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Market News 19 April 2021

Here's a 'glass full' perspective for you:

Barron's magazine thinks we are approaching a 'golden age of travel', reinforced by Wall Street pricing which expects air traffic in 2022 to exceed 2019!

Barron's cite past events (pandemics and wars) where the population's movements were restricted, and they were followed by explosive growth in travel.

The principle makes sense to me. Life is short, we are a migratory species that enjoys discovery and variety so once restrictions are lifted, we will move.

Here's another anecdote expecting success for the travel industry; Cruise ship company Carnival had to pay 11.50% to borrow money in 2020 but today the market is willing to lend to them at 4.00% such is the lift in confidence of a return to profit.

However, I think Wall Street's focal length is too short by pricing in 2022 volumes as a new high, exceeding 2019. If there is a vaccine hesitancy (witness Israel data) there will surely be some travel hesitancy and border controls.



Scientists – will be the ones to carry the world forward with genuine advances both in business and in health.

Vaccine experts are the ones currently basking in the light of glory.

Actually, that's not a fair statement because in my experience scientists don't seek glory, they seek evidence and progress. Rather than having their egos stroked they would prefer to be offered more funding.

The latest information I received was from a friend working in the fossil fuel industry.

After a wide-ranging discussion about how the world cannot, and thus will not, progress without liquid fuels for many decades ('the death of liquid fuels is highly exaggerated'). He explained that oil industry businesses are shifting the objectives and strategies too, putting serious minds and sums of money to work to improve environmental outcomes.

Their deep understanding of global energy system fundamentals underpins their future funding decisions, including work by many scientists, and they will be more effective at establishing change than populist politicians declaring Climate Emergencies.

Interestingly one of their future strategies is the increased use of gas due to its lower carbon dioxide emission levels if coal, and to a modest extent oil, are to be removed from the energy supply side.

So much electricity is generated using coal at present that unless increases to gas and nuclear are pursued then the world will not meet its 2050 targets for carbon neutrality (Intergovernmental Panel on Climate Change).

Remember that the NZ government decided to ban mining for new gas supplies and the fact that we banned coal mining means we are currently importing more (helping Australian employment – Ed).

The rate of change matters in these decisions.

The company I refer to is 'working to develop breakthrough solutions in areas such as carbon capture, biofuels, hydrogen and energy-efficient process technology. And is focused on society's highest-emitting sectors of industrial, power generation and commercial transportation, which together account for 80 percent of global energy-related CO2 emissions, and for which the current solution set is insufficient.'

Focusing change where 'we' can have the most effect is logical, and the only way we'll reach aspirational goals.

So, part of what I heard was that we need to be careful how fast we remove coal and oil from the energy supply mix but the item that kept me reading was the forward looking 'energy-efficient process technology' and a very interesting article about more efficient battery development, which is happening now.

When we can generate electricity from the most desirable sources (renewable) let's ensure it is not wasted and can reach consumers at the most suitable time of the day.

For the curious have a read about the NAWA technology company, in France:

They are developing battery technology that is described as a significant step forward from current battery technology by using carbon nanotube electrodes to store the energy, that can achieve an 80% recharge in five minutes! (time that is needed to grab a flat white whilst parked).

They also say that the energy stored in such a battery is capable of delivering a 1,000 kilometre range to mass market scale vehicles.

For those of you who are electrically minded, carbon nanotube electrodes high electrical and thermal conductivity (easy for ions to move around, and less distance to move).

Three cheers for the scientists, who will save us from ourselves as long as our governments lead well.

AML – By the Law of Unintended Consequences Act, dated since the beginning of time.

You will all have been emersed in the obligations set by the Anti Money Laundering and Countering Finance of Terrorism Act, some of you more deeply than you'd wish.

Well, you're not alone; we, the organisations tasked with meting out this new treacle to the business process, share your discontent (to some extent) and some businesses are now taking very strong positions on how they'll adjust their business services.

The regulators have been taking an aggressive stance on monitoring 'us' and issuing some enormous financial penalties to those who transgress, no matter how difficult it was to avoid a breach.

Last year I highlighted for you that Rabobank in NZ was no longer accepting new investment customers who use a trust as an investment vehicle, and they have been asking current trustee clients to close their accounts.

Performing AML obligations on a trust is far more onerous than a natural person both at the point of client account set up and for ongoing due diligence.

Rabobank's strategy (policy) is entirely understandable.

Whilst we think some aspects of the AML law have resulted in improved accuracy of client records the overbearing regulatory threat does mean our industry assesses every new client record for AML outcomes, including regulatory risks, before agreeing to a new relationship (entities from overseas are a challenging prospect!).

