Archive for July, 2011
Friday, July 29th, 2011
Here are this weekend’s reading diversions for your personal enlightement. Have a terrific long (Civic Holiday) weekend!
Margaret Cochran, Ph.D.: The Enneagram: A Guide to Understanding Yourself and The People Around You
It is important to understand, as you explore this system, that we each possess all of the nine types of Enneagram energy within us. However, there is one “home point” in which we spend the majority of our “psychological time.”
“If you focus on filling up on fruits and veggies, so they’re at least half your plate, you’re not going to have a lot of room left to even eat all that meat,” said Joan Salge Blake, R.D., a spokesperson for the American Dietetic Association. “The biggest thing is just getting down the amount we eat.”
The fruits and vegetables that have been dubbed “superfoods” over the past few years have a few things in common. They’re almost all dark-colored. Many of them are strong-tasting, either bitter or sweet. More than a few have been berries (blueberries, cranberries, goji berries, açai berries) and green leafy vegetables (kale, collard greens, spirulina, wheatgrass). Onion skins are none of these things. They are papery, beige and gross.
How to Prevent Crohn’s Disease | eHow.com
There is currently no medically documented way to prevent Crohn’s disease. However, you may be able to reduce the likelihood of developing Crohn’s disease through your lifestyle and diet. Here are some tips to help you lessen your chances of developing Crohn’s disease.
Although prednisone can be successful in bringing about remission, according to the University of Maryland Medical Center, it has numerous side effects including infection, metabolic bone disease, hypertension, diabetes, glaucoma and cataracts. If your condition requires a high-dose regimen of this medication, your doctor may suggest alternative procedures that eliminate these risks.
But while swimming can certainly be a healthy pastime, allowing you to burn calories while staying cool outdoors, the number of recreational water illnesses (RWIs) has been on the rise over the past few years, according to the Water Quality And Health Council. And though we rightfully tend to worry about taking precautions against sunburn and drowning accidents, it’s also important to keep an eye out for pool water safety.
If you have rheumatoid arthritis (RA), you also have double the risk for heart disease and heart attack.
Leo Galland, M.D.: Slimming Strawberries For Weight Loss
Peak strawberry season is just around the corner, so now is the perfect time to add strawberries to your menu for summer weight loss. From farm stands to your local supermarket, these luscious berries are sure to turn up just about everywhere.
There is one key factor that can either damage your relationships or deepen them. That factor is your attitude. If you’re hoping to grow and maintain positive relationships in your life, read on. Below you will find a 20 step attitude adjustment guaranteed to help you do just that.
Ten Healthiest Foods For Under $1 | Food & Drink | Living Frugally | LearnVest – Where life gets richer
Fresh fruits, vegetables and whole grains are vital components to any healthy diet. Fortunately, many of these nutritious foods can often be found in your local supermarket for less than a dollar, though prices vary depending on the season as well as where you live
Introducing you to health risks is not saying that turning forty somehow signals an onslaught of diseases and disabilities. Many women are healthier than they’ve ever been as they approach midlife. But a well-thought-out approach to health maintenance is smart at any age, and it becomes more important as each year passes. Don’t think of your health care efforts as part of entering old age; think of them as a simple, basic plan to preserve and extend your energy and quality of life.
The cause of Crohn’s disease is unknown. Some scientists suspect that infection by certain bacteria, such as strains of mycobacterium, may be the cause of Crohn’s disease. To date, there has been no convincing evidence that the disease is caused by infection. Crohn’s disease is not contagious. Although diet may affect the symptoms in patients with Crohn’s disease, it appears unlikely that diet is responsible for the onset of the disease
Crohn’s disease: Lifestyle and home remedies – MayoClinic.com
Avoid problem foods. Eliminate any other foods that seem to make your signs and symptoms worse. These may include “gassy” foods such as beans, cabbage and broccoli, raw fruit juices and fruits — especially citrus fruits, spicy food, popcorn, alcohol, and foods and drinks that contain caffeine, such as chocolate and soda.
10 quick and healthy snacks to stash at work | Healthy Eating | Eat Well | Best Health
Keep these 10 snack options in your desk drawer or office fridge for quick, healthy alternatives to vending machine fare
So what’s causing this cross-national divide in depression levels? The study’s researchers speculate that one reason could be the sharp income inequality in wealthy nations. Any other possible reason is the low level of awareness about mental illness in poorer countries. Or, say the researchers, it could be perhaps just be that depression is an illness of affluence.
If you’d like to lose 10 pounds or more this summer, check out these 20 tips. Three nutrition experts share their best advice on losing weight this summer and keeping it off for good.
Tags: American Dietetic Association, Civic Holiday Weekend, Crohn S Disease, Eating Meat, Enlightement, Enneagram, Flare Ups, Fruits And Vegetables, Fruits And Veggies, Goji Berries, Green Leafy Vegetables, Joan Salge Blake, Margaret Cochran, Maryland Medical Center, Metabolic Bone Disease, Onion Skin, Onion Skins, Psychological Time, Superfood, University Of Maryland Medical Center
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Friday, July 29th, 2011
by Lupin Rahman, PIMCO
- We forecast emerging economies will expand at a faster pace than advanced economies over the secular horizon.
- The challenge for emerging market central bankers is to remain ahead of inflation expectations and retain credibility on inflation targeting. We feel they are well positioned for this.
- We believe global investors remain significantly underweight emerging market assets. We expect this underallocation to decrease, providing multiyear support for the asset class.
Emerging markets are increasingly important drivers of growth for the global economy, though they face challenges to reaching parity with, or even surpassing, today’s developed nations.
In the final of a series of Q&A articles accompanying the recent release of PIMCO’s Secular Outlook, portfolio manager Lupin Rahman discusses growth dynamics, inflation and structural change in emerging markets (EM) as well as what all of this means for the global economy.
Q. Could you discuss growth dynamics in emerging markets and their share of the global economy?
Rahman: We forecast emerging markets to outperform advanced economies over the secular horizon (next three to five years) with growth averaging 6% vs. 2% in advanced economies. Significant transitions already underway in the global economy underpin this trend. Essentially we are seeing a shift from a unipolar world anchored by advanced economies toward a multipolar world with large emerging economies playing an increasingly larger role in the global economy.
Within EM we expect to see differentiation across economies. In Latin America and emerging Asia we forecast growth in the 6% to 7% range to be anchored by low leverage, strong structural demand for commodities and a soft landing in China. Meanwhile, countries in emerging Europe, and in particular those economies with high levels of leverage, are likely to experience a period of modest growth in the 4% range.
The relevance of this increasing importance of EM for investors lies in the remarkable divergence between current investor positioning and the economic realities of the postcrisis world. Specifically, we believe global investors remain significantly underweight emerging market assets in relation to both their current and future share of the world economy, as well as in relation to the trends in their relative credit fundamentals. We believe that as markets reorient to our New Normal view of the world this underallocation to EM will decrease, providing multiyear support for the asset class.
Q. How does the middle class in emerging markets compare to the developed world? And what are
current and anticipated domestic consumption patterns in EM?
Rahman: The growth of the emerging middle class is an important aspect of the EM growth story, particularly in the context of a deleveraging consumer base in advanced economies. If we take the World Bank’s definition, the global middle class is forecast to triple from 400 million in 2000 to 1.2 billion in 2030, with China and India accounting for most of this expansion, according to a December 2006 report. To put this into perspective, this means that by 2030 a significant majority of the global middle class will be from EM.
In addition to important strides in po verty reduction, this shift represents tremendous opportunities in new global consumer markets as EM consumption expands beyond food and shelter and towards consumer durables and services. In fact we are already seeing this trend with spending on automobiles, refrigerators and entertainment showing robust growth. We expect this to continue in the next decade and be underpinned by gains in real EM consumption growth which we estimate will increase by 50% in real terms.
Q. Shifting gears, could inflation cloud the outlook for emerging markets?
Rahman: There have been two important shifts in EM inflation dynamics over the past decade underpinned by more independent central banks, a reduction of fiscal dominance and a reduction in wage indexation. First, the levels of inflation in emerging markets have dropped from double-digit increases being the norm to headline inflation decreasing to the mid-single digits. Second, inflation volatility has decreased as a result of more anchored inflation expectations.
Looking ahead, the current 2 to 3 percentage point differential between emerging market and advanced
economy inflation will likely persist given our forecast of robust EM growth and debt deleveraging in advanced
economies. But importantly, we do not see a sharp secular increase in this differential. Of course there are risks to this baseline view from potential spikes in commodity prices and asset-market bubbles, but the fundamental shifts in inflation expectations mentioned before provide EM policymakers room to maneuver in tackling these shocks.
Q. What are central bankers in those countries doing to contain inflation, and what are the implications of
Tags: asset class, Brazil, Commodities, Credibility, Differentiation, Emerging Asia, Emerging Economies, Emerging Europe, Emerging Market, Emerging Markets, Global Economy, Global Investors, Growth Dynamics, India, Inflation Expectations, Latin America, Leverage, Market Assets, Multipolar World, Parity, Portfolio Manager, Unipolar World
Posted in Brazil, Commodities, India, Markets | Comments Off
Friday, July 29th, 2011
Last week I sat down with Laura Mandaro from Marketwatch to discuss what’s currently driving commodity markets. One of the key drivers today is the robust economic activity and commodity demand taking place in Asia.
