Here's my Top 10 links from around the Internet at midday today.
As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
See all previous Top 10s here.
My must read today is #5 and #6 from Gareth Morgan on Auckland's crazy housing market.
1. 'All guns blazing' - US Federal Reserve Chairman Ben Bernanke was expected to try to calm markets nervous about the end of money printing.
Instead he came out 'all guns blazing' as BusinessInsider says and was even more specific about when the money printing would end.
It was no surprise then that the US 10 year bond yield -- the one everyone watches -- rose almost 20 basis points to 2.36%, its highest in 15 months.
Now we'll see whether the markets can kick their addiction to free money.
And, more importantly, whether the developed world's biggest economy can manage a self-sustaining recovery.
I think it's going to be tough to get real growth when there's still so much debt weighing down US households and so little real income growth.
Here's Business Insider with its interpretation:
Today, most were expecting Federal Reserve Chairman Ben Bernanke to attempt to soothe markets.
After all, volatility in the Treasury market, caused by uncertainties surrounding how soon the Fed will begin to taper the pace of its bond-buying program, has had earthshaking reverberations around the world. Instead, Bernanke and the Fed did just the opposite. The FOMC revised up its economic forecasts – implying a quicker economic recovery, meaning tapering is closer than previously assumed – and even laid out a roadmap for tapering, saying bond buying could be completely finished by mid-2014.
This development wasn’t even borne out of the discussion in the Q&A with reporters – Bernanke had it ready to go in his prepared remarks to launch the presser. Guns blazing.
“If the incoming data are broadly consistent with this forecast, the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year,” said Bernanke, referring to the FOMC’s newly-released macroeconomic projections. “And if the subsequent data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year.“
2. China's deepening cash crunch - FT reports this is not going away in a hurry, as some had hoped. Read the tone of the comments from the PRC's propagandists. It's all about tightening monetary policy.
Short-term interbank rates jumped more than 200 basis points to a record high of nearly 8 per cent for loans of one month or less, in the latest indication of how tight credit has become in China.
The main reason for the lack of liquidity has been the central bank’s reluctance to pump liquidity into the money market, wrongfooting banks that had expected Beijing would continue to support them with large cash injections.
Signalling that the cash crunch could persist for a while, the China Securities Journal, a major state-run newspaper, ran a front-page commentary saying China was at a turning point in monetary policy. “We cannot use as fast money supply growth as in the past, or even faster, to promote economic growth,” the newspaper said. “This means that authorities must control the pace of money supply growth.”
3. Now that's a tax evasion fine - FT reports Dolce and Gabbana have been fined 500 million euros for tax evasion. Reuters is not so sure, saying it could be 10 million euros. It's still a lot.
It is a supply issue – but not supply of property, but rather supply of finance. And whether that supply is so high as to put the banks’ balance sheets at risk is beside the point. The damage is being done to the economy anyway as non-housing investment is shunned in favour of speculative demand for housing, demand that has nothing whatever to do with the demand for accommodation.
The problem with demand for property in New Zealand is one that has arisen as a legacy from a long history now of Reserve Bank prudential policy combining with selective tax policy to provide a toxic little no brainer for property investors. Put bluntly, it is the easiest way in town for people to make money – all they need do is gear up and the tax-free gains are, over time, sumptuous. All Kiwis know this and it is the national pastime.
6. 'Just buy houses' - Here's Part II of Gareth's comment on the latest housing boom. He's right.
Nowhere is the housing circus more entertaining to watch than in Auckland, our largest city and the giant sucking machine that’s pulling more and more New Zealanders north of the Bombay Hills as the jobs are there or nowhere.
So long as those desperadoes are in the market, forced to Auckland because of the job market and desperate and able to buy, courtesy of large dollops of credit courtesy of their banks, then it’s like babies to the slaughter insofar as an investor or property speculator is concerned.
I’ll have five houses please – it’s a certainty prices will rise, profits are all tax free, gearing available to amplify my gains – oh it’s all too much, why bother with the day job. And the more the merrier, this bubble is so much fun.
8. Can you inhale calories - It seems you can, Slate reports, but it still makes you fat.
Public health officials worldwide are warning young people off the new trend of “smoking alcohol.” The user either pours hard liquor over dry ice or heats it, then inhales the vaporized alcohol. Some believe the process affords the inhaler a high without the calories of alcohol, but experts say there are still calories involved. Can you really inhale calories?
Yes. Inhaled alcohol has to travel through the bloodstream to make it from the lungs to the brain. Once it’s in the blood, the alcohol will be metabolized and deliver calories to your cells. Inhalation is, however, a slightly lower-calorie booze-delivery method than ingestion. When you drink, your stomach and liver break down a portion of the alcohol before it enters the bloodstream. The metabolized alcohol has caloric impacts but doesn’t contribute to drunkenness. Inhalation bypasses your digestive organs. The caloric savings of volatilizing hard liquor are minimal, though, because of its composition.
9. Will NZ join this tax avoidance crack-down on multinationals? - Here's the G8's plan.
10. Totally John Oliver on US immigration reform
(Updated with cartoons)
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