It’s no surprise that Prime Minister John Key tops the Listener’s top 10 in its 2009 Power List.

The panel says he is:

being identified by leadership scholars as pioneering an entirely new style of political leadership in this country. Sceptics may cite his pragmatism as evidence of overt risk-aversion, but so far his reasonable, moderate demeanour and light-handed management has worked magic for the Government’s standing. He has been the polar opposite of Helen Clark, resisting both the micromanagement of others’ portfolios and playing favourites in the caucus. His cheerful tolerance of coalition partners’ ructions – “The bulk of people who come into politics have type-A personalities!” – has saved National from being embroiled in their crises.

Bill English is second followed by Alan Bollard, Rodney Hide, Steven Joyce and Rob Fyfe.

Then comes Michael Stiassny, the country’s senior receiver. The introduction to the list explains:

Perhaps the most telling detail about this year’s Power List . . .  is that a receiver (Micahel Stiassny) comes in at No 7. Yes, it has been a tough year; a year when debt became a dirty word, when old power bases were weakened by the recession. . .

Tariana Turia is ninth then John Whitehead and Peter Jackson. The top 10 has an 11th place – it’s filled by Phil Goff.

Then there’s those who have been delisted:

Craig Norgate who was 4th in the Business and economy section last year; Andrew West who was 3rd in agriculture  and Pat Snedden who was 4th in health and medicine.

The panel that selected the 2009 almanac of influence was chaired by Listener senior write Rebecca Macfie. Members were Lynn Freeman who hosts Radio NZ’s arts programme; Karl Du Fresne, Chris Wikaira, director of PR firm Busby Ramshaw Grice; Jane Clifton; Jacqueline Rowarth, Director of Agriculture at Massey; Bernard Hickey, Alan Isaac who chairs NZ Cricket, is a director of Wakefield Health, trsutee of NZ COmmunity Trust, chair of McGrathNicol & Co and advisor to Opus International; and Stephen Franks.

The full list and commentary won’t be online until Boxing Day. I subscribe to the magazine and if I didn’t I’d fork out the $3.90 for this issue.

The announcement that Crafar Farms has been put into receivership is not unexpected.

Bernard Hickey has a good analysis on the problems with the operation  and he wants an inquiry into large herd dairy farms.

However, it’s not the size of individual farms or operations that’s the problem, it’s the rapid growth of dairying which has led to a shortage of good staff.

If you’ve got a bigger farm any problems you have will be magnified but problems aren’t confined to bigger farms and bigger operators. 

We talked to the CE of a very large dairy operation last year. They have very good systems which include regular visits, the timing of which depends on how each farm is running. He said that was everything to do with the manager and staff and nothing to do with size.

They’d had 400-cow farms where the wheels fell off and 1500-cow farms which were model operations.

Big isn’t bad by itself. But the bigger an operation gets the more important it is to have really good management systems and processes; and no matter how good they are, they depend on good people to make them work well.

Bigger operations need regular checks to ensure they do. In smaller operations it’s much harder because often only the people on the property know what’s going on.

Some time back I noted in a post that Brian Gaynor had written an interesting article on South Canterbury Finance.

There is another interesting post on this subject at Bernard Hickey’s blog, especially concerning the wording of the audit report.

About 8/10 weeks ago I, and several other bloggers, commented on NBR’s move to a paywall and Bernard Hickey’s take on this.

Russell Brown interviewed Barry Colman of NBR on Media 7 .

In my post re Russell’s interview I noted:-

Russell Brown interviewed Barry Colman this week on Media 7. It is a shame that he did not have Hickey on and let Bernard and Barry debate this for say 30 minutes.

So it was with a degree of considerable excitement that I read this post at Business Talk with Marc Krisjanous dated 13 September 2009.

Now do not get me wrong, but I thought given it was datelined 13 September 2009, I was going to see new material. Indeed at first glance I thought I was going to see the debate I had hoped for.

What I saw was another version of the clip I had referenced above, headed with some clips of overseas commentary on the issue and tailed with a short clip from Bernard Hickey giving his contrary view.

I stand by my original comment, why does not Russell Brown get Barry Colman and Bernard Hickey to spend an entire Media 7 discussing this issue?

The Official Cash Rate remains at 2.5%.

Federated Farmers and other exporters have been caliing on Reserve Bank governor Allan Bollard to cut the rate again in the hope it would put some downward pressure on the value of the dollar.

But if an OCR at 2.5% isn’t lowering the attraction to the New Zealand dollar another small reduction would be unlikely to have any effect.

Bernard Hickey gives his view on Bollard’s statement at interest.co.nz

Bernard Hickey blogged at the NZ Herald on the way middle class people were rorting Working for Families. Yet this issue has gained very little traction in the media unlike the 160 odd families receiving high levels of the more traditional social welfare. The immediate reaction was to excoriate those involved. Bludger was one of the kinder expressions used by many.

