Will the Bear come here ?

[Beagle]

So seeing as the poll of how serious is the bear is split almost exactly 50/50 in terms of its seriousness or not and seeing as the NZX is one of the few markets in the world to be up for 2018, (apparently up 3.8% and being a gross index it should be noted that without the dividends it would be down very slightly) and seeing that the American markets for the first time ever recorded fell more than 1% on Christmas eve, actually more than 2% and several of their indices are now officially in bear market territory I thought a new poll would be appropriate, Will the bear come here ?
Now we know from Wikipedia that Bears reside only in North and South America, Europe and Asia https://en.wikipedia.org/wiki/Bear and so it seems with their share markets too, thus far, (although Australia is down a fair bit in 2018)
You'd almost be forgiven for thinking with our border control and isolation that Bears can't immigrate here...but seriously...might the chilling effects of bears elsewhere make their presence felt on our share market in 2019 or will our high dividend yield or some other factors shield the NZX from the worst ?
Please forgive the metaphorical nature of the poll questions, hopefully each slection and its implications are clear enough.
Not in the poll but if we do go into a full blown bear market (poll selection 4) how long do you think it will last ?

I will opine early on this one. I don't think you need to wait for the market to fall by the classic 20% to officially be in a bear market.
Business and consumer confidence is fragile and certainly not helped by an inexperienced government with a vast array of future policy currently in a state of flux in dozens and dozens of working groups. Business doesn't like uncertainty and that's exactly what we have going into 2019.
Some experts believe the forward PE on the NZX is still above 20 and is for example well ahead of the 14.5 of the S&P 500 in the US.
I think the potential for PE contraction remains very real for 2019 and we could see companies grow earnings but still make no difference to their share prices.
My focus is mainly on defensive dividend yield companies and I expect most of my return for 2019 to come from dividends.
To a large extent what happens to our markets will be determined by what happens overseas, (I know I am stating the obvious here but "bear" with me). RBNZ does have some room to move with the official cash rate and bank requirements and I expect they will need to dip into their toolbox at least once in 2019, probably twice or maybe three times. I ticked option 3 as I expect bearish tendencies next year even if we don't get to a full scale bear arrival.

[GTM 3442]

Opinion unsubstantiated by facts or numbers. . .

A long slow downtrend over a number of years (probably about 5 or so), with the occasional burst of irrational exuberance to leaven the mix.

It will take a while for the downside of passive,. indexed-based investment to sink in, but sink in it eventually will. Sadly, those who are slow to recognize it won't be capable of implementing the granularity needed for such an environment.

So, just as in the aftermath of 1987, a generation of Kiwis will be frightened off the sharemarket for life.

[Beagle]

Big boxing day for retailers. http://www.sharechat.co.nz/article/699cc417/retailers-enjoy-a-boxing-day-bonanza.html?utm_medium=email&utm_campaign=Retailers%20enjoy%20a%20Boxing%20Day% 20bonanza&utm_content=Retailers%20enjoy%20a%20Boxing%20Day%2 0bonanza+CID_f746f21ce05f304bf0799d18261a17c7&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle699cc417retail ers-enjoy-a-boxing-day-bonanzahtml Good sign or wait for the hangover from the party when January's credit card bills arrive and then see the lie of the land ?

[Biscuit]

Last time around, NZ was protected to some extent by China's demand for commodities and consequently by Australia. This time around this risks being a genuine global crisis IMO. China is weakened and is in a partial trade war with the USA. The USA has done quite well climbing out of the GFC and put in place sensible banking reforms. Now though they have a Government in disarray and a President who does not act responsibly and who has re-weakened the financial system and looks like a one-man bear who could exit the circus ring at anytime, leap into the audience and start shredding randomly. The USA and Europe climbed out of the GFC by printing money and providing stimulus through low interest rates. This means that this time around, debt is again very high, there is over-capacity and with global low interest rates we are not in a sensible place to re-stimulate. What we need is a good recession to clear away the over-capacity but politicians hate that so they will push for stimulation if they can - printing more money, pushing up asset prices and stoking overcapacity and further reducing returns on investment. I don't think they can pull this trick twice and I voted #4 in this poll.

[macduffy]

Will the bear come here? Yes, of course. It's part of the economic cycle/order of things that hasn't been repealed!

The real question is - When?

[Vaygor1]

Will the bear come here? Yes, of course. It's part of the economic cycle/order of things that hasn't been repealed!

The real question is - When?

2 or 3 months ago as far as I can tell.

[winner69]

2 or 3 months ago as far as I can tell.


..or about this time last year. A lot of discussion on here then

Bears just don’t happen ....they grind you down slowly

[Beagle]

2 or 3 months ago as far as I can tell.

Yeap, I reckon most people have felt the bears claws already and have been busy positioning themselves so they avoid its teeth !
NZX50 ended the year up 4.6%, one of the few markets in the world to be in the green for the year.
NZ investors in effect were handed a "get out of jail free card" in 2018...what they do with that in 2019 is up to them.

[Leftfield]

Yep I agree, the Bear is here. Howeva, my theory is that NZ is better placed than many economies to weather the Bear.

[Beagle]

I agree. We have one of the highest dividend yields in the world and tourism and agriculture are our two biggest export earners are still very much in vogue, (people have to eat and experiences rather than things are very much on trend). I like your analogy of riding the bear... Pick stocks that will perform regardless of economic conditions and be positioned to bag some real bargains later this year if the ride gets really bumpy.

2019 and 2020 could see very modest returns from the NZX. Sustainable dividend yield is my focus. Cash doesn't look too bad as an asset class either.

[winner69]

NZX50 ended the year up 4.6%, one of the few markets in the world to be in the green for the year.
NZ investors in effect were handed a "get out of jail free card" in 2018...what they do with that in 2019 is up to them.

Just as well it’s a gross index with dividends (reinvested as well) counted

NZX50Capital up 1% last year but 8% off its August highs

[percy]

Some headlines.
ANZ expect cash rate to fall.
NZ's unemployment rate declined to 3.9% in the third quarter of 2018.
Christmas retail bonanza .
Maybe this Bear is Cookie Bear?

[couta1]

Some headlines.
ANZ expect cash rate to fall.
NZ's unemployment rate declined to 3.9% in the third quarter of 2018.
Christmas retail bonanza .
Maybe this Bear is Cookie Bear? I Love all kinds of Bears including Cookie Bear of course.PS-Every man should own at least one Bear.

[winner69]

Some headlines.
ANZ expect cash rate to fall.
NZ's unemployment rate declined to 3.9% in the third quarter of 2018.
Christmas retail bonanza .
Maybe this Bear is Cookie Bear?

Slowing economic growth and a very low unemployment generally leads to a bust ....but thats a big problem for 2020

At 3.9% the unemployment rate is well below 4.6% RB economists estimate to be consistent with low inflation

RBNZ leading us to not so good times .....and ANZ have ulterior motives for ‘forecasting’ lower interest rates

[horus1]

I agree . It is a stock pickers market.Have been hit with HGH but donot sell . Will buy at the bottom. have a lot

[percy]

I agree . It is a stock pickers market.Have been hit with HGH but donot sell . Will buy at the bottom. have a lot

A year ago HGH's share price was a lot higher than it is today,yet today the business is in a lot better shape than it was a year ago.This will be confirmed when their half year result comes out in about 4 or 5 weeks time.

I actually added to our holding a couple of weeks ago,which caused the sp to drop further..lol..
.

[Beagle]

$1.30 ish is possibly somewhere close to the bottom (assuming the custard doesn't really hit the fan AKA GFC Mk2) but financials have never been known to be a defensive sector in a bear market before...so plenty of risk even at the current beaten down price and quite probably a 50/50 call whether this goes up or down in 2019 in my opinion. Disc: Holding a very modest stake for dividend yield.
They certainly have a more consistent track record than TRA with growing eps and are on not dissimilar metrics. Looks a much better bet than TRA to my eyes.

[horus1]

I have been adding.

