Saturday, March 31, 2007
We know it worked.We also know that worlwide inflation has ticked up regardless of whatthe feckless gov data shows, in the real world we experience inflation, and eroding of the ability of the dollar's purchasing power.
The value of the dollar in the world markets has sunk from a high near 120 to where it is now near 83. It had a bounce from IMPORTANT support at 80, ran to 90 ish and has since resumed its downtrend and has been hovering near current support. Should that support give way and we then break 80, the descent could accelerate rapidly.
A dollar that loses all support will have DIRE consequencess. All those FOREIGN investors, mainly ASIA that buy our Bonds (DEBT), CHina holds a TRILLION $$$ now, with Japan near that amount......as the $$ falls so does thevalue of thier enormous holdings.
A cascading fall of the US $$$ would most likely mean rising interest rates at home, so to attract the same money, as it loses value we will have to offer higher rates to keep attracting it. Of course that would CHOKE OFF our economy,and destroy those who hold bonds with much lower yields. The stock market could crash, and there would be nothing the Fed Reserve could do.
Already businesses are trimming workers as costs to retain workers has been rising, pressure on profits picking up. The run of double digit earnings gains are OVER for most S and P 500 companies, the main thrust of the recent Bull Market. Earnings had hit record performance for years running, that would not last forever.
My conclusion is not that the stock market will collapse next week or even next month, and maybe not this year, but it is clear to me, that the SWEET SPOT is gone, comparisons will be tough, we have seen the best and any additional gains from here will be sporadic, and in this man's opinion not worth the risk.
History says year after mid-term elections is one of the best times to be invested, that losses are RARE, and few and far between and minimal at worst. History repeats until it doesn't. The market is DOWN for the year so far, we are approaching the end of the BEST 6 months and beginning of the worst 6 months.
CASH OUT HOME EQUITY LOANS when the price of housing was rising at RECORD Paces was a NO BRAINER (so to speak), I could borrow $100K at LOW rates on a $450K house, because a year later the same house would be worth at least $550K or more, or perhaps when I borrowed, the house I purchsed for $300K was already worth $600K so I had TONS of APPRECIATION to borrow from.
Now what did the average person do with their LOOT? CONSUMED!!!!!!!! $100's of BILLIONS of $$$$ taken out as EQUITY and spent like drunken sailors.
For the most part NO DEBTS were PAID OFF, NO 30 yr mortgages were REDUCED to 15 year mortgages, and NO SAVINGS were had. We are still at a negative savings rate not seen since.....(I must say it) last DEPRESSION.
AT ZERO savings, NOW and heading into retirement, most of the 80 million or so BABY BOOMERS are ill prepared to meet their needs, so is this country with $40 TRILLION or so of UNFUNDED liabilities like Medicare and SS.
WILL many of these BOOMER be FORCED to LIQUIDATE ASSETS, like their 401K's stocks etc to meet their needs and consumption desires?
WHAT do we have NOW to make up for the near $1 TRILLION dollars poured into economy from these CASH OUT refi's, and HELOC'S????? AS NOW home property value at BEST has stopped RISING at worst is falling.
WE have near RECORD unsold inventory of over 8 months of homes, more being built, MANY MORE not on the market because of lack of interest, as soon as it perks up, they will flood the market.
MANY of the default properties, the banks are so far UNWILLING to take a massive hit, so when they realize there is no other way, prices could fall dramatically. I mean who wants to sell or admit the house they bought for $600K with NO MONEY DOWN is now worth lets say $550K.....certainly there is NO room to TAKE OUT ANY EQUITY!!!!!!!!
THis EQUITY LEECHING has been about the SOLE provider for this economy, WHAT WILL TAKE ITS PLACE????? GOV SPENDING? You know Bush's war has pumped BILLIONS into economy VIA the WAR MACHINE.
How has the economy been dealing with OIL prices holding ABOVE $60??? and ETHANOL production (subsidised by OUR TAX DOLLARS)putting pressure on CORN PRICES????
Inflation, even though reduced by GOV manipulation of the data, is "uncomfortably high" and defending the dollar with stable or rising interest rates puts the FED in a no win scenario.
WOULD falling interest rates revive the economy? maybe not this time......
Business has not collapsed, the economy is managing to muddle through so far, so we must be on the watch for a rising unemployment trend.
I will be monitoring the weekly employment figures for such a trend, with other eye the value of our currency. Stay tuned, this is getting interesting.
