Countries & Regions Archives - Page 170 of 382

June 9, 2014

Creating a Learning Society | Joseph Stiglitz | Project Syndicate

By Joseph Stiglitz:

The Nobel laureate economist Robert Solow noted some 60 years ago that rising incomes should largely be attributed not to capital accumulation, but to technological progress – to learning how to do things better. While some of the productivity increase reflects the impact of dramatic discoveries, much of it has been due to small, incremental changes. And, if that is the case, it makes sense to focus attention on how societies learn, and what can be done to promote learning – including learning how to learn.

Stiglitz also includes an observation particularly relevant to Australia, with its shrinking manufacturing sector.

The great economist Kenneth Arrow emphasized the importance of learning by doing. The only way to learn what is required for industrial growth, for example, is to have industry. And that may require ….ensuring that one’s exchange rate is competitive….

June 8, 2014December 1, 2021

China’s Investment-Driven Growth “Miracle”

Worth Wray quotes Michael Pettis from his 2013 book, Avoiding the Fall: China’s Economic Restructuring, about the future path of China’s debt-laden economy:

Every country that has followed a consumption-repressing, investment-driven growth model like China’s has ended with an unsustainable debt burden caused by wasted debt-financed investment. This has always led to either a debt crisis or a lost decade of very low growth.

We couldn’t agree more. China is no different to Japan or Brazil. Investment-driven growth is only sustainable where investment earns a higher return than the long-term cost of servicing the debt. With diminishing returns on additional investment, returns dwindle and a debt/investment imbalance develops.

Keynesian thinking goes even further, however, suggesting that a fiscal deficit can be used to fund expenditure that does not earn a return, whether public fountains or school libraries. But that is short-term thinking, as Keynes indirectly acknowledged with his response “in the long run we are all dead.” In the long run, as with Japan, the government ends up with a huge pile of public debt and no income from investment assets with which to service the interest, let alone repay the principal.

The effect of a Chinese slow-down is likely to be similar to that of Japan in the early 1990s — just on a larger scale.

June 4, 2014

What Is China’s Biggest Weakness? | Bloomberg

By William Pesek:

China’s debt reckoning is coming. Maybe not this quarter or this year, but Chinese President Xi Jinping’s unbridled effort to keep growth from falling below the official 7.5 percent target is cementing China’s fate…..

Why then, with so many clear examples of financial excess leading to ruin, is Xi continuing down this road? Blame it on the ghosts of Tiananmen Square. In the aftermath of the crackdown on student protesters on June 4, 1989, China’s leaders made a bargain with their people: We will make you richer, as long as you no longer dissent. After the crash of Lehman Brothers, the regime had to go to extraordinary lengths to keep up its end of the bargain, pumping up what was already the world’s highest investment rate. In doing so, China itself became a Lehman economy…

June 3, 2014

ASX 200 retreats

The ASX 200 closed below short-term support at 5500, warning of another test of support at 5400. Declining 21-day Twiggs Money Flow indicates short-term selling pressure. Breakout above 5550 is unlikely in the short-term, but would signal an advance to 5700*.

ASX 200

* Target calculation: 5550 + ( 5550 – 5400 ) = 5700

ASX 200 VIX below 12 indicates low risk typical of a bull market.

ASX 200

June 3, 2014

Asia: India bullish but China weak

India’s Sensex found support at 24000. Recovery above 25000 would signal a fresh advance to 26000*. Breach of support is unlikely, but would warn of further correction. The primary trend is up and bearish divergence on 13-week Twiggs Money Flow indicates nothing more than medium-term selling pressure from the present correction.

Sensex

* Target calculation: 21000 + ( 21000 – 16000 ) = 26000

China’s Shanghai Composite Index continues to test primary support at 2000. Follow-through below 1990 would signal a decline to 1850*. Reversal of 13-week Twiggs Money Flow below zero signals medium-term selling pressure. Recovery above 2150 is unlikely, but would complete a triple-bottom reversal.

Shanghai Composite Index

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

Japan’s Nikkei 225 rebounded off primary support and is testing resistance at 15000. Follow-through above 15200 would signal another test of 16000. Recovery of 13-week Twiggs Money Flow above 20% would confirm long-term buying pressure. Reversal below 14000 is unlikely, but would signal a primary down-trend.

Nikkei 225

June 3, 2014

Footsie and DAX tentative breakout

The Footsie is again testing resistance at 6850. Follow-through above 6900 would signal an advance to 7200*. Rising 13-week Twiggs Money Flow troughs above zero indicate long-term buying pressure. Reversal below 6800 is unlikely, but would warn of another correction.

FTSE 100

* Target calculation: 6800 + ( 6800 – 6400 ) = 7200

The DAX broke resistance at 9800. Expect retracement to test the new support level. Respect is likely and follow-through above 10000 would signal an advance to 10500*. Recovery of 13-week Twiggs Money Flow above the declining trendline suggests that selling pressure is easing. Reversal below 9750/9800 is unlikely, but would warn of another correction.

DAX

* Target calculation: 9750 + ( 9750 – 9000 ) = 10500

June 3, 2014

TSX bullish consolidation

Canada’s TSX 60 is consolidating in a narrow range on the weekly chart. Upward breakout is likely and would signal contuation of the advance to the 2008 high of 900. Bearish divergence on 13-week Twiggs Money Flow appears secondary, in line with the medium-term consolidation, but a further decline would warn of a correction. Reversal below support at 830 and the rising trendline is unlikely, but would indicate that the primary trend is slowing.