[percy]

Yes it will be interesting seeing whether HGH or TRA outperforms the other this year.
At this stage I think HGH's Australian REL business has the momentum to carry the day for HGH.
However, I and prepared to be pleasantly surprised by TRA.
In the meantime, both are paying large fully imputed divies,which they look able to maintain much to my pleasure.
I look forward to seeing which one increases their divie.At this stage I think it will be TRA.Their buyback will improve all their financial ratios.

[Beagle]

So the poll is running 2:1 that the bear's coming here and will do some pretty serious clawing.
Nobody has really opinioned on how long they expect the big bad bear to stay ?

[Raz]

So the poll is running 2:1 that the bear's coming here and will do some pretty serious clawing.
Nobody has really opinioned on how long they expect the big bad bear to stay ?

https://www.alhambrapartners.com/2019/01/04/if-youve-lost-the-ism/

perhaps now more than just the bear.....

[moka]

So the poll is running 2:1 that the bear's coming here and will do some pretty serious clawing.
Nobody has really opinioned on how long they expect the big bad bear to stay ?
Judging by the Reserve Bank of Australia’s reaction to encourage banks not to restrict lending in early December it looks like economic growth is the priority at the expense of reckless lending which fuelled a housing boom. With house prices posing a risk to growth, Guy Debelle says the lesson from the GFC is to keep credit flowing. The comments come a day after data showed Australia’s economy had slowed from an annual rate of 3.4% to 2.8%. Yet regulators over the past two years have wanted to tighten lending because credit standards were too loose. The subsequent shrinking of credit – especially to housing investors – is pinpointed as one of the key reasons for the current fall in prices.

So conflicting messages there from regulators. The Royal Commission into Banking exposed fraudulent and dodgy practices, liar loans, reckless lending, but it seems such behaviour is okay if it is the only way to get economic growth. Lots of lessons from GFC apart from keeping credit growth flowing and most of them have not been learnt. I can’t see enough Australians rushing into buy property to push up prices and get the economy growing. So growth will be flat at best, but most likely slowing growth. Certainly no long term sustainable growth.

https://www.theguardian.com/australia-news/2018/dec/06/dont-restrict-lending-too-much-in-downturn-rba-deputy-urges-banks

[moka]

Jeffrey Gundlach thinks this is a bear market. This bear market could last a long time he says.

https://www.youtube.com/watch?v=hA_kg_nMGNU
(https://www.youtube.com/watch?v=hA_kg_nMGNU)
He says in the fullness of time we’ll go below the February lows. “I’m pretty sure this is a bear market – I’ve been around 35 years, I’ve seen a number of bear markets.” It’s more about how you lead into it, how it develops, how the sentiment changes, and I think we’ve pretty much had all the variables that characterize a bear market. Amazed at how it goes on longer than it should eg dot.com IPOs with no sales/revenue. Cryptos truly a mania, and then it crashed last year. And then you start to see various sectors of the global markets give it up. Amazon gave it up, then Apple gave it up. Global markets peaked January 26.

Ford announced that it would have to raise the prices of new cars if inputs prices go up due to NAFTA, and suddenly the market seemed to wake up that this was real and the next day the stock market tipped. October 3rd Jerome Powell’s comment re a long way from neutral = scary thing for markets, and a tipping point. I’d be happier if the VIX would go above 40 – typically what happens when you get to the bottom coz so much nervousness and fear. Bear market = late day volume bad. We’ve had the first leg down and usually the second leg down is more painful in the short term.

Highly unusual increasing the budget deficit so late in the cycle. Budget deficit extraordinarily high. Supposedly having a good economy but almost no growth happening apart from increasing the deficit by 6% of GDP. So as we move into a weaker economy which will happen at some point the deficit will continue to expand at a rate which will be prohibitive for the usual decline in interest rates helping to stimulate the economy. That's the big variable which investors need to focus on. While deficit is rising the Fed is raising interest rates, so interest expense will be increasing. What if we go into a recession, what’s the deficit going to be? I’ve had a call that come 2020/2021 the 20 year treasury will be 6%.

In financial markets these things go much longer than they should. This bear could last a long time. 80% of the countries in MSCI world index are in the death cross. 90% of the risk assets in the world are in bear markets. A pretty widespread and coordinated set of weaknesses.

The problem is the fact that the deficit is out of control this late in the cycle. Never before had the Fed raise interest rates while the budget deficit was expanding. Usually the budget deficit expands as a response to recession, stimulating to get us out of recession. Instead we did it to keep this economic recovery going. Global economy slowing down. Fed didn’t see lending problems in 2006. Last quarter GDP of 3.5%, but real GDP if you take out building inventories is 1.2%. Yield curve has flattened out. It’s a debt based economy, when retail sales go up coz people borrowed more money is that really good? Borrowing money leads to short term growth.

Consumer expectations (re future) are amazingly weak, while consumer confidence (= current) is strong. Short term growth from growing deficit, which is driving the economy. Corporate economy also leveraged up to record levels, which previously has been a harbinger of recession. Can’t blame CEOs – given incredibly low interest rates so of course they leveraged up and borrowed to buy back shares. Very high vulnerability to higher interest rates. Investment grade corporate bonds looking bad. I’m negative on corporate credit.

US$ strong, peaked out Jan 2017, dropped 15% then rallied. Next big move for US$ is down, correlates very well with the size of the twin deficits = deficit up and US$ down. Reserve currency status keeps US$ up. Middle part of 2018 historically unique – new highs for USA stock market while global stockmarket went to 12 month low. Threat of trade war having a negative impact on the economy. Tarrifs don’t really hurt economy coz exports only 8%, but hurts consumers = inflation.
Capital preservation for 2019 he says. Commodities are up, bonds and shares down. Bearish on the bond market, yields headed higher he thinks. He is not a fan of passive investing.

[moka]

https://www.bloomberg.com/news/articles/2019-01-12/gundlach-warns-u-s-economy-is-floating-on-an-ocean-of-debt
Gundlach Warns U.S. Economy Is Floating on ‘an Ocean of Debt’
Gundlach expects further declines in the U.S. stock market, which recently have steadied after reeling for most of December since the Great Depression. Equities will be weak early in the year and strengthen later in 2019, effectively a reversal of what happened last year, he said.

https://www.bloomberg.com/opinion/articles/2019-01-09/gundlach-compares-recent-buy-the-dip-mentality-to-subprime-crisis
Gundlach Compares Recent Buy-the-Dip Mentality to Subprime Crisis
Dismiss his gloomy outlook if you wish, but, as Bloomberg News’s John Gittelsohn noted ahead of the webcast, a lot of what Gundlach predicted in 2018 came true. He called for U.S. equities to rise early in 2018 but then eventually reverse and leave the market down for the year. He nailed the direction of stocks better than some of his equity counterparts.

https://www.bloomberg.com/news/articles/2019-01-08/gundlach-likens-rising-u-s-debt-to-shoppers-maxing-out-credit
Gundlach walked through recession indicators and noted that some are now flashing yellow, such as junk bond spreads, consumer expectations and homebuilder confidence.

[moka]

https://www.youtube.com/watch?v=ZE9TJPEnn3Y
Jeff Gundlach predicted Donald Trump will be POTUS in May 2016 and even earlier in January 2016.

He says in a Trump portfolio companies that are susceptible to global trade slowdown should be avoided - particularly Mexico and China.
He says in investing hope is not a method, you have to deal with reality.

