Bellwether transport stock Fedex has risen dramatically in recent weeks, reflecting the improving outlook for economic activity.
UPS has enjoyed a similar surge, as has Deutsche Post AG (which owns DHL).
Druckenmiller Sees Storm Worse Than ’08 | Bloomberg
Stan Druckenmiller, George Soros’ former partner and one of the best-performing hedge fund managers of the past three decades, warns of the real long-term threat to the US economy:
Druckenmiller, 59, said the mushrooming costs of Social Security, Medicare and Medicaid, with unfunded liabilities as high as $211 trillion, will bankrupt the nation’s youth and pose a much greater danger than the country’s $16 trillion of debt currently being debated in Congress…… unsustainable spending will eventually result in a crisis worse than the financial meltdown of 2008…
Read more at Druckenmiller Sees Storm Worse Than ’08 as Seniors Steal – Bloomberg.
Martin Wolf: Has the financial crisis changed the world?
John Weatherall Public Lecture | Martin Wolf
http://youtu.be/1w-pODAjVyE
[1hr28mins]
Hat tip to Macrobusiness.com.au
Household Debt to Income ratio
Barry Ritholz highlights the alarming debt to income ratio for Canada compared to the USA:
How does Australia compare?
Australian household debt to income is similar to Canada’s. There has been discussion recently about whether Australia is in a housing bubble. As Anna Schwartz (joint author of A Monetary History of the United States, 1867-1960 with Milton Friedman) pointed out: there is only one kind of bubble and that is a debt bubble. It may manifest through rising real estate, stock or other asset prices, but the underlying driver is the same: a rapid expansion of the money supply through easy credit.
Claiming the $1 trillion prize in US health care | McKinsey & Company
Even within a single local market, we have found that the cost to deliver the same “episodes of care” [medical situations characterized by a relatively clear outcome and relatively predictable start and end points (for example, most hospitalizations, pregnancies, upper respiratory infections, and hip replacements)] typically varies by 30 percent to well over 100 percent, even after we held constant the prices that hospitals, physicians, and other providers charge and risk-adjusted the costs to reflect patients’ health status. The cost differences were unrelated to any discernible variation in care quality or outcomes. These results make it clear that some providers are dramatically more successful than others in addressing patients’ needs. The strong providers achieve good results not by cutting corners but by developing (or adopting) best practices that enable them to deliver high-quality outcomes at lower cost.
Read more at Claiming the $1 trillion prize in US health care | McKinsey & Company.
Here’s A Disturbingly Astute Line From When S&P Downgraded The US Credit Rating | Business Insider Australia
From S&P’s historic downgrade of the US credit rating on August 5, 2011:
More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
Read more at Here's A Disturbingly Astute Line From When S&P Downgraded The US Credit Rating | Business Insider Australia.
Pro-nuclear greenies? Thinking outside the box with Pandora’s Promise
Ben Heard and Prof. Corey Bradshaw highlight the environmental and economic damage caused by pursuit of nuclear-free power.
Had Australia deployed a modest nuclear program starting in 1965, to build slowly to around 20% of electricity provided (as done in the USA), over 876 million tonnes of carbon dioxide equivalent (CO2-e) would have been avoided to this day.
…..In the OECD, three yes, only three countries have achieved success in all but eliminating fossil fuels from electricity supply. They are France, Sweden and Switzerland Finland will soon join them. All did it by embracing nuclear power generation. These nations deliver reliable, large-scale electricity supply with less than 1/10th the emissions of Australia. France in particular delivers the cheapest electricity in Western Europe, and is the second-highest net exporter of electricity in the world…..
Read more at Pro-nuclear greenies? Thinking outside the box with Pandora's Promise.
China recovery
China’s Shanghai Composite Index is testing support at 2150 and the lower trend channel. Recovery above the descending trendline would suggest another rally, while failure of support would warn of a correction to primary support at 1950. The index hints at long-term recovery but further confirmation is necessary.
The Harper Petersen Index, from ship brokers Harper Petersen & Co., indicates that shipping rates for container vessels remain depressed, suggesting a sluggish global trade in manufactured goods. Exporters like China would be severely affected.
The Baltic Dry Index — reflecting dry bulk shipping rates for commodities like iron ore and coal — jumped sharply, however, reflecting an upturn in demand for bulk commodities.
Bulk commodity prices remain depressed according to the RBA.
But export volumes are rising, in step with the Baltic Dry Index, reflecting strong demand from infrastructure development.
WSJ reports that monthly electricity consumption has reached a new high:
China on Tuesday posted an all-time record-high electricity output level of 498.7 billion kilowatt-hours in August, rising 13% from a year earlier.
Monthly fluctuations should largely be ignored because of weather variation — excessively hot months like August can boost electricity demand — but the rising long-term trend in electricity consumption (chart from IndexMundi) suggests a robust recovery. A recovery led primarily by infrastructure investment rather than manufactured exports may well prove unsustainable in the long-term, but should provide welcome relief to the resources sector in the next few years.
Germany’s strange parallel universe | FT.com
……a large country with a huge structural current account surplus does not just export products. It also exports bankruptcy and unemployment, particularly if the counterpart capital flow consists of short-term debt.
~ Martin Wolf
Read more at Germany’s strange parallel universe – FT.com.
Bellwether Fedex suggests improving economy
Bellwether transport stock Fedex displays a healthy primary up-trend on the monthly chart, suggesting that economic activity is improving. Bearish divergence on 13-week Twiggs Money Flow warns of selling pressure at the 2007 high of $120; reversal below zero would indicate a reversal, while a trough above the zero line would signal a primary up-trend. Breakout above $120 would offer a target of $130*.
* Target calculation: 120 + ( 120 – 110 ) = 130