Here's my Top 10 links from around the Internet at 11 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.
I'm thrilled that Clarke and Dawe are back at #10.
1, Show us the growth - The problem in Spain and much of Europe is a lack of growth, rather than a lack of credit.
Spain is trying to kick start lending again in its bombed out property sector by forcing banks to acknowledge their losses, but the real problem is a lack of growth.
This is the danger of concerted austerity.
When everyone is cutting the entire economy stops growing and starts contracting.
This means few are willing to borrowing.
And so the spiral goes.
Here's Edward Hugh via Bloomberg on the Spanish problem:
“Everyone I speak to in the banking world tells me the same thing, which is that there is no solvent demand for credit,” said Edward Hugh, an economist and board member of CatalunyaCaixa, a banking group seized by the Bank of Spain last year.
“The underlying problem is that there is no growth horizon for Spain.”
2. Casino scandal brewing - The Sydney Morning Herald reports Sydney's Star Casino was warned in 2010 about a widespread culture of cocaine and drug use among executives.
This story comes hard on the heels on the mysterious sacking of the Star Casino's flamboyant boss last week.
It seems a bunch of Americans arrived and things changed.
Mr Mullin and Mr Vaikunta were brought in by Tabcorp from Atlantic City in late 2009 to take control of the $850 million redevelopment of Star City casino and oversee its relaunch as The Star last October.
It was reported that the arrival of the US executives led to a radical culture change at the casino, resulting in an exodus of senior Australian management.
3. WTF - NZ Herald reports A man convicted of fraud against Dunedin based car finance group MTF worth NZ$135,000 has been sentenced to 100 hours community service.
Would he have avoided a prison sentence if he had stolen the money from a pub or a bank?
It seems there is one standard for white collar criminals in New Zealand and another for blue collar/no collar criminals.
Here's what his lawyer argued:
Boyack told the court that if Saunders was convicted, the "consequences would be catastrophic" as the offender would lose his job and go bankrupt. The defence requested a discharge without conviction.
However, this was dismissed by Judge Philippa Cunningham, who said these consequences were not out of proportion with the offending. "He would have known exactly what he was doing ... these are consequences he is going to have to suffer," she said.
After giving Saunders a discount for previous good character, remorse and family circumstances, Judge Cunningham sentenced him to 100 hours' community work.
4. Inflation is dead - Bloomberg reports on the problems many US companies are having pushing through price increases.
Companies can’t raise prices because wage growth remains stunted, even though unemployment has started to recede. Average hourly earnings rose 1.9 percent in January from a year earlier, the smallest increase since April, and down from 3.2 percent in 2008 and 3.7 percent in January 2009, the Labor Department said Feb. 3. The jobless rate fell to 8.3 percent in January, the lowest level in three years, compared with a high of 10 percent in October 2009.
“This recovery has not been a great recovery with regard to income gains, and income gains are a function of both growth in wages and jobs,” Jeffrey Rosenberg, the chief investment strategist for fixed-income at BlackRock Inc., the world’s biggest money manager, said in a Feb. 1 interview in New York. “Why can’t you pass price increases through to consumers? It’s because consumers aren’t seeing income gains.”
5. Sunshine trusts - Bloomberg reports on the growth of 'sunshine trusts' in China as investors hunt for yield in the wake of slumps in stock and property markets...
China’s private trust-fund assets tripled to 138.3 billion yuan ($22 billion) in the 18 months to Sept. 30, according to the most recent data from the China Trustee Association, while global hedge-fund assets have stalled at around $2 trillion. The sunshine funds are exempt from some rules placed on Chinese mutual funds, even as limitations such as a ban on short selling means they can’t operate as hedge funds in the same way managers in Hong Kong, London and New York can.
“It comes back to the lack of investment choices,” said Fraser Howie, a Singapore-based managing director of CLSA Asia- Pacific Markets who co-authored the book “Red Capitalism” on China’s financial system. “The challenge for China will be, can these funds really differentiate and deliver absolute performance independent of whether the stock market was rising or falling.”
