Time for OCR intervention by Dr Cullen

The New Zealand Government is happy to intervene where its citizens don't want them
but when it comes to the precipitous economy in relation to lowering interest rates,
Michael Cullen gets blisters on his hands from sitting on them.


I'm not an interventionist by any stretch of the imagination but our monetary system, for better or worse, is, and so is the present regime that presides over the country's books, the New Zealand Labour party.

The interventionist approach in regard to the Reserve Bank and through the official cash rate(OCR) has led NZ INC, courtesy of drunken overspending and overtaxing by the aforementioned regime, to the highest interest rates in the "developed" world.

The Mike and Helen show has put the country in a very precarious position, given the uncertainty over the global economy and the "credit crunch"(2 days in a row, sorry) has slowed the wheels of commerce globally.

This dastardly duo seem quite pleased that an excuse like the global credit crunch has come around because they are now on a PR offensive to blame any current or future New Zealand downturn on it and not themselves, where the bony finger should be pointing.

The sensible among us know that high interest rate were here 3-4 years ago and then we though a credit crunch was a new chocolate bar bought on time payment.

Like Al Gore's science fiction movie "The Inconvenient Truth", we also know, like that movie, the M and K show lacks consistency and truth. When it comes to the economy we can all remember the Labour Party taking the accolades for the nearly 4% growth we had for a nano second, but they now blame the downturn and any possible downturns on other circumstances.

You cant have it both ways.

Now this government's profligate taxes and spending(they go hand in hand) has put its citizens in such debt that we even outrank those nasty Americans for our debt levels. This debt is primarily in real estate and servicing the high interest debt that bought it.

Higher house prices meant more borrowing on the increased equity, because taxes are so high we had to borrow to survive.

So guess what, now things are in reverse, because of that debt we are in potentially a worse condition than America.

They at least borrowed to buy other sorts of assets beside houses, while we sunk most of ours into houses and plasma TVs.

While we haven't had the extreme reckless lending like America's Sub Prime loans, we have got many thousands of kiwis who have borrowed more than they will be able to service when the shit hitith the fan.

Its hitting now.

NZ$40 billion of mortgages will be refinanced this year alone at close to 10% and others will be higher, the time for intervention is now.

The OCR should have been cut at least a year ago but now there is urgent need for it. An emergency cut to bring it into line with other nations suffering from the sub prime fallout would be a key move in the right direction.

There is no use sitting on your hands waiting "to see what happens" according to Alan Bollard, the Reserve Bank Governor. Decisive action needs to be taken because inflation is the least of his/our worries now.

Like I have said before the OCR is a poor way to maintain an economic system, it doesn't serve its purpose well, but it is all we have at present.

A progressive cut over this year, down to below 6%, starting with a .75 point basis cut will send a good message to the market and business, that lending rates will be somewhat dampened and business will be stimulated when it needs it.

Our socialist government are intervening in every other part of our lives, including the private business world but for the life of me , when we really do need intervention, Micheal Cullen just sits on his calloused hands and blames others for our countries current mis- fortunes.

Get off your arse and do something history boy.


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STUFF.co.nz: Sky City under review

Sky City Entertainment has been busy in the first few weeks
of Nigel Morrison's time at the top. Business units are all
under review.


By GARETH VAUGHAN - The Dominion Post | Tuesday, 18 March 2008

News out About Sky City today

• SkyCity CEO sees cinema sale within 3 months - Stuff.co.nz
• Sky City reviews Adelaide plan - Bloomberg

SkyCity Entertainment Group's(SKC) new boss wants to double to $3 billion the annual value of bets placed by high-rolling Asian gamblers as he strives to turn around the casino operator's recent disappointing performance.

Nigel Morrison, who took SkyCity's helm as chief executive on March 3, says this is the best way to combat the volatile impact on SkyCity's earnings from wealthy overseas gamblers.

The house did well against SkyCity's primarily Asian overseas customers in the December half-year, with $12.6 million in operating earnings from them. This helped push up group net profit, before the $60 million write-down in the carrying value of SkyCity Cinemas, by 36 per cent to $61.3 million.

