From Bloomberg:
http://www.bloomberg.com/video/75011500/
Monday, September 12, 2011
Thursday, September 8, 2011
Japan’s Machinery Orders Collapse 8.2%; Japan Ready to Take Bold Action on Currency
Japan’s central bank’s interventions have been ineffective, yet they are ready for it again.
From Reuters:
Japan's core machinery orders tumbled in July at twice the pace economists' had expected in a sign that companies are delaying investment due to worries about a strong yen, slackening global growth and slow progress in reconstruction from the March earthquake.
The current account surplus fell more in the year to July than the median estimate as exports weakened, highlighting concerns that a strong yen and a stuttering global economy could hamper Japan's recovery from the post-quake slump.
The disappointing data could place some pressure on the government and the Bank of Japan, which highlighted risks to growth after leaving monetary policy on hold on Wednesday, to ensure that the yen doesn't strengthen further.
The yen has been attracting safe-haven demand from investors unsettled by Europe's sovereign debt crisis and signs of U.S. economic slowdown even as Japan struggles with its own debt burden and its new government faces a long battle to gain consensus over how to fund reconstruction from the March 11 earthquake and tsunami.
Core machinery orders fell 8.2 percent in July from the previous month due to declines in orders from manufacturers and service sector firms, Cabinet Office data showed on Thursday. That compared with a median market forecast for a 4.1 percent decline and follows a 7.7 percent rise in June.
Japan is on guard against further yen appreciation after intervening in currency markets last month when its currency approached a record high versus the dollar.
Japan's economy probably shrank at a faster annualized pace in the second quarter than the government's initial estimate as corporate spending fell at a quicker rate due to the strong yen and a slowdown in the global economy, a Reuters poll showed before the release of the data on Friday. ($1 = 77.325 Japanese Yen)
http://www.reuters.com/article/2011/09/08/us-japan-economy-idUSTRE78705E20110908
From Bloomberg:
Japanese Finance Minister Jun Azumi said he will tell his Group of Seven counterparts that his country remains prepared to take “bold” action in currency markets when necessary. He spoke to reporters today in Marseille, France.
http://www.bloomberg.com/news/2011-09-08/azumi-says-he-will-tell-g-7-japan-ready-to-take-bold-action-on-currency.html
From Reuters:
Japan's core machinery orders tumbled in July at twice the pace economists' had expected in a sign that companies are delaying investment due to worries about a strong yen, slackening global growth and slow progress in reconstruction from the March earthquake.
The current account surplus fell more in the year to July than the median estimate as exports weakened, highlighting concerns that a strong yen and a stuttering global economy could hamper Japan's recovery from the post-quake slump.
The disappointing data could place some pressure on the government and the Bank of Japan, which highlighted risks to growth after leaving monetary policy on hold on Wednesday, to ensure that the yen doesn't strengthen further.
The yen has been attracting safe-haven demand from investors unsettled by Europe's sovereign debt crisis and signs of U.S. economic slowdown even as Japan struggles with its own debt burden and its new government faces a long battle to gain consensus over how to fund reconstruction from the March 11 earthquake and tsunami.
Core machinery orders fell 8.2 percent in July from the previous month due to declines in orders from manufacturers and service sector firms, Cabinet Office data showed on Thursday. That compared with a median market forecast for a 4.1 percent decline and follows a 7.7 percent rise in June.
Japan is on guard against further yen appreciation after intervening in currency markets last month when its currency approached a record high versus the dollar.