The public applauded the fact that the Top 50 welfare recipients were to be audited, but there appears to be no corrresponding demand regarding the 9700 who arranged their affairs to gain more WFF money. Yet many were incensed that MPs and Ministers did a similar thing.

Hickey writes:-

one family was earning more than $167,000 a year from salaries from an employer and distributions from a family trust, yet was legally able to tell the Inland Revenue Department their taxable income was just $27,303.

They then claimed more than $10,000 in Working for Family payments

This family pays no tax and we pay them. Appalling. No public anger though.

More concern was expressed over the 160 welfare families and the fear they might be rorting than the disgraceful state of affairs that sees over 100,000 people on the DPB.

More energy and indignation is expended on the ‘Smacking’ referendum and related matters than on how we improve the economic state of the country.

There seems to be a rather odd order of priorities at work here.

By EMMA PAGE – Sunday Star Times

Banks are relaxing their lending conditions as house prices stabilise, making it easier for would-be homeowners to get into the property market.

Mortgage brokers around the country say banks are now willing to consider loan applications that just a few months ago would have been flatly declined.

The changes, which include lending up to 90%, comes after a time when a minimum 20% deposit was the norm and banks were taking a more conservative approach to approving home loans.

Mike Pero Mortgages chief executive Shaun Riley classified the new banking mood as “a slight relaxing” of some criteria and said it was positive for hopeful homeowners.

“I think any time lenders make things a little bit easier is good news for the clients.”

Riley said the gradual change had been noticeable for around three months and included banks taking a more proactive approach, and slight changes in criteria. For example, before approving a 90% loan Westpac used to require the borrower had been employed for three years, but that had recently been dropped to one year.

John Bolton from Squirrel Mortgage Brokers said it was definitely easier to secure loans for clients.

“We’ve noticed a big improvement. We’ve just got so many options out there at the moment in terms of different banks and lenders, so we can pretty much cobble together a solution for most people.”

But although banks were more willing to lend above 80% of a home’s value, they were still being discerning and were only keen to take on good clients with “nice, clean” credit history just missing one mortgage payment, exceeding an overdraft or bouncing a cheque could sour any potential deal. Investors and people trying to consolidate debt were also likely to be out of luck.

“If you are professionals, if you’ve been in your job for a while and you’ve got really good servicing, then pretty much the banks will look at the deal all the way to 90%,” Bolton said.

He had an easy rule of thumb to define the likelihood of a loan being approved: “Take your household income, divide it by two and multiply it by eight and as long as you’re borrowing less than that, it’s a piece of cake all the way up to 95%.”

That meant a household earning $100,000 could potentially borrow up to $400,000 with a small deposit. If a borrower wanted an 80% loan they should divide income by two and multiply by 10.

Massey University banking expert David Tripe was not surprised by the change.

It indicated there had been a slow-down in demand and that banks were seeing less risk in property markets than they did a year ago.

Combined with the fact that many of the predicted job losses had already happened, this provided some justification for an easing of terms and conditions, he said.

But he did not foresee a return to banks lending the full value of properties as seen during the boom years. “I don’t think people are going to be rushing back to doing 95% or 100% loans in a hurry.”

Latest figures from the Real Estate Institute show house prices rose 5% in July, while the median days to sell fell to 36 days (seasonally adjusted) from 40 days last month.

In comments released last week, ASB economist Jane Turner said the data confirmed the recent housing market recovery remained firm and that price declines had come to an end.

The news of banks becoming more willing to lend comes as floating mortgage rates have dropped to their lowest level in 40 years. Last week, Kiwibank was offering 5.79% while BNZ had lowered its rates to 5.85%. But this good news for homeowners was moderated by lifts in fixed-term rates, with ANZ, ASB and Westpac all lifting their two-year rates to 6.55%.

But financial commentator Bernard Hickey from interest .co.nz said while lending may have relaxed, housing was still “vastly unaffordable for most people especially in Auckland”.

If prices did not come down, lower interest rates would not change the affordability equation.

He labelled the move to relax lending as “depressing” and said it meant the country was making the same mistake all over again, potentially getting further into debt, which could damage our international credit rating.

The problem was, he said, that there was no incentive to encourage more conservative borrowing the government was not moving to discourage rental investment by introducing a capital gains tax, while capital adequacy rules meant that banks did not have to put aside as much “precious capital” when they lent against a home.