[moka]

The 2008 was a serious bear and this is Congressman Alan Grayson in 2009 questioning Federal Reserve Chairman Ben Bernanke on $550B of loans to foreigners (or 'central liquidity swaps' in Federal Reserve-ese').
Which financial institutions received this money? Bernanke's answer: I don't know.
As the Fed was lending this money, the dollar increased by 30% in value. Grayson asks, was this a coincidence? Bernanke's answer: yes.
New Zealand got $9 billion.
https://www.youtube.com/watch?v=uGs_Qn5yEgs

[GTM 3442]

The 2008 was a serious bear and this is Congressman Alan Grayson in 2009 questioning Federal Reserve Chairman Ben Bernanke on $550B of loans to foreigners (or 'central liquidity swaps' in Federal Reserve-ese').
Which financial institutions received this money? Bernanke's answer: I don't know.
As the Fed was lending this money, the dollar increased by 30% in value. Grayson asks, was this a coincidence? Bernanke's answer: yes.
New Zealand got $9 billion.
https://www.youtube.com/watch?v=uGs_Qn5yEgs

Adam Tooze's "Crashed" is a good piece of background.

[hardt]

The hot hand fallacy does include doomsday critics.
I would argue those who saw the dot-com bubble bursting did not see the GFC coming, those who saw the GFC coming will not be the ones to predict the next crisis ( hopefully it's interesting ), simple political bears don't count

[moka]

The problem is not neo-liberalism, it is neo-feudalism.
Bernie Fraser in large part blames neoliberalism and its influence on policymaking for the “disconnect between Australia’s impressive economic growth story and its failure on so many markers to show progress towards a better, fairer society”.
This is true in some respects. That is not the fault of neo-liberalism. It is the fault of ad hoc government interventions that have turned the neo-liberal system into a neo-feudal one. We have gotten horribly confused about where the boundaries between government and markets should be and in that confusion oligarchy is thriving.
I have variously called it oligarchy, the business “identity state”, it could be called libertarianism or, in reality today, neo-feudalism. It is the rise of a self-sustaining business elite that consciously perverts all policy in its favour, systematically disenchfranshises working classes and youth, sees its own profits as a virtue in of themselves and, most importantly, has no idea what markets are supposed to look like nor how competition should operate.

https://www.macrobusiness.com.au/2018/10/problem-not-neo-liberalism-neo-feudalism/ (https://www.macrobusiness.com.au/2018/10/problem-not-neo-liberalism-neo-feudalism/)

[moka]

IMF says the global economic expansion is losing momentum as it cuts growth forecasts. The world economy is growing more slowly than expected and risks are rising. But even as the economy continues to move ahead it is facing significantly higher risks.
Risks include escalating trade tensions, high levels of public and private debt, “no-deal” Brexit for the U.K. and a deeper-than-envisaged slowdown in China. The U.K.’s exit from the EU is still uncertain. Though the official deadline for departure is in less than three months, there is no clear majority among U.K. lawmakers for what this departure should look like. As the deadline approaches, many believe the chance of an exit without a formal deal is becoming more likely — where the U.K. and the EU have to rely on WTO trading arrangements.
https://www.cnbc.com/2019/01/21/imf--cuts-global-growth-outlook-2019-2020.html

[Lewylewylewy]

Personally, I'm looking forward to brexit. I wanna top up 🤣

[Leftfield]

I would like a more positive option to vote on. (All these ones are pretty negative.)

How about.....

You gotta love bear hunting time.....plenty of fur to be found and some irresistible targets.

[Beagle]

I would like a more positive option to vote on. (All these ones are pretty negative.)

How about.....

You gotta love bear hunting time.....plenty of fur to be found and some irresistible targets.

:lol: :lol:

[moka]

Good chart in the article.
https://www.macrobusiness.com.au/2019/01/aussie-economy-quietly-falling-apart/
The Aussie economy is quietly falling apart. You’d have to be as blind as the RBA to miss the signals. GDP is made up of six components and they are not going well on balance.

[moka]

Ray Dalio says a rise of populism is also a pressing concern for market participants, with nationalist and far-right parties making significant electoral gains worldwide in recent months. We have to make capitalism work for the majority of Americans.
“What scares me the most longer term is that we have limitations to monetary policy — which is our most valuable tool — at the same as we have greater political and social antagonism,” “So, the next downturn in the economy worries me the most,” he added.
Central bank ability to stimulate is limited. Can’t print money and can’t lower interest rate. We need to re-engineer capitalism in a productive way. Economy will be slowing around the globe. Wealth gap and populism like 1930s.
https://www.cnbc.com/2019/01/22/bridgewaters-dalio-the-next-economic-downturn-worries-me-the-most.html

[moka]

https://www.cnbc.com/2019/01/22/billionaire-hedge-fund-manager-klarman-issues-dire-warning-on-economy.html
Seth Klarman, a hedge fund billionaire some call the next Warren Buffett, wrote a sobering letter warning his investors of the economic impact of global tension, rising debt and the pervasive political divide. “It can’t be business as usual amid constant protests, riots, shutdowns and escalating social tensions,” Klarman wrote in the annual letter to investors.
Klarman also warned about growing debt levels, pointing out that total U.S. government debt now exceeds GDP, a level that other countries like Canada, France, Britain and Spain are approaching. “The seeds of the next major financial crisis (or the one after that) may well be found in today’s sovereign debt levels,” he said.

[Aaron]

Ray Dalio says a rise of populism is also a pressing concern for market participants, with nationalist and far-right parties making significant electoral gains worldwide in recent months. We have to make capitalism work for the majority of Americans.
“What scares me the most longer term is that we have limitations to monetary policy — which is our most valuable tool — at the same as we have greater political and social antagonism,” “So, the next downturn in the economy worries me the most,” he added.
Central bank ability to stimulate is limited. Can’t print money and can’t lower interest rate. We need to re-engineer capitalism in a productive way. Economy will be slowing around the globe. Wealth gap and populism like 1930s.
https://www.cnbc.com/2019/01/22/bridgewaters-dalio-the-next-economic-downturn-worries-me-the-most.html

Currently reading Ray Dalio's book on debt crisis's and have watched his videos on youtube. Smart guy makes sense and describes what is happening (although his quote about people in cash looking silly last year just goes to show even the smartest can't see into the future). What I don't like about Ray Dalio is that he describes what is happening and expresses concern about the wealth gap and the need for capitalism to work for all etc etc. What he doesn't propose is a way to change the current system to rectify the issues. Sounds like he would like to hang onto his wealth without all the societal/political disruptions that occur once the wealth gap gets too big to bear. I think he trotted out the standard threat of capital flight if taxes are raised on the well off the other day. Ray Dalio seems to be for the status quo even while recognising the problems it is starting to cause outside and inside the financial world.

[moka]

Currently reading Ray Dalio's book on debt crisis's and have watched his videos on youtube. Smart guy makes sense and describes what is happening (although his quote about people in cash looking silly last year just goes to show even the smartest can't see into the future). What I don't like about Ray Dalio is that he describes what is happening and expresses concern about the wealth gap and the need for capitalism to work for all etc etc. What he doesn't propose is a way to change the current system to rectify the issues. Sounds like he would like to hang onto his wealth without all the societal/political disruptions that occur once the wealth gap gets too big to bear. I think he trotted out the standard threat of capital flight if taxes are raised on the well off the other day. Ray Dalio seems to be for the status quo even while recognising the problems it is starting to cause outside and inside the financial world.
I agree Dalio, Gundlach, Klarman are acting out of self-interest. What are they scared of? Losing their current assets and investments in a crash, and also worry about where the future opportunities are to come from when 90% of the world lives in poverty and there is no economic growth. Yes, they are operating out of self-interest and they have been big players in the creation of these problems.
However I am pleased they are pointing out there is a serious problem because they have more credibility than the average man in the street who is suffering. These investors are very successful because they understand macroeconomics and the world of finance so well. So I commend them for speaking out and going against the current trend of denial. Printing money, keeping interest rates low which helps create more debt is unsustainable.
My point in doing these posts is to point out that there is a serious problem. Many economic leaders refuse to accept there is a problem. Only when the problem is acknowledged at the highest level at forums like the Davos Economic Summit can we start to look at solutions. We are not there yet.