Thursday, March 29, 2007
Asian Decoupling Unlikely
March 26, 2007
By Stephen S. Roach | New York
As the US economy slows, most believe that Asia’s growth machine will fill the void. Don’t count on it. Policy makers in China and India are shifting toward restraint, tilting growth risks in the region’s fastest-growing economies to the downside. Nor is an externally-dependent Japanese economy likely to provide much compensation. To the extent the case for global decoupling is dependent on an Asian offset, prepare to be disappointed.After years of doubt, convictions are deep that both China and India will stay the course of hyper-growth. There has been talk for years about the coming Chinese slowdown, but so far the downshift has failed to materialize. The 10.7% increase in Chinese GDP in 2007 was the fastest since 1995, when the size of the economy was less than one-third what it is today. Moreover, with India now showing impressive improvement in its macro foundations of growth – especially saving, infrastructure, and foreign direct investment – there is good reason to believe that there may be considerable staying power to the recent acceleration in economic growth that averaged 9% during the 2005-06 interval.
Incoming data give little reason to doubt the staying power of the Asian growth machine. Chinese industrial output growth has reaccelerated to an 18.5% y-o-y pace over the January-February period – up from the sub-15% comparison in the final period of 2006 and only a shade slower than the 19.5% gains recorded last June. While India’s industrial production growth is certainly not as brisk as China’s, the 10% y-o-y comparison in early 2007 remains well above the 7¼% pace that was evident in late 2005 and early 2006. Needless to say, if China and India stay their present course, the global economy would barely skip a beat in the face of a US slowdown. Collectively, China and India account for about 21% of world GDP, as measured by the IMF’s purchasing power parity framework – essentially equal to the 20% share the statisticians assign to the United States. Add in the recent acceleration in the Japanese economy – a 5.5% annualized increase in the final quarter of CY2006 for an economy that accounts for another 6% of PPP-based world GDP – and there is good reason to believe that the impact of America’s downshift could well be neutralized by the ongoing vigor of the Asian growth machine.
The Asian offset, in conjunction with a modest cyclical uplift in a long sluggish European economy, is the essence of the case for global decoupling – a world economy that has finally weaned itself from the great American growth engine. A key presumption of that conclusion is that Asia can stay its present course. There are two flaws in that argument, in my view – the first being that internal pressures are now building in Asia’s fastest-growing economies that could be sowing the seeds for slower growth ahead. In particular, both the Chinese and Indian economies are now displaying worrisome signs of overheating. In China, the symptoms have manifested themselves in the form of imbalances in the mix of the real economy, widening disparities in the income distribution, and a large and growing current-account surplus – to say nothing of the negative externalities of environmental degradation and excess resource consumption. In India, the overheating has surfaced in the form of a cyclical resurgence of inflation, with the CPI running at a 6.8% y-o-y rate in early 2007 – a sharp acceleration from the 3.8% pace of 2002-05.
In recent weeks, I have met with senior policy makers in both China and India. It is clear to me that in both cases the authorities are in the process of shifting their policy arsenals toward meaningful restraint. In China, the direction comes from the top in the form of growing concerns expressed by Premier Wen Jiabao about a Chinese economy that he has explicitly characterized as “unstable, unbalanced, uncoordinated, and unsustainable” (see my 19 March dispatch of the same name). Since those words were first uttered at the end of the National People’s Congress on 15 March, Chinese authorities have been quick to respond. There was a monetary tightening the very next day and the securities industry regulators have issued new rules that prevent companies from purchasing equities with proceeds from share sales. The former move is aimed at cooling off an overheated investment sector while the latter move is addressed at dealing with a frothy domestic stock market that increased by 100% in the six months ending in late February. I am more convinced than ever that Beijing is now deadly serious in attempting to regain control over its rapidly growing economy in an effort to shift the focus from the quantity to the quality of growth. This is good news for China but could be disappointing for the decoupling camp that expects rapid Chinese economic growth to remain resistant to any downside pressures.
India is similarly positioned. The Reserve Bank of India does not take overheating and cyclical inflationary pressures lightly. I was actually in Mumbai the day the RBI tightened monetary policy last month (13 February), and it was clear to me in my discussions at the central bank that it meant business. The RBI’s official statement following that action said it all: “(A) determined and co-ordinated effort by all to contain inflation without unduly impacting the growth momentum is not only an economic necessity but also a moral compulsion.” Our Indian economics team underscores the risk of another monetary tightening prior to the 24 April policy meeting. At the same time, the government’s annual budget contained measures that would cut tariffs on food and other price-sensitive manufactured products. Indian authorities are fixated on a mounting cyclical inflation problem and appear more than willing to take a haircut on economic growth to achieve such an objective. Our current economic forecast reflects just such an outcome – a downshift to 6.9% GDP growth in 2008 following average gains of 8.7% over the 2005-07 period.
There is a second factor at work that is also likely to challenge the view that hyper growth is here to stay in Asia – the region’s persistent reliance on external demand as a major driver of economic growth. This is less a story for India, with its relatively small trade sector, and more a story for the rest of Asia. China is at the top of the external vulnerability chain. Its export sector, which rose to nearly 37% of GDP in 2006, surged at a 41% y-o-y rate in the first two months of 2007. Moreover – and this is an absolutely critical point in the decoupling debate – the United States is China’s largest export market, accounting for 21% of RMB-based exports. As the US economy now slows, the biggest piece of China’s export dynamic is at risk. So, too, are the large external sectors of China’s pan-Asian supply chain – especially Taiwan, Korea, and even Japan. Lacking in self-sustaining support from private consumption, the Asian growth dynamic remains highly vulnerable to an external shock. That’s yet another important reason to be very suspicious of the case for global decoupling.
