Jenée Tibshraeny on why you shouldn't believe what Wheeler has to say, whether millennials are really doing it tough, what middle-class China actually looks like, the CBA scandal & more

Jenée Tibshraeny on why you shouldn't believe what Wheeler has to say, whether millennials are really doing it tough, what middle-class China actually looks like, the CBA scandal & more

Here's a list of items from the internet that have caught the attention of interest.co.nz's Jenée Tibshraeny

We welcome your additions in the comments below or via email to david.chaston@interest.co.nz. If you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 10s here.

1. “Be very careful taking any speech that Governor Wheeler might give at face value.”

BNZ’s head of research, Stephen Toplis, has hit-up the Reserve Bank Governor for changing tack on the course everyone thought he was on, by cutting the Official Cash Rate to a record low of 2.25% yesterday. Toplis has been brazen in his commentary, saying:

This is the second time in two years that we have listened to a speech by Graeme Wheeler and been stupid enough to pay attention to it. For example: 

In Wheeler's February speech a lot was made of the Bank's factor model showing core inflation to be at 1.6%. A level which was seen as "encouraging" and "well within the target range". Now this core measure has been seemingly ditched and instead we are told we have "subdued core inflation relative to history across a number of measures". 

Wheeler also said that "the Bank would avoid taking a mechanistic approach to interpreting the PTA. Some commentators see a low headline inflation number and immediately advocate interest rate cuts". Looks like some central bankers now fall into the same category. 

Concerns over "creating serious distortions in the financial system, housing market, and broader economy" seem to have dissipated. 

As has the desire to look through movements in oil prices... 

Where to now becomes a very interesting question? Is the "new" way of looking at things by the RBNZ here to stay or will its approach be upended again? 

2. How concerned should we be about foul play allegations at CBA?

Fairfax journalists in Australia have this week published a series of stories exposing how Commonwealth Bank’s insurance arm, CommInsure, has allegedly used unethical tactics to get out of paying people’s claims. CommInsure is accused of manipulating medical reports so that claims that should be accepted are declined.

The bank’s former chief medical officer has filed an unfair dismissal claim, as he says he was sacked for being a whistleblower, having gone to the media after his concerns about CommInsure’s practises fell on deaf ears among the bank’s board.

The Australian Shareholders' Association has also called for a royal commission into the insurance sector and urged the Commonwealth Bank, which is ASB's parent, to "start taking ethics seriously".

CommInsure has responded by promising to make a raft of changes to its systems, including appointing an independent expert to oversee a claim review program focused on declined claims.

Reflecting on the investigation, Fairfax journalist Adele Ferguson says, “Until the cases became a media threat, the bank had treated these people, its policyholders, with disdain. It had a system geared towards denial and delay.”

Some Cantabrians still battling their insurers to have their quake claims paid undoubtedly have similar stories to tell as those Fairfax have profiled in their investigation. I would be interested to hear what experiences people have had with life insurers in New Zealand.

3. The cost of preventing money laundering and the financing of terrorism.  

A World Bank manager and economist, Dilip Ratha, highlights the magnitude of people in developing countries reliant on funds sent to them from family members in other parts of the world, during a time tough anti-money laundering laws are causing banks to stop doing business with money remitters.

In a TED talk he says that in 2013, international migrants sent US$413 billion home to families and friends — three times more than the total of global foreign aid. Of the 232 million international migrants around the world, 180 million from poor countries send money home regularly.

Ratha calls for regulations on small remittances under US$1000 to be relaxed. He also wants to see non-profit organisations create a remittance platform on a non-profit basis to serve the money transfer companies so that they can send money at a low cost, while complying with the law.

Ratha’s comments are interesting in light of the fact money remitters and banks in New Zealand are awaiting a High Court judgement that will determine whether Kiwibank can choose to close a remittance firm’s bank account due to money laundering risk. The ruling will be far-reaching and affect the way both industries do business. See this interest.co.nz story, and this one, for more.

4. An insight into the man who runs one of NZ’s most successful companies.

Listener contributor Guyon Espiner has written an excellent personal profile on Christopher Luxon that makes you feel like you’ve just met the Air New Zealand CEO yourself.

Espiner explores how Luxon’s financial and moral compass guides an airline that’s just made a record profit and is key to New Zealand’s economic success. He describes Luxon, saying:

There are similarities with John Key. Grew up in Christchurch. Married early and stayed married. Has a son and a daughter. Made it big in business overseas and returned to a top job. Wants the silver fern on the flag. He’s relaxed and informal and doesn’t try to assert his authority. He has a loose style of speech and comes across as an Everyman, but when the game face comes on he has a striking ability to marshal the data and has a child-like love of the pursuit.

I am always interested to find out what drives the movers and shakers in our community. I think there’s room in New Zealand’s media landscape for more of this kind of journalism.

5. You’ll get a good job if you go to law school: Yeah right.

A US lawyer is suing the university she graduated from in 2008 for defrauding law school applicants by inflating its figures around the number of grads who get jobs and the salaries they earn.

