (darkies) to another exec.
Oh boy, i bet he wishes we were back in the 18 hundred's Southern States, USA. Just think of the flexability.

Oooooops ! ..... sorry Mike B : But we're gonna have to delete that word .....
 
.... . you really can't call people " darkies " anymore .

What about me header Gummy?

One header coming up , comrade : -
 
 http://englishrussia.com/2009/10/16/russian-grain-harvesters/
 
...... who need's Mike B's " niggers " , when yo got one of these chunky beasts to get the cotton in ......

Gummy....a 'header' has four legs and a tail....

Moscow girls ?

Yes, the desire to enslave seems to be alive and well. Mind you the States has always been a strange mixture. The Democrats are the party that wanted to keep States Rights and slavery and the Republicans wanted central power and no slaves. Try to make sense of that.

Our cobbers across the ditch have been hiding Australia's energy crisis - this is what you get when you put all your energy into "fighting" gorebull warming and pander to the Greens.
The once secret report is here.
http://www.manicore.com/fichiers/Australian_Govt_Oil_supply_trends.pdf
What happened is reported here.
All evidence of this treachery went down the memory hole
http://www.dailytelegraph.com.au/news/opinion/all-evidence-of-this-treachery-went-down-the-memory-hole/story-e6frezz0-1226248729853
Gillard is down to a one seat majority. OZ voters will be severely p'd off.

#4 - depressing
The banks certainly do rule the world. Tony Alexander is our PM, not John Key.

What do you mean by "our' PM MIA. Since when did you become one of "us"?

"The scantily clad ladies are around the 27 minute mark"
- Keep it classy.

After looking at the comments of some international sites I wonder what will impair our international reputation more?
a) The fact that this guy got residency in NZ.
or
b) (from a comment on telegraph.co.uk)
"So, without any due process, the US government has basically shut down 2 companies, confiscated millions of personal possessions and demonised these people. What happened to innocent until proven guilty? I'm pretty sure that's a thing in the US still... Not to mention shame on these other countries for enabling the US in this endeavour without a conviction."

What's missing from virtually all the stories on Megaupload et al is their legitimate function as cyberlockers.
I used them 10 years ago to managed shared task lists and calendars with clients (major IT services provider with Star Alliance client airlines) and to share files larger than the ones that email filters would let through.
Paid $10 a month out of my own pocket and claimed it back on expenses.
Crims just found other uses for it, in the same way that txting took off from the mobile phone platforms.

"A decline in unemployment and pickup in manufacturing point to accelerating U.S. growth. Some economists say the numbers may not be as good as they look.
One reason: the severity of the economy’s plunge in late 2008 and early 2009 after Lehman Brothers Holdings Inc. collapsed threw a wrench into models used to smooth the data for seasonal changes, according to analysts at Goldman Sachs Group Inc. and Nomura Securities International Inc."
http://www.bloomberg.com/news/2012-01-23/goldman-sachs-says-u-s-performance-may-appear-better-than-it-is-economy.html
"The adjustment process is unable to distinguish between a one-time shock, like Lehman’s demise, and a recurring issue that would need to be smoothed away. For that reason, the mechanism gives some data a leg up from about September through about March before turning negative the rest of the year. "
doh....in other words all the reports about signs of life in the US...so much BS.
 
 
 
 

What is really bogus, the only way that a crisis can occur for these models is an 'external' shock, such as Lehman's demise. Thats right, according to economic models you can't have a crisis without something bad and outside the field of macro economics happening to the economy. Also, since these external shocks are not part of economics you can't then determine what the impact of the shock will be on the economy when it occurs. No wonder these models have no idea whats going on.
This might sound reasonable when explaining an earthquake, but when explaining a financial crisis. Rational people would refuse to accept this premise is valid. Also rather odd, the crash of Lehman Brothers is bigger than the Christchurch earthquakes, Hurricane Ketrina, and the Japaneese tsunami combined. To me this makes absolutely zero sense.
 
 
 
 

 
"The only function of economic forecasting is to make astrology look respectable."--John Kenneth Galbraith 
 
 

The aspect of partipation rate in the US often not highlighted is the financial strategy to adopt when your 99 weeks are up and that is student loans. For those with limited remaining wealth or options this is where they are advised to go by financial planners...take a look at the debt education bubble developing.

"prices paid by Australian producers decelerated in the October through December period for a third straight quarter, boosting scope for the central bank to lower borrowing costs next month, data from the Bureau of Statistics showed in Sydney."
 
http://www.bloomberg.com/news/2012-01-23/goldman-sachs-says-u-s-performance-may-appear-better-than-it-is-economy.html
Q the rise in the Kiwi v the au....wham another blow to the tourist sector...on top of the European got no money go no trips blow...
So why is the price of wool dropping so fast?....oh dear....markets are heading down fast....
Hey what that do to the NZ govt fiscal farce?....oops it kinda makes the red colour a deeper shade of red...in fact the red has turned into blood
No worries folks cos we are signed up IMF suckers and to the rescue will come the puppet masters banks in tow....are you ready for the austerity drive...YOU BETTER BE.
But Mr Smiles sees no problems....steady as she sinks folks.