Decoupling and global rebalancing go hand in hand. A decoupled world is very much a rebalanced world – and vice versa. Recent trends admittedly lend some support to the decoupling thesis – especially a booming Asia economy but also a seemingly remarkable cyclical revival in Europe. The European upsurge is a welcome development, but perspective is key. At most, it will add 0.2 to 0.3 percentage point to our baseline case for world economic growth. Asia, especially China and India, is a very different story. This is a much larger segment of the global economy and is growing at rates that are three times as fast as those in the developed world. An Asian economy that only barely widens its growth multiple relative to the rest of the world could well drive global decoupling on its own.
That’s unlikely to be the case, in my view. Not only does Asia remain vulnerable to a US-centric external shock, but the region’s two most powerful growth stories – China and India – are now both very focused on matters of internal sustainability. The Premier of China has put his reputation on the line in attempting to bring an unstable, unbalanced, uncoordinated, and unsustainable Chinese economy under control. The Indian government is equally focused on an anti-inflationary policy tightening. Looking backward, both of these economies have been on an exceptionally strong growth path that – if left to its own devices – could play an increasingly important role in powering a decoupled world. Looking forward, however, it’s likely to be a very different story. With growth prospects in China and India tipping to the downside at the same time the US economy is slowing, the global economy is likely to be a good deal weaker than the decoupling crowd would lead you to believe.
Tuesday, March 27, 2007
Subprime losses lead to drop in home ownership
Despite the mortgage industry's claims to the contrary, an advocacy group says that subprime foreclosures will leave 1 million fewer homeowners.
By Les Christie, CNNMoney.com staff writer
March 27 2007: 4:28 PM EDT
NEW YORK (CNNMoney.com) -- About 2.4 million holders of subprime mortgage loans made between 1998 and 2006 will lose their properties to foreclosure, according to a report from the Center for Responsible Lending, a non-profit policy and advocacy organization for home owners.
Worse, that will result in a net home ownership loss of one million households.
CRL's analysisrebutted the mortgage industry's claims that the increase in subprime loans has opened up home ownership for millions of low income buyers. Instead, CRL contends, relatively little subprime lending is used for first-time home buying.
Testifying before the House Finance Committee today, CRL's president, Michael Calhoun, said the primary reason for the jump in foreclosures is "the abandonment of underwriting standards."
The report criticized both lax underwriting - noting in particular a disregard for the ability of borrower's ability to repay loans - as well as dangerous loan vehicles, such as "exploding ARMs," which have low rates for the first two or three years before resetting at much higher rates.
CRL contends that few subprime loans went to first time buyers, a notion that was seconded by Emory Rushton, chief national bank examiner for the Office of Comptroller of the Currency, in his testimony before the Finance Committee. He pointed out that Mortgage Bank Association figures revealed only 11 percent of subprime loans went to first-time buyers last year.
CRL says the record going back to 1998 is even worse; only 9 percent of subprime loans went to first-time buyers in the nine years through 2006.
The bulk of these loans actually went to refinance existing mortgages, incurring additional fees. And many of these refinancings involved cash back deals which increased the size of the original mortgages. When all was said and done, borrowers owed more on their homes after refinancing.
Because of the lower teaser rates, however, the new loans were affordable - at first. But when they reset at the higher, fully indexed rates, many borrowers could no longer make their payments.
Often that forced home owners to refinance yet again, extracting even more equity from their house. Since home prices kept rising, there was home value to draw on.
But now that prices are stagnant, even falling in some areas, many owners find themselves tapped out or even underwater, owing more on the mortgage than the house is worth and unable to make their monthly mortgage payment.
Borrowers in this kind of a bind are likely to find themselves in foreclosure, and that's what's going to lead to the decline in home ownership that CRL is predicting.
Monday, March 19, 2007
Sunday, March 18, 2007
SO it is ultimate demise time right? time to get short right? End of bull right?
But we have the CONTRARIAN PUT/CALL RATIO at levels normally indicating some kind of bottom? some near historic readings of pessimism?
But let's say I live on an Island, with a VOLCANO named KRAKATOA....and I see it is spitting out plumes of fire and smoke and I FEEL the ground SHAKING.....is this a case I need to WAIT to see the MOLTEN LAVA FLOWING down its side, it's TOP blown off to run for cover?
It is a known fact once I see LAVA flowing it HAS ERUPTED......WHO WOULDN'T thnk so?
If I am ON TITANIC AFTER it hits the iceburg, what are my chances on BETTING (PUTS) the f'er will sink?