[moka]

If you are doing okay then other people’s or countries’ pain tends to get ignored. Let’s hope it is not austerity for us all.
The leaders of Germany, Italy and Spain each offered a different view on the future of Europe when they delivered their messages to participants at Davos.
"A sense of despair is spreading," said Italy's Giuseppe Conte. "Even the middle class is facing poverty. Everyone feels that tomorrow will be worse than today ... Our experience might be an indication of what Europe will look like tomorrow," the Prime Minister said.
Germany's Chancellor took a more optimistic view, pointing to the fact that the world is a much better place with far less poverty than in 1971. And she urged people to think beyond their narrow national interests and to reform global institutions with a view to achieving “win-win” outcomes.
Spain's Prime Minister Pedro Sánchez started his speech by warning that we are in danger of forgetting the lessons learnt from the 2008 financial crisis.
https://www.weforum.org/agenda/2019/01/10-key-moments-from-day-three-at-davos/

[moka]

A bit of positive news - New Zealand featured in the 8 top stories from Davos 2019.
4. New Zealand has a well-being budget.
Jacinda Ardern has unveiled a new approach to running New Zealand’s finances. "We need to address the societal well-being of our nation, not just the economic well-being,” she said during a discussion on More than GDP.
This means that from 2019, her government will present a “well-being budget” to gauge the long-term impact of policy on the quality of people’s lives.
https://www.weforum.org/agenda/2019/01/top-stories-from-davos-2019/

[blackcap]

A bit of positive news - New Zealand featured in the 8 top stories from Davos 2019.
4. New Zealand has a well-being budget.
Jacinda Ardern has unveiled a new approach to running New Zealand’s finances. "We need to address the societal well-being of our nation, not just the economic well-being,” she said during a discussion on More than GDP.
This means that from 2019, her government will present a “well-being budget” to gauge the long-term impact of policy on the quality of people’s lives.
https://www.weforum.org/agenda/2019/01/top-stories-from-davos-2019/

How is a well-being budget going to stop a bear from coming here though?

[moka]

How is a well-being budget going to stop a bear from coming here though?
It won’t stop the bear from coming, but when it does come a well-being budget will ensure that there is plenty of porridge in the cupboard for the bear so it is not so grizzly.

[blackcap]

It won’t stop the bear from coming, but when it does come a well-being budget will ensure that there is plenty of porridge in the cupboard for the bear so it is not so grizzly.

What is a "well-being" budget anyway. How is it defined. And I think if it is what I think it is, that a well being budget will actually exacerbate the actions of the bear. From an investing point of view it will. If a well being budget means taxing at higher rates to "redistribute" wealth and or income, then that will be negative for the markets..... the parameter by which a bear is measured.
Jacindarella is deluded.

[Timesurfer]

We aren't worried about the general "well-being," we are worred about our well-being come next elections.

[Aaron]

What is a "well-being" budget anyway. How is it defined. And I think if it is what I think it is, that a well being budget will actually exacerbate the actions of the bear. From an investing point of view it will. If a well being budget means taxing at higher rates to "redistribute" wealth and or income, then that will be negative for the markets..... the parameter by which a bear is measured.
Jacindarella is deluded.

A "well-being budget" sounds a bit airy fairy but nice to see a government putting the people ahead of the financial system. Especially a financial system that appears to be responsible for an ever increasing gap in wealth between the haves and have-nots.

[blackcap]

A "well-being budget" sounds a bit airy fairy but nice to see a government putting the people ahead of the financial system. Especially a financial system that appears to be responsible for an ever increasing gap in wealth between the haves and have-nots.

It does sound airy fairy indeed. The problem I have with it is that will it actually help the people that it is trying to help? Hand outs do not help. Look at Africa for huge hand out failures. There needs to be incentive to people can work their way up. Giving money away to those "in need" just exacerbates the problem and creates dependency.

That said we still do not even know what this "well-being" budget will look like. To me it is a catch cry and a political slogan, but in actual real terms will make no difference.

Anyway we are talking whether the bear will come here. No budget or political slogan is going to change or minimise the impact of the Bear if and when it comes.

[moka]

If a well being budget means taxing at higher rates to "redistribute" wealth and or income, then that will be negative for the markets..... the parameter by which a bear is measured.
Apparently taxing at high rates is not necessarily bad for the economy according to history and Professor Brynjolfsson.
At Davos Michael Dell, the billionaire CEO responds to a question about a 70% marginal tax rate on the wealthiest Americans, “No, I’m not supportive of that,” Dell says, to much laughter from the assembled plutocrats.
“And I don’t think it will help the growth of the US economy. Name a country where that’s worked.”
At which point his co-panellist, MIT professor Erik Brynjolfsson, chimes in: “The United States.”
As Dell and others sputter incredulously, Brynjolfsson explains that America didn’t always allow the super-rich to pay a mere 37% in tax.

“From about the 1930s to the 1960s the tax rate [on the very rich] averaged about 70%,” he says. “At times it was up as high as 95%. And those were actually pretty good years for growth … There’s actually a lot of economics to suggest that it’s not actually going to hurt growth.”

The top marginal tax rate in the United States was above 90 percent in much of the 1950s and early 1960s, and the rate was 70 percent as recently as 1980. That year, the 70-percent rate applied to income over $215,400 for married couples. It has steadily fallen in the last 25 years, with the top rate hovering in the mid-to-high 30s.

https://www.theguardian.com/commentisfree/2019/jan/29/alexandria-ocasio-cortez-knows-yesterdays-radicalism-can-become-tomorrows-common-sense
https://thehill.com/policy/finance/domestic-taxes/426695-dell-ceo-rejects-ocasio-cortezs-tax-plan-at-davos
(https://thehill.com/policy/finance/domestic-taxes/426695-dell-ceo-rejects-ocasio-cortezs-tax-plan-at-davos)
https://www.youtube.com/watch?v=5sl7yVVaKl4 short you tube video
Davos laughs at AOC tax proposals
https://www.youtube.com/watch?v=8akySjXuOAs longer you tube video
MIT Professor Destroys Entire DAVOS Panel, Silences Confused Panel Host

[blackcap]

Apparently taxing at high rates is not necessarily bad for the economy according to history and Professor Brynjolfsson.
At Davos Michael Dell, the billionaire CEO responds to a question about a 70% marginal tax rate on the wealthiest Americans, “No, I’m not supportive of that,” Dell says, to much laughter from the assembled plutocrats.
“And I don’t think it will help the growth of the US economy. Name a country where that’s worked.”
At which point his co-panellist, MIT professor Erik Brynjolfsson, chimes in: “The United States.”
As Dell and others sputter incredulously, Brynjolfsson explains that America didn’t always allow the super-rich to pay a mere 37% in tax.

“From about the 1930s to the 1960s the tax rate [on the very rich] averaged about 70%,” he says. “At times it was up as high as 95%. And those were actually pretty good years for growth … There’s actually a lot of economics to suggest that it’s not actually going to hurt growth.”

The top marginal tax rate in the United States was above 90 percent in much of the 1950s and early 1960s, and the rate was 70 percent as recently as 1980. That year, the 70-percent rate applied to income over $215,400 for married couples. It has steadily fallen in the last 25 years, with the top rate hovering in the mid-to-high 30s.

https://www.theguardian.com/commentisfree/2019/jan/29/alexandria-ocasio-cortez-knows-yesterdays-radicalism-can-become-tomorrows-common-sense
https://thehill.com/policy/finance/domestic-taxes/426695-dell-ceo-rejects-ocasio-cortezs-tax-plan-at-davos
(https://thehill.com/policy/finance/domestic-taxes/426695-dell-ceo-rejects-ocasio-cortezs-tax-plan-at-davos)
https://www.youtube.com/watch?v=5sl7yVVaKl4 short you tube video
Davos laughs at AOC tax proposals
https://www.youtube.com/watch?v=8akySjXuOAs longer you tube video
MIT Professor Destroys Entire DAVOS Panel, Silences Confused Panel Host

That may be the case in the 50's 60's and before. That was before capital and people were as free to move as they are today. I just watched the Australian Open tennis. Of note was that many of the players represented their countries ie Serbia (Novak Djocovic) Croatia (Marin Cilic) etc etc, but for some funny reason the majority of players had their place of residence somewhere else. Monaco seemed to pop up frequently.