Frequent Frank Talk readers know there is something profound and significant happening in China—the building of a massive high speed rail network. It’s a $300 billion project that will connect more than 250 Chinese cities, span 18,461 miles and reach roughly 700 million people. This is going to create massive demand for commodities and a wave of investment into the sector. We believe that resource companies associated with coal, iron ore and steel are well positioned to benefit from China’s long-term sustainable bull market.
I also discuss a few individual stocks I think are structurally sound as well as talk about a market ready to take off and The Fear and Love Trade.
Tags: Asia, Boom, China, Chinese Cities, Coal, Commodities, Commodity Markets, Economic Activity, Fear, High Speed Rail, Iron Ore, Love, Marketwatch, Massive Demand, Resource Companies, Stocks
Posted in Commodities, Markets | Comments Off
Friday, July 29th, 2011
Here is the complete transcript of this interview:
CONSUELO MACK: This week on WealthTrack, how Great Investor Dennis Stattman is navigating the great divide between the slow growing developed world and the fast growing developing one; paper based assets and hard real assets; bonds and stocks. BlackRock Global Allocation Fund’s Dennis Stattman on managing a bifurcated investment world is next on Consuelo Mack WealthTrack.
Hello and welcome to this edition of WealthTrack. I’m Consuelo Mack. We have said many times in the past that in this global and interconnected world we live in, money will flow to where the growth is and will leave where growth is lagging. The developed world- Europe, the U.S., and Japan- are all in the lagging column right now. According to independent research firm ISI Group, over the past 8 years China’s nominal GDP, that’s with inflation included, has accelerated 250%. In contrast, U.S. GDP has expanded only 40%, the Eurozone’s a mere 25% and Japan’s nominal GDP has actually contracted 5%.
Recent figures show China’s economy is still booming as are many other developing nation’s, whereas the mature economies of the West and Japan- with their heavy levels of government debt, unemployment, aging populations and slow recovery from a series of real estate, banking and credit bubbles- are laboring. According to many economists, the debt reduction, or deleveraging process as it is known in the trade, will be particularly painful and lengthy, taking several more years. As a recent article in The Economist put it, “get used to it!” What’s an investor to do?
That’s where this week’s Great Investor guest comes in. We last talked to Dennis Stattman, lead portfolio manager of BlackRock’s Global Allocation Fund at the beginning of this year. Given the rapid escalation of world events, we decided we better get an update. Stattman, who once worked at the World Bank, had the prescience to join the now $55 billion plus fund at its inception, way back in 1989. Since then, the fund has had only three down years and has outperformed most stock and bond markets, as well as the majority of its peers, with less than stock market volatility, achieving a primary goal. It’s done it with a broadly diversified portfolio of 700 plus individual stocks, bonds, alternative investments and cash invested around the world. I began my visit with Stattman by asking him why he thinks there is something artificial about the current market environment.
DENNIS STATTMAN: Treasury bond prices have been heavily influenced by the purchases that the Federal Reserve has been making, and they’ve been quite explicit about this. They want Treasury bond prices higher and yields lower than they otherwise would be. And in the end, all fixed income prices and yields are influenced by the Treasury market; and so when the Treasury market is artificially high in terms of price and low in terms of yield, that tends to influence all fixed income security prices. And in fact, since fixed income securities compete with other assets, that tends to influence all asset prices. And we believe that asset prices have been held higher than they otherwise would have been because of the Fed’s purchases.
CONSUELO MACK: So therefore the rally that we’ve seen in what we now call ‘risk assets’ that Ben Bernanke has said was one of the reasons that he did the QE1 and QE2, so in fact, you’re saying the risk assets are artificially inflated.
DENNIS STATTMAN: They could well be. Now, to different degrees, and we happen to think that the Treasury bond market is the most inflated, and the stock market has a more questionable amount of inflation in its prices.
CONSUELO MACK: So what happens now that the Fed at least will not be actively buying Treasury securities, at least the new issues, that they’re going to be turning over their portfolio, right? And replacing, as the Treasuries that they hold on their balance sheet mature, they’re going to continue to buy, to replace those with Treasuries, is that correct? So we’ve still got some stimulus going on, even though the QE2 officially ended?
DENNIS STATTMAN: They’re maintaining, we believe, the size of their portfolio, but they’ve told us they’re not going to be increasing the size of it. So our sense is that having been through a program where they were buying approximately one-tenth of a trillion dollars worth of per month, that when you take away the growth in demand that they’ve been providing, that the Treasury market’s going to have to find another buyer. And if it’s not a foreign buyer, then it’s going to need to be a domestic buyer. And we have not, for some time now in this country, been self-financing. And it might take higher interest rates to do that.
CONSUELO MACK: And when do we start to see that pressure building?
DENNIS STATTMAN: Well, I certainly hope rates are going to go higher, not just in order to reward savers. But if rates don’t go higher, that would probably be associated with a very weak economy, and perhaps even financial trouble again, some place in the world; for example, in Europe. So our hope is that higher rates would be accompanied by at least a decent economy. And I think if we have a decent economy, we will have higher interest rates.
CONSUELO MACK: Okay, so let’s talk about a decent economy. Are we going to have a decent economy, and if so, when?
DENNIS STATTMAN: We’d love to see something far more dynamic than we’re seeing. But so far, we haven’t seen employment strengthen enough to, for example, reduce the average length of unemployment, which is distressingly high. So what we think we will continue to see is a world in which the developing economies outgrow the developed economies, and where the developed economies struggle to get back to trend growth.
CONSUELO MACK: But the theme is that you felt that we’ve got a bifurcated world, essentially; that they’re not the haves and the have-nots, but the rise of the rest. Where are you seeing the rise of the rest, that’s most noticeable, and what are the areas that you think that we should be paying particular attention to, as investors?
DENNIS STATTMAN: Well, clearly China, India, Brazil. And those are very well-known stories, but they’re powerful stories. And these are not stories that are going to change every three or six months. These are decade or multi-decade-long stories. It’s simply a case that production, jobs, income and wealth are spreading much more broadly around the world. And in fact, what’s generating those jobs and income and wealth growth is increasingly domestic consumption in some of those countries, especially China.
CONSUELO MACK: How risky is the China story, and the fact that so many of us seem to be banking on China as kind of the driver of world growth in the 21st century? And what are the risks to that scenario?
DENNIS STATTMAN: Surely when loan growth is as robust as it has been, in China, and where lending policies are influenced by many different levels of government, you’re going to have some very questionable sorts of loans created. But at the same time, the growth of the banks’ assets, to some degree, means that the portion of them that are troubled from a year or two years ago, is not as overwhelming as it otherwise would be. We should also keep in mind that China is a country of financial surpluses, and surpluses on the one hand are associated sometimes with growth that is so fast that there are problems created. But at the same time, surpluses are surpluses, and they can absorb losses.
CONSUELO MACK: What are the surpluses that you’re talking about that you think can provide a cushion to China, even in the case of some sort of a downturn, or at least a slowdown?
DENNIS STATTMAN: Well, let’s keep in mind that China generates a high level of savings, a high level of trade surplus. It has the world’s highest foreign exchange reserves, by far. And it’s in a position to use some of those reserves, and that power to generate financial assets to repair, when there’s some problems. And also if a growth rate of 10 or 11% turns into a growth rate of 7 or 8%, it’s still a growth rate.
CONSUELO MACK: Let’s talk about another controversial statement that you made, and that is that government bonds are not safe. Whose government bonds are not safe, and why are they not safe?
DENNIS STATTMAN: Well, we believe that most government bonds are safe in terms of the nominal value of them- in other words, that most of them will pay their interest and pay their coupons on time. Might not be every single one of them, and we can think of some countries in Europe that are very questionable at this point.
CONSUELO MACK: So Greece and Spain and Portugal and Ireland are?
DENNIS STATTMAN: I would say at least Greece and Portugal are in serious question, and of course, they’re small enough to be manageable. The big question is probably Spain. And if Spain were to get into trouble, people would look around for the next country to worry about. And let’s hope that the trouble stops before it gets to Spain not being able to meet its obligations.
But I think more to the point is simply something like U.S. Treasury bonds. A 10-year Treasury yields a little over three percent these days. And what that really means is that’s like a stock that sells at a PE ratio in the thirties, but has no growth. And this is before inflation and before taxes. And we are right now, as a nation, facing a big deficit that has a large cyclical component. And that cyclical component is also occurring at the same time there is a tidal wave of demographic-related spending that is just starting to happen and will grow and grow and grow.
CONSUELO MACK: The Baby Boomers, social security, Medicare.
DENNIS STATTMAN: Exactly. That will grow for the rest of our lifetimes, and we don’t, as a nation, yet have much of a plan about how to pay for it. And given that we’re starting with very low interest rates, a low but rising rate of inflation, very low real interest rates. The real interest rates on a Treasury inflation-protected security with a maturity of ten years are less than one percent. It seems that there are risks of inflation and risks of higher interest rates that one is not really compensated for today.
