US HOUSE BUILT ON SAND?

Gonzo leaves the drugs debate alone for a while and looks at some interesting business info about America.

GM sells the Hummer brand for a quarter of the asking price.
Gonzo rightly questions just while the US talks assets up their real value appears to be substantially less.

HERALD HAS THE FINANCIAL STORY OF THE WEEK

We missed it today - we normally get the Herald in hard copy but it was sold out in the dairy so we did not see Fran Sullivan's sobering article..

Thanks to QB at the Hive we have now

The dark clouds of financial upheaval are on the horizon but it looks like our politicians are looking the other way. Our banks are not as safe as we have been led to believe.

It is hard to believe that Cullen and Clark would leave the country teetering on the brink of financial collapse just so they can go in a couple of days before the election and save the day but that's what Fran is implying.

Bollard has the ability to step up and tell the country what needs to be done rather that Clark and Cullen telling him what they want done.


Read the Hive Here - for a good summary

and Fran's Column is here its mandatory reading


and re read these two Roarprawn posts as well

NZ one of thirteen most at risk countries

and

Iceland Melts

GLOBAL ROLLER COASTER CONTINUES

Just as we predicted - the markets are still up and down .

Its not over by a long shot see Stuffs latest report

LABOURS DEPOSIT GUARANTEE SCHEME IS A CROCK

Queen Bee at Wellington Hive does some further analysis this morning and it doesnt look good.

It was as Roarprawn expected - a very badly drafted piece of legislation.

Investment guru Chris Lee said on RNZ this morning, that it will be lapped up by the finance companies and skew the market.

We also note that this issue was of so much concern to QB that she got out of bed at sparrow fart to post on the changing face of the Global Credit crisis.

Wellington Hive is a must read for all journalists and investors this morning - read it and weep.

NOT A BAD FINANCIAL COMMENTATOR FOR A SHEILA

This Aussie woman writes wise words

This is a sample of Janet Albrechtsen's very well read column in The Australian

THE Prime Minister is back in the business of building up myths to justify policy intervention. In 2006 he was peddling the myth of “brutopia” under John Howard. It was a flagrant falsehood but it won Kevin Rudd the election.

Now Rudd is using the financial meltdown in the US to flog a nightmare on Wall Street. It’s all the fault of “excessive capitalism” and unregulated markets, home to the 21st-century children of Gordon Gekko, he says.

Rudd’s myth-making is dangerous if it presages an era of misconceived regulation. Alas, listening to and reading some of the local reaction to the $US700 billion ($973 billion) bailout in the US is to step into an uninformed parallel universe.

On ABC radio last Thursday afternoon, Jennifer Byrne offered her take on the crisis. She was furious about the bailout, given that chief executives had pocketed millions of dollars. Sensing an opportunity to push their anti-market ideology, the uninformed have a simple and alluring solution: rein in unregulated greed to build a more socially progressive world.

But here’s the rub. Socially progressive regulation caused much of the mess that has enveloped the US. In pursuit of the perceived social benefits of home ownership, the mortgage dice has been ridiculously loaded in favour of American borrowers. The American dream of home ownership for all is a fraud. Not everyone can own a home. But politicians pimped this dream, creating an unsustainable mortgage industry whose collapse is surprising only because it didn’t happen sooner.

The US mortgage industry will not recover, or deserve to recover, unless someone somewhere is prepared to challenge that politically unpalatable reality. Eager law-makers in Washington are as much to blame for the financial crisis as the unregulated suits on Wall Street.

Wrong regulation, rather than deregulation, is the problem.

Those genuinely interested in understanding the causes of the meltdown could start by comparing the US mortgage industry with Australia’s. The stark differences explain why our central banker, Glenn Stevens, said a few weeks back that Australian banks were “light years away from what’s happening in other banking systems around the world”.

And why Australia’s four leading banks sit among the 20 AA-rated banks across the globe. And why the most recent International Monetary Fund country report concluded that Australia’s banking sector was sound, with stable profits, high capitalisation and few non-performing loans.

Unlike the situation in Australia, the American dream was founded on a house of legislative cards that deserved to topple. Take non-recourse mortgage loans. When Australians borrow money to buy a house, they know that if they default and the mortgaged property doesn’t cover the debt, they will be responsible for the shortfall and the lender will chase them for it.

It’s a neat way of reminding Australians to borrow responsibly.