Has the market erupted? has it HIT the TITANIC...is it SO OBVIOUS that buying PUTS is the right thing to do? Given MANY other ways we can guage complacency (lemmings sitting tight)
Saturday, March 17, 2007
Avg Joe holding tight, money flow still going into 401K's and foreign purchases of our funny money debt goes unabated. Game on!
Meanwhile the grumpies are lining up in front of the PUT money machine ready to CASH IN on a frumpy dumpster market slump coming to a front page near you. Not so fast?
When has the market made it easy to know where it's headed? NAZ continues to underperform. Bond yileds stiffened up at near 4.5% the 10 year.
Market has been following the action of the YEN, whenit goes up the market goes down, further evidence of weakening of carry trade liquidity drain?
Consumer confidence is falling, reaction to all this? Economic indicators in the crapper......put/call ratio near a hist0ric leaning meaning VERY PESSIMISTIC
VIX is rising, weaker market until this trend reverses IMHO
Friday, March 16, 2007
SUBPRIME WOES. WATCH THE VIDEO! The markets do NOT reflect the reality of what is happening on the ground. A MAJOR shakedown is coming IMHO, even if somehow someway this market recovers to new highs ( never say never LOL) a TEST of the 2002 lows in the books down the road IMHO
Thursday, March 15, 2007
This you gotta hear. Now MULTIPLY his Millions by tens of tens of millions controlled by Goofman Sax and 1,000's of hedge funds plus the FED manipulation machine et al PPT and you will (or maybe you won't) understand how markets get mannipulated.
Below please find a rant posted by CIVIL BEAR:
CivilBear - Thu, Mar 15, 2007 - 03:00 PM
If Wall Street had any connection to economic fundamentals and the realworld, the markets would be down big-time today.But with options expiration coming up tomorrow, Da Boyz, The PPT, TheWorking Committee on The Markets and every market manipulator on the face ofthe earth are doing their darndest to make sure there is no market drop.
Fact is, today's economic reports were as ugly as Abby Jo in a thong bikini!The Philly Fed report is awful.The Empire State numbers are terrible.The Producer Price Index showed that wholesale prices are rising a helluvalot faster than expected.Consumer confidence is down significantly.Two more subprime lenders are folding their tents.
Yet the market aren't allowed to drop.Gotta love dem "free markets."Not surprising that yesterday, the Fed and the Treasury Department combinedto supply more than $27 BILLION for the buying of stocks.No action is too drastic when it comes to propping up the markets.What a stench-ridden, steaming pile of Kudlow!Ah, that feels better.
Tuesday, March 13, 2007
This could negate the importance of the 90% upside day after the first 2 90% downside days which began in Feb 27th with 99% downside volume day, one of if not worst on historic market data.
That was taken lightly as the VIX melted back away but SHOT up again today. Of note the VIX stayed about its now rising 20 EMA and a rising trend in the VIX is VERY BEARISH if it continues.
Tomorrow I think is a CRITICAL day for the markets. Many think if 12,000 is broken
(it should be) and that break holds, then we will work our way back to 11,000, any 20% correction is considered a Bear Market. (somewhere near 10,200) 11,475 ish is the 10% NORMAL correction many were "hoping" for.
There is MORE at stake here, we have RECORD MARGIN DEBT BEYOND EVEN 2000 BUBBLE TOP!!! WTF???? and some never learn?
We have subprime lender crisis. Long in tooth bull market. Interest rate inversion (Recession indiactor) WE have DOA housing market and trickle down effects on busineses. Many housing stocks hitting new 52 week lows.
25 year uptrend line from 1982 bull lows is near 11,000, this must NOT be broken o maybe back to 4,000-5,000 on Dow IMHO.
Home Equity loans supporting spending done! Housing NOT affordable to most.
Inventories are building, consumer demand not strong. Price pressure to salaries, prfoit miracle done IMHO, most likely string of double digit SPX earnings growth OVER.
NO leadership in market. Defensive stocks stronger, appetite for risk on decline?
Avg Joe has done NOTHING, sold NOTHING, while he watches and begins to ask what is going on, gets a little nervous, but hasnt sold anything. ALL those gains in jepeordy IMHO
BULL MKT IS INTACT however according to my TA on moving averages, but if we get a cross from 20 week through 50 week, to me that is bear cross, and LOTS of damage would already be done.
As I said before I am IN CASH 100%, I am in effect shorting stocks by being able to buy them MUCH cheaper then they were, when time is right. QID fund is on upswing (inverse naz 2X)
WHAT of potential MARGIN CALLS? FORCED LIQUIDATION, selling of securities.....is possible, and makes matters worse, as bears tag on.
rally off lows was weak, on weaker volume, todays selloff on HUGE VOLUME. NYSE near DOUBLE the NAZ!!! that is a sign also I think.
Hey, I do my thing, I try to reach out, I try to keep open mind to any outcome, but I was ONE LONELY BEAR!