CONSUELO MACK: Now, the Chinese, for instance, hold a lot of Treasury securities.
DENNIS STATTMAN: Yes.
CONSUELO MACK: U.S. Treasury securities. And even though they’re diversifying, supposedly, into some sovereign debt of European countries and whatever, but good luck to them in that area, so you know, I mean, what’s the alternative? If, as far as kind of the traditional use of Treasuries in portfolios has been for liquidity reasons and also a defensive, kind of a non-correlated asset, what do you substitute for the traditional role that Treasuries have played in most of our portfolios?
Tags: 8 Years, Best Game, Brazil, Commodities, Consuelo Mack, Debt Reduction, Economists, Eurozone, Global Allocation, Government Debt, Great Divide, Independent Research Firm, India, Investment World, Isi Group, Levels Of Government, Nominal Gdp, Portfolio Manager, Rapid Escalation, Real Assets, Recent Article, Wealthtrack, World Europe
Posted in Brazil, Commodities, ETFs, India, Markets | Comments Off
Friday, July 29th, 2011
The S&P 500 has bounced back above its 50-day moving average today after suffering an extreme decline yesterday where it went from being just under overbought to below its 50-day. Unfortunately, underlying breadth hasn’t bounced as much as the market itself today. As shown below, just 38% of stocks in the S&P are currently trading above their 50-days. Technology, Financials and Industrials are the weak links right now. Ironically, the two sectors that are helping out the market the most right now are Energy and Consumer Discretionary, which are supposed to counter each other. Both of these sectors have more than 50% of their stocks trading above their 50-days.
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Friday, July 29th, 2011
MOODY’S PLACES SPAINS AA2 RATINGS ON REVIEW FOR POSSIBLE DOWNGRADE further reading click here
For all news continue below,
Nerves are fraying among holders of Treasury bills maturing on August 4, which bondholders fear could be a prime candidate for a default. One trader told the FT he had dumped all his bills maturing on August 4 http://ftalphaville.ft.com/thecut/2011/07/29/637521/short-term-treasury-owners-on-edge-as-yields-rise/
Money market funds continued to pull billions of dollars worth of cash out of the market on Thursday. Nomura says investors took $9bn a day out of money funds this week, while the Investment Company Institute says $62bn has left the funds in the past two weeks http://ftalphaville.ft.com/thecut/2011/07/29/637486/money-markets-repos-suffer/
The United States and North Korea on Thursday began discussions on whether to reopen talks on the latter’s nuclear weapon programme. Two years after the countries’ last diplomatic exchange, the US special envoy for North Korea, http://ftalphaville.ft.com/thecut/2011/07/28/637421/us-and-north-korea-begin-nuclear-talks/
Chinese Premier Wen Jiabao has tried to quell rising public anger by visiting the scene of last weekend’s high-speed rail crash and vowing to “severely punish” those responsible for the accident that killed 39 people and has fuelled concerns about the safety of the country’s bullet train system http://ftalphaville.ft.com/thecut/2011/07/28/637381/china-blames-signalling-error-for-crash/
Credit Suisse will cut 2,000 jobs after becoming the latest bank to announce weak trading in the second quarter, Reuters reports. Net profit fell to SFr 768m ($959m), below the SFr 1bn estimates of analysts and down 52 per cent on the year. Net fixed income sales and trading revenues plunged by 59 per cent, http://ftalphaville.ft.com/thecut/2011/07/28/636986/credit-suisse-trading-revenues-plunge/
Brazil has announced a harsh tax on currency derivatives, sending the Real tumbling against the dollar from its 12-year high, the FT reports. The government’s 1 per cent transactions tax could be increased to up to 25 per cent and carry requirements for both registration of over the counter trades and minimum trading margins, http://ftalphaville.ft.com/thecut/2011/07/28/636971/brazil-clamps-down-on-real-speculation/
The UK’s benchmark borrowing costs have fallen below those of the US for the first time in 15 months as markets continue to fret about the risk of a US default. Yields on 10-year gilts, which move inversely to prices, were at 2.95 per cent at about midday in London on Thursday, two basis points below Treasury yields. Gilt yields were last lower than Treasuries briefly in 2009 and April 2010 and before that throughout most of 2006. http://www.ft.com/intl/cms/s/0/b1916334-b907-11e0-bd87-00144feabdc0.html#axzz1TBR7mQo3
Asian markets were mixed in choppy trade Friday amid continued concern over the stalled negotiations on raising the U.S. debt ceiling, with a key House vote delayed Thursday night, while key Japanese tech plays dropped on poor earnings reports. Japan’s Nikkei Stock Average edged up 0.1%, Australia’s S&P/ASX 200 was down 0.1%, South Korea’s Kospi Composite fell 0.2% and New Zealand’s NZX-50 tacked on 0.4%. Dow Jones Industrial Average futures were eight points higher in screen trade. http://online.wsj.com/article/SB10001424053111904800304576474993815099076.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews
As China criticized U.S. leaders over their debt wrangling, a U.S. official said the U.S. doesn’t see any significant change in the pattern of Chinese bond purchases, reflecting the limited choices Beijing has in managing its money. With over $1 trillion in U.S. Treasurys, China is among those that could be most immediately affected by any U.S. default or downgrading. While Chinese officials talk about diversifying the country’s foreign-exchange reserve holdings of $3.2 trillion, market analysts say China’s options are limited because there are few markets in the world outside the U.S. that are deep or liquid enough to handle China’s massive foreign-exchange purchases. http://online.wsj.com/article/SB10001424053111904888304576473540495283566.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews
Rising signs of strain emerged across financial markets on Thursday as investors pulled out billions of cash out of money-market funds, in turn driving the funds to rein in lending in short-term markets. Financial markets have become increasingly alarmed at the deepening divide in Washington and the potential that the U.S. could be downgraded by credit-rating agencies or, worse, default on its debt. http://online.wsj.com/article/SB10001424053111903635604576474580203604662.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews
The House postponed a Thursday night vote on Speaker John Boehner’s plan to raise the federal borrowing limit after he failed to stem a revolt by conservative GOP members. The delay leaves the credit status of the U.S. government in jeopardy with five days remaining before it begins running out of money to pay all its bills. The development came after a two-hour debate on the bill was abruptly ended earlier in the evening. Mr. Boehner, knowing that a rejection could undermine his speakership, then joined other House GOP leaders in trying to pressure party members to reconsider their opposition.http://online.wsj.com/article/SB10001424053111904800304576474072808358338.html?mod=WSJ_hp_LEFTTopStories
Friday’s report on the pace of economic growth may be so weak as to spur talk of stagflation. Economists polled by MarketWatch expect the economy slowed in the second quarter to a 1.6% annual rate from a already disappointing 1.9% rate in the first three months of the year. Growth is nowhere near the pace that would make a dent in the 9.2% unemployment rate http://www.marketwatch.com/story/whiff-of-stagflation-may-come-in-q2-gdp-report-2011-07-28
Gold held steady on Friday, heading for its fourth straight week of gains, as investors watched U.S. debt ceiling talks after Republicans delayed a vote on the debt plan. Spot gold was flat at $1,615.99 an ounce by 0346 GMT, on course for a weekly rise of 1.2 percent. It was headed for a monthly gain of nearly 8 percent, its second best month of this year after April. U.S. gold edged up 0.2 percent to $1,615.90. http://www.reuters.com/article/2011/07/29/us-markets-precious-idUSTRE7592IU20110729
Oil was heading on Friday for its first rise in three months as investors focused on forecasts of improved demand despite jitters over an elusive debt deal in the United States to avert a default and a credit downgrade. Brent crude for September rose 6 cents to $117.42 a barrel by 0151 GMT after closing down 7 cents at $117.36 a barrel on Thursday. U.S. crude for September was down 24 cents at $97.20 a barrel, but was on track to rise 1.8 percent on the month, its first increase in three months. http://www.reuters.com/article/2011/07/29/us-markets-oil-idUSTRE7592LE20110729
The number of Americans claiming new jobless benefits hit a three-month low last week and contracts to buy existing homes rose in June, hopeful signs for an economy that has struggled to regain momentum. Initial claims for state unemployment benefits dropped 24,000 to 398,000, the Labor Department said on Thursday, below economists’ expectations for a fall to 415,000. A separate report from the National Association of Realtors showed pending home sales rose 2.4 percent in June, the second straight monthly increase. Contracts usually lead sales by a month or two.http://www.reuters.com/article/2011/07/28/us-usa-economy-idUSTRE7662I420110728
Exxon Mobil Corp reported a higher quarterly profit that missed Wall Street estimates as maintenance slowed its international refining and production, and its shares closed down 2 percent. Some of Exxon’s refineries in Asia-Pacific and its international oil and natural gas production — including from its liquefied natural gas project in Qatar — were affected by downtime, the world’s largest publicly traded oil company said. http://www.reuters.com/article/2011/07/28/us-exxonmobil-idUSTRE76R2OT20110728
Banking group HSBC Holdings Plc may cut more than 10,000 jobs as part of its plan to slash costs by up to $3.5 billion a year, Sky News reported Thursday. New HSBC Chief Executive Stuart Gulliver in May announced a far-reaching plan to cut costs and revive flagging profits by exiting dozens of countries and refocusing on its areas of strength. http://www.reuters.com/article/2011/07/28/us-hsbc-idUSTRE76R0L620110728
