Economy Archives - Page 126 of 134 - the patient investor

January 30, 2012

Baltic Dry Index reflects falling demand from China

The Baltic Dry Index has fallen by more than 60 percent in the last 3 months, headed for a test of its 2008 low at 600. The index reflects bulk international shipping rates and is dominated by Capesize iron ore and coal shipments to China. Its fall coincides with a 23 percent drop in iron ore spot prices over the last quarter of 2011. Falling demand for raw materials from China warns that economic activity is slowing rapidly and there may not be a soft landing.

Baltic Dry Index

Australia and other resource-rich economies will need to brace themselves for a sharp fall in exports over the year ahead.

January 30, 2012

Bill Moyers: How power and influence helped big banks rewrite the rules of our economy

Bill Moyers talks with former Citigroup Chairman John Reed and former Senator Byron Dorgan to explore a momentous instance: how the mid-90’s merger of Citicorp and Travelers Group — with help from Alan Greenspan, Robert Rubin and Bill Clinton — brought down the Glass-Steagall Act and sowed the seeds of the GFC.

January 28, 2012

Living In A QE World | Jim Bianco

Central banks are ruling markets to a degree this generation has not seen. Collectively they are printing money to a degree never seen in human history.

So how does this process get reversed? How do central banks pull back trillions of dollars of money printing without throwing markets into a tailspin? Frankly, no one knows, least of all central banks as they continue to make new money printing records.

…..When/If these central banks go too far, as was eventually the case with home prices, expanding balance sheets will no longer be looked upon in a positive light. Instead they will be viewed in the same light as CDOs backed by sub-prime mortgages were when home prices were falling. The heads of these central banks will no longer be put on a pedestal but looked upon as eight Alan Greenspans that caused a financial crisis.

via Living In A QE World | The Big Picture.

January 26, 2012

Business Sector Is More Open for Business – Real Time Economics – WSJ

The business investment momentum is continuing into 2012. New orders for nondefense capital goods excluding aircraft–a proxy for future business spending–increased 2.9% in December, reversing the two previous monthly drops. The backlog of unfilled orders is also on the rise. Fulfilling that pent-up demand means more industrial production in 2012.

via Business Sector Is More Open for Business – Real Time Economics – WSJ.

January 26, 2012

The winners and losers of QE3 – macrobusiness.com.au

The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

That’s a clear declaration of intended QE3 if conditions are met. The two conditions are price stability and inadequate employment growth. Price stability now has a number with the Fed also announcing a new inflation target of 2%. Anything under that number potentially triggers QE3.

via The winners and losers of QE3 – macrobusiness.com.au | macrobusiness.com.au.

January 25, 2012

What’s Going on With Debt in U.S.? – Real Time Economics – WSJ

The chart shows clearly the build up of debt heading into the bust, and the subsequent deleveraging. Overall public and private debt, by this measure, peaked at 302% of GDP in the first quarter of 2009. Since then, it has fallen to 279% as the economy has grown and some private players have lightened their debt loads.

US Debt by Sector as Percentage of GDP

via What’s Going on With Debt in U.S.? – Real Time Economics – WSJ.

Comment: ~ The Financial sector can be ignored as this merely acts as a conduit for, and mirrors, the other sectors. My concern is that Government debt is growing at a faster rate than the fall in Household and Nonfinancial Corporations debt. That is unsustainable and is likely to reverse after the November elections. At which point the economy will contract.

January 25, 2012

King Says BOE Ready to Act – WSJ.com

[BOE Governor Mervyn King] kept the door open for more stimulus in his speech Tuesday. “With inflation falling back and wage growth subdued, there is scope for interest rates to remain low and, if necessary, for further asset purchases, to prevent inflation falling below the 2% target,” he said. The annual rate of inflation in the U.K. dipped to 4.2% in December from 4.8% a month earlier, and is expected to slow sharply this year.

via King Says BOE Ready to Act – WSJ.com.

January 18, 2012

Banks Point to a Pickup in Lending – WSJ.com

At Citi, retail-banking loans rose 15% from a year ago to $133 billion, as the New York bank lent more to individuals and local businesses. At San Francisco-based Wells, commercial and industrial loans rose 11% from a year earlier to $167 billion at Dec. 31, amid what Chief Financial Officer Tim Sloan called broad-based growth.

All told, loans outstanding at the companies and J.P. Morgan rose by $41 billion from a year ago in the fourth quarter, to $2.14 trillion. That’s the first increase for the three giant lenders since 2008…

via Banks Point to a Pickup in Lending – WSJ.com.

Comment: ~ Private sector deleveraging is slowing and new capital investment improving, but this may prove a temporary respite as purchases were brought forward to take advantage of accelerated tax depreciation in 2011. The 100% write-off of new capital investment (in the year of purchase) will expire in 2012 if not extended by Congress.

January 17, 2012

Nouriel Roubini’s Global EconoMonitor » The Straits of America

Given the bearish outlook for US economic growth, the Fed can be expected to engage in another round of quantitative easing. But the Fed also faces political constraints, and will do too little, and move too late, to help the economy significantly. Moreover, a vocal minority on the Fed’s rate-setting Federal Open Market Committee is against further easing. In any case, monetary policy cannot address only liquidity problems – and banks are flush with excess reserves.

Most importantly, the US – and many other advanced economies – remains in the early stages of a deleveraging cycle. A recession caused by too much debt and leverage (first in the private sector, and then on public balance sheets) will require a long period of spending less and saving more. This year will be no different, as public-sector deleveraging has barely started.

via EconoMonitor : Nouriel Roubini’s Global EconoMonitor » The Straits of America.

January 11, 2012

Westpac: Follow that Flow

The US recovery from the 2007–2009 recession has been particularly disappointing, in part due to the moribund state of the housing market.

The state of the housing market is in part a symptom of excess leverage, the US’ core concern.

Excess leverage will continue to weigh on US economic growth, restricting it to a sub-trend pace for the foreseeable future, resulting in a need for further QE.

….. Given the size of the US’ debt stock and the lack of assets set aside to fund future pension liabilities, it is logical to conclude that above-trend growth conditions are a long way off. In the meantime, households and government authorities will remain heavily exposed to any further deterioration in conditions, whether it be domestic or foreign (i.e. Europe) in origin.

QE3 will be needed merely to help protect against a further deterioration in economic conditions. Such a program would have to be large in scale and in coverage, likely covering USTs, mortgage securities and, with time, the existing debt of SLGs.

A final point: the degree of easing required to alleviate the financial stresses the US economy currently faces (and hopefully at least maintain the current level of activity) has not been recognised by markets. Given the precarious state of Europe, the market will likely take its time in coming to terms with the US’ own concerns. But, when the spotlight falls on the US, we expect a greater awareness of US credit risk and the absence of near-term growth prospects will see yields rise and the US dollar fall.