David Thompson Posted:
So very, very true. It beggars belief that we consider ourselves to be a developed nation when so much of our economy is based on selling milk powder or logs. BTW, I own a Plinius amplifier (my second) that drives a set of Theophany speakers.
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David Thompson Posted:
A robust but sobering report. It concerns me that confidence is rising, yet sales and exports are down and "manufacturers and exporters are still lagging behind other sectors". Surely we should wait until we're earning more money before we start spending more?
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siemens Posted:
Yes true! The only thing that will never die in this world is the nature and its science behind it. Great post.
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Kieran Ormandy Posted:
Thanks for the question Steven, Germany has seen increases in manufacturing employment since 2009, and Switzerland has had stable manufacturing employment between 2006 – 2011, even in the face of ongoing Euro-zone issues. Korea has seen increases in manufacturing employment since 2008 and Israel experienced large increases since 1998, while being stable over the last 4 years. Singapore has had increases in manufacturing employment over the last two years. These countries all value their manufacturing sectors and work to protect them, this is reflected in the above numbers and their performance through the GFC. Note data around the above examples was sourced from OECD labour market stats.
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John Walley Posted:
Point one: you should have no doubt what our Association says publically represent the views of our members. Point two: we don’t knee jerk responses, if you trace back our comments around NZPower you will see them link all the way back to our research in 2004 and 2005. All that material is fully linked from our comments above. Point three: you will note our comments on major users, sadly the same advantage does not accrue to smaller industrial users. The perverse incentives of the LRMC approach in all this are well known. Point four: the NZMEA is not like any other Association in New Zealand we admit only manufacturers and exporters into membership, and our public expressions are the views of that restricted membership.
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Companies freeze hedging after big losses: Reuters

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This article from Reuters which featured on yesterday demonstrates the problems firms have been having with hedging overseas.

These problems are even worse in New Zealand where the NZ Dollar tends to be even more volatile.

It's been a tough few months for companies that use derivatives to hedge their commodity costs. A collapse in industrial metal prices handed major paper losses to firms like Ford. The massive dislocation in crude oil benchmarks hit United Continental hard.

And now, with deepening despair over the European economy and ever-present fears of a US slow-down, many companies that would normally be locking in their costs have retreated to the sidelines this month, market sources say.

"Consumers are paralysed right now," said one senior trader with a bank, who declined to be named.

So far, traders are shrugging this off as a temporary lull, typical of markets that have fallen from their peaks and are not showing imminent signs of the kind of price spike that would cause end-users to rapidly buy more price protection.

Southwest Airlines, long one of the most consistent and aggressive hedgers in the airline business, already hedged some fuel costs as far forward as 2015 - but it has since paused. It took a non-cash markdown of more than US$200 million ($266 million) tied to its hedge portfolio in the third quarter.

"We have reduced our hedging portfolio over the next several months to ... actively manage what we believe will be a lower price environment," chief executive Gary Kelly told analysts a month ago.

But privately, some traders fear that consumers could be slow to return to the market, burned by this year's losses and facing higher costs as new regulations bite. That could be a particularly painful blow for US banks that are ever more dependent on the business of hedging for airlines, power plants, auto makers and other bulk raw material consumers,

One company has already abandoned the practice.

Railroad operator BNSF, which counts fuel about one quarter of its operating costs, has effectively quit hedging ever since Warren Buffett's Berkshire Hathaway bought the company last year. Its coverage for next year has remained flat at 3 per cent of total demand as old hedges expire; it was 19 per cent hedged in 2011.

tags: currency hedging, exchange rate, nz dollar


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