However, a winning streak by high rollers in the first half of last year led to a $2.9 million loss, helping slash group net profit 23 per cent to $45 million.

Mr Morrison said high-roller volatility stemmed from the fact that the $1.5 billion worth of total annual bets placed by international gamblers at SkyCity's casinos was not enough. SkyCity expects to win about 1.3 per cent of the $1.5 billion.

The challenge for SkyCity, therefore, was to double at least the value of annual high-roller bets: "We need to think outside the square about how we might do that," he said.

Mr Morrison, a 48-year-old Australian, quit a role as chief financial officer of Hong Kong and Macau Casino group Galaxy Entertainment to move to Auckland. He replaced Evan Davies, SkyCity's founding chief executive, who departed abruptly after 11 years with a $2 million payout last June. SkyCity director Elmar Toime held the fort as executive director in the interim.

Including the write-down on SkyCity Cinemas, SkyCity last month posted interim net profit of just $1.3 million. Mr Morrison said SkyCity was talking with two potential buyers of the cinema business and he hoped to have the protracted sale wrapped up within three months. SkyCity Cinemas produced operating earnings of just $2 million in the six months to December.

SkyCity, which owns casinos in Auckland, Hamilton, Darwin, Adelaide, 41 per cent of Christchurch Casino and 55 per cent of one of Queenstown's two casinos, would then be free to focus on improving the performance of those businesses.

Mr Morrison said his mandate from shareholders for the next 18 months was to get SkyCity's casinos "buzzing". The recent $40 million refurbishment of the flagship Auckland Casino's main gaming floor was a step toward this.

Auckland produced $107.7 million of $161.4 million group operating earnings in the December half, but this rose just 0.4 per cent as margins contracted. SkyCity would work on getting the lighting, music, food and service right at Auckland, now that the hard work on the "physical asset" was completed.

"I would hope that in six months we would have made a big impact into all those things."

Disclosure: I own SKC shares


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The Global Economy looks bad now? But wait there's more

JPMorgan scoops up troubled Bear 4:56am: The deal values Bear Stearns at just $2 a share. Regulators hope purchase will stave off wider chaos in financial markets. more

The Bear Stearns fire sale reveals the iceberg underneath the tip of current disclosed sub-prime losses.

Everyone is talking about it and I have written about it frequently for more than a year. The contagion from the reckless lending of the last 10 years still has time to play out its course.

Emergency rate cuts on Sunday(US time) in the United States and talk of another one on Monday 17, of perhaps 100 basis points, will do little to restore the faith in credit markets, housing, business, the stockmarket and every other sort of financial instrument that is traded, with the possible exceptions of some commodities and minerals.

In New Zealand a story out today shows the high exposure our banks have to our ever decreasing housing market and along with higher government spending promised by the Labour government and a whole host of other price increases, interest rates are clearly going to skyrocket.

Things are looking grim here but in the United States, where it all began, they are suffering worse than anyone else. High house foreclosures, defaults on loans and increasing unemployment are front page stories. One doesn't have to be Warren Buffett to figure out that America is already in recession. The official confirmation of two consecutive quarters of GDP stagnation will only be a matter of course when it is announced.

The real question is, how bad is it going to get in the US and how much is it going to affect us in New Zealand and other parts of the world?

I'm not an expert in global economics but do have a keen economic grounding and I think things in the US are going to get alot worse. We still haven't seen the full extent of losses that banks and other financial institutions have been hit with, and those losses will have to be accounted for somewhere in the US economy.

The selling of Bear Sterns to JP Morgan Chase for $2 a share is a good indicator of more financial institutions sitting on bigger than disclosed losses. The balance sheet of BS, who incidentally survived the Great Depression, must be grim indeed.

The impact on other countries is going to be felt more than it is now because these things take time to filter down. Of course immediate impacts on currency values, world sharemarkets etc are felt quickly but longer term impacts, like even higher interest rates oil prices and goods and services.

Some economists talk of a "disconnect" of Asian economies from the still dominant US beast but that really isn't probable to me because countries like China, India and Japan still rely on a strong United States to survive. Economic self sufficiency in Asia is still a decade or so away.