China should buy U.S. stocks instead of Treasuries as they may be safer investments amid concerns about a U.S. debt default or credit-rating downgrades, according to Andy Xie, an independent economist. “The U.S. stock market can be a credible alternative,” Xie, 50, formerly Morgan Stanley’s chief Asia economist in Hong Kong, said in an interview in Bloomberg’s Shanghai office yesterday. “U.S. companies are reporting strong earnings and they are selling a lot to emerging markets. Even though U.S. stocks aren’t cheap by historical standards, they are a better investment relative to Treasuries.” http://www.bloomberg.com/news/2011-07-29/china-should-favor-u-s-stocks-over-treasuries-as-default-looms-xie-says.html
Demand for physical gold in China may exceed consumption in India by the end of this year, said Chuck Jeannes, chief executive officer of Goldcorp Inc. (G), the world’s No. 2 producer of the metal by market value. “Three or four years ago there was no one who would have expected Chinese physical demand for gold to surpass India,” Jeannes said yesterday in a telephone interview from New York. “Now it looks like that could happen as early as the end of this year. And that’s while Indian demand is increasing.” http://www.bloomberg.com/news/2011-07-28/goldcorp-ceo-sees-gold-price-at-1-700-an-ounce-by-end-of-year.html
Japan’s industrial production rose less than expected as companies from Nissan Motor Co. to Toyota Motor Corp. warned that a yen close to a post World War II high threatens to drag down exports. Factory output increased 3.9 percent in June from May, when it rose 6.2 percent, the biggest gain since 1953, the Trade Ministry said in Tokyo today. The median estimate of 31 economists surveyed by Bloomberg News was for a 4.5 percent gain. http://www.bloomberg.com/news/2011-07-29/japan-s-june-industrial-output-expands-less-than-forecast-3-9-from-may.html
The world’s 7-billionth person will be born Oct. 31 in India, according to a projection by researchers working with data from the United Nations. Medical advances, more effective vaccines, antibiotics and improvements in public-health conditions has boosted life expectancy in developing countries, where most of the population growth is taking place, according to the UN data reported tomorrow in the journal Science. The number of people globally reached 1 billion in 1800, then 2 billion in 1925, the report said. Within the last half century, the population boomed to just under 7 billion from 3 billion. By 2050, the population will reach 9.3 billion, and 97 percent of the growth will be in less developed regions, http://www.bloomberg.com/news/2011-07-28/world-population-hits-7-billion-after-boom-in-developing-world.html
In the very unlikely event that the United States defaults on its debt obligations, the country’s economy would contract by 5 percent and stocks would fall by nearly a third, according to Credit Suisse. While Andrew Garthwaite and the global strategy team at the Swiss bank see a 50-50 chance of a ratings downgrade of U.S. debt by the major ratings agencies, they remain confident such an outcome would not lead to disaster. “We think there is a 50 percent chance of a ratings downgrade on U.S. sovereign debt. http://www.cnbc.com/id/43907446
Underwhelming earnings reports Thursday from several of Germany’s largest companies, along with a report showing a slump in confidence among European business and consumers, raised concerns that growth could be slowing even in the Continent’s strongest economies. Meanwhile, the European Union’s economic sentiment indicator fell by 2.2 points to 103.2 in the euro area, as both business people and consumers became less optimistic about their prospects. The reading, the lowest in almost a year, indicates that growth is likely to continue, but at a slower pace. http://www.nytimes.com/2011/07/29/business/global/reports-heighten-concerns-about-german-economy.html?_r=1&ref=global
Japan’s jobless rate ticked higher in June, while consumer prices rose slightly slower than expected. The seasonally adjusted June unemployment rate was 4.6%, the Ministry of Internal Affairs said Friday. The reading was up from May’s 4.5%, with economists surveyed by Dow Jones Newswires having expected on average that the rate to hold steady. As in recent months, the data excluded three prefectures worst-hit by the March 11 earthquake and tsunami. The June core consumer price index, which excludes volatile fresh food prices, was 0.4% higher than in June 2010, easing from May’s 0.6% rise, though the index was down 0.2% on a month-on-month basis. http://www.foxbusiness.com/2011/07/28/japans-jobless-rate-edges-higher-in-june-to-46/#ixzz1TT4bVn00
Oil & Natural Gas Corp., India’s biggest energy explorer, is betting higher local fuel prices will reduce discounts given to state-run refiners and help to boost profit. The company’s subsidy bill has dropped by about 500 million rupees ($11.3 million) daily after the government raised fuel prices and cut taxes on crude last month, Finance Directo r D.K. Sarraf said yesterday after ONGC posted first-quarter earnings that missed analyst estimates. “The positive impact of higher fuel prices will be felt from this quarter,” said Arindam Pal, a Mumbai-based senior research analyst at Asian Market Securities Pvt. “The impact could increase ONGC’s oil selling price about 10 percent.” http://washpost.bloomberg.com/story?docId=1376-LOZP7I0D9L3501-4VDT1I2L3KF1QIJ4HSS2UD1DOS
The number of Americans who signed contracts to buy homes rose for a second month in June. But the gain was not enough to signal a rebound in the weak housing market. The National Association of Realtors reported Wednesday that its index of sales agreements for previously occupied homes rose 2.4% in June to a reading of 90.9. A reading of 100 is considered healthy by economists. The last time the index reached that level was in April 2010, the final month when buyers could qualify for a federal tax credit. http://www.usatoday.com/money/economy/housing/2011-07-28-home-sales-june_n.htm
Most of the nation’s largest metropolitan areas are seeing a sharp drop in foreclosure activity as banks take longer to move against homeowners who are behind on their mortgage payments. In the first half of this year, 84% of metropolitan areas with a population of at least 200,000 saw their foreclosure rate drop versus the same period last year, foreclosure listing firm RealtyTrac said Thursday.http://www.usatoday.com/money/economy/housing/2011-07-28-foreclosure-rates_n.htm
A chorus of global banks has warned that Washington risks triggering a global slump and may suffer permanent loss of credibility by flirting with default on America’s $14.3 trillion (£8.8 trillion) federal debt. http://www.telegraph.co.uk/finance/financialcrisis/8669352/Global-slump-warnings-if-US-triggers-insane-default.html
The Italian government was forced to pay the highest borrowing costs for 11 years in a bond auction that underscored market fears that a new phase of the European debt crisis is set to be unleashed.http://www.telegraph.co.uk/finance/financialcrisis/8667986/Eurozone-crisis-fears-continue-as-Italy-forced-to-pay-higher-rates-to-borrow.html
July has been the toughest month of trading faced by retailers in more than a year, according to the Confederation of British Industry (CBI), as worried consumers baulked at rising prices. Just one in three retailers (33pc) polled in the weeks to mid-July said sales volumes were up on a year ago, with more (38pc) reporting a fall. The resulting negative balance of minus 5pc was the worst seen since June 2010.http://www.telegraph.co.uk/finance/economics/8668781/July-is-cruellest-month-for-UK-retailers.html
Largely invisible on a radar screen dominated by concerns over the US and eurozone debt crises, the Chinese economic miracle, one of the few apparent bright spots that remains in a world beset by trouble, has in recent weeks also been showing unnerving signs of strain. Indeed, it may even be about to come off the rails entirely – quite literally. http://www.telegraph.co.uk/finance/comment/jeremy-warner/8669207/Chinas-economic-miracle-may-be-about-to-come-off-the-rails.html
Consumer confidence took a dive last month, taking the GfK NOP poll to -30 and erasing a bounce in May for the Royal Wedding. The survey found that people held largely negative views on the general economic situation and their own personal finances in July, adding to a renewed sense of gloom in the June poll. http://www.guardian.co.uk/business/2011/jul/29/uk-economic-gloom-in-june
Economists are lining up to make their call on whether the Reserve Bank will hike official cash rates at its board meeting next week, even amid signs that businesses and households are cutting back on borrowing. Any 25 basis point hike at its Tuesday meeting could see mortgage rates offered by some big banks push above the 8 per cent mark. This would be the highest level since November 2008.http://www.smh.com.au/business/interest-rates-will-they-or-wont-they-20110729-1i3es.html#ixzz1TT7YxnKg
Home values continued to drop in June as consumers worried about rising interest rates and the state of the global economy. RP Data-Rismark Hedonic’s latest home value index for capital cities fell by 0.2 per cent in June, the sixth straight monthly fall in capital city home values. Homes in Sydney dropped 0.2 per cent in June, but posted a 0.5 per cent gain for the 12 months to the end of June, while houses in Melbourne dipped 0.1 per cent for the month, pushing the decline for the year ended June 30 to 2 per cent. http://www.smh.com.au/business/house-prices-post-sixth-straight-monthly-fall-20110729-1i35g.html#ixzz1TT7dCtUO
Greek officials have launched talks with international bankers on the details of a complex plan to restructure the loan-dependent country’s privately held debt under a new bailout deal. Finance Minister Evangelos Venizelos said the Athens negotiations started “in a most encouraging manner”. “We have started (the talks) and will conclude very soon because we face specific bonds maturing in August and September and want either to have finished before that or to have formulated a transitional framework until we have finished,” Venizelos told parliament. http://www.smh.com.au/business/world-business/greece-launches-debt-restructure-talks-20110729-1i2wh.html#ixzz1TT7izWSH