I may write in vaccum, not sure how many read, I have heard from a few readers from around the globe, but I'll keep my blog going, no matter what.
When I think of it I will post my 25 yr Dow chart
Before the bell, February retail sales rose just 0.1% (consensus 0.3%) while the more closely-watched sales, ex-autos, unexpectedly fell 0.1% (consensus 0.3%). Both figures pressured a market already extremely sensitive to signs of potential economic weakness even though unseasonably cold weather was a likely cause for the soft report. It is also worth noting that the data won't alter expectations of about 2% real GDP growth in Q1.
However, with subprime mortgage worries acting as an overhang for weeks now, more negative developments in the space took a weak stock market and made it even weaker as sellers found another excuse to take some money off the table following three straight days of gains for the Dow and S&P 500.
Accredited Home Lenders (LEND 3.97 -7.43) was the latest company in the subprime lineup to warn of such difficulties, saying it needs to raise new funds to cover the risk of default. The stock lost nearly 70% of its value. Adding insult to injury was Countrywide Financial's (CFC 33.49 -1.65) CEO saying on CNBC that the subprime issue is becoming a "liquidity crisis."
But the straw that broke the backs of the bulls today was a report midday from the Mortgage Bankers Association which showed delinquencies among subprime borrowers hit 13.3% in the fourth quarter. That was the highest rate in more than four years!!
I am getting that feeling this AM, but I will say this for us.......we have been LOOKING for the TOP and stayed true to that yesterday (Yes P) as one of my targets held (came to within a few points)
AS MANY disregard subprime trouble, this will be THE scandal of 2007.....and its effects hardly felt yet.HOV BZH TOL now falling AGAIN to NEW LOWS, remember how many hopped aboard at the lows, bet they are still holding (THE BAG)
SO OK< we have GS etc nowhere near 52 wk highs, home builders falling to new lows, subprime crisis, consumers pulling back, SPX profits predicted 5% growth (dbl digit string broken), I believe we have enough info as to which side to LEAN on, I will let you know any action I take.
I am hoping on an initial SLOW opening...that doesnt GAP down to the lows...maybe even some GREEN (fake out) there I would prefer to lay my shorts using QID, why QID? because NAZ has lagged all the way.....NEVER confirmed SPX move
Monday, March 12, 2007
Pollution is invariably one of the first impressions visitors form of China. From bicycles to cars in 25 years, urban China rarely sees much in the way of blue sky anymore. Rapid and large-scale industrialization only compounds the problem. The Chinese government knows full well it must take prompt and forceful actions to avoid an environmental crisis. There are encouraging signs it is now rising to the occasion. Can China pull it off while, at the same time, staying the course of its remarkable economic development strategy?
On a per capita basis, China’s pollution problem hardly jumps off the page. Its ratio of carbon emissions per person is less than half the global average and less than one-tenth that of the world’s biggest polluter – the United States. China’s enormous population, of course, distorts those comparisons. On an absolute basis, it’s a different story altogether. China’s total carbon emissions are more than double those of Japan and Russia, fractionally behind the European Union, and a little more than half those of the US. The essence of the Chinese environmental degradation problem is both its scale and growth. Over the 1992–2002 period, CO2 emissions in China have expanded at a 3.7% average annual rate – more than two and a half times the global average of 1.4%. At that rate, according to a recent report issued by the International Energy Agency, China will surpass the United States as the global leader in carbon emissions by 2009.
In terms of sulfur dioxide, China’s current rate of discharge is already double its so-called environmental capacity – responsible for an acid rain that now covers about one-third of China’s total land mass. According to SO2-based measures of air pollution, seven of the ten most polluted cities in the world are in China. With respect to the emissions of organic water pollutants, China leads the world by more than three times the number two polluter – the United States. Moreover, fully 90% of China’s urban rivers are polluted, and 90% of its grassland has been degraded. (Data cited above are from Al Gore’s Inconvenient Truth , Nicholas Stern’s The Economics of Climate Change , and a recent paper prepared by the Development Research Center of China’s State Council, “China: Accelerating Structural Adjustment and Growth Pattern Change” ).
China’s environmental moment of truth is now at hand. The problem is twofold, in my view: It is not just an issue of moving from dirty to clean technologies that drive production, distribution, and transportation platforms, but it is also a matter of shifting the macro structure of the Chinese economy from a pollution-intensive to an environmentally-friendly mix. This latter point is a key and often overlooked aspect of China’s environmental challenge. It is also a crucial element of the rebalancing challenge that shapes China’s macro debate. The issue, in a nutshell, is that the Chinese economy is heavily skewed toward exports and fixed investment – two sectors that now collectively make up over 80% of China’s GDP. This concentration represents the most lopsided mix of a major economy in modern history. It is not sustainable from a macro point of view in that it threatens to produce the twin possibilities of a deflationary overhang of excess capacity and a protectionist backlash to an open-ended export boom. And it is not sustainable from an environmental point of view because the industrial-production-driven export and investment booms have a natural bias toward excessive carbon emissions.