“Instead of slowing the car down for the corner that is ahead, we are accelerating into it and we hope we’re not going to crash… I fear we’re just going to blast off the edge.”

http://www.stuff.co.nz/business/2756561/Banks-easier-on-loans-as-home-prices

Financial journalist Bernard Hickey from interest.co.nz has blogged about the how the price of aluminium has risen 30% this year:

Here’s another commodity market that is rapidly heating up: aluminium. This is good news for Rio Tinto and the people at Bluff, although it may help keep the pressure up on power prices. The [Financial Times] has a nice piece here explaining why aluminium prices have risen 30% this year. However, the fundamentals are not brilliant and people are wondering if it’s another speculative driven squeeze up. Something tells me a vampire squid is making money out of this.

CLICK HERE to read the FT’s story.

Last night’s globalDairyTrade auction resulted in a lift in the whole milk price to $US2301 per tonne – an increase of 25.8%

That’s a very welcome change to the downward trend since March but Fonterra chair Henry Van der Hayden isn’t breaking out the champagne yet.

In an email to farmers he says while it’s great to see the lift,  it’s difficult to know where the market’s going.

The dollar which is trading above 65 cents continues to cause concern and the US has increased its support price for skim milk by 15%.

The next globalDairyTrade auction is scheduled for September 1.

UPDATE: Bernard Hickey notes the improved price has taken the dollar over 67 US cents.

Sigh.

I know a weak currency isn’t necessarily a good thing but Hickey points out the rise in the value of the dollar will cancel out some of the gains from the better auction price.

I have been posting see Media:but not as it was on the Barry Colman of NBR/new media debate as exemplified by Bernard Hickey’s remarks .

Russell Brown interviewed Barry Colman this week on Media 7. It is a shame that he did not have Hickey on and let Bernard and Barry debate this for say 30 minutes.

Here is the Colman interview. I am not convinced by Colman’s remarks, especially as the first 2 items behind the paywall today were in the print edition, yet I was sure I heard him say to Russell that the material behind the paywall was going to be unique.

  The BNZ Home Loan Affordability measure worsened in June from May, thanks to a slight rise in average fixed mortgage rates and an increase in the median house price.

The rise in both house prices and interest rates helped increase the proportion of after-tax pay needed to service a mortgage on a median home to 56.3% in June from 55.9%.

However, this is sharply better than the 78.1% seen a year ago and the record worst level of 83.4% in March last year, said www.interest.co.nz, which produces the series of national and regional reports for BNZ.

Affordability improved in an unbroken run through 2008 as interest rates fell sharply and house prices fell. A rise in after-tax incomes because of wage inflation and a tax cut helped extend the trend. But that run of improvement ended in February, March and April this year as house prices stopped falling and interest rates began to bottom out.

 

“The rebound in the housing market through the autumn and winter will please homeowners, but first home buyers are now finding it slightly more difficult to get into the housing market,” said Interest.co.nz editor Bernard Hickey

“Housing affordability is unlikely to improve much further without further significant falls in house prices, given wage growth is likely to be subdued in the next couple of years without further tax cuts and as unemployment rises,” Hickey said.

The indefinite delay of tax cuts planned for 2010 and 2011 puts all the weight on interest rates and house prices as sources for further improvement.

The REINZ median house price rose to NZ$340,000 in June from NZ$337,500 in May, while the average 2 year mortgage rate rose to 6.25% from 6.23%.

Affordability hit its worst level of 83.4% in March 2008 just after house prices peaked and 2 year mortgage rates were close to 10%.

Many home buyers jumped in March , April and May to take advantage of lower interest rates and look for bargains, which improved the number of houses sold and stabilised prices. But short term mortgage interest rates flattened out in late March and longer term mortgage rates began to rise in line with rises on wholesale markets.

Affordability remains slightly out of reach for most individual home buyers. The threshold proportion of after tax income considered prudent to sustainably own a house is around 40%. Anything above that is starting to become unaffordable.

Affordability also worsened for a typical first home buyer. The Housing Affordability report’s measure shows the mortgage servicing proportion worsened to 44.3 in June from 44.1% in May. This measure is for a median income earner aged 25-29 buying a first quartile home. Interest.co.nz thinks the ‘affordable’  threshold is 40% for such a home buyer.

 

For more articles by Bernard Hickey visit http://www.interest.co.nz/ratesblog/

About Bernard Hickey

Bernard is the editor of interest.co.nz. He worked for 18 years for Reuters, the FT Group and Fairfax as a financial journalist and editor.

I missed reading Brian Gaynor’s Saturday column in the NZ Herald for some reason, but caught up with it this morning.

His column is about litigation funding and the recent establishment of a litigation funding vehicle in NZ.

He writes:-

Litigation funding could be used in a large number of situations including receiverships, breaches of continuous disclosure rules, insider trading, inaccurate prospectuses and valuations, related party transactions, breaches of directors’ duties and breaches of care by financial advisers.

