Forum Archive Index - February 2004

["Allan Potts" <ajp7079@excite.com>]

Very, very astute post Baa Baa IMHO.-----Very nice 
indeed.--------Allan-------------------------------------------------------------------------------------------------
 




 --- On Sat 01/31, Baa Baa < baa_baa@hotmail.com > wrote:
From: Baa Baa [mailto: baa_baa@hotmail.com]
To: sharechat@sharechat.co.nz
Date: Sun, 01 Feb 2004 03:55:53 +0000
Subject: [sharechat] Bollard must be a Goldbug!

He must be. What surprised the mainstream economists, is no surprise to 
<br>Goldbug. (ergo a 0.25% basic rate increase). Some months ago, we had this 
<br>discussion on Kitco prior to the first Aus Reserve Bank annoucement, and 
<br>they hiked rates, to the surprise of the fundamental economists; those that 
<br>steadfastly refuse to see past a certain key sector profile, or beyond the 
<br>shoreline to the global economic quagmire emerging before us.<br><br>So, 
Bollard (& cronies) decide it's best to prick the domestic property <br>bubble 
by raising rates. This is in the face of a market already flattening, 
<br>already exposed to higher interest rates due to banks moving first anyway, 
<br>and declining investor confidence. [no wonder the fundamentalist economists 
<br>are confounded]<br><br>Thereafter comes, slowing domestic investment 
interest (due to higher cost <br>of money), and 'in theory' slower offshore 
investment in domestic property <br>for the same reason (but imo a falsity due 
to offshore money typically <br>buying outright/freehold as they see our rates 
as high already -ergo not for <br>borrowing, but ideal for lending). Typically 
the RBNZ decides to hurt the <br>common Kiwi first -the citizen and the 
businessperson.<br><br>The rise in rates quickly reflects in higher bank rates 
and foriegn <br>investment in Kiwi assets accelerates! The already perky Kiwi$ 
seems <br>destined to go 0.70 to the USD (and probably well above). This factor 
shuts <br>down the 'export led recovery' through reducing revenues after forex 
for the <br>same product volumes. Naturally, this disincents production and 
that <br>declines too. Balance of trade as a result continues to expand on the 
<br>negative side. The so called budget 'surplus' pales into insignificance. As 
<br>an aside, the misguided investment of 100's of millions of NZ'ers 
<br>savings/surplus into grossly overvalued / overbought foriegn funds/share 
<br>markets is just a disaster in slowmotion.<br><br>So, what's the immediate 
foreseeable result?<br><br>1. Domestic borrowing slows and exisitng debt 
holders get penalised, <br>Property falters.<br>2. Foreign investment 
accelerates and the Kiwi$ appreciates, perhaps beyond <br>what most would 
consider acceptable, or manageable (not that it can be <br>managed per se from 
the Kiwi side).<br>3. Export focused producers really hurt and shutdown 
production to reduce <br>costs against falling revenues.<br>4. The overall 
economy sags - domestic spending declines, domestic <br>production in response 
declines.<br><br>Why would Bollard be a goldbug in all of this? Well, of course 
a rising <br>Kiwi$ offsets the rising GoldUS$ prices and physical metal in NZ 
continues <br>its decline. (short term) 
http://finance.yahoo.com/q/bc?s=XAUNZD=X&t=2y&c= <br>or, (long term) 
http://quote.yahoo.com/m5?s=XAU&t=NZD&a=1&c=3 and, (dont <br>forget Silver) 
http://finance.yahoo.com/q/bc?s=XAgNZD=X&t=2y&c=<br><br>Bollard is providing a 
gift - potentially a gift of a lifetime - to Kiwis <br>who:<br><br>a) Have 
minimal debt, preferrably none.<br>b) Have no exposure to businesses reliant on 
export trade<br>c) Have limited exposure to retail/wholesale businesses that 
feel the first <br>pinch of higher domestic cost of money<br>d) Have enough 
cash/savings to be able to cycle a percentage into precious <br>metals (or any 
commodity actually)<br>e) Are patient enough and aware enough to know 'buying 
weakness' is an <br>accumulation opportunity and by nature, accumulation is a 
process which is <br>fulfilled over time.<br><br>I have to say in summary, that 
I did expect basis rates to rise first, and I <br>see this as a final chapter 
in the accumulation phase into weakness for <br>Gold, Silver (and whatever 
commodity you fancy) in NZ$. The phase after this <br>will see buying into 
strength, which is a -late to market- strategy, but <br>perhaps a neccessaity 
as the 'late majority' / 'mass market' will fall into <br>this 
category.<br><br>By the by, There is nothing NZ can do about the whipsaw effect 
coming <br>through excessive USD liquidity, declining velocity of money, a
 nd increasing <br>voltility of interest rates ... except, de-couple from the 
USD. That's <br>unlikely though isn't 
it.<br><br>BAA<br><br>_________________________________________________________________<br>Surf
 the net and talk on the phone with Xtra Jetstream @  
<br>http://www.xtra.co.nz/products/0,,5803,00.html 
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