This latter conclusion is key but, unfortunately, difficult to quantify in light of the paucity of data on the carbon intensity of the various sectors of the Chinese economy. Bear with me as I take you through a brief, but important, digression that uses the United Kingdom production model to illustrate what China is up against. The Stern Review contains a detailed breakdown of the carbon intensity of 123 production sectors in the UK economy. Not surprisingly, services are at the low end of the UK spectrum in terms of carbon emissions – averaging around 0.3 on the carbon intensity scale; for manufacturing industries, the range is wide – motor vehicles ( 0.5) and sporting goods/toys (0.8) are at the low end while the paper (2.4) and steel (2.7) industries are at the high end. A comparable dispersion is evident in the energy share of total UK business costs – with non-transportation services at the low end of the spectrum and manufacturing industries at the high end.
OK, China is not exactly England. But I strongly suspect – and this is my key analytical leap of faith – that the relative dispersion of the carbon- and energy-intensity of the major sectors of the Chinese economy is comparable to that of the UK. In other words, just as manufacturing is more carbon-intensive than services in the UK, the same ranking is likely in China. Under that presumption, consider the following: The latest data put China’s industrial sector at around 52% of its GDP – well in excess of the 32% share of the average developed economy and considerably higher than the 37% average of the low- and middle-income countries of the developing world. That means the manufacturing-intensive Chinese economy is most likely highly skewed toward a pollution- and energy-intensive model of economic activity.
In the case of China, there is an important twist – it is the heaviest consumer of coal of all the major economies in the world today. According to China’s Development Research Center, coal-driven power accounted for fully 79% of total electricity generated in 2003 – eight percentage points higher than in 1990 and essentially double the 40% share of coal-powered electricity for the world as a whole. The adverse environmental implications of coal power are well known; according to the Stern Review, the CO2 emissions of coal per unit of energy generation are twice as much as those associated with the combustion of natural gas and about 50% more than those generated by oil-burning technologies. Inasmuch as UK coal consumption – fueling 34% of the country’s total energy generation – is less than half the share in China, there is actually good reason to believe that the pollution implications for the Chinese economy per unit of GDP would be a good deal worse than those implied by the British results cited above.
The India comparison is also an interesting one in putting Chinese environmental issues in perspective. India’s per capita carbon emissions are only about half those in China and its total emissions are about one-third those of the Chinese. But the 4.3% average annual growth rate of Indian CO2 emissions over the 1992-2002 period is more than 15% faster than the rapid growth evident in China over the same period – suggesting that if India stays its current course, its environmental threats will quickly get out of hand. Even so, the structure of Indian GDP – a much smaller industrial portion (28%) than China (52%) and a much larger services share (53%) than China (34%) is biased toward a less pollution- and energy-intensive growth trajectory. That’s not to let India off the hook on environmental issues but only to stress that China is very much in a league of its own.
China has a rare and important opportunity to kill two birds with one stone. A successful rebalancing of the Chinese economy – moving away from excess reliance on investment and exports and embracing more of a pro-consumption growth model – would be a huge plus in dealing with two key issues: On the one hand, it would enable China to avoid the capacity excesses and protectionist risks that might arise from a continued irrational expansion of a severely unbalanced real economy. But it would also have the advantage of tilting the mix of Chinese output away from a pollution- and energy-intensive growth trajectory.
The latest statements from official Beijing are quite encouraging in addressing this conjoined problem. Premier Wen Jiabao’s 5 March “Work Report” to the National People’s Congress strongly endorsed a strategy of macro rebalancing, energy conservation, and environmental remediation. Just as China has had the will and determination to deliver on the reform front over the past 28 years, I am hopeful that it will rise to the occasion and deliver on the rebalancing front. In the end, there is no other choice.
TIME IS RUNNING SHORT
Yes, it's Al Gore, this is well researched, well presented, not irrefutable fact, but seems very plausable, very probable and more than worth considering and how each of us can make a change, a difference in lessening the possibility of irreversable damage to our environment and the world we live in.
Is it any miracle the #1 car maker in the world is TOYOTA? IS IT any wonder they lead in fleet miles per gallon? or are leaders in HYBRID SYNERGY TECHNOLOGY? WHO makes the HUMMER? WHO is $350 Billion in debt?
It is true you can be conscious about environment and be good for business. The BUSH ADM are frauds and lack any leadership in the world except war making and lies.
ONLY 2 countries have NOT signed KYOTO TREATY, the US is one of them.
Which country is hopelessly in debt and has $50 Trillion in unfunded liabilities?
One day you will wake up and wonder what the F**!! happened to the world, and wish you could have done something to change it!!
Vote for those who have of like mind and want to change the way things are done and what the priorities are.
By invading Iraq we have created 10X more terorists than we have killed, and the 1st country we freed and attacked terrorism is now slipping back into a haven...Afghanistan.