In the US, where populist post-Depression laws in many states have mandated loans be non-recourse, the opposite is true. Americans can take out a mortgage loan more or less as a one-way bet.

If you can’t afford the repayments and can’t refinance, you just send the keys back to the bank. The banks collect the jingle mail. Borrowers wipe their hands of liability. So, naturally, an American in financial strife will pay off debts that carry personal liability, such as credit cards, before they pay off their mortgage.

The rest of this very good summary of the financial ills of America is here

WELL WORTH A READ. - MORE ECONOMICS

NBC


Witty straight to the point and scary...

THE POPE IS A HYPOCRITICAL DORK

The pope with an estimated wealth measured in the billions has proffered his wise advice - keep the faith...



The Associated Press
Pope Benedict XVI says the global financial crisis show the futility of money and ambition.
Benedict says that "now with the collapse of big banks we see that money disappears, is nothing and all these things that appear real are in fact of secondary importance." He urges those who build their lives "only on things that are visible, such as success, career,
money" to keep that in mind.The pontiff was speaking Monday as he opened the
works of a meeting of 253 bishops at the Vatican.Benedict says "the only
solid reality is the word of God."




thats all very well - and if he thinks that money means bugger all perhaps he could divest the vatican of some of its extensive financial interests and spread some money around some of its poorer people - stimulate the economy so to speak...

FINANCIAL BUBONIC PLAGUE HITS BRITAIN AND EUROPE

Things just got worse. Our dollar is down 4 cents the Dow and FTSE are down with record falls for both. Oils about $90 a barrel.

Here at Stuff

EVEN AUSSIE IS JITTERY

And their economy is in better shape than ours

from the Australian
AUSTRALIAN shares and the local currency fell sharply today on fears about the deepening global financial crisis.
The benchmark S&P/ASX 200 Index closed down 155 points, or 3.3 per cent, at 4540.4, it lowest level since November 2005, as the bear market tightened its grip. The bourse is now about 34 per cent below last year’s all-time peak. The Australian dollar was also hit hard, falling to a 30-month low below US75 cents, taking is losses to about 24 per cent since its 25-year peak of US98.40c in mid-July.

A BIO WORTH READING - ALEX SUNDAKOV

BB bumped into Alex on Friday and enjoyed a pleasant hour with this affable man with an exceptional intellect.
Anyway it seems that Unlimited caught up with Alex recently - the interview is well worth a read here .
I would be surprised if Alex doesn't have some sound advice for John Key and Clark about whats needed to help NZ counter the Global Financial crisis..

WE NEED A PLAN - OR OUR ECONOMY COULD BE IN THE CRAP

Mark Weldon is saying it at Stuff

Fran O'sullivan is saying it in the Herald


And Gareth Morgan says we are " Unbelievably Exposed"

ad we agree - we need to hear from both political parties about what their strategy will be to counter the global credit crisis - we are burying our collective heads in the sand if we think that its not going to trickle down and impact on the families on Struggle street.

We can't afford to wait and then have to do a patch up job like the bail out the US has just voted on. They waited until their country was on its knees. And it is clear it might be too little too late.

We are a very small nation and we depend on exports for our economic survival so we must to plan to protect our fragile existence on the global stage.


We need leadership
We need a strategy
We need to hear from Clark and Key this week.

US CREDIT CRISIS STARTS TO BITE HERE

I have been astounded over the last few weeks about the number of people who think as a nation we will be isolated from the US credit crisis. We wont be and the trickle down effect has already started.


This from the Herald

The credit crisis that started half a world away is hitting renovators and first-home buyers.

A combination of falling house prices, rising living costs and higher prices for overseas money is forcing banks to tighten their lending policies.

Worst affected will be those borrowing a high proportion of their home's value. But all borrowers now face tougher tests to prove they can pay back a loan.

ASB drastically tightened its lending rules this week, telling brokers that it would generally not lend more than 80 per cent of a home's value.

Its head of retail banking, Ian Park, said ASB would consider applications for more than 80 per cent, "but they will have to be very strong from a servicing perspective".

A year ago, all main banks would lend up to 100 per cent of a home's value.

When house prices were rising and the economy was strong, up to 40 per cent of first-home buyers were getting 100 per cent loans, brokers say.

Massey University banking expert David Tripe said consumer credit had been tightened as banks took a less rosy view of borrowers' prospects.