TSX 60

June 3, 2014

S&P 500 bullish, Nasdaq tests resistance

After early skittishness over some dud Institute for Supply Management (ISM) data, the S&P 500 recovered lost ground by the close. Expect an advance to 1950*. Rising 21-day Twiggs Money Flow troughs above zero indicate strong medium-term buying pressure. Reversal below 1900 is unlikely, but would warn of a correction.

S&P 500

* Target calculation: 1850 + ( 1850 – 1750 ) = 1950

CBOE Volatility Index (VIX) below 12 indicates low risk typical of a bull market.

VIX Index

The Nasdaq 100 is testing resistance at 3740/3750. Breakout would signal an advance to 4000*. Rising 21-day Twiggs Money Flow troughs above zero again indicate strong medium-term buying pressure. Reversal below 3700, however, would warn of another correction.

Nasdaq 100

* Target calculation: 3700 + ( 3700 – 3400 ) = 4000

May 29, 2014

Gold tumbles as Treasury yields fall

Overview:

Treasury yields fall
The Dollar strengthens slightly
Stocks are rising
Gold breaks support

Interest Rates and the Dollar

The yield on ten-year Treasury Notes broke primary support at 2.50 percent, warning of a decline to 2.00 percent*. Reversal of 13-week Twiggs Momentum below zero confirms weakness. Recovery above 2.80 is most unlikely at present, but would indicate another advance.

10-Year Treasury Yields

* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00

The Dollar Index is testing resistance at 80.50. Recovery of 13-week Twiggs Momentum above zero would increase the chances of a double-bottom reversal (to a primary up-trend), but respect of resistance remains as likely and would test primary support at 79.00. Another 13-week Twiggs Momentum peak below the zero line would signal continuation of the primary down-trend.

Dollar Index

* Target calculation: 79.0 – ( 81.5 – 79.0 ) = 76.5

Stocks and Housing

Falling long-term interest rates are likely to boost the housing sector and the broader stock market. The Dow Jones Industrial Average is heading for a test of the recent high at 16750. Rising 21-day Twiggs Money Flow signals medium-term buying pressure. Retracement that respects support at 16500 would confirm an advance to 17000*.

Dow Jones Industrial Average

* Target calculation: 16.5 – ( 16.5 – 16 ) = 17

Gold and Silver

Gold faces conflicting forces: low inflation reduces demand for precious metals, but low interest rates and a weaker Dollar increase demand. At present low inflation seems to have the upper hand, driving gold through support at $1300/$1280 per ounce. Expect a test of primary support at $1200. Reversal of 13-week Twiggs Momentum below zero reinforces the bear signal. Recovery above $1300 is most unlikely, but would warn of a bear trap and rally to $1400.

Spot Gold

May 28, 2014

War on entitlements doesn’t extend to military | | MacroBusiness

By Leith van Onselen, with kind permission from Macrobusiness:

I have noted previously how the Coalition has ear-marked tens-of-billions of taxpayer dollars to local defence manufacturing, including a $10 billion to $15 billion-program for 1,000 locally produced armoured vehicles, and locally designed and built submarines for around $40 billion. It has also flagged a multibillion-dollar warship project that will be built locally.Today, The AFR has revealed that an $8 billion contract for local shipbuilder, ASC, to supply three air warfare destroyers for the Australian Navy is running two-and-a-half years late and more than $300 million over budget because the company has no experience in shipbuilding:

An audit released in March… warned there could be further cost blowouts and delays to come…

The 320-page audit found defective drawings supplied by Navantia and an inexperienced Australian shipyard workforce were a devastating combination leading to hull blocks not joining up, pipes, air conditioning systems and cabling requiring modification, doors not lining up and equipment being left off and expensive and costly rework.

Surely the above schmozzle casts serious doubts over the Government’s plan to build military hardware locally.

While I acknowledge that there is an argument to retain your own military hardware building capacity, at what cost? The Coalition’s hard line on industry assistance appears to be in stark contrast to its defence procurement policy. Australia could easily purchase proven, fit-for-purpose, military hardware from abroad at a fraction of the cost of developing similar technology locally, saving taxpayers billions in the process.

Once again, it is these sorts of inconsistencies that undermine the Government’s goal of “ending the age of entitlement”. While it slashes benefits to vulnerable sections of the community, it is allowing egregious lurks and subsidies to remain in others, which is undermines the Government’s calls for “shared sacrifice”, whilst also ensuring that the burden of adjustment is not broad-based, reducing its efficacy. As I’ve said before, a much clearer framework for these decisions is needed.

Past experience of Australian military hardware (e.g. Collin’s class submarines) is that locally built generally means over-priced and second-rate (….be kind). While that does not necessarily extend to armoured vehicles, naval vessels such as frigates, destroyers and submarines appear beyond present capabilities. Commissioning local development is no doubt intended to create jobs, but is at the expense of selling short our soldiers and sailors — equipping them with second-rate equipment in situations where it can mean the difference between life and death. Which is why military procurement, like the selection of infrastructure projects, should be above the political process.