[Aaron]

That may be the case in the 50's 60's and before. That was before capital and people were as free to move as they are today. I just watched the Australian Open tennis. Of note was that many of the players represented their countries ie Serbia (Novak Djocovic) Croatia (Marin Cilic) etc etc, but for some funny reason the majority of players had their place of residence somewhere else. Monaco seemed to pop up frequently.

Blackcap still banging on about supply side economics in spite of actual evidence to the contrary. What a magnificent ideologue.
It would also seem that recent tax cuts in the US have not done what they were supposed to do.
https://www.zerohedge.com/news/2019-01-29/kass-death-supply-side-economics

The job creator myth was disproved now capital flight seems to be the last great threat against raising taxes(other than we will turn out like Venezuela if we raise taxes) (My view is we are more likely to turn out like Venezuela with excessive money printing and low interest getting inflation really cranking) .
Sorry not really related to the bear coming, but breaking news, the price of gold is signalling an increased possibility of a bear.

[moka]

The problem I have with it is that will it actually help the people that it is trying to help? Hand outs do not help. Look at Africa for huge hand out failures. There needs to be incentive to people can work their way up. Giving money away to those "in need" just exacerbates the problem and creates dependency.
Is it a handout or social welfare?
A social welfare system provides assistance to needy individuals and families.
The definition of a handout is - a portion of food, clothing, or money given to or as if to a beggar. A handout is a gift not a right. We all have a right to an adequate standard of living under the UN Universal Declaration of Human Rights.

Article 25.(1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
http://www.un.org/en/universal-declaration-human-rights/index.html

[blackcap]

Is it a handout or social welfare?
A social welfare system provides assistance to needy individuals and families.
The definition of a handout is - a portion of food, clothing, or money given to or as if to a beggar. A handout is a gift not a right. We all have a right to an adequate standard of living under the UN Universal Declaration of Human Rights.

Article 25.(1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
http://www.un.org/en/universal-declaration-human-rights/index.html

Why are you quoting the UN? The UN is as corrupt as can be. I do not give 2 flying FCUK's about Article 25 or any other article for that matter.

Look Moka, I know where you are coming from. We probably want the same outcome. We disagree on how to get to that outcome.

For mine, I am a communist (for use of a better term) when it comes to my family, a socialist when it comes to my community (town) a capitalist when it comes to my country and globally well not sure on that one yet.

[moka]

It would also seem that recent tax cuts in the US have not done what they were supposed to do.
https://www.zerohedge.com/news/2019-01-29/kass-death-supply-side-economics
Excellent article thanks Aaron. Economics needs to be simple for me to understand and this is:
The tax cut did not trickle down, it trickled up; it produced a further widening in the gap between the haves and have nots. As Seth Klarman recently warned, the “Screwflation of the Middle Class” will likely have adverse economic, social and investment ramifications

We are being feed propaganda.
'If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.'
—Joseph Goebbels, German Minister of Propaganda, 1933-1945

[Vaygor1]

.... We all have a right to an adequate standard of living under the UN Universal Declaration of Human Rights.
....

Everyone has a right to make of it what they will.

The UN and governmental agencies tasked with providing such welfare more often than not end up unintentionally ensuring this objective is never met. The following clip may be a bit biased in the view of some, but I think it does highlight a valid mechanism as to why and how this occurs.

https://www.youtube.com/watch?v=pQ4lnDy2xnQ

[moka]

That may be the case in the 50's 60's and before. That was before capital and people were as free to move as they are today.
Some capital and some people are free to move. The capital invested in freezing works in New Zealand was not very mobile. It was invested in a building for the long term production of value. And the workers were not always free to move either e.g. family ties, schooling, owning a house in a small town that was hard to sell, as well as where were the jobs.

Freezing works were good for New Zealand economy for many years. And then like other old industries and firms, which are no longer profitable, they closed down enabling the resources (capital and labour) to move into more productive processes. This is the creative destruction of capital and especially the destruction of the value of capital assets i.e. the buildings.

However much of the capital and labour has not moved into productive processes. Capital is in cash or short term speculative investments and this is where the problem lies. It is not producing value.


Good cartoon
https://teara.govt.nz/en/cartoon/25193/meat-works-closures


(https://teara.govt.nz/en/cartoon/25193/meat-works-closures)

[Beagle]

AIR in a unique position to give an indication of economic conditions right up to the minute, (at any one time they have approx. 2 months of forward bookings with which to judge consumer intentions). Going off their profit downgrade today I would say economic conditions are very soft in N.Z. and global growth is slowing considerably. The Bear is clawing at the door and looks like he wants to come in a wreak havoc !

Have a good think about what this suggests about the prospects for other listed NZ companies...

Is CASH KING again ?

[moka]

I just watched the Australian Open tennis. Of note was that many of the players represented their countries ie Serbia (Novak Djocovic) Croatia (Marin Cilic) etc etc, but for some funny reason the majority of players had their place of residence somewhere else. Monaco seemed to pop up frequently.
Yes, rich or talented people can move freely around the world, but the vast majority of people can’t. Why do they live in Monaco? No income tax. All foreigners officially residing in Monaco and people with the Monegasque nationality can benefit from this zero personal income tax regime.
http://www.nomoretax.eu/living/relocation-to-monaco/
So we come back to the tax issue or tax avoidance. Not paying tax is an option if you are rich. And the less tax you pay the wealthier you become. But is this fair?

[blackcap]

Yes, rich or talented people can move freely around the world, but the vast majority of people can’t. Why do they live in Monaco? No income tax. All foreigners officially residing in Monaco and people with the Monegasque nationality can benefit from this zero personal income tax regime.
http://www.nomoretax.eu/living/relocation-to-monaco/
So we come back to the tax issue or tax avoidance. Not paying tax is an option if you are rich. And the less tax you pay the wealthier you become. But is this fair?

No its not fair. (although fair is a very subjective word and fair is defined in the eye of the beholder) My point is, if we start taxing the rich at 70% or wherever, they will just up and move to Monaco and that means we as a country lose the benefit of tax and potential capital. I would rather the IRD receive 33% of $1m than 70% of zero.

[moka]

No its not fair. (although fair is a very subjective word and fair is defined in the eye of the beholder)
I disagree that fair is defined in the eye of the beholder. Fairness is impartial and just treatment or behaviour without favouritism or discrimination. People have an intuitive sense of fairness, just as people have a conscience. Many people think very little about fair play and very largely about what is unfair. We judge fairness in a relative way, usually in comparison with our peers.
A simple idea of fairness is do unto others as you would have them do unto you or if you phrase it negatively as whatever is hurtful to you, do not do to any other person.

The American philosopher John Rawls came up with the concept of “the veil of ignorance” to insure impartiality of judgment when committed to the principles of social and political justice.
Professor Rawls said those who must decide what to do have to put themselves behind what he called a “veil of ignorance.” This means asking what system would be fair if you didn’t know whether you were a claimant or a taxpayer. Clearly that is a very difficult thing to do. Just as making any decision about fairness is, although the I’ll-cut-the-pie-you-chose-which-piece-you-want rule might be a good place to start.
https://owlcation.com/humanities/The-Philosophy-of-Fairness
(https://owlcation.com/humanities/The-Philosophy-of-Fairness)
A good article on the need for fairness.
http://changingminds.org/explanations/needs/fairness.htm

[blackcap]

I disagree that fair is defined in the eye of the beholder. Fairness is impartial and just treatment or behaviour without favouritism or discrimination. People have an intuitive sense of fairness, just as people have a conscience.
[/URL]

What one deems fair another does not. ie some think taxing those earning over x amount of $ at 80% as being fair. Some thing that is unfair.

Therefore fair is very subjective. Fair is a subjective word. It is not quantifiable.

