Economy Archives - Page 112 of 133 - the patient investor

July 31, 2012

STEPHEN ROACH: America Can't Keep Relying On Spending To Drive The Economy – Business Insider

STEPHEN ROACH highlights the importance of capital investment in any US recovery:

Over the last 18 quarters, annualized growth in real consumer demand has averaged a mere 0.7%, compared to a 3.6% growth trend in the decade before the crisis erupted…… Consumption typically accounts for 70% of GDP (71% in the second quarter, to be precise). But the 70% is barely growing, and is unlikely to expand strongly at any point in the foreseeable future. That puts an enormous burden on the other 30% of the US economy to generate any sort of recovery.

Capital spending and exports, which together account for about 24% of GDP, hold the key to this shift. At just over 10% of GDP, the share of capital spending is well below the peak of nearly 13% in 2000. But capital spending must exceed that peak if US businesses are to be equipped with state-of-the-art capacity, technology, and private infrastructure that will enable them to recapture market share at home and abroad. Only then could export growth, impressive since mid-2009, sustain further increases. And only then could the US stem the rising tide of import penetration by foreign producers.

via STEPHEN ROACH: America Can't Keep Relying On Spending To Drive The Economy – Business Insider.

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

July 31, 2012

China: Why the Recovery Has Begun | PRAGMATIC CAPITALISM

A bullish outlook on China from Citi Research:

The key drivers of growth recovery are that de-stocking is near its end, the hard landing risk of the property sector is contained, and investment, consumption and exports had shown signs of improvement in June. In our view, given more policy supports in the near term, 3Q GDP growth will likely be flattish…….the planned Rmb360bn infrastructure investment will be fully implemented.

via China: Why the Recovery Has Begun | PRAGMATIC CAPITALISM.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 31, 2012

Australia: Housing credit slows

From the Westpac Bulletin:

Housing credit has lost momentum under the weight of past tight monetary policy and with the sector facing a number of headwinds.

Housing credit grew by just 0.30% in the month of June. This is the weakest monthly result on record (back to 1976), with the exception of a one-off fall of -0.38% for June 1984. Annual housing credit growth has now slowed to 5.1%, moderating from 6.0% a year ago.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 28, 2012

David Stockman

David Stockman, former Director of the Office of Management and Budget under President Ronald Reagan, gives Alex Daley a run-down of the Fed’s performance.

Duration 30:43

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 25, 2012

McDonald’s Sees Downbeat Consumers World-Wide – Real Time Economics – WSJ

“This is one the first times where we have seen it [consumer confidence issues] in a much broader-based perspective. It’s a little bit more than a European cold.” CFO Peter Bensen added, “The magnitude of the issues in Europe are having ripple effects around the world,” hurting consumer confidence and causing fewer people to eat out.

via McDonald’s Sees Downbeat Consumers World-Wide – Real Time Economics – WSJ.

Comment:~ McDonald’s are a worldwide barometer of consumer spending. When they report a broad decline in sales, we should expect an economic down-turn.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 24, 2012

Christian Noyer: Monetizing public debt

Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the BIS: Some central banks have developed large-scale public debt acquisition programmes. They have done so for reasons relating to immediate macroeconomic stabilisation… to go beyond the zero-interest rate limit. The Eurosystem as well intervened on a much smaller scale when malfunctioning debt markets prevented the effective transmission of monetary policy impulses. There is not a single central bank that is seriously considering the monetisation of deficits with the more or less declared intention of reducing the weight of debt via inflation. In my view, this notion is nothing more than a financial analyst’s fantasy.

via Christian Noyer: Public and private debt – imbalances of global savings.
Comment:~ No central bank has declared an intention to monetize public debt (or deficits) — reducing public debt via inflation — but without a viable alternative how many will end up there? Gary Shilling points out that “competitive quantitative easing by central banks is now the order of the day.” The Bank of Japan last year “expanded its balance sheet by 11 percent, while the Federal Reserve’s increased 19 percent, the European Central Bank’s rose 36 percent and the Swiss National Bank’s grew 33 percent.” Japan, after 20 years of stagnation and with net public debt at 113% of GDP, illustrates the predicament facing many developed countries. If there was a plan B they would have tried it by now.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 24, 2012

