Bernard's Top 10: 'An incredible orgy of spending' (on art); The weight of (China's) money is coming; Don't worry about the robots; Clarke and Dawe on tit for tat politics; Dilbert

Here’s my Top 10 items from around the Internet over the last week or so. As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz

See all previous Top 10s here.

My must read is #9 on the rise of the robots.

1. Women of Algiers – The astonishing record-high price fetched by Picasso’s Women of Algiers recently has got people thinking about where all the money being printed is being pumped.

All sorts of hard assets, property and stocks are inflating in value as people look for places to put it.

The art world is a beneficiary.

The art world, though, seems to think it’s real and sustainable.

Here’s the thinking via WSJ:

“Art likes to move around the world, but the scale is so much bigger now,” said Ed Dolman, chairman and chief executive of boutique auctioneer Phillips. “We’re talking an incredible orgy of spending, and it feels like a total transformation.”

2. So where is the money coming from? – Here’s an indication via the same WSJ article:

Asian collectors played a key role in this latest round. David Norman, a four-decade veteran specialist at Sotheby’s, said a handful of Asian collectors—including Chinese movie mogul Wang Zhongjun and business tycoon Wang Jianlin—accounted for a third of the spending at his house’s $368 million Impressionist and modern art sale on May 5.

3. The cash supply is enormous – The extraordinary money supply growth seen in China between 2009 and 2012 has ended up in bank accounts in China and the numbers are astonishing — about US$17 trillion.

It’s been quite hard to get that money out of China, but it is starting to move now, either overseas as the authorities ease the restrictions on capital outflows, or into Chinese stocks now that apartment prices have started falling under the weight of over-supply.

These two charts tell the story. The first is Chinese term deposits. The second shows capital outflows from China and China’s stock market.

4. So where are some of those outflows going? – Australian property, it seems,  going by this chart courtesy of Business Insider’s Alan Kohler.

No wonder the Government here is starting to rethink it’s view that foreign buying is not much of a factor here.

5. Show us the ghosts now – Remember all those Chinese ghost cities? WSJ has gone back to have a look at a few. What it found was fascinating. Some are coming to life (sort of).

When a ghost starts taking on corporeal aspects, but still isn’t exactly alive, what is it?

That state of in-between horror is what some of China’s ghost cities are experiencing as they morph, Benjamin Button-like, into something more vital. Some, like Henan province’s Zhengzhou, have evolved into fully functioning cities, having passed seemingly unscarred through the trauma of a premature after-life. Others, however, still look as though they will never grow up to be a real boy.

That seems to be fate of new Tieling city, about an hour’s drive north of Shenyang in northeast China. Old Tieling is a city of about 340,000. Plans for a new Tieling were launched by the local government in 2005. When the Wall Street Journal visited in early 2013, it was the model of a ghost city.

Two years later, the city is starting to look more lively.

6. Why are some people so relaxed about the new LVR restrictions on Auckland property investors? – This Reserve Bank chart out this week (see below) shows that there was NZ$16.3 billion lent to rental property investors nationwide in the last eight months alone, which is when the Reserve Bank started collecting the data. The bank effectively banned this type of lending in Auckland last week. We don’t know the Auckland vs the Rest breakdown, but it would have to be around the 50% mark, so that would suck NZ$8 billion or so out of the ‘demand’ in Auckland over the next eight months.

This chart shows rental property investor borrowing by LVR type. The red bits were just banned.

7. Ban the deflators? – The likes of Uber and Air BnB are unleashing a revolution where the services provided by people and hard assets are turned into software that can be appified and put into the cloud, all the while reducing prices.

The reaction in some places is to try to ban them. Here’s the latest in Santa Monica where the local council trying to ban peer to peer short term rentals.

8. The end of life – I’m a big fan of Atul Gawande, who is asking some hard but necessary questions about medical interventions to prolong life and ‘solve’ many other problems.

Here’s a piece in the New Yorker he has written:

It was lunchtime before my afternoon surgery clinic, which meant that I was at my desk, eating a ham-and-cheese sandwich and clicking through medical articles. Among those which caught my eye: a British case report on the first 3-D-printed hip implanted in a human being, a Canadian analysis of the rising volume of emergency-room visits by children who have ingested magnets, and a Colorado study finding that the percentage of fatal motor-vehicle accidents involving marijuana had doubled since its commercial distribution became legal. The one that got me thinking, however, was a study of more than a million Medicare patients. It suggested that a huge proportion had received care that was simply a waste.

 

9. Here come the Luddites (again) – The LA Times has written a nicely sceptical alternative view of the growing concerns about robots taking away the jobs.

Here’s a taste:

It’s a scary story. But, first of all, it’s not new. Second, although robots are “coming for” some jobs, that fact does not explain the current economic situation. Robots are a distraction from very real problems.

On the first point, concerns about machines creating mass unemployment date back centuries. The term “Luddite” refers to textile workers in the early 19th century who smashed the machines that threatened to make their skills redundant. When I was young, Kurt Vonnegut’s “Player Piano” was a must-read tale of a society in which machines did all the work and people were unnecessary. So we have seen this script many times before.

Turning to the evidence, if technology were rapidly displacing workers then productivity growth — the rate of increase in the value of goods and services produced in an hour of work — should be very high, because machines are more efficient. In the last decade, however, productivity growth has risen at a sluggish 1.4% annual rate. In the last two years it has limped along at a pace of less than 1% annually. By comparison, in the post-World War II “Golden Age,” from 1947 to 1973, productivity grew at an annual rate of almost 3%.

10. Totally Clarke and Dawe on childish tit for tat politics.