krakknisse
01-08-09, 02:45 PM
Just a quick sketch of the state of things in Norway. Not too much data, but you'll get the gist of it. Some assessment of sentiment and a little data.
Media: late autumn was very gloomy. It started to catch up with J6P. Now, with ZIRP, things look all dandy.
A semi-doomer banker talking head just last day volunteered to tell the crowd that ZIRP perhaps had its drawbacks. Almost no-one knows here:
Drowning the economy in money is not risk free. One day the policy will work and consumer prices will increase. If everyone has closets and cupboards flush with cash, deflation could rapidly turn into inflation, possibly hyperinflation, if the printing press has been running at full speed.(Original in Norwegian: http://e24.no/kommentar/spaltister/dorum/article2853132.ece)
Maybe he read a little EJ.
Tidbit of personal information: This is perhaps the best thing I can tell you. I noticed in one particular relatively price-sensitive part of my income stream that during the last quarter of 2008 revenue was down - I estimate 10-20% down, talked to other colleagues and they felt the same. Now, for the last few weeks it's back to normal (running at max capacity, flat out, money streaming in). People seem happy with ZIRP: "my mortgage payment is down.".
Stocks/oil: The main stock index OSEBX peaked at 522 in May 2008 (trebled from 5 years ago), crashed to 188 (-63%) late November, and is now edging up to 250 (+30%) since early December. Oslo Stock Exchange is very oil sensitive, large volume of volatile foreign holders.
Real estate: Properties are not moving. Loans are much more difficult to get from banks, and are given with a much higher safety margins. First time buyers are wary. Showings have few/zero attendees. But seller's won't sell. A significant number of people I meet in my job volunteer that they cannot sell their houses. The main housing index peaked in July 07, and is down 14%. This is not a re-sale index and is vulnerable to segment mix changes. My guess is that you'd have to put your price down at least 25% from the peak to actually be able to sell.
Currency: The NOK fell quite rapidly vs the Euro and hit 10.1 NOKs per euro. Some slight gloom in media regarding expensive foreign holidays, and there were some "outlandish" headlines describing an "Icelandic situation".
Banks: There was a large bank bailout (about 50 billion USD, or 10k USD/capita vs. 2.5k/capita for the 750 billion TARP). No political storm over this.
Norway's banks are very vulnerable to the private and commercial real estate bust that has just begun. They also have significant liabilities in Eastern Europe.
Monetary: The main private credit indicator is decreasing (K2), rapidly say some. Y-O-Y the K2 indicator was increasing by 13-14% per year last year. It is now "down" to only 10% last month. We're rapidly on our way to a ZIRP, we're just a few months behind the rest of Europe. The government however does not have net external debt, so it's credit is stellar. There is however a huge private debt bubble. There's a big question as to how impaired the state's finances will be as income tax and VAT tax intakes decrease and our generous employment benefits outlays increase.
Regulatory/political: Tax planning is coming under scrutiny. The government wants to abolish the 1000 NOK note "because only criminals use it". Could be seasonal, they always do this around the new year (Dec 31st is the date the wealth tax is calculated).
We're a small, vulnerable economy with a huge social welfare net that is too expensive. Politically, we have a "red" government that is welded to Keynesianism, as is the rest of the political spectrum, and fiscal and monetary restraint is confined to "loonies" like me with little political influence.
My take: first innings yet for Norway. Some people have got burned (employees in construction, real estate and real estate flippers). Most people have no idea of what's coming. Unemployment is increasing, but not rapidly. I estimate we lag the US by a year or two.
I don't know which is worse, the USD, NOK or Euro. There is no safe haven. For outsiders, Norway would be a trade on changes in the timing of business cycles, or an oil play. At least we're better off than Sweden, which has no oil.
Media: late autumn was very gloomy. It started to catch up with J6P. Now, with ZIRP, things look all dandy.
A semi-doomer banker talking head just last day volunteered to tell the crowd that ZIRP perhaps had its drawbacks. Almost no-one knows here:
Drowning the economy in money is not risk free. One day the policy will work and consumer prices will increase. If everyone has closets and cupboards flush with cash, deflation could rapidly turn into inflation, possibly hyperinflation, if the printing press has been running at full speed.(Original in Norwegian: http://e24.no/kommentar/spaltister/dorum/article2853132.ece)
Maybe he read a little EJ.
Tidbit of personal information: This is perhaps the best thing I can tell you. I noticed in one particular relatively price-sensitive part of my income stream that during the last quarter of 2008 revenue was down - I estimate 10-20% down, talked to other colleagues and they felt the same. Now, for the last few weeks it's back to normal (running at max capacity, flat out, money streaming in). People seem happy with ZIRP: "my mortgage payment is down.".
Stocks/oil: The main stock index OSEBX peaked at 522 in May 2008 (trebled from 5 years ago), crashed to 188 (-63%) late November, and is now edging up to 250 (+30%) since early December. Oslo Stock Exchange is very oil sensitive, large volume of volatile foreign holders.
Real estate: Properties are not moving. Loans are much more difficult to get from banks, and are given with a much higher safety margins. First time buyers are wary. Showings have few/zero attendees. But seller's won't sell. A significant number of people I meet in my job volunteer that they cannot sell their houses. The main housing index peaked in July 07, and is down 14%. This is not a re-sale index and is vulnerable to segment mix changes. My guess is that you'd have to put your price down at least 25% from the peak to actually be able to sell.
Currency: The NOK fell quite rapidly vs the Euro and hit 10.1 NOKs per euro. Some slight gloom in media regarding expensive foreign holidays, and there were some "outlandish" headlines describing an "Icelandic situation".
Banks: There was a large bank bailout (about 50 billion USD, or 10k USD/capita vs. 2.5k/capita for the 750 billion TARP). No political storm over this.
Norway's banks are very vulnerable to the private and commercial real estate bust that has just begun. They also have significant liabilities in Eastern Europe.
Monetary: The main private credit indicator is decreasing (K2), rapidly say some. Y-O-Y the K2 indicator was increasing by 13-14% per year last year. It is now "down" to only 10% last month. We're rapidly on our way to a ZIRP, we're just a few months behind the rest of Europe. The government however does not have net external debt, so it's credit is stellar. There is however a huge private debt bubble. There's a big question as to how impaired the state's finances will be as income tax and VAT tax intakes decrease and our generous employment benefits outlays increase.
Regulatory/political: Tax planning is coming under scrutiny. The government wants to abolish the 1000 NOK note "because only criminals use it". Could be seasonal, they always do this around the new year (Dec 31st is the date the wealth tax is calculated).
We're a small, vulnerable economy with a huge social welfare net that is too expensive. Politically, we have a "red" government that is welded to Keynesianism, as is the rest of the political spectrum, and fiscal and monetary restraint is confined to "loonies" like me with little political influence.
My take: first innings yet for Norway. Some people have got burned (employees in construction, real estate and real estate flippers). Most people have no idea of what's coming. Unemployment is increasing, but not rapidly. I estimate we lag the US by a year or two.
I don't know which is worse, the USD, NOK or Euro. There is no safe haven. For outsiders, Norway would be a trade on changes in the timing of business cycles, or an oil play. At least we're better off than Sweden, which has no oil.