Category: US & Canada

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Container shipping: trade balance

The percentage of containers shipped empty from the Port of Los Angeles was 43.8% (or 1.1 million twenty-foot units) for the 8 months ending February 2012. Incoming containers received empty were a mere 3.6%. The net 40.2% of incoming containers returned empty to their port of destination reflects the trade disadvantage suffered by US manufacturers relative to their Asian competitors; primarily from artificial (suppressed) exchange rates, state subsidy of export industries and protectionism in local markets. While the figures remain high, they show a steady down-trend since 2006. But it will take another 12 years at the current rate of decline for traffic to reach parity, by which time many industries will have suffered irreparable harm.

Net Percentage of Empty Container Traffic Leaving the Port of Los Angeles

Shippers attempt to fill containers on their return journey, even at super-low rates, in order to offset the cost of completing the round-trip. Empty containers indicate failure to locate manufactured goods that can compete in export markets. This affects not only the shipper, but the entire economy. You see, those containers leaving the West Coast are not really empty. They contain something far more valuable than the goods being imported. They contain manufacturing jobs — and the infrastructure, skills and know-how to support them.

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You can't borrow yourself out of debt: The Secret of Oz

“You can’t borrow yourself out of debt any more than drink yourself sober.”

Bill Still on the on-going debt problem and the solution proposed by L. Frank Baum in the Wizard of Oz.

Comment:~ The solution proposed is not a magic bullet. Money printed by Treasury, whether in the form of banknotes (“scrip”) or tally sticks, is still Treasury debt; Treasury effectively borrows when the currency is issued in payment and settles when the notes are presented in payment of taxes. It also debases the currency, though not as fast as debt created by the banks. This video serves as a reminder that we still have not solved the global debt problem — merely postponed the inevitable by issuing further debt.

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EconoMonitor » A Colossal Mistake of Historic Proportions: The “JOBS” Bill

Simon Johnson: Professor John Coates hit the nail on the head:

“While the various proposals being considered have been characterized as promoting jobs and economic growth by reducing regulatory burdens and costs, it is better to understand them as changing, in similar ways, the balance that existing securities laws and regulations have struck between the transaction costs of raising capital, on the one hand, and the combined costs of fraud risk and asymmetric and unverifiable information, on the other hand.”

In other words, you will be ripped off more. Knowing this, any smart investor will want to be better compensated for investing in a particular firm – this raises, not lowers, the cost of capital. The effect on job creation is likely to be negative, not positive.

via EconoMonitor : EconoMonitor » A Colossal Mistake of Historic Proportions: The “JOBS” Bill.

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Nouriel Roubini's Global EconoMonitor » Scary Oil

Nouriel Roubini: The last three global recessions (prior to 2008) were each caused by a geopolitical shock in the Middle East that led to a sharp spike in oil prices. The 1973 Yom Kippur War between Israel and the Arab states led to global stagflation (recession and inflation) in 1974-1975. The Iranian revolution in 1979 led to global stagflation in 1980-1982. And Iraq’s invasion of Kuwait in the summer of 1990 led to the global recession of 1990-1991.

Even the recent global recession, though triggered by a financial crisis, was exacerbated by spiking oil prices in 2008. With the barrel price reaching $145 in July of that year, oil-importing advanced economies and emerging markets alike faced a recessionary tipping point.

……..Oil is already well above $100/barrel, despite weak economic growth in advanced countries and many emerging markets. The fear premium might push prices significantly higher, even if no military conflict ultimately takes place, and could trigger a global recession if one does.

via EconoMonitor : Nouriel Roubini’s Global EconoMonitor » Scary Oil.

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Selling pressure warns of correction

Medium-term selling pressure, signaled by bearish divergence on 21-day Twiggs Money Flow, continues to warn of a correction in US and Asia-Pacific markets. The Dow Jones TSM (formerly “Wilshire”) Asia-Pacific Index displays a bearish divergence since mid-February. Reversal below 1280 would confirm a correction.

Dow Jones TSM Asia-Pacific Index

Dow Jones Industrial Average shows a similar bearish divergence, though the latest down-turn was exaggerated by triple-witching hour [TW] on Friday. Reversal below 12750 would confirm a correction.

Dow Jones Industrial Average

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Canada: TSX 60 Index

Canada’s TSX 60 Index found support at 700, above the rising trendline. Respect of the zero line by 13-week Twiggs Money Flow indicates a primary up-trend. Recovery above 720 would confirm an advance to 790*.

TSX 60 Index

* Target calculation: 720 + ( 720 – 650 ) = 790

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US: Good week for Nasdaq and S&P 500

The Nasdaq 100 rallied strongly this last week, closing on its revised target of 2750*. Steeply rising 13-week Twiggs Money Flow indicates strong buying pressure. Extension of the rally above the target would be risky and we are likely to see retracement to test the new support level and (long-term) rising trendline at 2400.

Nasdaq 100 Index

* Target calculation: 2400 + ( 2400 – 2050 ) = 2750

The S&P 500 followed through after its breakout above 1370, signaling continuation of the primary up-trend. Expect retracement to confirm support at 1350 before an advance to our target of 1450.

S&P 500 Index

* Target calculation: 1300 + ( 1300 – 1150 ) = 1450

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Steve Keen: Australia & Canada face debt-deflation crisis

[23 minutes]

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Real Recovery: America’s Debt is on the Decline

[A new report from the McKinsey Global Institute] estimated that home equity loans and cash-out refinancing increased consumer spending by a percentage point to 3 percent growth a year during the housing bubble years. But with that source of debt financing gone, retailers are more likely to see 2 percent annual growth over the next few years, which is about where it has been in recent months.

via Real Recovery: America’s Debt is on the Decline.

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The Myth Of Cash On The Sidelines – Jim Bianco | The Big Picture

Last Thursday the Federal Reserve released its quarterly Flow of Funds data, current through December 2011. One of the more popular headlines from this data concerns the record amount of “cash on the sidelines.” Through Q4 2011, nonfarm nonfinancial corporate businesses held $2.23 trillion in liquid assets on their balance sheets. As the argument goes, this must be a sign of pent-up demand just waiting to be unleashed on the market.

The chart below shows liquid assets as a percentage of total nonfarm nonfinancial corporate business assets since 1952. By this measure, the “cash on the sidelines” argument is far less compelling.

Liquid Assets as a Percentage of Total Nonfarm Nonfinancial Corporate Business Assets

via The Myth Of Cash On The Sidelines – An Update | The Big Picture.

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