Everyone has their own opinion of what unfair is, or what fair is. It differs to a certain degree from person to person. Everyone has a conscience, but every person has a conscience that differs. Every person's intuition also differs.

[moka]

What one deems fair another does not. ie some think taxing those earning over x amount of $ at 80% as being fair. Some thing that is unfair.

Therefore fair is very subjective. Fair is a subjective word. It is not quantifiable.

Everyone has their own opinion of what unfair is, or what fair is. It differs to a certain degree from person to person. Everyone has a conscience, but every person has a conscience that differs. Every person's intuition also differs.
Economists have established some principles around fairness of tax. Vertical equity and horizontal equity. Vertical equity refers to the relative tax burdens of taxpayers of different means. Taxes that take an increasing portion of income as income increases are commonly termed "progressive," while those taking a smaller portion are termed it regressive." Those that take the same fraction of income at every income level are termed "proportional."
Horizontal equity implies that we give the same treatment to people in an identical situation. E.g. if two people earn $15,000 they should both pay the same amount of income tax (e.g. $2,500).

https://www.economicshelp.org/blog/935/economics/horizontal-and-vertical-equity/

(https://www.economicshelp.org/blog/935/economics/horizontal-and-vertical-equity/)So which tax system do you believe is fairer progressive, regressive or proportional? And why?

We also need to look at the role of government. The underlying issue is the relationship of government to society: does government serve society, or vice versa ?

I was surprised that with fairness you see it just as individuals with everyone having their own opinion. That’s true but then individuals come together in groups to negotiate what they consider is fair. This happens in families, workplaces, community groups and government. It’s called democracy.

[Aaron]

https://www.youtube.com/watch?v=pQ4lnDy2xnQ
Sadly clicked on the link. Now you tube is giving me this libertarian's videos as options. A couple of others for your information.
https://www.youtube.com/watch?v=m3hHi4sylxE
https://www.youtube.com/watch?v=8neTAW256Wo

Possibly he is a bit biased Vaygor? I believe he might just be a little bit biased and may have strong beliefs relating to his ideaologies.

You can make up your own mind on this fella but my opinion of Vaygor has dropped.

[Bobdn]

Thanks for the links Aaron. Stossel certainly makes some compelling arguments. I hadn't come across him before and have subscribed.

[fungus pudding]

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12200399

There's Labour's attempt to buy back the Maori vote that Auntie Helen lost. No trouble at all when they can use our money to do it; although eZ will be here shortly to explain that isn't the case at all.

[Sgt Pepper]

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12200399

There's Labour's attempt to buy back the Maori vote that Auntie Helen lost. no trouble at all when they can use our money to do it; although eZ will be here shortly to explain that isn't the case at all.

If I recall the last government didnt hesitate to disperse $$. Whanau Ora one example etc etc.

[moka]

Everyone has a right to make of it what they will.

The UN and governmental agencies tasked with providing such welfare more often than not end up unintentionally ensuring this objective is never met. The following clip may be a bit biased in the view of some, but I think it does highlight a valid mechanism as to why and how this occurs.

https://www.youtube.com/watch?v=pQ4lnDy2xnQ
The presenter Libertarian journalist John Stossel is a zealous advocate of free markets. I encourage people to use critical thinking when viewing it.
Vaygor1’s intention in posting the link was to show that agencies that are supposed to provide welfare often end up abusing those in their care.
The video says at the start “no group has been helped by government more than American Indians. Our government has made Indians tribes wards of the state. No group has been more helped by government and no group has done worse.”

To be a ward of the welfare state was often unpleasant and inhuman. That’s why New Zealand is having a Royal Commission of Inquiry into abuse suffered by wards of the state.
https://www.radionz.co.nz/news/on-the-inside/349448/abuse-inquiry-the-government-has-got-it-right

[moka]

Many people think very little about fair play and very largely about what is unfair.
I’m reading a book by journalist Gary Weiss in which he interviews members of the Tea Party to understand why they favour policies that will only make the current problems worse. He could understand their dissatisfaction with the status quo, but could not understand why they favoured policies that will only get them deeper into the mess they are already in.

Millions of middle class people were endorsing policies that would directly harm them, their children and their parents. The national debt is a burden but if cuts affect education, healthcare isn’t that the immediate priority. Isn’t low-cost health care in the rational self- interest of most people? Did these Tea Party activists understand what was in their best interests?
He had trouble comprehending their acceptance of the most radical form of no-government capitalism with their call for lower taxes, decreased government spending and more deregulation.

After a long discussion with a leading Tea Party activist he came to the conclusion that “He only seemed to know what he was against, not what he was for.”
It’s the same principle as in this statement - many people think very little about fair play and very largely about what is unfair. We are good at complaining about problems and escalating them and not so good at moving on, seeing solutions and resolving problems.

[moka]

"You should never underestimate human stupidity. It is one of the most powerful forces that shape history," says historian Yuval Noah Harari.
In the end democracy is not based in human rationality, is based on human feelings...and if somebody can manipulate your emotions effectively democracy will become an emotional puppet show.
Why fascism is so tempting -- and how your data could power it.
https://www.youtube.com/watch?v=xHHb7R3kx40

[moka]

https://www.youtube.com/watch?v=DuTm1WA09uk
A Billionaire Investor Says The Economy Is Headed For '20 Years Of Ugliness' | Davos 2019
Bob Prince, the co-chief investment officer at Bridgewater Associates — the world's biggest hedge fund — gave an exclusive interview to Business Insider last week at the World Economic Forum's Annual Meeting in Davos, Switzerland.

[moka]

Expert warns Australia could turn into slums in 20 years | 60 Minutes Australia
https://www.youtube.com/watch?v=vRSdiq3sOTc
(https://www.youtube.com/watch?v=vRSdiq3sOTc)
Housing and banking expert Martin North North has criticised developers and the housing industry for “throwing up” high-rise buildings at such alarmingly fast rates. He warned viewers that significant defects and safety concerns are imminent.
Residents were evacuated on Christmas Eve from the 392 luxury apartments in Opal Tower in Sydney when dangerous cracks appeared. The building had only opened 4 months earlier.
It's not an isolated incident, thousands of buildings have defects because developers are trying to get buildings on the market quickly and there is a high risk they are cutting corners. There are a large number of projects with defects.
About 10% of Australian households with mortgages are in negative equity = 450,000 households.

[moka]

When the next recession comes there is going to be a lot of turmoil,' says Jeffrey Gundlach
The Fed admits they’re having discussions about doing QE again, discussing whether it will be a regular policy tool, not one that will be only used during emergencies. The Fed not sure whether they are going to do quantitative easing or quantitative tightening, so the Fed has sort of lost its way.
The biggest risk is the corporate bond market which is extraordinarily leveraged, 45% of investment grade bond market would be rated junk right now.
During the next recession we are going to have an extraordinary national debt problem because the national debt is growing at a rapid rate in a growing economy. National debt increased by $1.27tn.
The biggest problem is we have a growing economy and yet we have decided that debt doesn’t matter one bit, and national debt went over $22tn and it’s growing during a growing economy. Taxation versus GDP gone from 20% to 15% so we have decided to run a large deficit and it seems no is interested in collecting the taxes for that.
Global stock market peaked 26 January 2018. US market hung on until October.
https://www.youtube.com/watch?v=YsSo1rTqMdc (https://www.youtube.com/watch?v=YsSo1rTqMdc)

[NeverQuestion]

When the next recession comes there is going to be a lot of turmoil,' says Jeffrey Gundlach
The Fed admits they’re having discussions about doing QE again, discussing whether it will be a regular policy tool, not one that will be only used during emergencies. The Fed not sure whether they are going to do quantitative easing or quantitative tightening, so the Fed has sort of lost its way.
The biggest risk is the corporate bond market which is extraordinarily leveraged, 45% of investment grade bond market would be rated junk right now.
During the next recession we are going to have an extraordinary national debt problem because the national debt is growing at a rapid rate in a growing economy. National debt increased by $1.27tn.
The biggest problem is we have a growing economy and yet we have decided that debt doesn’t matter one bit, and national debt went over $22tn and it’s growing during a growing economy. Taxation versus GDP gone from 20% to 15% so we have decided to run a large deficit and it seems no is interested in collecting the taxes for that.
Global stock market peaked 26 January 2018. US market hung on until October.
https://www.youtube.com/watch?v=YsSo1rTqMdc (https://www.youtube.com/watch?v=YsSo1rTqMdc)

The only real way out of this for the Fed is to go to a new monetary system. If you look back over the last 100 years they have gotten out of tough situations by slowly removing the gold backing on the dollar. Today there is no gold backing on the USD.