ASB has also stopped giving "low doc" loans - the credit once advanced to high-earning business people who did not have all the documents to prove their income.

In March, Westpac changed its lending policy to require faster repayment of mortgages that had a high ratio of debt to value.

ANZ and National changed their rules early this year to make it more likely that anyone seeking more than 80 per cent of a home's value would be asked for a registered valuation.

FIRST US VOTE BACKS FINANCE BAILOUT

74- 25

11.30 OUR TIME, FOR US FINANCIAL PACKAGE VOTE

The whole world will be waiting for what happens at 11.30. RoarPrawn has been at the pessimistic end of spectrum re the damage that this would cause here. the Silver Farm deal and now the Mataura Dairy deal falling through are examples of what will hit us here .

Stuff has more here

MORE CYNICAL POLITICS FROM LABOUR

The Dom Post reports on Labour's shrill call for an investigation into power prices.

Commerce and energy ministers Lianne Dalziel and David Parker hit out at "alarming" rises of up to 12 per cent in Wellington and parts of the South Island, and said they would seek Cabinet approval for an inquiry.

But National's energy spokesman, Gerry Brownlee, said the promise of an inquiry was too little, too late, after a 48 per cent rise in domestic power prices in the past five years.

"Suddenly, on the eve of an election, they announce a review ... After nine long years and regular complaints about the state of transmission and generation, they are trying to pretend they will do something about it."

Mr Brownlee questioned whether a review would carry any more clout than the recent inquiry into petrol prices, which found no evidence of anti-competitive behaviour among petrol companies

But the stuffy, prudish but elegant Queen Bee at Wellington Hive points to a cracker of an idea from Fran O'sullivan to open the government books this week to allow for better planning in the face of the global financial crisis.

Neither leader has any excuse for failing to inject a reality check at this juncture. Clark has had nearly a decade of golden economic weather under her belt during her prime ministership.
This may have lulled her into a sense of false security. But she was Deputy Prime Minister after the 1987 international sharemarket crash and should be well aware how long it took for the New Zealand economy to climb back as our companies found themselves well down the pecking order in the hunt for international equity.
Key - who also ought to know better given his financial trading background - still appears to be clinging to the notion that his party's "well-structured economic plan" will ensure the New Zealand economy is hermetically sealed from the global shocks.
But the upcoming hunt for international credit will impose constraints on New Zealand irrespective of the underlying health of our companies in much the same ways they were impacted in the late 1980s/early 1990s.
Neither prospective Prime Minister seems to have grasped the nettle - at least publicly - that their plans to buy our votes at this year's election also need to be urgently recast.
Continuing on their respective "default" modes (Clark promising more cash to Labour's people and Key promising another round of tax cuts without compensating expenditure cuts) is questionable as will be obvious on Monday.
On that day, the parlous state of the Crown's coffers will be confirmed as Treasury releases the pre-election economic and fiscal update.

Bloody good thinking from Fran ... Top chick and smart with it.

SOUTHLAND REMAIN STOIC IN THE FACE OF VOLITILE MONEY MARKETS

The Southland Times reflects the Southland conservatism as the Wild West Show raises nary an eyebrow in the deep south.

Impossible to predict impact of sharemarket fall: advisers

Southern investment advisers yesterday said while the fall in the New Zealand sharemarket was of concern, it was impossible to predict the full impact.

Forsyth Barr Invercargill manager Paul Tuckey said he expected at least short-term market volatility.

"But the current market is down about 3 percent while the United States market is down about 7 percent; at this stage it has not hit quite as hard." While the downturn in stocks could be concerning for some investors, for others it created a new opportunity to expand their portfolios, he said.

"A lot of investors these days have a good understanding of the market," he said.

Mr Tuckey said he had not had any phone calls from concerned clients yesterday.

Southern investors were more conservative than elsewhere, which was often reflected in their investment portfolios, he said.

"Good advice is important, but no more now than always," Mr Tuckey said.

ABN Amro Craigs Invercargill branch manager John Wilson said the sharp drop in share prices was largely reactionary to the events overnight but was buoyed by the stability shown by the New Zealand sharemarket at its close.

However, he said there could be market fluctuations until a resolution was found in the United States.

AN "OH SHIT" MOMENT IN THE USA

The Americans have voted against the bail out - wow.... this will probably create havoc world wide today.....