Japan's economy probably shrank at a faster annualized pace in the second quarter than the government's initial estimate as corporate spending fell at a quicker rate due to the strong yen and a slowdown in the global economy, a Reuters poll showed before the release of the data on Friday. ($1 = 77.325 Japanese Yen)
http://www.reuters.com/article/2011/09/08/us-japan-economy-idUSTRE78705E20110908
From Bloomberg:
Japanese Finance Minister Jun Azumi said he will tell his Group of Seven counterparts that his country remains prepared to take “bold” action in currency markets when necessary. He spoke to reporters today in Marseille, France.
http://www.bloomberg.com/news/2011-09-08/azumi-says-he-will-tell-g-7-japan-ready-to-take-bold-action-on-currency.html
Wednesday, September 7, 2011
The Chart Showing QE3 Failed Before It Even Started
From Zero Hedge
While it is all too clear that a year from today, right about the time QE4 is gearing up for deployment, QE3 will have had absolutely no impact on the economy (in the upside case; the downside case would imply millions in job losses primarily in the financial sector courtesy of record low 2s10s and even lower Net Interest Margins, aka Carry Trades), just as QE2 ended up doing nothing not only for the US economy but for the stock market as well, what is somewhat disturbing is that the only primary purpose of Operation Twist, namely the lowering of 10 Year bond yields in order to make consumers "weathier" through cheaper refis, has already failed. Presenting Evidence A: 10 Year Treasury Yields (inverted axis where lower yields are plotted higher) and the MBA Refi Index, which today dropped by 6.3%, the third week in a row, sending the Refi index to 3169.4 from 3915.5 in the beginning of August. As the chart makes all too obvious, the correlation between the two series has been as close to 1 as possible... at least until talk of QE3 via Operation Twist not only picked up but was made virtual fact through Wall Street's wholehearted acceptance of more monetary easing. What has happened recently is a substantial break between dropping yields and increasing refinancings. It thus begs the question: if an ever flatter 2s10s curve, the explicit objective of Op Twist which has gotten priced in in the past several weeks, has no impact on the housing market currently languishing in a historic depression, then just why is the Fed focusing on lowering long bond yields even more?
And while one can attempt to attribute this drop to "transitory" factors such as hurricanes and summer vacations, the reality is that every single time the Fed commences another monetary easing episode, mortgage refi rates plunge, in the process undoing everything that the Fed tries to accomplish by forcing mortgage-holders to refinance into a cheaper loan.
This also means that the only other reason for QE is and continues to be the funneling of zero cost money to banks via excess reserves which can then be used for all sorts of asset levitating fungible purposes. It also has some unpleasant side-effects: such as sending gas to $5/gallon (for consumers) and gold to over $2000 (for central bankers).
And while none of this is likely to change any of the course that the Fed will embark on after its next FOMC meeting, the population at least deserves to know just why it is being fleeced over and over.
And tangentially, the most dramatic confirmation of just how much of a failure not only monetary but fiscal stimulus have been (and will be) is the following snapshot of major headlines on Gallup's economy page.
http://www.zerohedge.com/news/chart-shows-qe3-failed-it-even-started
While it is all too clear that a year from today, right about the time QE4 is gearing up for deployment, QE3 will have had absolutely no impact on the economy (in the upside case; the downside case would imply millions in job losses primarily in the financial sector courtesy of record low 2s10s and even lower Net Interest Margins, aka Carry Trades), just as QE2 ended up doing nothing not only for the US economy but for the stock market as well, what is somewhat disturbing is that the only primary purpose of Operation Twist, namely the lowering of 10 Year bond yields in order to make consumers "weathier" through cheaper refis, has already failed. Presenting Evidence A: 10 Year Treasury Yields (inverted axis where lower yields are plotted higher) and the MBA Refi Index, which today dropped by 6.3%, the third week in a row, sending the Refi index to 3169.4 from 3915.5 in the beginning of August. As the chart makes all too obvious, the correlation between the two series has been as close to 1 as possible... at least until talk of QE3 via Operation Twist not only picked up but was made virtual fact through Wall Street's wholehearted acceptance of more monetary easing. What has happened recently is a substantial break between dropping yields and increasing refinancings. It thus begs the question: if an ever flatter 2s10s curve, the explicit objective of Op Twist which has gotten priced in in the past several weeks, has no impact on the housing market currently languishing in a historic depression, then just why is the Fed focusing on lowering long bond yields even more?
And while one can attempt to attribute this drop to "transitory" factors such as hurricanes and summer vacations, the reality is that every single time the Fed commences another monetary easing episode, mortgage refi rates plunge, in the process undoing everything that the Fed tries to accomplish by forcing mortgage-holders to refinance into a cheaper loan.