So my guess is that they will switch. But only when there is no other option. This Recession will be scary.

Hope I'm wrong.

[JBmurc]

[QUOTE=NeverQuestion;747796]The only real way out of this for the Fed is to go to a new monetary system. If you look back over the last 100 years they have gotten out of tough situations by slowly removing the gold backing on the dollar. Today there is no gold backing on the USD.

So my guess is that they will switch. But only when there is no other option. This Recession will be scary.

And of course GFC fix was a ton of cheap money .. the next GFC will be forced by DEBT servicing costs seeing the BOND market crash as rates spike ...US is a consumer economy ..borrow spend borrow spend

like many we don't produce all that much(Outside the leverged exporters working on paper thin margins which also bar new entries to growth) but we love to spend and haven't we done well at that....

Add in opening up the doors flooding the country with more consumers to pump the GDP ...which was a boom for property market and the 10% or so of kiwis employed in it... but we also have all the downsides where costs to live here are skyhigh .... how Bunnings or Supermarkets can get workers in the likes of Queenstown with $250-300pw room costs when you only have $500-$600 in the hand each week..I just can't work out...

It really just doesn't paint a good outlook >>> where is the growth going come from .....when the Building slows down?

As really it's that just how we have grown on the back of cheap debt .. I guess we could see rates here fall to 0%(loans 2-3%) that will kick the can for a few more years but it really is a flight to the end collaspe of fiat currencies ...to be rebuilt one day in a new world order??

[blackcap]

[QUOTE=NeverQuestion;747796]The only real way out of this for the Fed is to go to a new monetary system. If you look back over the last 100 years they have gotten out of tough situations by slowly removing the gold backing on the dollar. Today there is no gold backing on the USD.

So my guess is that they will switch. But only when there is no other option. This Recession will be scary.

And of course GFC fix was a ton of cheap money .. the next GFC will be forced by DEBT servicing costs seeing the BOND market crash as rates spike ...US is a consumer economy ..borrow spend borrow spend

like many we don't produce all that much(Outside the leverged exporters working on paper thin margins which also bar new entries to growth) but we love to spend and haven't we done well at that....

Add in opening up the doors flooding the country with more consumers to pump the GDP ...which was a boom for property market and the 10% or so of kiwis employed in it... but we also have all the downsides where costs to live here are skyhigh .... how Bunnings or Supermarkets can get workers in the likes of Queenstown with $250-300pw room costs when you only have $500-$600 in the hand each week..

It really just doesn't paint a good outlook >>> where is the growth going come from .....when the Building slows down?

On a slightly related topic but its relevant to the NZ situation. So I have a flat that I rent out for $300pw in Wellington. It is a 1 bed room flat and currently occupied by a single mother with a daughter. Now she is on a benefit. But even with the benefit money coming in I wonder how she is able to afford a $300pw rent with enough for food, petrol, phone etc left over. And there must be untolds in this situation in NZ. Are we sitting on a ticking timebomb here? I recently had friends over from Europe who stayed for a few weeks and they were astounded at the cost of living being so high there, especially the cost of housing. If this deck of cards were to fall over we could be in a world of hurt.
On the flip side, as long as NZ is a desirable destination for "global citizens" our house prices are going to stay high as there is limited supply and insatiable demand.

[JBmurc]

[QUOTE=JBmurc;747839]

On a slightly related topic but its relevant to the NZ situation. So I have a flat that I rent out for $300pw in Wellington. It is a 1 bed room flat and currently occupied by a single mother with a daughter. Now she is on a benefit. But even with the benefit money coming in I wonder how she is able to afford a $300pw rent with enough for food, petrol, phone etc left over. And there must be untolds in this situation in NZ. Are we sitting on a ticking timebomb here? I recently had friends over from Europe who stayed for a few weeks and they were astounded at the cost of living being so high there, especially the cost of housing. If this deck of cards were to fall over we could be in a world of hurt.
On the flip side, as long as NZ is a desirable destination for "global citizens" our house prices are going to stay high as there is limited supply and insatiable demand.

Yeah ..it is ..and I agree how the average family on average household income survives in this country is really on the back of other TAXpayers ..working for families ,tax credits etc.. which is fine but how it will play out if continue to replace high paying export jobs (Mining/oil&Gas/fishing etc) with more tourism / tech low to no paying jobs as the robot just took your job..

NZ is a desirable destination for "global citizens" yes those in their golden years or those from overpopulated sesspools..but is that how we plan on keeping property at these very high levels to household incomes ??

[blackcap]

[QUOTE=blackcap;747840]

Yeah ..it is ..and I agree how the average family on average household income survives in this country is really on the back of other TAXpayers ..working for families ,tax credits etc.. which is fine but how it will play out if continue to replace high paying export jobs (Mining/oil&Gas/fishing etc) with more tourism / tech low to no paying jobs as the robot just took your job..

NZ is a desirable destination for "global citizens" yes those in their golden years or those from overpopulated sesspools..but is that how we plan on keeping property at these very high levels to household incomes ??

I have no answers JB, just musings at this stage. I do not agree with keeping property prices up but unless we have drastic immigration/purchasing laws put in place I do not see our prices declining significantly anytime soon and that will continue to create these really unaffordable living situations in NZ for the foreseeable future.

[SBQ]

The only real way out of this for the Fed is to go to a new monetary system. If you look back over the last 100 years they have gotten out of tough situations by slowly removing the gold backing on the dollar. Today there is no gold backing on the USD.

So my guess is that they will switch. But only when there is no other option. This Recession will be scary.

Hope I'm wrong.

The same ol' argument between gold vs fiat money. Keep dreaming. Replace it with what? Cryptocurrencies?? There's good reason why the 'gold standard' went off. If I recall correctly, NZ was one of the last countries to put it's currency to a free floating exchange rate system (early 1990s?) It's benefited the country far more than other countries that had nothing to offer. Would you go back to the time when in order to buy a car from overseas, you needed to have "overseas funds" ? My elders have told me times when a newly overseas imported car would sell more in NZ new because of the restriction in currency.

Anyways, no one knows when the next bear will come. Countless of critics every year are saying it will be this year or that year. No one is following up on those claims when the prove false year after year. As my finance prof told us in class, a bear person will eventually be right if he calls the bear every year for the next 10 or 15 years. Meaning, sooner or later he will guess it right and claim fame.

NZ's situation isn't that bad. I do believe we're able to borrow more as our debt per capita is nothing compared to the US or for the extreme matter.. Japan. I mean Japan has like a 160% debt to GDP ratio and look at their high quality of living. It just shows us that as nations, those that can borrow the most usually have a higher standard of living. Just like the person that borrows the more to buy the bigger house, new car, etc is going to enjoy a better living standard. I don't see a problem for NZ being able to service the debt. But I do see a problem if NZ goes on the path like Spain or Greece of irresponsible gov't fiscal policies. I'm optimistic. If you want to enjoy the scenery that NZ offers, and got the $ to move to NZ, then better expect to pay tax to enjoy it.

[SBQ]

[QUOTE=JBmurc;747851]

I have no answers JB, just musings at this stage. I do not agree with keeping property prices up but unless we have drastic immigration/purchasing laws put in place I do not see our prices declining significantly anytime soon and that will continue to create these really unaffordable living situations in NZ for the foreseeable future.