Talk TOUGH to IRAN now, see where that gets us too. But I digress, and well its my blog.
Friday, March 09, 2007
Beijing to create agency to oversee its investment of foreign currency reserves of more than $1 trillion; global investors wary of impact.
March 9 2007: 7:11 AM EST
BEIJING (Reuters) -- China is setting up a new investment agency to seek higher returns on its foreign currency reserves of more than $1 trillion, the largest stockpile in the world, Finance Minister Jin Renqing said Friday.
It was the first official confirmation of China's plans, which Premier Wen Jiabao foreshadowed in January by saying Beijing would actively explore new ways of using the reserves.
"The biggest priority is safety, and under the principle of security we will try to increase the efficiency of management and the investments' returns," Jin told a news conference.
He gave no details of how much money the fund would manage, let alone how it might invest, but he said Singapore's state-owned Temasek investment company would be one of its models.
"This company is still in the process of being formed, and it will let the public know when it has been formally set up," said Jin, who was speaking during the annual session of the National People's Congress, China's largely ceremonial parliament.
China's financial firepower means the fund has the potential over time to make a big impact on world markets.
"Some people in the market are concerned that if there is going to be a drastic change in the way the FX reserves are being managed, it could have a potentially important impact on capital flows and financial markets," said Grace Ng, an economist at JPMorgan Chase in Hong Kong.
Academic studies estimate that investment by China and other Asian countries in U.S. bonds has reduced long-term American interest rates by anything from half a percentage point to 2 percentage points - a boon to U.S. businesses and home buyers.
The State Administration of Foreign Exchange (SAFE), an arm of the central bank, currently manages all of China's reserves.
Where they are invested is a state secret, but bankers assume two-thirds or more are held in low-risk dollar bonds.
SAFE, which regulates China's currency, would continue to manage what Jin called China's "normal" reserves; the rest would be invested by the new agency.
As China's reserves have ballooned on the back of record trade surpluses, demands have grown for part of the hoard to be managed more aggressively.
Some researchers have argued for buying oil, natural resources and high-technology imports; others want the money to be converted back into yuan and spent relieving poverty at home.
Cheng Siwei, a leading lawmaker, told Reuters this week that China needed no more than $600 billion-$700 billion in reserves, and various state media reports have said the new agency could receive as much as $200 billion to manage.
Bankers, however, say a fund would take years to grow that big without driving the prices of assets it buys sharply higher.
To avoid rocking markets, one possibility for the new agency would to give it only part of China's new reserves, not its existing stash. The reserves are growing by about $20 billion a month.
"Given the way the Chinese government does things, it's likely to be a gradual process. Any impact on the market would likely to be gradual and manageable," said Ng at JPMorgan.
Reflecting the importance of the venture, the new agency will report directly to the State Council, China's cabinet, and not to either the finance ministry or the central bank.
Lou Jiwei, a former vice finance minister, was promoted to a cabinet-level post this week in a move that analysts saw as prefiguring his appointment to run the agency.
"We will draw upon the successful practices of other countries, for example Singapore's Temasek, to manage China's foreign exchange reserves," Jin said.
Temasek Holdings invests Singapore's fiscal surpluses, not its currency reserves. It owns stakes in several of Singapore's biggest firms and has expanded aggressively in Asia since 2002 to try to boost its long-term investment returns.
Temasek reported total shareholder return by market value of 24 percent in the year ending March 31, 2006, matching that of the city-state's main stock market index.
Over a 10-year period, its total shareholder return of 6 percent a year was also in line with the Singapore index.
Last year it paid $3.8 billion for Shin Corp., Thailand's biggest telecommunications firm, triggering a political crisis in Bangkok that culminated in a military coup against former prime minister Thaksin Shinawatra, who founded the company.
China has grown into an economic powerhouse in the last decade, becoming the home to manufacturing for products sold by Wal-Mart (Charts), Target (Charts), Lowe's (Charts), and Home Depot (Charts).
China looks to boost property rights
Paulson calls for change in China
Find this article at: http://money.cnn.com/2007/03/09/news/international/bc.china.economy.reserves.reut/index.htm
March 08, 2007: 07:10 PM EST http://money.cnn.com/news/newsfeeds/articles/djhighlights/200703081910DOWJONESDJONLINE001264.htm
SAN FRANCISCO (Dow Jones) -- New Century Financial Corp. said late Thursday that it has stopped accepting loan applications because some of the subprime- mortgage specialist's financial backers are refusing to provide access to financing.
New Century also said that it has received $150 million worth of margin calls from its so-called warehouse lenders. It has satisfied about $80 million of those calls, but $70 million remains, according to the company.
"As a result of the current constrained funding capacity, the company has elected to cease accepting loan applications from prospective borrowers effective immediately, while the company seeks to obtain additional funding capacity," New Century said in a statement.