There are a number of recent circumstances, including Hanover, Bridgecorp, Blue Chip, the ING income funds, Vestar, Feltex and Tranz Rail, where litigation funding would have been welcomed by investors.

Given the circumstances affecting many of the aggrieved investors and what appears on occasion to be the reluctance of regulatory authorities to take action I am inclined on balance to think that such a development is not a bad thing.

It as well to remember though that litigation funders are not in this for their health or as charities. It is a business and they will assess the risk and probabilities of success very carefully.

Having said that the likelihood is that in some respects governance may well be improved through the arrival of this mechanism. If that happens then collectively we all benefit.

The whole of Gaynor’s article is well worth reading.

UPDATE #1:- Bernard Hickey includes the Gaynor column in his Top 10 at 10 piece. There are some other useful stories there as well. Hickey does not see Litigation Funding as a silver bullet either.

I agree that we are at or near a tipping point for a great new journalism adventure and I’m having a ball embarking on that adventure. But I think Barry has tipped the wrong way and I’d like to suggest another better and more profitable way.

Bernard Hickey in the introduction to an excellent analysis of media today and why he thinks Barry Colman of NBR has it all wrong.

Hardly a day goes by in the office these days without someone asking me, “What’s up with Twitter? I don’t get what people see in it.” And, on the surface of it, I can understand where they’re coming from. Because when you think about it, what is there to get excited about following friends (and random strangers) telling you what they’re getting up to in 140 characters or less? Up until a few weeks ago I felt completely the same way. It’s not that I’m not interested in what my friends are doing, or even that I think they lead dull lives that aren’t worth following. Instead it was more about the fact that I just wasn’t that interested. Just like I’m not that interested in basketball. I can see the attraction of it, but it’s just not my thing.

Then one day, things changed. After having a dormant Twitter account for a number of months I decided to give it a go and persevere with it for a while. I am, after all, the online marketing manager for a bank. You could say that I saw it as my duty to at least understand first hand what all the fuss was about. Who knows, some good might even come out of it, like it did for Commonwealth Bank in Australia.

Then a funny thing happened. Before I knew it, I was hooked. And, even more surprisingly to me, it wasn’t because of a sudden realisation that in fact my friends lead amazingly exciting lives that I couldn’t get enough of. (Quite the opposite in fact, as hardly any of my friends have taken the plunge yet.) My addiction was spawned by the realisation that Twitter truly has something for everyone. All of a sudden I found myself following the most disparate group of people, all of whom had something to offer me. From the man I consider to be New Zealand’s most inciteful business blogger, Bernard Hickey to the very funny Stephen Fry and, wait for it, even our Prime Minister.

It soon became obvious to me that telling others what you just had for lunch is only the smallest part of what Twitter is all about. Now I’m kept up to date about all sorts of things that I find interesting. (Remember that the most important word in that sentence is “I”.)

Here’s an example. Sitting in the office on Sunday I wanted to keep up with the score in the NZ Warriors match, but couldn’t find live scoring anywhere. Never fear, a quick search of “Warriors” gave me everything I needed – not only the score, but a perspective on the team’s performance from as many people as I cared to read. That’s true live reporting – by the people watching it first hand. It doesn’t get much better than that. (As an aside, in this instance Twitter left Google for dead in terms of providing me the timely information I needed.)

Figures out last month from Nielsen suggested that 60% of Twitter users fail to return the following month. This says to me that these users haven’t found the fit for Twitter in their lives. And, quite frankly, that’s Ok. If I think of the information websites I’ve visited in the past month, I probably won’t return to a whole heap of them ever again. They served a purpose at a point in time, but didn’t engage me for the long haul. Twitter will never be a Facebook in terms of its depth of engagement for the mainstream audience, but it has a place for those who bother to take the time to seek out its value. Who knows, you may even decide to follow me.

Bernard Hickey writes on the significantly increased readership at interest.co.nz.

The site has considerably improved and extended both reach and range.

Well done to all the team at interest.co.nz

Metrics Adam can only marvel at.

Of interest is the fact that they are a web only operation.

H/T David Farrar

The Wall Street Journel interview with John Key  generated a bit of interest in New Zealand, but mostly by way of the isn’t-it-good-the-world-notices-us reporting.

Bernard Hickey reckons it was worth much more than that and explains how John Key secured a US1bln loan for New Zealand with a newspaper interview.

Hickey’s post explains how ANZ  National secured a $1b bond issue in the USA, it’s worth reading in full so I’ll leave it with this:

It turns out the interview was a crucial factor in the success of the bond issue, the first long term issue by a New Zealand bank since July last year. It is likely to set the tone for more.

Thank you John.