We already have the ban of non-residents buying properties. Uncertain on the full impact if it's making Auckland housing prices coming down. I would much rather see the NZ gov't do what they did in Vancouver Canada by simply taxing them (using taxation to discourage the parking of shady $ in real estate). If a person truly wants to be a NZ resident, then do so and enjoy owning a home. But don't use the real estate market as a means to profiteer tax free which deprives those on the low end needing to get their 1st home. Like I say, look to your children and see what opportunities they have ; can they afford to get into their 1st home? Don't look at the adults that are playing around in the market as they're certainly myopic in sight.

[JBmurc]

[QUOTE=blackcap;747853]

We already have the ban of non-residents buying properties. Uncertain on the full impact if it's making Auckland housing prices coming down. I would much rather see the NZ gov't do what they did in Vancouver Canada by simply taxing them (using taxation to discourage the parking of shady $ in real estate). If a person truly wants to be a NZ resident, then do so and enjoy owning a home. But don't use the real estate market as a means to profiteer tax free which deprives those on the low end needing to get their 1st home. Like I say, look to your children and see what opportunities they have ; can they afford to get into their 1st home? Don't look at the adults that are playing around in the market as they're certainly myopic in sight.

I think bring down costs of building products would be a great start $3000+ per sqm for an basic house is overboard ...of course a good part of this cost is labour .+ land that it at record highs per sqm..many reason too see costs stay high but be great if we seen moves to bring it lower or else we just going continue to see Kiwibuilds unsold

[Xerof]

NZ was one of the last countries to put it's currency to a free floating exchange rate system (early 1990s?)

4th March 1985, at USD0.4444. Never went lower than that either IIRC

[Bobdn]

The same ol' argument between gold vs fiat money. Keep dreaming. Replace it with what? Cryptocurrencies?? There's good reason why the 'gold standard' went off. If I recall correctly, NZ was one of the last countries to put it's currency to a free floating exchange rate system (early 1990s?) It's benefited the country far more than other countries that had nothing to offer. Would you go back to the time when in order to buy a car from overseas, you needed to have "overseas funds" ? My elders have told me times when a newly overseas imported car would sell more in NZ new because of the restriction in currency.

Anyways, no one knows when the next bear will come. Countless of critics every year are saying it will be this year or that year. No one is following up on those claims when the prove false year after year. As my finance prof told us in class, a bear person will eventually be right if he calls the bear every year for the next 10 or 15 years. Meaning, sooner or later he will guess it right and claim fame.

NZ's situation isn't that bad. I do believe we're able to borrow more as our debt per capita is nothing compared to the US or for the extreme matter.. Japan. I mean Japan has like a 160% debt to GDP ratio and look at their high quality of living. It just shows us that as nations, those that can borrow the most usually have a higher standard of living. Just like the person that borrows the more to buy the bigger house, new car, etc is going to enjoy a better living standard. I don't see a problem for NZ being able to service the debt. But I do see a problem if NZ goes on the path like Spain or Greece of irresponsible gov't fiscal policies. I'm optimistic. If you want to enjoy the scenery that NZ offers, and got the $ to move to NZ, then better expect to pay tax to enjoy it.

Japan is a creditor nation so at least have they have the assets to back up borrowings (although I might be misunderstanding the whole thing).

https://en.wikipedia.org/wiki/List_of_creditor_nations_by_net_international_inve stment_position_per_capita

Just on fiat vs the alternative, if gold went down in price I'd definitely bolster my portfolio with a few ounces. Unfortunately it just seems to be slowly increasing and I love a bargain too much to buy at these levels. I guess its all those central banks buying it up. Apparently its the biggest central bank gold buying spree in 50 years.

https://www.bloomberg.com/news/articles/2019-01-31/gold-demand-up-amid-biggest-central-bank-buying-spree-in-decades

[moka]

The only real way out of this for the Fed is to go to a new monetary system. If you look back over the last 100 years they have gotten out of tough situations by slowly removing the gold backing on the dollar. Today there is no gold backing on the USD.

So my guess is that they will switch. But only when there is no other option. This Recession will be scary.

Hope I'm wrong.

Jim Rickards in his book Road to Ruin says SDRs(Special Drawing Rights) created by the IMF in 1969 will be the new monetary system when the next financial crisis comes. SDRs are not issued in the conduct of normal monetary policy. They are not issued to bail out individual firms or even countries. SDRs exist primarily to provide liquidity from thin air when there is a liquidity crisis or lost confidence in other money forms. SDRs are a world money fire brigade to douse financial infernos. The most recent issuance was in August 2009; the last issuance before that was in 1981.
In the coming collapse, the financial system will be frozen because central banks are unable to reliquefy the system as in the past. The G20 will convene an emergency meeting, as happened in November 2008, and direct the IMF to reliquefy the system with SDRs. If successful, banks and brokers will gradually reopen. Customers will be allowed to access cash. Transactions in cash and securities will still be denominated in dollars, euros and yen. The SDR, not the dollar, will be the reference point, or numeraire for world trade and finance. This transition has been under way for decades. A curious aspect of the SDR’s rise as world money is that individuals can’t have any. SDR’s are issued by the IMF to its multilateral organizations including the United Nations and World Bank. The dollar will be devalued against SDRs. World money means the dollar is worth what the G20 and IMF decide.

https://www.youtube.com/watch?v=lJNW2IwBJg8
Jim Rickards - Road to Ruin - Animated Book Summary

[moka]

https://blogs.imf.org/2017/06/02/the-sdr-giving-an-old-idea-new-life/
The SDR: Giving An Old Idea New Life

The IMF's Special Drawing Right (http://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/14/51/Special-Drawing-Right-SDR), or SDR, was created more than 50 years ago and used only by IMF member countries to supplement their official reserves. The SDR’s value is based on a basket of five major currencies—the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound. In this podcast (http://imfpodcast.imfpodcasts.libsynpro.com/mohamed-el-erian-new-life-for-the-sdr), Mohamed El-Erian, Chief Economic Advisor at the financial services firm Allianz, and a former deputy director at the IMF, says an expanded use of the SDR in global markets could help to strengthen the world economy.

https://www.imf.org/external/POS_Meetings/SeminarDetails_archive.aspx?SeminarId=222
50 Years After: The SDR’s Role in the International Monetary System

[moka]

An October 2018 interview with Nassim Nicholas Taleb but still relevant. He says the US national debt is like a Madoff scheme or Ponzi scheme. You have to borrow more and more to pay interest. We have to borrow to pay creditors. Normal solution to get rid of debt is inflation, but inflation traditionally has been uncontrollable. In 2008 we transferred the debt from individuals to the state and lowered interest rates. Who is going to pay the price of higher rates? Those who benefited from free money - higher leveraged corporations, and higher end real estate first, then rest of real estate, then stock market, cannot maintain high valuation in stock market in the presence of high interest rates. I showed the risks of the fragility of the system in 2008. Same fragility now as 2008. The thing that would save us miraculously is real growth, or some kind of inflation – smooth inflation. Unless we have these two we are doomed.

https://www.youtube.com/watch?v=62rfLjnPxKE
Taleb Says World Is More Fragile Today Than in 2007

[moka]

https://www.reuters.com/article/us-kraft-heinz-results/kraft-heinz-discloses-sec-probe-15-billion-write-down-shares-dive-20-percent-idUSKCN1QA2W1
Kraft Heinz discloses SEC probe, $15 billion write-down; shares dive 20 percent. The gloomy results and forecast from the company, which is one of billionaire Warren Buffett’s largest investments, reflect changes in consumer trends away from processed foods to healthier alternatives.

[moka]

https://www.stuff.co.nz/business/world/110842731/debtclogged-world-close-to-tipping-point-of-recession
Debt-clogged world close to tipping point of recession.

It does not require a catalyst to set off global recession. Claudio Borio, from the Bank for International Settlements, said asset markets can "fall under their weight" from exhaustion and then take the economy down with them. This is what happened in the dotcom bust of 2001 and the Great Recession of 2008.