6. Thai floods - It's been a horrid 18 months for natural disasters, including the Japanese Tsunami, the Queensland floods (times two), the Christchurch earthquakes (times hundreds) and the Thailand floods.
Reinsurers are really struggling and that pain is being passed on in the form of higher premiums.
The Japanese are being hammered in particular. Many manufacturers were hit in Japan and again in Thailand.
Here's Moody's on that (I don't have a link):
The severe flooding in Thailand in 2011 presents reinsurers with challenges that go beyond just significant losses, says Moody's Investors Service in a new report.
Specifically, the floods compounded losses for the year from Japanese and Australian insurers already hit by other catastrophes, present a peril the reinsurers find difficult to model, and may be followed by conditions not conducive to recouping losses. "We view Thailand flood losses as a credit negative for reinsurers," says Moody's Vice President and Senior Credit Officer Kevin Lee.
"Beyond capping off a very active year for natural disasters, the flood losses expose risk management challenges for reinsurers." Insurers expect to pay out anywhere between $10 billion and $20 billion on losses from the flooding, says Moody's. Similar to the 2011 Tohoku Japan earthquake and the 2011 Christchurch New Zealand earthquakes, much of the loss will be passed on to the reinsurance market. Because of the flooding, reinsurers suffered two sets of losses from Japanese insurers in 2011, once for the Tohoku earthquake and again for the Thailand floods.
"The floods stopped production at more than 400 Japanese firms in six industrial parks north of Bangkok. Moreover, at the time of flooding many of these Japanese firms were using their Thailand operations to mitigate business interruption losses from the March Tohoku earthquake," says Lee.
7. Growing inequality - Simon Collins has started a useful series of articles in the NZ Herald about the growing problems with poverty and inequality of incomes in Auckland.
In human terms, the Herald will reveal - in a six-part series starting today - that childhood skin infections and other infectious diseases associated with poverty and overcrowding more than doubled in the decade after the benefit cuts in the 1990s. They levelled off in the first decade of this century, and are now rising again.
And economically, many economists now see reducing inequality as a prime economic goal - both to harness our full human potential and to dampen boom/bust cycles caused by excessive lending by people who have more than they need to people who need the loans but can't afford them.
8. 'Crime has been decriminalised' - Here's Michael Hudson talking to Lauren Lyster via Russia Today (doing its bit to bring about the collapse of America) about the socialising of losses and the privatisation of profits by America's bankers. HT Iain via email. Hudson starts about 4 mins 20 seconds.
Entertainingly heretical.
9. Retroactive collective action - Bloomberg reports on how Greek politicians are looking to impose 'retroactive collective action' on the bondholders who won't agree to a 70% haircut.
This is designed to thwart the vulture hedge funds trying to greenmail the Greeks (and the Germans) into paying them more to avoid the armageddon of a formal default that would trigger default swaps and hammer banks, who (by the way) are also having to take the haircuts.
This is the sort of thing that explains why many bond buyers are so nervous now about European debt.
Because hedge funds and other holders could collectively keep the participation rate below that level, Greece has said it may approve legislation that imposes losses on investors who don’t support the voluntary swap by adding a retroactive collective action clause into its bond documentation. Such a provision would give a majority of bondholders the ability to force holdouts to accept the same terms as everyone else.
It will be difficult for holdouts to assemble enough votes to block any collective action clause, because European banks have an incentive to support the provision, fund managers said.
A lawsuit against a collective-action clause legislated by the Greek government may also be difficult to win, because it would probably have to be filed in Greece, said a hedge-fund executive whose firm holds the country’s debt and has examined the legal options.
10. Yay! - They're back. John Clarke and Brian Dawe have their first debate of the year. It's about the news business and feelings...
"Women tennis players do grunt too much...let's go to the big issues."
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