This also means that the only other reason for QE is and continues to be the funneling of zero cost money to banks via excess reserves which can then be used for all sorts of asset levitating fungible purposes. It also has some unpleasant side-effects: such as sending gas to $5/gallon (for consumers) and gold to over $2000 (for central bankers).
And while none of this is likely to change any of the course that the Fed will embark on after its next FOMC meeting, the population at least deserves to know just why it is being fleeced over and over.
And tangentially, the most dramatic confirmation of just how much of a failure not only monetary but fiscal stimulus have been (and will be) is the following snapshot of major headlines on Gallup's economy page.
http://www.zerohedge.com/news/chart-shows-qe3-failed-it-even-started
Tuesday, September 6, 2011
US Dollar Very Long Term Chart
From Jesse's Cafe:
Please bear in mind that the DX dollar index will become increasingly irrelevant because of its outdated structure, heavily weighted to the euro yen and the pound, to the exclusion of the emerging currencies and the precious metals.
The shorter term chart has been rallying largely on euro weakness. We might see another eurodollar short squeeze if things continue to deteriorate in the European banking system.
A stronger dollar is something that the wealthy and the financial sector may enjoy, to the detriment of the rest of the country and any hopes of economic recovery. However the realities of things make a stronger dollar problematic.
So the next best thing is to slowly devalue the dollar by printing money and selectively distributing it, with tax benefits, to the most powerful and fortunate members of society.
In a 'free market' for currencies the dollar would have been much lower by now because of the persistent trade deficit, and the enormous dollar balances held by some of her trading partners.
The financial engineers favor a slow decline so as not to disclocate any of the major banking concerns. The currency discussions between China and the US are political theater for their respective peoples and the currency tourists, i.e. the small speculators who provide a snack for the wolves.
http://jessescrossroadscafe.blogspot.com/2011/09/us-dollar-very-long-term-chart.html
Please bear in mind that the DX dollar index will become increasingly irrelevant because of its outdated structure, heavily weighted to the euro yen and the pound, to the exclusion of the emerging currencies and the precious metals.
The shorter term chart has been rallying largely on euro weakness. We might see another eurodollar short squeeze if things continue to deteriorate in the European banking system.
A stronger dollar is something that the wealthy and the financial sector may enjoy, to the detriment of the rest of the country and any hopes of economic recovery. However the realities of things make a stronger dollar problematic.
So the next best thing is to slowly devalue the dollar by printing money and selectively distributing it, with tax benefits, to the most powerful and fortunate members of society.
In a 'free market' for currencies the dollar would have been much lower by now because of the persistent trade deficit, and the enormous dollar balances held by some of her trading partners.
The financial engineers favor a slow decline so as not to disclocate any of the major banking concerns. The currency discussions between China and the US are political theater for their respective peoples and the currency tourists, i.e. the small speculators who provide a snack for the wolves.
http://jessescrossroadscafe.blogspot.com/2011/09/us-dollar-very-long-term-chart.html
Italy Crisis Mounting: Hike VAT As Strikes Spread
From Reuters:
Italy's government pledged on Tuesday to hike value added tax and introduce a constitutional balanced budget amendment as hundreds of thousands of people went on strike against an already widely criticized plan.
As market pressure on Italian bonds intensified, Prime Minister Silvio Berlusconi's center-right government yielded to demands to strengthen measures intended to balance the budget by 2013.
The 20 percent VAT bracket will be raised by one percentage point to 21 percent and a special 3 percent levy will be imposed on incomes of over 500,000 euros, a statement from Berlusconi's office said.
It also said ministers would approve the introduction into the constitution of a "golden rule" on balanced budgets and transfer provincial government functions to the regions in a move to simplify local administrations.
Other changes would delay retirement for women employed in the private sector from 2014.
A confidence vote will be called which should see the package passed in Senate on Wednesday, offering some reassurance ahead of Thursday's meeting of the European Central Bank governing council which has been pushing Rome for action.