Moody’s Investors Service Inc. has renewed Canada’s triple-A credit rating, citing the factors that helped the country emerge from the global financial crisis relatively unscathed, such as its “economic resiliency, very high government financial strength, and a low susceptibility to event risk. http://www.theglobeandmail.com/report-on-business/economy/moodys-renews-canadas-triple-a-credit-rating/article2112783/
Economic and social experts predict that the Indonesian economy would be able to equal those of Asian giants Japan and South Korea in the next 20 years if its current political and financial stability continued, local media reported on Friday. Noted American political scientist George Friedman said on Thursday that Indonesia had a unique place as an emerging economy with a huge market potential for international companies. “As countries like the Philippines and others have trouble accommodating investments, Indonesia has become a stable platform for international corporations to grow,” Friedman said at an international conference on futurology held here. http://news.xinhuanet.com/english2010/business/2011-07/29/c_131017579.htm
The Asian Development Bank (ADB) maintained its five percent growth forecast for the Philippines this year on back of slower demand for its export products as well as higher commodity prices. In its latest Asia Economic Monitor released Thursday, the Manila-based lender said the Philippines, along with Thailand and Malaysia will see economic growth taper off this yearhttp://news.xinhuanet.com/english2010/business/2011-07/28/c_131015944.htm
China`s provincial government had released the data of Gross Domestic Product (GDP) by the date of July 27. There are only two municipalities like Beijing and Shanghai, which reports GDP rise less than 9.6 percent among the 31 provinces. Economists said, the GDP summation of the 31 provinces shows 2 trillion yuan higher than the data presented by the National Bureau of Statistics of China. It shows that most provinces still pay much attention to the data of GDP, and investment is the main measure for the provincial governments to drive the economy development. http://www.cs.com.cn/english/ei/201107/t20110729_2985533.html
China`s inflation are affected by various factors and the mounting-up of foreign exchange reserve is not directive or main dynamic to the rising of inflation, the State Administration of Foreign Exchange (SAFE) said on Thursday. The SAFE said the rapid build-up of China’s reserves, the world’s largest that swelled by $152.8 billion in the second quarter, was “not a direct” cause of inflation, which hit a three-year high of 6.4 percent in June. http://www.cs.com.cn/english/ei/201107/t20110729_2985532.html
The Indianmedia and entertainment industry is expected to grow at a compounded annual growth rate of 13.2% to reach a size of Rs 1.19 lakh crore by 2015, said consulting firmPricewaterhouseCoopers (PwC) in a media outlook report released on Thursday. The Indian industry grew by 11.2%, one of the highest growth rates in the world, in 2010 on the back of improved economic conditions and rebound in advertising. http://economictimes.indiatimes.com/news/news-by-industry/media/entertainment-/media/indian-media-and-entertainment-industry-to-grow-at-over-13-pwc/articleshow/9403557.cms
Monsoon slipped into the worry zone with vast regions getting deficientrainfall in the week to July 27, a period which is crucial withKharif sowing peaking in many parts of the country. The drop in the rainfall during the week widened the deficit for the entire monsoon season (June-September) to 4% below normal, from 1% below normal at the beginning of the week. About 155 lakh hectare of paddy had been sown by July 22, which is less than half the acreage last year. The deficient rainfall in the peak sowing time can affect farm performance. http://economictimes.indiatimes.com/news/economy/agriculture/deficit-in-rainfall-rises-to-4-fuels-kharif-sowing-fears/articleshow/9402534.cms
South Korean banks’ lending rates climbed in June from a month earlier due mainly to the rising costs of corporate lending, the central bank said Friday. The average rate for new loans extended to households and companies stood at 5.8 percent in June, up 0.04 percentage point from the previous month, according to the Bank of Korea (BOK). The June rate marked the second straight monthly gain. According to the BOK, the average rate for household loans slipped 0.02 percentage point, while the rate for corporate loans jumped 0.06 percentage point.http://english.yonhapnews.co.kr/business/2011/07/29/55/0503000000AEN20110729003500320F.HTML
President Dmitry Medvedev‘s exit from the Kremlin would trigger a share sell-off as well as accelerated capital flight and emigration, a presidential adviser said. If Medvedev isn’t able to run for a second term next March, the July 2008 decline in Russian stock prices after Prime Minister Vladimir Putin publicly attacked coal miner Mechel will seem like a “minor event,” Igor Yurgens, who heads a research institute set up by Medvedev, said in a co-authored commentary published Wednesday in Vedomosti. “That will be in addi tion to a rapid acceleration in already serious capital flight and emigration from Russia.” Putin rebuked Mechel owner Igor Zyuzin at a metals-industry meeting July 24, 2008. Russia’s benchmark MICEX share index fell 5.5 percent during the next trading session, while Mechel’s stock lost 50 percent of its value over a one-week period that month. http://www.themoscowtimes.com/business/article/yurgens-sees-fallout-from-the-election/441305.html#ixzz1TTAeGvAg
Tags: Bondholders, Brazil, Bullet Train, Canadian Market, Chinese Premier Wen Jiabao, Credit Suisse, Crude Oil, Currency Derivatives, Diplomatic Exchange, High Speed Rail, India, Investment Company Institute, Money Funds, Money Market Funds, Money Markets, News That Matters, Nuclear Talks, Premier Wen Jiabao, Prime Candidate, Public Anger, Rail Crash, Thetrader, Train System, Treasury Bills
Posted in Brazil, Canadian Market, India, Markets, Oil and Gas | Comments Off
ECRI’s Lackshman Achuthan Continues to be Bearish on Economic Conditions as Longer Term Indicators Remain Negative
Friday, July 29th, 2011
by Trader Mark, Fund My Mutual Fund
I’m watching the ECRI interviews very closely since they have had a far better track record than any Wall Street strategist or economist the past half decade.
About 4-5 months ago ECRI said their long term indicators were turning down, and sure enough we’ve hit (at best) a ‘soft patch’. Apparently there has been no improvement in said indicators (not turning back positive) so the intermediae term still looks soggy.
Very interestingly, when asked about the dichotomy between economic figures and corporate profits, Achuthan believes profits will mean revert to the economy and not vice versa. If accurate, the market will be in for a bit of a surprise as that is certainly not banked into the cake.
7 minute video – email readers will need to come to site to view.
Copyright © Trader Mark, Fund My Mutual Fund
Tags: 5 Months, Copyright, Corporate Profits, Decade, Dichotomy, Economic Conditions, Economic Figures, Economic Indicators, Economist, Economy, Ecri, Interviews, Mutual Fund, Soft Patch, Strategist, Surprise, Term Indicators, Video Email, Wall Street
Posted in ETFs, Markets | Comments Off
Friday, July 29th, 2011
It turns out there may be a very interesting wrinkle to private ownership issue.
By way of background, BIS is often called the “central banks’ central bank”, as it coordinates transactions between central banks, and which is the entity determining the level of reserves banks are required to keep worldwide.
As Spiegel reported in 2009:
The BIS is a closed organization owned by the 55 central banks. The heads of these central banks travel to the Basel headquarters once every two months, and the General Meeting, the BIS’s supreme executive body, takes place once a year.
But the New York Federal Reserve Bank currently states on its website:
As of March 2006, the BIS had 55 shareholding central banks from around the world. As of March 2006, the Bank’s assets were approximately $221 billion, including $5.8 billion of its own funds.
When the BIS initially raised capital, participating banks were given the option to buy BIS shares or arrange for those shares to be bought by the public. Currently, 86 percent of the shares of the BIS are registered in the names of central banks, and 14 percent are held by private shareholders. The shares owned by private shareholders consist of part of the French and Belgian issues and all of the shares that were in the original U.S. issue in 1930.
So the private banks own the Fed (and most other central banks), and the central banks – and private shareholders – in turn own BIS, the global bank regulator.
It would obviously be very interesting to find out who these private shareholders are.
And to find out if the shareholders enjoy any special benefits. As Spiegel notes:
Formally registered as a stock corporation, it is recognized as an international organization and, therefore, is not subject to any jurisdiction other than international law.
It does not need to pay tax, and its members and employees enjoy extensive immunity. No other institution regulates the BIS, despite the fact that it manages about 4 percent of the world’s total currency reserves, or €217 trillion ($304 trillion), as well as 120 tons of gold…
Central bankers are not elected by the people but are appointed by their governments. Nevertheless, they wield power that exceeds that of many political leaders. Their decisions affect entire economies, and a single word from their lips is capable of moving financial markets. They set interest rates, thereby determining the cost of borrowing and the speed of global financial currents.
Could that mean that the private shareholders owning 14% of the world’s central bank have somehow been “grandfathered in”, and are immune from taxes and other national rules? Wouldn’t it be interesting to find out?
