Category: Countries & Regions

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Auditor Says F.H.A. Could Need Bailout – NYTimes.com

WASHINGTON — The Federal Housing Administration has a “close to 50” percent chance of requiring a bailout if the housing market deteriorates next year, the agency’s independent auditor said in a report released Tuesday.

The F.H.A., which offers private lenders guarantees against homeowner default, has just $2.6 billion in cash reserves, the report found, down from $4.7 billion last year.

The agency’s woes stem from the national foreclosure crisis. In the last three years, the F.H.A. has paid $37 billion in insurance claims against defaulting homeowners, shrinking its cash cushion.

via Auditor Says F.H.A. Could Need Bailout – NYTimes.com.

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EconoMonitor : EconoMonitor » The Triumph of Austerity (and its Consequences)

FT reports:

The president of Germany’s powerful Bundesbank has firmly rebuffed international demands for decisive intervention in the bond markets by the European Central Bank to combat the eurozone debt crisis, warning that such steps would add to instability by violating European law. Bundesbank president Jens Weidmann told the Financial Times that only politicians could resolve the crisis, and he rejected the idea of using the ECB as “lender of last resort” to governments.

We’ve seen this movie before. Higher rates after a severe debt-deflation recession are burdensome, perhaps economically fatal. Hiding behind the excuse that we must fight inflation NOW requires a grand dismissal of economic history. There are times to impose austerity and don the hawkish posture, but there are times when that’s exactly wrong. This is one of those times, particularly for Europe.

via EconoMonitor : EconoMonitor » The Triumph of Austerity (and its Consequences).

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Things That Make You Go Hmmm… – Outside the Box Investment Newsletter – John Mauldin

Italy is running a primary surplus. The only thing sending her over the edge is the simple fact that the Italian government cannot borrow at low-enough rates. At 4% (where rates were a year ago), they can gradually begin to adjust their debt ratios and still finance their borrowing – it will not be easy, but they, unlike their spendthrift cousins in the Aegean, have one of the highest savings rates in the OECD…..

via Things That Make You Go Hmmm… – Outside the Box Investment Newsletter – John Mauldin.

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No one was listening

“Common responsibility for the European currency will also engender a common decision-making instance for the European economy. It is unthinkable to have a European central bank but not a common leadership for the European economy. If there is no counterweight to the ECB in European economy policy, then we will be left with the incomplete construction which we have today… However even if the building is not finished it is still true that monetary union is part of a supranational constitution… It is our task for the future to work with the appropriate means for the transfer of traditional elements of national sovereignty to the European level.”

~ Italian President Carlo Ciampi, Frankfurter Allgemeine Zeitung, February 8, 2000

With thanks to Grant Williams (via John Mauldin)

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Asian markets

The Shanghai Composite Index reflects China’s controlled slow-down, edging lower with intermittent bear market rallies. The index is currently testing the descending (secondary) trendline at 2500. Penetration would offer a target of 2650 but would not indicate that the primary down-trend is over. Failure of support at 2300/2350 remains more likely and would offer a target of 2000.

Shanghai Composite Index

* Target calculation: 2300 – ( 2600 – 2300 ) = 2000

HongKong’s Hang Seng Index is headed for a test of the (primary) descending trendline at 21000; breakout above 20000 would confirm. The primary trend remains downward, however, and respect of the trendline would suggest another test of 16000.

Hang Seng Index

Japan’s Nikkei 225 Index is ranging between 8400 and 9100. Breakout would indicate future trend direction.

Nikkei 225 Index

* Target calculation: 8400 – ( 9000 – 8400 ) = 7800

South Korea’s Seoul Composite Index continues to reflect buying pressure on 13-week Twiggs Money Flow. Follow-through above recent highs would indicate a strong bear rally, but the primary trend remains downward.

Seoul Composite Index

* Target calculation: 1900 + ( 1900 – 1800 ) = 2000

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Europe’s Economy Shows Weakness – WSJ.com

Italy was forced to pay its highest interest rate since the euro’s creation to sell five-year bonds—a sign of skepticism that new governments in Italy and Greece will be able to simultaneously boost economic growth and reduce high public-debt levels……Industrial production in the euro zone plunged 2% in September from August, the steepest slide since February 2009, according to the European Union’s statistics agency. The decline stretched from the weak periphery of Spain, Italy and Portugal to powerhouses such as Germany, France and the Netherlands. Compared with a year ago, output rose just 2.2%—the weakest gain in nearly two years. The data suggest “the euro-zone will soon fall back into another fairly deep recession,” said Ben May, economist at consultancy Capital Economics.

via Europe’s Economy Shows Weakness – WSJ.com.

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ASX 200 runs into resistance

The ASX 200 encountered selling pressure at 4350, as indicated by the tall shadow (or “wick”) on Monday’s candle. Bearish divergence on 21-day Twiggs Money Flow also indicates medium-term selling pressure. Failure of support at 4150 would signal another test of primary support at 3850. Upward breakout is less likely but would offer a target of 4850*.

ASX 200 Index

* Target calculation: 4350 + ( 4350 – 3850 ) = 4850

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India & Singapore

The BSE Sensex found support at 17000, rallying to 17300 Monday. Breakout above 18000 would offer a target of 19000 — and breach of the descending trendline would warn that the primary down-trend is weakening. Reversal below 17000 remains as likely, however, and would test primary support at 16000. Twiggs Money Flow oscillating close to zero indicates uncertainty.

BSE Sensex Index

* Target calculation: 18 + ( 18 – 17 ) = 19

Singapore’s Straits Times Index found medium-term support at 2750 last week before rallying to 2840 Monday. 63-Day Twiggs Momentum deep below zero continues to indicate a primary down-trend. Failure of support at 2750 would test primary support at 2500, while breakout above 2900 would offer a target of 3200*.

Singapore Straits Times Index

* Target calculation: 2900 + ( 2900 – 2600 ) = 3200

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Canada TSX 60

Canada’s TSX 60 index is consolidating between 680 and 720. Upward breakout would penetrate the descending trendline, indicating that the primary down-trend is weakening. A 13-week Twiggs Money Flow trough that respects the zero line would signal a primary up-trend. Reversal below 680, however, would warn of another test of primary support at 620.

TSX 60 Index

* Target calculation: 720 + ( 720 – 680 ) = 760

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Nasdaq fails to dispel fears of a bear market

The Nasdaq 100 is consolidating in a narrow band below resistance at 2400 on the weekly chart, suggesting an upward breakout. Follow-through above 2450 would confirm the target of 2800*. 13-Week Twiggs Money Flow continues to signal buying pressure after an earlier bullish divergence.

Nasdaq 100 Index

* Target calculation: 2400 + ( 2400 – 2000 ) = 2800

The Dow Industrial Average is consolidating below 12300. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure. Breakout above 12300 would offer a target of 12800*. Failure of support at 11600 is less likely, but would mean another test of primary support at 10600.

Dow Jones Industrial Average

* Target calculation: 12200 + ( 12200 – 11600 ) = 12800

The S&P 500 is similarly consolidating between 1220 and 1300. Expect strong resistance at 1350.

S&P500 Index


Comparing to early 2008, the S&P500 displays a similar pattern, with the index testing resistance at 1400. We are close to a watershed: reversal below medium-term support (1220) would be a strong bear signal, while follow-through above recent highs would dispel fears of another bear market.

Index

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