A key sign of a loss of faith in the global economy will be seen when the US stockmarket opens in a few hours time.

If another interest rate cut is announced by the Fed and it is a big one, one should expect a rise in the DOW. Having said that, the fact that such a large cut is being proposed will probably mean the market will rightly look at this scenario as a good reason to dump their shares.

The uncertainty will have investors hitting the sell button.

The feeling I have in this part of the world is that investors have already started to panic. The New Zealand market was down by 2% and Australia followed with a 2.5% drop. Asian markets, as usual in times of turmoil, were hit harder. Over a broad range of markets in Asia they were down around 4% on average.

Whatever happens to the global economy in the coming days, weeks, and months, you can be sure it will be volatile, fraught with emotional writing from people like me and bad for the back pocket.

It will however, be very interesting.


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Clark's push for Neo Muldoonism deja vu all over again

News out last week that a so-called "anti-obesity" bill put forward by the dangerous, corrupt, carbon footprint waving, anti-free speech, private property/business hating, and tofu munching socialists, the New Zealand Labour party has this correspondent jumping for joy, in a cynical sarcastic, toxic sort of way.

A Labour supporter at last Sunday's Electoral Finance Act protest will have too keep his mouth shut if he is a "junk food"
eater. Labour wants to tax it.

The bill seems to be at the peak of Labour's desires to control the New Zealand populous, as it will restrict, at a whim, by the PC Director of Health or Cabinet, to prescribe what we should be eating.

That means supermarkets could be asked to put the Moro bars under lock and key, the chips behind plate glass and the ice cream in a room where only thin people can buy it with a license and photo ID.

I have joked about this for years, but here is the unfunny part, it looks set to actually happen.

No "junk" food for those of us, like me, who love it.

I mean, give me a motherfucking break, who do these vermin think they are?

Like Micheal Cullen's attack on private owners of Auckland International Airport last week, why the hell don't you just buy the Airport or open state run supermarkets yourself oh great leader?

While you are at it why don't you follow Cullen's lead, as Mugabe followed his lead last week, and nationise all private companies.

We could get around high prices buy opening state run gas stations, real estate agencies, banks, gyms, brothels, travel agencies and corner dairies. They could all be as successful as our hospitals, education system, police force and parliament.

Hang on a second perhaps that is not such a good idea.

Imagine the shortages, red tape, long queues and jobs for the boys.

Get the point people!

The state, let alone the stooges at the head of the Labour party couldn't run a bath, let alone the additional government departments the great leader obviously wants us to have.

Why not have everyone working for the government, at least then we can go back to a simpler gentler time, when everyone was happy and we all held hands and sung kombaya around a spluttering State funded fire.

Helen Clark's wish to follow a Neo Muldonism, and reconstruct New Zealand the way it was in Robert Muldoon's time is a scary thought, but that is where we are heading.

Muldoon knew in 1983-84 that he was going to find the 1984 election a tough one and he plundered every resource at his disposal to enable him to control almost every aspect of New Zealand life.

He nationalised everything he could, controlled the economy with an iron fist and spent so much money in his tenure at the top and buying that election that NZ INC was broke when the new Labour government of the day came into office and looked at the books.

One Roger Douglas was the architect in that Labour governments resurrection of the country and economy as he embarked on a radical plan that transformed our country and economy almost overnight.

It seems to be deja vu all over again in 2008. Helen Clark has the platinum taxpayer credit card in her hand and she is going to go well over the limit to buy your vote with your money.

In a time warp back to, 1984 Sir Roger Douglas is going to take a position in the Act Party, his first foray into politics in over 20 years and this time he is on the opposite side to her former party mates Clark and Cullen et al.

It seems to be a case of a perfect storm of politics crashing against a crumbling economy and an out of control bunch of power drunk socialists who will say, do and spend anything to retain their naked lust for power.

The addition this year of a recession and a possible deep recession at that makes the likelihood of a repeat of the class of 1984 almost a certainty.

Bugger.


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