The New York Fed claims that the private BIS shareholders don’t have voting rights:
All shareholders receive the Bank’s dividends. However, private shareholders do not have voting rights or representation at the BIS annual meetings. Only a country’s central bank or its nominee may exercise the rights of representation and voting.
This may or may not be true. It is common for powerful and wealthy people informally influence agency decisions. Just look at every captured financial regulator in the United States.
But whether or not the shareholders get special treatment or influence the decisions of the world’s most powerful banking institution, it is still newsworthy that there are private parties with not insignificant ownership interests.
Copyright © Washington’s Blog
Tags: Assets, Bank For International Settlements, Bank For International Settlements Bis, Bank Regulator, Central Banks, Executive Body, Federal Reserve, Federal Reserve Bank, General Meeting, Global Bank, International Organization, Juri, New York Federal Reserve, Private Banks, Private Ownership, Private Shareholders, Shareholding, Spiegel, Stock Corporation, World Banks
Posted in Markets | Comments Off
Friday, July 29th, 2011
by Michael ‘Mish’ Shedlock, Global Economic Trends Analysis
Thursday morning Bloomberg reported House Majority Leader Cantor Predicts House Republicans Will Pass Debt Plan Today
House Majority Leader Eric Cantor predicted Republicans would pass a debt-limit increase plan today as some freshman lawmakers pledged support for the measure in the face of unified Democratic opposition in the Senate.
Kiss that prediction of Cantor goodbye. Thursday evening Republicans put off vote on debt limit because Boehner clearly lacks the votes.
An intensive endgame at hand, Republican leaders abruptly postponed a vote Thursday night on legislation to avert a threatened government default and slice federal spending by nearly $1 trillion.
“The votes obviously were not there,” conceded Rep. David Dreier, R-Calif., after Speaker John Boehner and the leadership had spent hours trying to corral the support of rebellious conservatives.
The decision created fresh turmoil as divided government struggled to head off an unprecedented default that would leave the Treasury without the funds needed to pay all its bills. Administration officials say Tuesday is the deadline for Congress to act.
Senate Democrats stood by to scuttle the bill — if it ever got them — as a way of forcing Republicans to accept changes sought by Obama.
Based on public statements by lawmakers themselves, it appeared that five of some two dozen holdouts were from South Carolina. The state is also represented by Sen. Jim DeMint, who has solid ties to tea party groups and is a strong critic of compromising on the debt issue.
Others said conservatives wanted additional steps taken to try to ensure that a constitutional balanced-budget amendment would be sent to the states for ratification. As drafted, the legislation merely requires both houses of Congress to vote on the issue.
Even before the House voted, Reid served notice he would stage a vote to kill the legislation almost instantly.
“No Democrat will vote for a short-term Band-Aid that would put our economy at risk and put the nation back in this untenable situation a few short months from now,” he said.
Boehner was humiliated and justifiably so. He had nothing to gain and everything to lose by attempting to ram-rod a gaseous bill through the House that was guaranteed dead-on-arrival in the Senate.
Majority leader Cantor made matters worse by predicting passage.
Stock Futures Tank in Unusual Correlation with Treasuries
Futures on the Standard & Poor’s 500 Index fell after the U.S. House of Representatives postponed a vote to increase the nation’s debt limit, boosting concern that the lawmakers are far from an agreement to avoid default.
S&P 500 futures expiring in September lost 0.8 percent to 1,286.9 at 12:28 p.m. in Tokyo. The decline suggests the U.S. equity benchmark may extend its 3.3 percent slump from the past four days when markets open in New York.
Stocks and Treasuries are moving in tandem twice as often as they normally do, a sign investors are growing convinced the U.S. will lose its AAA credit rating and that an impasse among lawmakers may spur losses in both markets. The S&P 500 has risen or fallen together with 10-year Treasury notes 80 percent of the time in the last 10 days, compared with the average since 2000 of 41 percent, according to data compiled by Bloomberg.
Not Raising the Debt Ceiling Would be Blessing
I am sticking to what I said in Not Raising the Debt Ceiling Would be Blessing; Debt Limit Analysis; Interactive Map, You Decide What Not To Pay
All things considered, especially since Boehner’s credibility is gone in his latest gaseous proposal, the best thing for Congress to do would be to NOT hike the debt ceiling and work out a credible plan over the next month.
Is Mish a “closet Liberal-humanist?”
In response to that post I received a humorous email from “BC” who wrote…
Mish, your choices reveal your empathy! Are you a closet Liberal-humanist?!
Your choices favor the elder working class, the working-class and poor ill, unemployed, poor and “food challenged”, and imperial legionaries and auxiliaries against the corporate-statists!!!
Are you one of those maladjusted working-class types who just doesn’t “get it”?!
Wink , wink ;-) ;-).
To see my choices as to what I would cut and to make your own choices about what to do if the debt ceiling is not raised, click on the above link for an interactive map.
Mike “Mish” Shedlock
Copyright © Michael ‘Mish’ Shedlock, Global Economic Trends Analysis
Tags: Balanced Budget Amendment, Bloomberg, David Dreier, Debt Issue, Debt Limit, Debt Plan, Democratic Opposition, Eric Cantor, Federal Spending, Global Economic Trends, Holdouts, Jim Demint, John Boehner, Michael Mish, Mish Shedlock, Party Groups, Republican Leaders, Senate Democrats, Senate Vote, Stock Futures
Posted in Markets | Comments Off
Thursday, July 28th, 2011
by The Trader, thetrader.se
For all news continue below,
Diageo, the world’s largest spirits company, has agreed to pay $16m to resolve US allegations that it bribed government officials in India, Thailand and South Korea to boost sales and receive favourable tax treatment. http://ftalphaville.ft.com/thecut/2011/07/28/636686/diageo-to-settle-with-sec-over-bribery/
Ford plans to invest $1bn to build a factory in western India in a drive to gain a greater share of one of the fastest-growing car markets, the FT reports. The factory in Gujarat, which should be in production by 2014 employing 5,000 people, http://ftalphaville.ft.com/thecut/2011/07/28/636671/ford-to-build-1bn-indian-factory/
Visa, the world’s largest electronic payments company, exceeded Wall Street’s expectations by reporting a 40 per cent surge in quarterly profit as more consumers turned to credit cards and other forms of electronic transaction, http://ftalphaville.ft.com/thecut/2011/07/28/636646/visa-results-beat-expectations/
Royal Bank of Scotland has been ordered by the US Federal Reserve board to improve compliance and governance in its US operations, the WSJ reports. The Fed issued similar cease-and-desist orders to HSBC and Barclays in 2010. http://ftalphaville.ft.com/thecut/2011/07/28/636566/fed-demands-rbs-improve-compliance/
Standard & Poor’s president told a US House of Representatives panel that the country is unlikely to default on its debt obligations but its credit rating could still be lowered if it doesn’t come up with an adequate plan to address spending and its soaring budget deficit Representatives of leading emerging market countries at the International Monetary Fund have warned the fund’s management against pouring more large sums of money into another Greek bail-out with uncertain prospects http://ftalphaville.ft.com/thecut/2011/07/28/636591/emerging-markets-warn-imf-over-greek-loan/
The cost of buying insurance against a default by the US rose to a record on Wednesday, the FT reports, in a sign of growing unease that gridlock in Washington over raising the federal debt ceiling may result in the Treasury failing to pay interest to bondholders. Premiums for one-year US sovereign CDS rose sharply this week and traded at about 90 basis points in London on Wednesday, http://ftalphaville.ft.com/thecut/2011/07/28/636576/treasury-cds-reach-record-highs/
The Brazilian real tumbled on Wednesday after the country introduced measures to curb foreign exchange speculation in a bid to bring down the currency from a 12-year high against the dollar and protect its manufacturers http://ftalphaville.ft.com/thecut/2011/07/27/636521/real-tumbles-as-brazil-imposes-fx-curbs/
As much as half US companies’ record $1,240bn in cash balances is being held overseas, according to Moody’s research, with groups wary of incurring a 35 per cent repatriation tax, writes the FT. While debates rages in Washington about the state of public finances, http://ftalphaville.ft.com/thecut/2011/07/27/636511/us-firms-keep-cash-abroad-away-from-tax/
Wall Street bankers, from senior executives to traders, are complaining that the Federal Reserve is refusing to engage in scenario planning for a US downgrade or default. With days until the Treasury’s August 2 deadline to raise the debt ceiling, bankers say they are not getting a response to efforts to discuss the market impact of a failure to reach a deal in Washington or if credit ratings agencies cut the US triple A rating. http://www.ft.com/intl/cms/s/0/6aed9f82-b85e-11e0-8d23-00144feabdc0.html#axzz1TBR7mQo3
Asian stock markets were lower Thursday as uncertainty over the U.S. debt ceiling debate continued to weigh market sentiment, while concerns over a stronger yen dragged exporters in Tokyo. Japan’s Nikkei Stock Average fell 1.1%, Australia’s S&P/ASX 200 slid 1.2%, South Korea’s Kospi Composite lost 0.8% and New Zealand’s NZX-50 fell 0.5%. Dow Jones Industrial Average futures were up 19 points in screen trade. http://online.wsj.com/article/SB10001424053111904800304576472903501102840.html?mod=WSJ_hp_LEFTWhatsNewsCollection