Christian Noyer: Public and private debt – imbalances of global savings

Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the BIS: My first remark….. In advanced countries, the average public debt to GNP ratio is 100%. In emerging countries, the figure is 30%. This is a very wide gap, and it represents one of the global economy’s largest imbalances. And one of the least mentioned. It also represents a complete reversal of the situation compared with just over twenty years ago…..
Second remark, global demand is still fairly concentrated on the advanced countries. Not only is their debt higher, but their savings (as a ratio of GNP) are lower. The G7 countries alone still account for 56% of global consumption. The problem is clear. How can we hope to raise our level of consumption if we need to reduce our level of debt and increase our savings? And if the advanced countries’ consumption stops growing, what will happen to global economic growth and particularly that of emerging countries with entirely export-oriented economies?

via Christian Noyer: Public and private debt – imbalances of global savings.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 17, 2012

Compromises Are Needed to Boost Growth – WSJ.com

Gerald Seib: Most sensible people in Washington know exactly what kinds of compromises on the deficit, taxes, trade and entitlement programs are within reach to change the economic trajectory.

What’s needed is simply for both parties to accept that neither is likely to be in full command of the government after the fall election and perhaps for some time to come, and to move on to the compromises needed to end a policy paralysis that is exacting a real economic price….

This imperative is well embodied in a new study, titled “The Bargain,” soon to be released by Third Way, a centrist think tank. It lays out a series of seven big policy bargains the two parties could strike to address economic malaise….

via Compromises Are Needed to Boost Growth – WSJ.com.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 16, 2012

A lack of money isn't the problem: it's time to shrink – The Drum – ABC News

Alan Kohler: Debt was built up through 30 years of current account imbalances after currencies were finally unshackled from the gold standard in 1971, and the depression of the 70s came to an end in 1982.

Central banks, principally the Federal Reserve, complied in the process of debt build-up by holding down interest rates and allowing asset prices to rise, keeping balance sheets in the black.

The credit crisis of 2007-08 brought asset prices down rapidly and rendered banks suddenly insolvent, so they had to be recapitalised by governments. Now the governments of Europe, the US and Japan are insolvent, and the only question is when the central banks will monetise their debt – that is, print more money and buy their debts…..

via A lack of money isn’t the problem: it’s time to shrink – The Drum – ABC News (Australian Broadcasting Corporation).

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

July 14, 2012

Australia and the Endgame

John Mauldin: We wrote about Australia in a full chapter of Endgame. Their economy never really suffered in the recent debt crisis, in large part due to their growing housing market and their trade with China. If you talk to the average Aussie, they think that all is right with the world. They acknowledge a few issues but see nothing major like the rest of the world has experienced. Jonathan and I think otherwise. Their housing market is by recent standards in a clear bubble (which I know will get me a lot of email). Their banking system is dominated by foreign deposits (shades of Northern Rock, but not as bad as Iceland). They are vulnerable to a Chinese economic slowdown. I should note that Chinese GDP growth was “down” to 7.6% last quarter. That China might slow down should not come as a surprise. No country can grow at 10% forever. Eventually the laws of large numbers and compounding take over. All that being said, Australian government debt and deficits are under control. Any problems should be of the nature of “normal” business cycle recessions and accompanying issues.

Comment:~ Massive Chinese stimulus saved Australia from the GFC but that is no reason to become complacent. As Steve Keen recently pointed out, Australia is in a similar position to Spain in 2006. Spain was generating a fiscal surplus which it used to reduce government debt below 40% of GDP, but its banks were exposed to a large housing bubble funded by offshore deposits. Australian banks are similarly exposed to offshore funding and are leveraged 50 to 1 on residential mortgages (Macrobusiness May 4, 2012) — even after adjusting for mortgage insurance — leaving them highly vulnerable to a contraction. We also need to recognize that Australia is not exposed to a slowdown in China’s GDP growth, but to a slowdown in Chinese spending on infrastructure and housing. While GDP growth may fall to zero, the Chinese economy will still survive, but what are Australia’s chances if that is accompanied by say a 50 percent fall in new infrastructure and housing projects? The fall in iron ore and coking coal exports would have a far greater impact on the Australian economy.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.