With a US$170,000 student loan and having not had a full-time job as a lawyer since graduating, Anna Alaburda says she wouldn’t have enrolled in the Thomas Jefferson School of Law if she’d known its statistics had been fudged.

Yet the Thomas Jefferson School of Law isn’t the only university allegedly talking itself up. More than a dozen similar suits have been filed in the US in recent years, but this is the first one to approved by a judge and make it to court.

This chart shows just how dim prospects are in the US legal market, thanks in part to law firms trimming their numbers post-recession.

Anecdotal evidence suggests job prospects and salary levels for law grads in New Zealand aren’t that rosy either.

6. How tough are millennials doing it?

Are millennials really that hard done by? NZ Initiative economist, Eric Crampton, has responded to a report in The Guardian detailing how young peoples’ incomes have been declining in other developed countries, by saying we’re doing ok.

Compare this graph from The Guardian…

With this one Crampton made using Stats NZ data…

Crampton says, “New Zealand isn't doing too badly compared to the international experience. But the international experience isn't good. And New Zealand has a bad habit of just assuming that whatever's reported in the Guardian about the US or UK is also true here.

“Youths locked out of housing by the Auckland gerontocracy could be excused for not noticing their very real growth in real incomes as compared to the 1990s; it's all being eaten up by housing costs.”

7. Reverse migration in China.

China’s slowing growth is sparking a spate of de-urbanisation, as people laid off from their jobs in the city retreat back to the rural areas they grew up in.

This 5-minute long New York Times documentary humanises the economic speak we hear about China moving from a manufacturing to a services sector economy.

It follows a middle-aged worker who heads back to the countryside after the sudden closure of the shoe factory he worked at in Dongguan.

The video shows the desolate streets of the once ‘sneaker capital’ of the world, as factories are moving from China to parts of South East Asia.

8. How much money China’s middle class really has – a bit of perspective.

Bloomberg reports:

Beijing recently overtook New York as the 'Billionaire Capital of the World' and country-to-city migration is at its highest level in recent history. But China's average annual wage was 56,360 yuan (US$8,655) in 2014, and Goldman Sachs estimates that 387 million rural workers — half the working population — earn about US$2,000 a year. 

The average Chinese consumer spends US$7 a day, according to Goldman Sachs. Food and clothing make up nearly half of all personal spending, with 9.2 percent allocated to recreational activities like travel, dining out, sports and video games.  The average American spends US$97 a day, 17.3 percent of it on recreation.

9. “The truth is like poetry and most people f***ing hate poetry.”

This is a great line from The Big Short. It’s a comment, author Michael Lewis heard in a Washington bar that was quoted in the Times and the Week.  An underlying theme in the story is truth, and how people do or do not accept it.

The Big Short is a black satire on the 2008 financial crisis, which brings us shoulder to shoulder with a small band of Wall Street “outsiders and weirdos” who spotted the worsening fault lines in the bedrock of the US economy three years early, and reacted by betting against it and crossing their fingers for disaster. 

The film is well worth a watch (or re-watch) if you haven’t already seen it.

10. Behind the gloss of Silicon Valley.

What images come to mind when you think of Silicon Valley? Slick, industrial-looking open-plan offices? Scenes that could be mistaken for the set of a science fiction movie?

A New York Times photographer has taken a series of photos capturing how the tech geeks of Silicon Valley really live. She writes:

The tech boom has contributed to growing income inequality in the area. And many of the young transplants profiled below are not among the area’s elite, at least not yet. They often live on the cheap while working on their companies, a process known as bootstrapping.

They work long hours with hopes to build empires. And their lives are intertwined: They live with each other, network with one another in co-working spaces, compete with everyone and party together.

Over the last few months, the headlines have changed, amid gyrating tech stocks and questions over the broader economy. For every success story, there will be many more failures. Yet most of these dreamers believe that the industry remains a true meritocracy: that those who deserve to succeed will do so.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

19 Comments

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(Repetitive rant that doesn't pick up on any of the items in this Top 10 deleted. Ed).

Methinks that when a bank economist complains as loudly as Toplis has, they have been caught with their investment pants down.
Why should Wheeler take any notice. We may just get realistic exchange rates if the Wheelers of this world were indeed less predictable.

#2 in an often discussed theme on this site, why are we surprised that banks refuse to behave themselves until they are made to, either by bad press or regulation? They rule the world, is there any government out there with the balls to stomp on them as they deserve? I have said it before right wing free market rules (or lack of them) doesn't work any more than Left wing total Government control does. there must be some form of regulatory balance in the middle that preserves both the right to grow money while preventing unethical behaviour. Do we really need to wait for a total collapse and the accompanying blood on the street before we get some common sense in the system?

Murray86. There is a line of thought and research developing that big corporates have the same characteristics as psychopaths. That if you 'diagnose' them in the same way as you would a human you come up with lack of empathy etc.
What has struck me about psychopaths is one feature is that they do not see the down side often and while that causes their downfall, t can be after some savage and destructive acts.
Is this Banks? Adds up to me.

Big is not better in some sectors of the economy, it is uglier and soul less ?

