Archive for the ‘Credit Crisis’ Category

South Canterbury Finance asks to be put into receivership

August 30, 2010

I wonder how far the tentacles of this wee disaster will spread. I have heard the cry that people are worried about the South Island economy. You don’t get to be New Zealand’s second largest finance company and only have interests in the South Island.

Mr Hubbard and his cohorts have invested heavily in the agri/horticultural industry right throughout NZ.  A wholesale firesale of land will hurt the whole sector if only through the ol’ supply and demand equation. More land on the market = lowers the price per hectare = less equity for those who own farming land.

I wonder if Scales Corporation is will be caught in the web and is the rumour that the Aussies are looking to buy Mr Apple (just as NZ Apples growers get into Australia) true.

I am probably drilling down too soon but….

Update: Well it didn’t take long for someone much wiser than I to answer one of the questions.

Now, unfortunately, the pain will begin for the South Island rural economy.

South Canterbury owns a third of Dairy Holdings, which is New Zealand’s largest dairy farm company with 72 farms that produce more than 1% of Fonterra’s supply. It also owns fruit packaging and warehousing company Scales Corp and HNZ, which is New Zealand’s largest helicopters company.

It also has close to NZ$2 billion of loans out there in the rural economy, backing farms, contractors and small businesses in provincial centres.

Though as I have stated it’s not just the South Island that going to be hit.  It’s interesting that it’s two years since the Global Financial Crisis hit……

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Global Financial Crisis Explained

February 26, 2009

The financial crisis explained in simple terms:*

Heidi is the proprietor of a bar in Berlin. In order to increase sales,
she decides to allow her loyal customers – most of whom are unemployed
alcoholics – to drink now but pay later. She keeps track of the drinks
consumed on a ledger (thereby granting the customers loans).

Word gets around and as a result increasing numbers of customers flood
into Heidi’s bar.

Taking advantage of her customers’ freedom from immediate payment
constraints, Heidi increases her prices for wine and beer, the
most-consumed beverages. Her sales volume increases massively.

A young and dynamic customer service consultant at the local bank
recognizes these customer debts as valuable future assets and increases
Heidi’s borrowing limit.

He sees no reason for undue concern since he has the debts of the
alcoholics as collateral.

At the bank’s corporate headquarters, expert bankers transform these
customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These
securities are then traded on markets worldwide. No one really
understands what these abbreviations mean and how the securities are
guaranteed. Nevertheless, as their prices continuously climb, the
securities become top-selling items.

One day, although the prices are still climbing, a risk manager
(subsequently of course fired due his negativity) of the bank decides
that slowly the time has come to demand payment of the debts incurred by
the drinkers at Heidi’s bar.

However they cannot pay back the debts.

Heidi cannot fulfil her loan obligations and claims bankruptcy.

DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs
better,stabilizing in price after dropping by 80 %.

The suppliers of Heidi’s bar, having granted her generous payment due
dates and having invested in the securities are faced with a new
situation. Her wine supplier claims bankruptcy, her beer supplier is
taken over by a competitor.

The bank is saved by the Government following dramatic round-the-clock
consultations by leaders from the governing political parties.

The funds required for this purpose are obtained by a tax levied on the
non-drinkers.

The D Word

February 16, 2009

Someone has finally used the D word,Depression, and I’m not talking about the sort that can be fixed with pink and purple pills. No this Depression was used to express Japan’s economy.
This article states that Japan’s economy shrunk by an annualised 12.7% over the December quarter (interestingly they didn’t use the work annualised on BBC, CNN or TV1 news yesterday which gave me cause for greater concern :-0) AND they don’t state that Japan is actually in a Depression but what they do say is that the economy fits the description

The collapse in growth fits the profile of a depression — a deep recession in which annual GDP falls by 10 per cent or more.

This definition just leaves us to define ‘deep recession’

However another definition doesn’t leave that much wriggle room

A good rule of thumb for determining the difference between a recession and a depression is to look at the changes in GNP. A depression is any economic downturn where real GDP declines by more than 10 percent.

We are just left defining the word ‘real’ in ‘real GDP’.

Truth is there is no formal definition of Depression, the word recession was employed after the 1930’s Depression as previously every downturn was termed a Depression but obviously a small downturn did not fit as a Depression in the minds of those who had lived through a real one. The panic that the use of the D word would have conjured up would have been unsettling too.

Throughout this current economic cycle commentators have been loathed to use the word Depression; I guess it still conjures up images of soup lines and those doen’t fit well with the luxurious positions we have found ourselves in, in recent years. I am also NOT saying that New Zealand is heading for a Depression, nor am I saying that the world is plunging into a Depression, what I am simply  saying is that someone has finally used the D word, correctly or not; and I find that interesting

And once again from The Consumerist

October 10, 2008

The Consumerist gets it right again, apparently the paint got removed from the ‘famous Wall Street bull’ :[(

Heh

The Economist sums it up?

October 10, 2008

This brilliant spoof from The Consumerist

That’s entertainment!

October 10, 2008

Well I’ve not been blogging for a while due to a major operation; not, I will hasten to add due to ill health, just girlie stuff gone haywire.  So as I lay on the couch being bought endless cups of coffee I needed some form of entertainment.  The credit crunch/crisis/catastrophe has provided that. 

CNN telling everyone not to panic, Fox’s ‘journalists’ yelling at, and talking over, each other and not allowing interviewees to answer the questions, BBC’s stoic analyses…endless drama to had.

Yes, I guess it feels that surreal, being at arms length, but watching and listening has reinforced my beliefs about the world’s use of credit.  Here’s the thing, consumers need to realise that you do not have automatic right to credit to buy that new car or get that marble topped kitchen.  Credit is NOT an income source.

I am hearing US commentators complaining that people can’t get credit when they want it, now I feel for those losing their homes, but sometimes…just sometimes… you have to save for the things you want.

I am worried that worldwide we have an entire generation of people who have never had to wait for what they wanted, it’s been too easy.  I don’t know if they have the tools to survive.

On another note there has been talk of an export led recovery, the dollar, euro and yen are all dropping but if we are to sell our products to other countries, their consumers have to have the money to buy them.  I suspect luxury items will be off the shopping list…the world may go back to basics.

It’s going to be interesting to watch and see; that’s entertainment