As the government scrambled with the last minute changes to the package, protestors held rallies in around 100 towns and cities as part of a strike against the cuts called by Italy's largest union, the CGIL.
Protests in Italy have not matched the "indignados" demonstrations in Spain or the mass rallies in Syntagma Square in Athens but Tuesday's strike brought out simmering anger at the burdens imposed on ordinary Italians by more than a decade of economic stagnation.
Italy's strengthened measures came after a stark warning from President Giorgio Napolitano who said on Monday that markets had sent an "alarming signal" of the need for urgent action to restore faith in public finances.
http://www.reuters.com/article/2011/09/06/us-italy-austerity-protests-idUSTRE7852CG20110906
Italy's government pledged on Tuesday to hike value added tax and introduce a constitutional balanced budget amendment as hundreds of thousands of people went on strike against an already widely criticized plan.
As market pressure on Italian bonds intensified, Prime Minister Silvio Berlusconi's center-right government yielded to demands to strengthen measures intended to balance the budget by 2013.
The 20 percent VAT bracket will be raised by one percentage point to 21 percent and a special 3 percent levy will be imposed on incomes of over 500,000 euros, a statement from Berlusconi's office said.
It also said ministers would approve the introduction into the constitution of a "golden rule" on balanced budgets and transfer provincial government functions to the regions in a move to simplify local administrations.
Other changes would delay retirement for women employed in the private sector from 2014.
A confidence vote will be called which should see the package passed in Senate on Wednesday, offering some reassurance ahead of Thursday's meeting of the European Central Bank governing council which has been pushing Rome for action.
As the government scrambled with the last minute changes to the package, protestors held rallies in around 100 towns and cities as part of a strike against the cuts called by Italy's largest union, the CGIL.
Protests in Italy have not matched the "indignados" demonstrations in Spain or the mass rallies in Syntagma Square in Athens but Tuesday's strike brought out simmering anger at the burdens imposed on ordinary Italians by more than a decade of economic stagnation.
Italy's strengthened measures came after a stark warning from President Giorgio Napolitano who said on Monday that markets had sent an "alarming signal" of the need for urgent action to restore faith in public finances.
http://www.reuters.com/article/2011/09/06/us-italy-austerity-protests-idUSTRE7852CG20110906
Monday, September 5, 2011
UBS: The Consequences of EURO Break-Up
From Zero Hedge:
Any time a major bank releases a report saying a given course of action is too costly, too prohibitive, too blonde, or simply too impossible, it is nearly guaranteed that that is precisely the course of action about to be undertaken. Which is why all non-euro skeptics are advised to shield their eyes and look away from the just released report by UBS (of surging 3 Month USD Libor rate fame) titled "Euro Break Up - The Consequences."
UBS conveniently sets up the straw man as follows: "Under the current structure and with the current membership, the Euro does not work. Either the current structure will have to change, or the current membership will have to change." So far so good. Yet where it gets scary is when UBS quantifies the actual opportunity cost to one or more countries leaving the Euro. Notably Germany. "Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade. If Germany were to leave, we believe the cost to be around EUR6,000 to EUR8,000 for every German adult and child in the first year, and a range of EUR3,500 to EUR4,500 per person per year thereafter. That is the equivalent of 20% to 25% of GDP in the first year. " It also would mean the end of UBS, but we digress.
Where it gets even more scary is when UBS, like many other banks to come, succumbs to the Mutual Assured Destruction trope made so popular by ole' Hank Paulson : "The economic cost is, in many ways, the least of the concerns investors should have about a break-up. Fragmentation of the Euro would incur political costs. Europe’s “soft power” influence internationally would cease (as the concept of “Europe” as an integrated polity becomes meaningless).
