Posts by Jim Cathcart
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Russell, improving public accounts is irrelevant when you have private debt is as bad as NZ's. Take a look at Japan. The public debt is 150% of GDP--an appalling state for a country in its stage of development. On the flip side, Japan remains a net creditor to the rest of the world? Why? Quite simply, households and the private sector live and operate within their means.
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It's remarkable that the nobody in the NZ media wants to mention the dreaded fact that NZ is one of the most indebted nations in the developed world (based on debt per capita to GDP). Whether you like it or not, this has exploded under Labor and is a far better reflection of NZ's economic performance than public accounts.
Anyone taking notice would have realized that the NZ's largest challenge is to live within its means. Whether or not the Labour government can be faulted for not addressing this situation is arguable, but they've been happy to bask in the glow of the economic "boom" (as fake as it was).
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"I've been wondering about that... we are all told that in the long term stock prices always go up, and every time think to myself "go tell it to the Japanese". The Nikkei was at 39,000 in 1989, then it crashed. Ten years later, when it was at 15,000, I'm sure there were stockbrockers all over the place urging people to buy: it was bound to go back up because shares always go up. Now it's halved in price again, and it's all in absolute terms, not even factoring in inflation (although of course Japan has had lots of deflation too)"
It's a good case in point. Even now, the Nikkei has the most undervalued stocks in the developed world (based on P/E ratios). Considering that Japan is leading the world in energy efficiency and in the development of clean technologies and alternative energy, you would think that Japanese stocks would be a new brainer.
Personally I think there are various reasons to explain it. Japanese don't buy stocks like westerners. They don't share the same financial philosophy. Secondly, Japanese capitalism is different in that the real stakeholders of a company are the employees (not the shareholders). Compared to the west, dividends are pathetic and the companies are prepared to sit on mountains of cash (instead of share it with the shareholders).
Various contrarian investors such as Marc Faber have suggested that the Nikkei could outperform once the great de-leveraging finally unwinds.
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"Some of Bernard Hickey's analysis is a little hysterical for my tastes, but he's dead right when he asserts that it's a total no-brainer to invest in finance companies for a 10% return (vis the sub-8% return offered by banks), if that investment is just as secure as that low-return bank deposit. That's bad business. It's especially bad for the stock market, since you're in for the very long haul right now if you want a 10% return on a share investment, not to mention praying that the company will still be around in 18-months' time."
Oh, I think Bernard Hickey's great. He is the only journalist in NZ to have pciked up on Christopher Wood's dire analysis of NZ's banking system. If you think Bernard's "hysterical," you definitely wouldn't want to read too much of Wood.The problem I see is that company's such as South Canterbury Finance don't really promote NZ's future as an exporter. Perhaps they do indirectly through farm finance, etc.
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I think Bernard Hickey pointed out that this bank guarantee covers investements in busienss like South Canterbury, which means one can effectively have a guaranteed deposit at 10%! Who in their right mind would invest in the NZSX? What a nutty scenario!
From my armchair, this band deposit scheme still needs some serious revision. Doesn't the govt also have a commitment to supporting listed companies through functioning capital markets as opposed to questionable local investment in silly things such as overpriced houses?
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Whatever you do, read Bernard Hickey's latest blog on just how out of control the caboose is.
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"I think you're confusing Minister of Finance with Minister Responsible for the Economy, which we don't have. Cullen is responsible for what the government does with its money. His responsibility for managing the economy is much more limited, and comes more under the heading of "if you screw up the economy you're unlikely to get re-elected".
There seems to be a general understanding here that our elected representatives are only accountable when we actually land in the shit. My original post suggested that Key at least recognizes what is the real issue (the current A/C deficit) and that it needs to be addressed. The incumbent govt glosses over the issue while a large number of blindingly ignorant creditors potentially ruin their futures. Is it too much to suggest that our politicians actually employ some progressive economic thinking and foresight to these problems? Plenty of economic experts, such as Steve Keen of the University of Western Sydney, have been warning about these problems for years.
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"Really? I remember him commenting it on it a number of times, plus that whole setup the Cullen Fund, Kiwisaver and run big surpluses schtick he had going on.
And frankly I don't want my Minister of Finance telling me how to spend my money."It's not about being "told how to spend your money", it's being honest with your constituents that debt relative to GDP cannot improve when people continue to live beyond their means with funds borrowed offshore. Kiwisaver has been born far too late to make any significant difference (and is as obtrusive as being "told how to spend your money" when you have a fixed selection of government approved funds) and govt surpluses are somewhat irrelevant when you're up to the eyeballs as NZers are.
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In due respect, where was Micheal Cullen warning NZers to tighten their belts when it was blindingly obvious that this was all coming to a head? Anyone with a passing interest in global capital flows could see this as far back as 2003-2004. With all the wrong-headed infatuation with the govt balancing its books, private debt is now so out of hand that whoever's in power has no choice but to stimulate domestic demand by any means possible.
And what's the bleeding alternative? Friggin U.S. treasury bonds?
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Regardless of the pork involved in directing public money towards public infastructure, John Key is dead right when he suggests that something needs to be done to address the alarming current account deficit--the result of borrowed money funding a mindless property boom. Isn't the crux of the issue here?