"The company expects to resume accepting applications as soon as practicable; however, there can be no assurance that the company will be able to resume accepting applications," it added.
New Century shares fell 4.4% to $3.70 during after-hours trading on Thursday. The stock slumped 25% to close at $3.87 during regular trading, leaving it down more than 85% so far this year.
Subprime mortgages are offered to home buyers who fail to meet the strictest lending standards. Companies like New Century (NEW) that specialize in these loans have suffered as housing prices stopped rising and interest rates climbed from record lows.
Lenders specializing in such loans, like New Century, rely in part on big banks known as warehouse lenders to finance their operations. These backers require that subprime lenders meet certain minimum financial targets; otherwise, they have the right to end the business relationship.
On Friday, New Century said it had breached one of those requirements, or covenants, and also disclosed that it's the subject of a federal criminal investigation.
New Century said on Thursday that it has yet to get waivers on this covenant from five of its warehouse lenders, having made no progress on this point since Friday.
"Once you get hit with one of these crunches, warehouse lenders don't want to lend to you, so you're really done," said Joseph Mason, associate professor of finance at Drexel University's LeBow College of Business and a visiting scholar at the Federal Deposit Insurance Corp.
Mason, who recently published a study on the subprime mortgage market, said he's expecting more bankruptcies in the sector.
Subprime originators usually sell their loans on to big banks or package them up into mortgage-backed securities for sale into the secondary market. The buyers of these assets have the right to send them back in certain circumstances, including when borrowers fail to make payments during the first month or two. In those cases, the originator is forced to repurchase the loans.
New Century said late Thursday that one of its financial backers forced the company to repurchase some loans. It didn't identify the lender.
One of New Century's lenders also has extended $265 million in financing that is mainly secured by its real-estate investment trust mortgage loan portfolio.
New Century also announced that it borrowed more money to help it refinance roughly $710 million in mortgage loans currently financed through another lending relationship.
The company said it's talking with lenders and other third parties about getting more access to financing, but warned that its efforts might fail.
"These firms that rely on funding mechanisms like securitizations are like sharks -- if they stop moving they die," Mason added.
In another blow earlier on Thursday, New Century said one of its directors - David Einhorn of hedge fund Greenlight Capital - resigned.
Thursday, March 08, 2007
100 EMA 12,283
.382 Fib 12,329
As it looks we have similar setup to JULY bottom!!! how could that be?? series of 80-90% down volume days and now we have had one 90% up day, and today has good chance of doubling that!
World markets appear to have gotten their footing back, lost their fear already. VIX shedding points like SUMO wrestler in steam room.
ANother 90% upside day could set stage to challenge previous highs, as strange as that seams to me.
Tuesday, March 06, 2007
http://money.cnn.com/2007/03/05/markets/yen_carry/index.htm yen carry trade bet
Don't be a Lemming, read, educate yourself, form your OWN opinion or Wall Street will give it to you, the kind that make you grab your ankles.
Today we had a 90% up day. It is VERY unusual to have a market top followed by 2 such HUGE downside volume days, stay tuned, should we go down again and break the recent lows near 12,000 with similar volume, the health of this bull is definately in question, and the BEAR must be potentially entertained, IMHO
Today IMHO is nothing more than a normal bounce from HUGE oversold, see if it lasts.
Thursday, March 01, 2007
The 500 point jugernaught decline 2 days ago IMHO is a wanring shot, not a one day wonder or blip on the chart, some mistake or a reaction to rumor. If you try to figure out fundamentally why anything happens, you will parse away the meaning, and lose your way.
We may never know exactly why anything happens, what we can do is look at a move in context of where we are, how far we have come, and what it means technically.
It may that when you add the news from China, and the tightening going on in Japan, that what the 500 PT drop is warning is that the WORLD LIQUIDITY GAME IS COMING TO AN END. And that is ALL that is carrying this game forward for so long.
WE have now accumulated historic levels of debt, and imbalances, and the scales are tipped toward Deflation, there seems to be plenty of everything.......from China that is.
How do we pay for these things? With credit, from foreign purchases of our debt, of which China holds near $1 Triillion. Their currency is 40% or more undervalued, and they have NO intention of making any rude changes.
We have had WILD and damaging real estate specualtion here, it is rippling through our economy, a 4.5% 10 yr bond, which is lower in yield than the 2 yr and the 90 day, has been warning of trouble.
Durable goods orders plummeting, construction spending, home sales off the charts, but today our Manufaturing index inched up and all is well!?? LOL reason for stock turnaround given.
The Dow hit previous reaction lows andbounced, no doubt program buying came to recue.
Very good argument can be laid we have seen the highs for this market.
If it isnt cars and housing, tell me what will drive the economy?
Under current conditions, I am stepping aside and feel profits are profits, and sitting idle and letting them slip away would not be prudent.
I think the tenor of market has been changed, shocked into recognition or it should be that a direction stock prices can and do go in once in awhile is down.