The International Monetary Fund, concerned about its enormous long-term exposure to the euro zone, is likely to contribute a smaller share of official financing in the new Greek aid package than it did for the Portuguese and Irish rescue programs, according to people familiar with the situation. The IMF has pledged to lend €78.5 billion ($113.91 billion) to Greece, Ireland and Portugal through 2014. That amount is many times the IMF shareholding of these three countries, a growing source of worry to fund officials. http://online.wsj.com/article/SB10001424053111904888304576471812186354764.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews
Financial investors grew increasingly worried Wednesday about lawmakers’ failure to reach accord on raising the debt ceiling, pushing U.S. stocks to their worst one-day drop in two months and weakening the demand for Treasury securities. The Dow Jones Industrial Average fell 198.75 points, or 1.6%, to 12302.55. The daily decline was the fourth straight, leaving the Dow down 3.3% in that period and on pace for its worst week since August 2010. Risk-averse investors began selling Treasury bills maturing in coming weeks, and an auction for Treasury debt drew lackluster interest. Asian markets opened lower on Thursday morning, with the http://online.wsj.com/article/SB10001424053111904888304576472580028486102.html?mod=WSJEurope_hpp_LEFTTopStories
Banco Santander SA reported a 38% slump in second-quarter net profit, after the Spanish bank set aside €620 million ($899.7 million) to cover potential claims for payment-protection insurance policies sold to U.K. customers. Santander, the largest bank in the bloc of euro-using nations by market value, said net fell to €1.39 billion from €2.23 billion a year earlier. Net interest income, Santander’s main income stream, rose 3.5% to €7.64 billion, just ahead of market expectations of €7.59 billion. Fee income jumped 9.9% to €2.73 billion. http://online.wsj.com/article/SB10001424053111904800304576471360038647984.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews
Most steelmakers are gloomy about the third quarter as steel prices sag and raw material costs rise. But the world’s biggest steelmaker, ArcelorMittal, raised its forecast for global steel demand on Wednesday and said it expects a strong quarter, partly because of its geographic diversity and rising demand from auto makers. Luxembourg-based ArcelorMittal reported an 11% fall in second-quarter profit to $1.54 billion from $1.71 billion a year earlier, when the company benefited from a one-time gain. But ArcelorMittal said sales jumped 25% to $25.13 billion.http://online.wsj.com/article/SB10001424053111904888304576472102814348190.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews
Sober warnings that the European debt crisis didn’t end with last week’s summit of European Union leaders reignited concerns of contagion risks on Wednesday, boosting borrowing costs for high-debt governments and pressuring the euro. German Finance Minister Wolfgang Schäuble said Wednesday in an open letter to lawmakers belonging to his Christian Democratic Party that the euro-zone debt crisis isn’t over and that more discipline is needed. http://online.wsj.com/article/SB10001424053111904800304576471501119691290.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews
The debt stalemate in Washington is creating stress in a little-known but vital corner of the bond market, increasing the risk that banks, hedge funds and other investors will have to pay billions of dollars in additional costs if the U.S. defaults or is downgraded. Rates are rising for repurchase agreements, or repos—a roughly $4 trillion market that greases the wheels of the U.S. financial system—as officials in Washington feud over how to bring down the nation’s debt. And Wall Street is now calculating the damage that could ensue if the nation was forced to default on its debt earlyhttp://online.wsj.com/article/SB10001424053111903635604576472600045259640.html?mod=WSJ_hp_LEFTWhatsNewsCollection
Japanese retail sales rose 1.1% in June from a year earlier, according to government data released Thursday, rebounding from a 1.3% drop in May. The result exceeded market forecasts for a 0.5% year-on-year decline, according to a poll of economists by Reuters. Part of the rise was attributed to an increase in machine sales. Apparel and food and beverage sales also rose during the period, while car and general merchandise sales declined. http://www.marketwatch.com/story/japan-june-retail-sales-rise-11-2011-07-27
China’s trade surplus is likely to narrow 14% to $157 billion in 2011 from a year earlier, a government think tank said Thursday. The country’s exports are likely to rise 20% this year, while its imports are likely to increase 24.5%, the State Information Center said in a research note published on the China Securities Journal. In the first half of the year, China’s exports rose 24% to $874.3 billion and imports grew 28% to $829.4 billion, resulting in a $44.9 billion trade surplus, down 18.2% from the same period a year earlier. http://www.marketwatch.com/story/china-2011-trade-surplus-may-fall-14-economists-2011-07-27
House Speaker John Boehner and Senate Majority Leader Harry Reid were building support for their reworked deficit-cutting plans Wednesday, after congressional analysts said the rivals’ original proposals didn’t cut deficits as much as estimated. Boehner’s plan reportedly was gaining ground with Republicans. Reid insisted his plan was a true compromise with his political rivals, but tweaked it to get more savings. http://www.marketwatch.com/story/boehner-debt-plan-finds-legs-after-rewrite-2011-07-27
Soft labor markets and weak real estate offset a slight boost to consumer spending and an encouraging start to the tourism season, the Federal Reserve reported Wednesday in its Beige Book of anecdotal evidence on the U.S. economy. The Beige Book, which is based on information collected on or before July 15, said growth has slowed in the majority of districts, particularly those nearest the Atlantic seaboard, with the Minneapolis district hurt by the now-concluded state government shutdown. http://www.marketwatch.com/story/growth-slows-as-labor-markets-soft-beige-book-2011-07-27-149390
Weaker orders for airplanes and automobiles translated into a steeper-than-forecast 2.1% decline in durable-goods orders in June, the Commerce Department estimated Wednesday. It was the second large drop in the past three months for durable-goods orders, raising fears that manufacturing is running out of steam after leading a tepid recovery over the past two years. Without a strong manufacturing sector, it is hard to see how forecasts of a strong second-half recovery can be realized. http://www.marketwatch.com/story/us-durable-goods-orders-fall-21-in-june-2011-07-27
Spot gold edged up 0.1 percent to $1,614.86 an ounce by 0219 GMT, off an all-time high of $1,628 set on Wednesday. U.S. gold was flat at $1,615.50. Adding to the safe haven demand, Standard & Poor’s cut Greece’s sovereign credit rating further into junk territory, saying the European Union’s proposed debt restructuring would put the country into “selective default.” http://www.reuters.com/article/2011/07/28/us-markets-precious-idUSTRE7592IU20110728
U.S. crude for September fell 16 cents to $97.24 a barrel by 0353 GMT, hitting a 7-session low of $96.51 earlier. It settled down $2.19 at $97.40 a barrel on Wednesday. Brent September crude rose 41 cents to $117.84 a barrel. Oil is unlikely to slide much further even with the economic uncertainty surrounding the U.S. and Europe as demand is expected to grow steadily amid reduced global output, analysts said. The U.S. hurricane season may also put a floor on prices over concerns of disruption in output. http://www.reuters.com/article/2011/07/28/businesspro-us-markets-oil-idUSTRE7592LE20110728
Russian Prime Minister Vladimir Putin is close to a decision to bid for the presidency in an election next year because he has doubts about his protege, President Dmitry Medvedev, senior political sources say. Putin ruled as president from 2000 to 2008 before handing over to Medvedev to comply with a constitutional ban on a third consecutive term. He will be free to run in the March presidential election.http://www.reuters.com/article/2011/07/27/us-russia-election-idUSTRE76Q2M320110727
Japanese Economics Minister Kaoru Yosano, under pressure to curb the yen’s latest spike in value, said currency intervention as big as 1 to 2 trillion yen ($13-26 billion) would be quite difficult, Jiji news agency reported on Thursday. Japan is faced with the prospect of acting alone to hold down its currency, with markets seeing little chance of a repeat of the Group of Seven’s coordinated action to hold down the yen in the aftermath of the March 11 earthquake. Last time Japan intervened alone, in September last year, it spent around 2 trillion yen. http://www.reuters.com/article/2011/07/28/japan-economy-yosano-idUSL3E7IS0IC20110728
Employment in the retail sector fell in the second quarter compared to last year, the British Retail Consortium and business law firm Bond Pearce said Thursday, and weakening sentiment among retailers pointed to further job losses. The number of employees in the retail sector fell by 0.4 percent compared to the second quarter of last year and was down 0.7 percent in June, the BRC said. Staff numbers were below the year-ago level for three consecutive months for the first time since the BRC launched its employment survey in October 2008, the industry body said. http://uk.reuters.com/article/2011/07/27/uk-britain-retail-embargo-idUKTRE76Q7G320110727
Contrasting statements by euro zone politicians to domestic audiences have underlined the fragility of last week’s deal to rescue Greece and unsettled financial markets already on edge because of the U.S. debt impasse. Greek Prime Minister George Papandreou told lawmakers from his Pasok socialist party on Wednesday that debt-stricken Athens will effectively receive the first joint eurobonds in the form of loans at close to cost price from the euro zone’s rescue fund.The decision of our European partners to lend us at 3.5 percent, an interest rate just above the one at which Germany itself is borrowing, is in essence tantamount to introducing a European bond, regardless of the fact that this system has not been completed yet,” he said. http://uk.reuters.com/article/2011/07/27/uk-eurozone-idUKTRE76Q1G920110727