The AML obligations for local banks providing settlement services to businesses in the foreign exchange market, helping people to make payments from one jurisdiction to another, has become a risk that is too high so local banks are refusing to provide such services.

It's hard to blame them; this is one area where the banks have been heavily fined for not monitoring all the risks of the money movements under their ongoing due diligence obligations.

The banks aren't making hundreds of millions from this business flow so there's little point in being exposed to the threat of fines in the hundreds of millions.

This strategic change has become such a problem that the banking regulator, the Reserve Bank of New Zealand has stepped in (again):

The Reserve Bank has again asked banks not to impose a blanket ban on taking money remittance service providers and virtual asset service providers on as customers in the name of de-risking themselves from money laundering and terrorism financing risks.

They pressed the banks in 2015 not to deprive businesses of access to banking services but in 2016 the High Court supported bank freedom to choose who they agree to do business with.

The Reserve Bank wants banks to take a risk-based approach and improve their understanding of the risk variations (read grey zone) and to mitigate those risks whilst continuing to provide the services.

That might be acceptable if regulators assessed AML compliance as a grey zone, but they don't; it's black and white, compliant or in breach. No exceptions, and very large fines are issued for breaches.

It's the regulators who defined the playing field risk setting, both with the law and their enforcement actions. Their mothers must have taught them what happens once they've made your bed…

Interestingly the Bank of International Settlements said last year that AML laws and processes seem well designed but they are proving to be ineffective with respect to catching criminals (for the most part), so is anyone now debating the value relative to the economic drag?

If you are a regulator, be careful what you wish for.

Important AI news – The news that Microsoft has purchased Nuance, a dominant provider in the healthcare sector using artificial intelligence, reminds us that AI use will continue to accelerate across the world's economies, especially post Covid19.

AI adds leverage to a process, but it is also supporting remote servicing options and there's no going back for the health sector.

Hopefully this means health costs will decline and services will be accessed more widely.

It also reminds me that it is likely that the world's most dominant businesses will become even more dominant in the year ahead.

If you want to be an excellent small business, you'd better hope that the dominant would rather buy your business than compete with you.

I think the NZX team made a very good, forward looking decision, when they introduced a thematic smart share directed at Automation & Robotics sector risks (BOT).

Not so Green – The efforts to redirect the global population's behaviour toward better outcomes for the planet are having more impact now than any other efforts that I can recall through my lifetime.

However, the world's lunge toward better form on climate related influences is still a bit messed up when you learn that Bitcoin mining in China uses more (coal fired) electricity than a whole European nation!

Yet here in NZ some think we should reduce our livestock numbers by 15%!

Let's reduce the world's access to food so a very small group can try and access a cryptocurrency that enables payments across criminal networks.

It's more than a little ironic that the command economy of China agrees to such excessive use of energy to mine for something that supports anonymity.


The World Expo in Dubai has been rescheduled for October 2022; another sign that the world is ready to move forward.

I sincerely hope that New Zealand is planning to attend and tell the world we are open for business.



It may finally be the time when the governments of the world tackle the unfairness of corporate tax collection, where the largest global firms used by a majority of consumers only pay the lowest tax ratio to the countries selling their souls via tax policy.

Paying less corporate tax benefits the small subset who own such companies, and this surely contributes to the financial imbalance in the world.

The governments of the world have forced all taxpayers to contribute to many enormous financial underwrites (paying for Covid19) so they should make more effort to collect taxes too.

If the US insist that you and I in NZ fill in the silly forms* that demand a declaration that we are not US Tax Residents then surely they can tackle the concept of paying tax in the jurisdiction revenue is generated.

*It is absurd that a registry asks for this declaration upon every new investment rather than sharing our declaration with all whom they act for as registrar.

ETO III – Vaccinations

Global Data:

Vaccinations delivered – 894 million (reaching 1 billion by month's end looks simple)

Total (recorded) Corona Virus cases – 142 million

Active Cases – 18.4 million (not clear why this has been cut so far! Data fatigue??)

Daily rate of new cases – 800,000+ (rising, with Brazil and India dominating data)

People in serious condition – 107,000

Daily Deaths – 12,000+

Investment Opportunities

Strangely quiet, but we will need some new bond offers soon because you all have a lot of money being repaid over coming months.


Edward will be in Auckland on April 29 (Albany) & April 30 (Remuera). He also plans to be in Auckland on June 10 & June 11, Napier on June 24 & June 25 and in Nelson in July.

Johnny will be in Christchurch on April 28 and again each month in May and June. He will be in Tauranga on May 12.

David will be in Palmerston North on Wednesday 21 April, Kerikeri on May 6 and Whangarei on May 7.

Kevin will be in Timaru on April 27.

If you would like to make an appointment, please contact our office.

Mike Warrington 

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