And the pollies who have got their fingers up their date, doing nothing are the same too! Question is - how to make them sit up and take notice that the train they are collectively steering is trucking ever faster towards a fairly steep precipice, and no matter how good, or untouchable they think are, there will be a fall out!

Treatment or persuasion does not work with human psychopaths, nor with corporates probably.
They have to be controlled. There is no better side to appeal to.

Iceland?

My theory is that sometime in the last weeks Wheeler got presented with some numbers on Fonterra/Dairy that made him go glassy eyed big time. You could see in his manner that he was unhappy with what he had to do. As someone mentioned on the site you can't remove $12B of dairy from the economy with a 7X multiplier effect without having major problems. I really don't think anyone in NZ except the dairy farmers believed this but I think Wheeler and English now do. Key - well he is interested in something about a flag.
The OCR drop yesterday was Wheeler revealing that saving dairy and other exporters is more important than whats happening in Auckland but a mere 2% drop in the Kiwi ain't going to do it.

No 3 - I know numerous people in NZ who send money back to families in other countries.....Just recently a Fijian builder working in NZ who regularly sends money back to his family in Fiji was run through the gauntlet here in NZ for sending money to his family which the authorities claimed the bank account he was sending money too was a terrorist organisation.....the authorities can get it very wrong and there are no consequences on them when the do so!

No worries, the hot cash coming into Auckland property (until now anyway) swamps outgoings by a margin.......

.... that is until it wants out.

having gone to the media after his concerns about CommInsure’s practises fell on death ears among the bank’s board.
For a commentary on medical insurance that has to be the Freudian typo of the day...

Whilst there's obviously a lot more to this story than we've seen yet, based on my personal experiences with CBA colour me unsurprised.

You would think the BNZ would know better. They are constantly lobbying for higher interest rates, tightening warnings, and dismissive of obvious signs that rate cuts are inevitable (even if undesirable in an ideal world).
Is the BNZ trying to convince the public that inflation will be getting to 2% in 2017? Perhaps they should look at inflation since 2009.

8 so if the .2% are taking their money out of the country instead of investing or spending internally does not make for good picture when you look at the average income left of the spenders

The Big Short; and the US election have made me think again about paradigms, and how even in very large markets supposed truths that just aint so, (as Mark Twain reportedly called them) become so ingrained in the national psyche.
Donald Trump is bursting a few on the Republican side. Following are a few that have occurred to me:

That evangelical (whatever that means- the Americans clearly can't agree) and gun lovers are both a majority, and have those as priorities. Sorry Ted Cruz, but you can never be elected in a general election.

That George Bush was a good end effective president, despite the evidence from the Iraq and Afghani wars, and that the GFC happened on his watch. Trump pointed it out that he wasn't actually very successful. Sorry Jeb Bush, and now Rubio, who seems to be paid by the same lobby groups.

That 11 million Mexicans can be sent home to Mexico, and that if they were, that would be good for the USA. My own take on Trump's position is that he might send most home, but he would have guaranteed that all but convicted felons can come back immediately and legally.

That taxes can be lowered, trillions more spent on defence, all entitlements can really survive, but that the fiscal deficit can be balanced. (Actually No Republican has addressed this). I wonder if the electorate is stupid, or knows it can't be done, without the helicopters. Somewhere I see helicopters with trillions being used to fund the economy- that would help lower the USD, and go to Trump's trade plan. Am not sure otherwise what trade plans he would have. Note that the others are no better, but pretend to be.

The only thing the Republicans are good at is trashing the Democrats (and themselves, to be fair). From afar, Obama's legacy looks pretty good, but the vitriol thrown at him is staggering, even in the modern bloggers world.
Similarly Hillary's apparently a pathological liar, even though by politicians standards she seems pretty robust to me, and actually has plausible accounts for most major circumstances. And she's extraordinarily well qualified for the job.
Anyway, interesting times.

So its going to come down to one of a couple of bad eggs who would fit in at a Fred West working bee getting elected by a bunch of red neck, gun toting religious freaks after which it will be time to short the US$??
God bless the US and A.

"Beef is now so expensive in Argentina, which once was the third-largest exporter, that slaughtering plants are about to start importing cattle from neighboring countries for the first time in almost two decades.

It’s a big switch for a population that eats more beef per person than any other and where the meat has become as much a part of their national identity as the tango or World Cup soccer. Rising costs have encouraged what was almost unthinkable a decade ago: beef demand is dropping, and consumers are substituting with cheaper chicken and pork."

Ye olde government intervention...

http://www.bloomberg.com/news/articles/2016-03-10/beef-mad-argentina-pre...

There is a lot that Gloomberg is not telling us. Argentina had a lot of cattle ranchers that got pushed out of business by multi National corporations wanting to grow Soy. Then good old Monsanto turned up.

http://www.argentinaindependent.com/currentaffairs/62260/

http://www.truth-out.org/news/item/29781-the-dilemma-of-soy-in-argentina

http://www.globalresearch.ca/argentina-disappearing-farmers-disappearing...

A lot of that soybean land is leased on only one year contracts so land holders not tied to the Los Grobos.