The International Monetary Fund warned France on Wednesday it would miss its 3 percent deficit target for 2013 unless it took further steps to cut medium-term spending, which were needed to safeguard its AAA credit rating. With France gearing up for presidential elections in April, the Fund backed President Nicolas Sarkozy’s proposal to write balancing the budget into the constitution — a move bitterly opposed by the opposition Socialist Party. Sarkozy has staked his reputation on cutting France’s deficit from 7.1 percent of GDP last year to the limit of 3 percent under the euro zone’s Stability and Growth Pact by 2013. http://uk.reuters.com/article/2011/07/27/uk-imf-france-idUKTRE76Q2VW20110727
Asian policy makers need to tackle rising inflationary pressures in their economies even as global growth weakens, the Asian Development Bank said. The region can use monetary and fiscal policies as well as exchange rates to ease price pressure, the Manila-based lender said in its Asia Economic Monitor report today. Asian economies also face the risk of increased financial market volatility and destabilizing capital flows, the ADB said. http://www.bloomberg.com/news/2011-07-28/asia-faces-rising-price-pressures-adb.html
Foreclosure filings dropped in 84 percent of the largest U.S. cities in the first half of the year as paperwork delays and a glut of seized properties slowed the repossession of homes, according to RealtyTrac Inc. Notices of default, auction and home seizure fell in 178 of the nation’s 211 biggest metropolitan areas, the Irvine, California-based data seller said today in a report. Cities in judicial states, where courts supervise the foreclosure process, showed the biggest declines from a year earlier. http://www.bloomberg.com/news/2011-07-28/foreclosure-filings-decline-in-84-of-u-s-cities-after-paperwork-backups.html
South America is the next retail frontier as Brazil, Uruguay and Chile top China and India for new expansion opportunities. The region made the biggest gains in an annual ranking of the top 30 emerging countries for retail development, according to a report by management consulting firm A.T. Kearney. That improvement puts four South American countries in the top 10 for the first time, said Hana Ben-Shabat, a New York-based partner at A.T. Kearney who started the ranking 10 years ago. http://www.bloomberg.com/news/2011-07-28/chile-behind-uruguay-converge-on-brazil-for-world-best-expanding-retailers.html
South Korea’s current-account surplus rose to an eight-month high in June as global demand for cars and steel bolstered exports, putting pressure on the won to strengthen further. The surplus was $2.99 billion, compared with a revised $2.18 billion in May, the Bank of Korea said in a statement in Seoul today. The current account is the broadest measure of trade, tracking goods, services and investment income. http://www.bloomberg.com/news/2011-07-27/south-korea-s-current-account-surplus-widened-to-2-99-billion-in-may.html
Surging inflation, a weak post-tsunami economic recovery in Japan and debt woes in the U.S. and Europe threaten East Asia’s economic outlook, the Asian Development Bank said Thursday. The Manila-based lender maintained its economic growth forecasts for 14 emerging and newly industrializing East Asian countries in 2011 and 2012. But it said the region faces risks that also include more volatile financial markets and destabilizing inflows of short term capital, also known as “hot money.” http://www.aolnews.com/story/adb-inflation-threatens-east-asian/1889470/
We will continue to diversify the asset allocation of our reserve assets and continue to optimize the holdings based on market conditions,” the foreign exchange regulator said in a statement, responding to questions from the public. The SAFE said the rapid build-up of China’s reserves, the world’s largest that swelled by $152.8 billion in the second quarter, was “not a direct” cause of inflation, which hit a three-year high of 6.4 percent in June http://www.foxbusiness.com/markets/2011/07/27/china-says-to-press-ahead-with-fx-reserves/#ixzz1TNEJYsqa
Plunging rates for chartering container vessels that carry sneakers, furniture and flat-screen TVs may signal a U.S. consumer slowdown and losses for shipping lines in what is traditionally their busiest time of the year. Fees for hiring vessels have fallen 9.3 percent since the end of April, according to the Howe Robinson Container Index, which tracks charter rates for a range of vessels. Last year, the index surged 56 percent in the period, as lines added ships on demand from U.S. and European retailers restocking for the back-to-school and holiday shopping periods. http://washpost.bloomberg.com/story?docId=1376-LOZHXM0UQVI901-6MJLCM7QSV4C5BOEVU480VI7UF
Cyprus may be the latest EU country to find it harder to borrow money after its credit rating was cut. Moody’s said it had cut Cyprus’s credit rating by two notches, from A2 to Baa1, and warned it may downgrade it further. It increases the chance that Cyprus may become the latest country to require an EU bailout. http://www.bbc.co.uk/news/business-14309971
The German finance minister has warned that he will not bail out every troubled eurozone country in a move that rattled confidence in Europe’s response to the debt crisis. In a strongly worded report to German parliamentarians, Wolfgang Schaeuble explained that the €159bn Greek bail-out was a one-off. He said: “In the future such purchases must only take place under very tight conditions, when the European Central Bank establishes that there are extraordinary circumstances in financial markets and dangers to financial stability.” http://www.telegraph.co.uk/finance/financialcrisis/8666789/Greek-bail-out-was-a-one-off-says-German-finance-minister-Wolfgang-Schaeuble.html
Higher bank capital ‘would not hit recovery’, says Bank of England’s David Miles. A leading Bank of England policymaker has rubbished banks’ claims that forcing them to hold significantly more equity capital will damage the recovery and inhibit future growth. If lenders are given time to adjust, David Miles told the London School of Economics, they could double capital ratios to around 20pc without hurting the supply of credit to households and businesses. http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8666301/Higher-bank-capital-would-not-hit-recovery-says-Bank-of-Englands-David-Miles.html
Profits for China’s industrial businesses rose 28.7 percent year-on-year to 2.41 trillion yuan (374 billion U.S. dollars) in the first half of this year, the National Bureau of Statistics (NBS) announced Wednesday. The NBS figures showed that combined revenues for the country’s industrial firms rose by 29.7 percent from a year earlier to reach 38.86 trillion yuan from January to June. The report was based on a survey of industrial companies with annual sales exceeding 20 million yuan each. Surveys of industrial companies conducted before 2011 used a sales threshold of 5 million yuan.http://news.xinhuanet.com/english2010/china/2011-07/27/c_131013516.htm
The Indonesia government has unveiled steps to ease inflation pressures in the second half of this year which seasonally higher than in the first six months. The Muslim dominated country with over 240 million population is to face fasting month of Ramadhan which falls in August and will be followed by Islamic festivity. At the end of this yea r the country is to celebrate Christmas and New Year. Weather phenomenon, which disturbed foods supply and triggered inflation to a 21-month high to 7.02 percent in January, is still threatening. http://news.xinhuanet.com/english2010/business/2011-07/28/c_131015106.htm
In an effort to promote cross-Line of Control (LoC) trade, India and Pakistan have doubled the trading days between them to four in an effort to promote LoC trade. Truck movement will take place on Tuesdays, Wednesdays, Thursday and Friday both on Srinagar-Muzaffarabad and Poonch-Rawalakot routes. http://www.thehindubusinessline.com/industry-and-economy/economy/article2298291.ece?homepage=true
Finance Minister Pranab Mukherjee on Wednesday cautioned that year-end inflation may not be less than 6-7 per cent even as the government and the RBI are making sustained efforts to fight price rise. “We are fighting against inflation…increase in repo and reverse repo by the RBI on Tuesday conveys a strong signal… (but) we shall have to keep in mind that year-end inflation may not be less than 6-7 per cent,” Mr. Mukherjee told reporters here. http://www.thehindu.com/business/Economy/article2298747.ece
From next year, atta,bread,biscuits ,snacks and everything made frommaida andsooji will become seriously more expensive. Even after a bumper crop, there just won’t be enoughwheat for us. ET helps you join the dots. The trigger for wheat inflation that will hit each one of us is the Food Security Act, which kickstarts next year. The Food Corporation of India (FCI) will need substantially more wheat to supply three out of four Indian households, meet the new buffer stocking norms that stipulate larger quantities, and also keep aside a strategic reserve for emergencies. http://economictimes.indiatimes.com/policy/food-security-to-create-permanent-wheat-shortage/articleshow/9391239.cms
The South Korean economy is expected to expand 4.1 percent in the second half of the year in the face of rising global and domestic uncertainties, a private think tank said Thursday. The growth forecast marks a modest gain from 3.8 percent growth in the first half, the Korea Economic Research Institute (KERI) said, adding Asia’s fourth-largest economy is likely to grow 3.9 percent for all of 2011. The full-year projection is well below the 6.2 percent increase reached in 2010 when the economy was able to make a comeback from the global financial crisis triggered by the collapse of U.S. investment giant Lehman Brothers in late 2008. http://english.yonhapnews.co.kr/business/2011/07/28/50/0502000000AEN20110728005000320F.HTML
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