It is also worth observing that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war." So you see: save the euro for the children, so we can avoid all out war (and UBS can continue to exist). The scariest thing, however, by far, is that for this report to have been issued, it means that Germany is now actively considering dumping the euro.
http://www.zerohedge.com/news/bring-out-your-dead-ubs-quantifies-costs-euro-break-warns-collapse-banking-system-and-civil-war
Any time a major bank releases a report saying a given course of action is too costly, too prohibitive, too blonde, or simply too impossible, it is nearly guaranteed that that is precisely the course of action about to be undertaken. Which is why all non-euro skeptics are advised to shield their eyes and look away from the just released report by UBS (of surging 3 Month USD Libor rate fame) titled "Euro Break Up - The Consequences."
UBS conveniently sets up the straw man as follows: "Under the current structure and with the current membership, the Euro does not work. Either the current structure will have to change, or the current membership will have to change." So far so good. Yet where it gets scary is when UBS quantifies the actual opportunity cost to one or more countries leaving the Euro. Notably Germany. "Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade. If Germany were to leave, we believe the cost to be around EUR6,000 to EUR8,000 for every German adult and child in the first year, and a range of EUR3,500 to EUR4,500 per person per year thereafter. That is the equivalent of 20% to 25% of GDP in the first year. " It also would mean the end of UBS, but we digress.
Where it gets even more scary is when UBS, like many other banks to come, succumbs to the Mutual Assured Destruction trope made so popular by ole' Hank Paulson : "The economic cost is, in many ways, the least of the concerns investors should have about a break-up. Fragmentation of the Euro would incur political costs. Europe’s “soft power” influence internationally would cease (as the concept of “Europe” as an integrated polity becomes meaningless).
It is also worth observing that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war." So you see: save the euro for the children, so we can avoid all out war (and UBS can continue to exist). The scariest thing, however, by far, is that for this report to have been issued, it means that Germany is now actively considering dumping the euro.
http://www.zerohedge.com/news/bring-out-your-dead-ubs-quantifies-costs-euro-break-warns-collapse-banking-system-and-civil-war
Thursday, September 1, 2011
Asia Exports Stall
We saw this coming. Some Korean media outlets have been reporting recently about the rise in the consumer price index, the increased delinquency rate and deteriorating trade balance.
As Asian mercantilist countries’ exports dwindle, the property bubble would pop sooner or later. We also know that demands in both the U.S. and Europe is shrinking, so Asia’s exports won’t be recovering anytime soon.
From Reuters:
Factory activity worldwide stalled last month as new orders tumbled, heightening fears that the global economy may be heading for another recession and driving stock markets lower.
Surveys of company purchasing managers showed manufacturing contracted in the euro zone for the first time in almost two years in August, echoing earlier data from South Korea and Taiwan where new export orders fell sharply.
China's new export orders index dropped to 48.3 from July's 50.4 and Beijing pinned the blame at least partly on the debt crises in advanced economies. The National Bureau of Statistics said the export sector was "facing challenges."
Taiwan saw a sharp decrease in new export orders, particularly from Europe, while in South Korea the sub-index fell to a seasonally adjusted 48.86 from 52.13 , coming below the neutral point for the first time since October last year.
http://www.reuters.com/article/2011/09/01/us-global-economy-idUSTRE77Q1XT20110901
As Asian mercantilist countries’ exports dwindle, the property bubble would pop sooner or later. We also know that demands in both the U.S. and Europe is shrinking, so Asia’s exports won’t be recovering anytime soon.
From Reuters:
Factory activity worldwide stalled last month as new orders tumbled, heightening fears that the global economy may be heading for another recession and driving stock markets lower.
Surveys of company purchasing managers showed manufacturing contracted in the euro zone for the first time in almost two years in August, echoing earlier data from South Korea and Taiwan where new export orders fell sharply.
China's new export orders index dropped to 48.3 from July's 50.4 and Beijing pinned the blame at least partly on the debt crises in advanced economies. The National Bureau of Statistics said the export sector was "facing challenges."
Taiwan saw a sharp decrease in new export orders, particularly from Europe, while in South Korea the sub-index fell to a seasonally adjusted 48.86 from 52.13 , coming below the neutral point for the first time since October last year.
http://www.reuters.com/article/2011/09/01/us-global-economy-idUSTRE77Q1XT20110901
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