- Samsung takes a bruising, but Apple gets nibbled

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Welcome to Signposts and Indicators! Economic News
A publication from Organized Change Consultancy
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2014 December

No help from our friends
Various
With the US economy progressing at an annualized 3.9% rate, it and Britain seem to be members of a lonely club. The Eurozone economies as a whole are essentially flat on growth: Japan seemed to be sliding into recession, enough so that PM Abe postponed a sales tax increase and announced snap elections(later revisions showed that Japan’s GDP is did not decline, but was essentially flat). China is slowing down as well. Brazil has been underperforming the rest of Latin America and the Caribbean since 2010.

2014 November

The price of oil is falling. Will it make regimes fall?
Various
Brent oil as we publish has dropped to $84/ barrel, and NYMEX to $82. Iran needs about $95/barrel to meet its needs; Venezuela, more than that. Russia, already hurt by sanctions and capital flight, needs $95/barrel. Mr. Maduro of Venezuela is already in trouble; This may put more pressure on Iran to make concessions in its nuclear talks; and Putin’s economy is already in recession. Saudi Arabia’s attempt at keeping market share may some interesting political ramifications.

2014 October

We can’t make up our mind
The Wall St. Journal, week of Sept. 29., 2014

New housing starts in the US increased significantly, and the dollar strengthened, but consumer confidence pulled back, though inflation is tame, and consumer spending is still good. Will 300 million people please make up their mind?

2014 September

The sorry state of SOEs
The Economist, August 30, 2014

Most people think that state-owned enterprises(SOEs) in China are banking, petrochemical or defense companies. Given there are 155,000 of them, they are rather diverse. Many run local industries, hotels, cooperatives and the like. Unfortunately the return on assets for SOEs is behind that of privately-owned companies, and the smaller ones are weaker than the larger. This is changing, with many of them selling themselves, or selling a part of their assets. Whether this reform movement will win over the "vested interests" is another question.

2014 August

Differential fallout from Russian sanctions
various
Lithuania and the other Baltic states will be hit much, but you can add Finland to the list. With the demise of much of Nokia’s phone business, Finland is much reliant on natural products for its exports base. It’s an open question whether Finland is on the banned list, but according to its Prime Minister, the effects would be devastating. Finland’s economy has not done well of late, even before Russia began its sanctions.
Manufacturing down, sentiment up?
The Wall St. Journal, July 8, 2014
English and German manufacturers did not do too well the last quarter. The US economy fell 2.9% annualized in the first quarter.
“Still, these data continue a phenomenon that has been seen many times in the wake of the financial crisis: that of disconnects between buoyant survey data, euphoric markets and ultra-loose monetary policy on the one hand and setbacks in the real economy on the other.”
So, which will win out?

2014 June

Economic
Back up, but not Quite There yet
Wall St. Journal , June 2, 2014
Manufacturing jobs in the United States have increased by 650,000 since the end of the recession: 12.1 million people work in that sector. These gains are geographically uneven: The South has gained the most, as well as the Midwest. However, the number of manufacturing jobs is still 15% below where it was in 2004.

2014 May

MIFID:the Sequel
The Economist, April 26, 2014
MIFID2, (Markets in Financial Instruments Directive ) has just passed the European Parliament. The original legislation encouraged competition to national stock exchanges, but left out regulation of derivatives, and “dark pools”(where stocks are traded without the data being published). MIFID2 is designed to fix that by encouraging, but for the largest trades, transactions be done on public exchanges.

2014 April

The US economy warms up
CNN and WSJ websites.
The ISM(Institute for Supply Management) index of orders is up, though not quite up to economists’ expectations.; Car sales are up again, and consumer confidence is higher. The S&P 500 is at its highest level ever. Can Mr. Putin, General Al-Sissi, Benjamin Netanyahu, even the US Congress derail recovery this time?

2014 March

An economic winter to remember, or not?

The Wall St. Journal, March 4, 2014
The Institute for Supply Management said Monday that its broad manufacturing index rose 1.9 points to 53.2 in February, partially making up for a sharp tumble in January. Readings above 50 indicate expansion in the sector. Personal consumption, the government's official tally of spending on everything from restaurants to cars, climbed a seasonally adjusted 0.4% in January from a month earlier after a weak December gain, the Commerce Department said Monday. Sales were especially weak in a number of sectors in December and January. The question is(was?) whether these weak numbers indicated just bad weather problems, or the economy becoming sluggish. It seems are looking up, but not yet looking warmer.

2014 February

Making money while going to pot

The Wall St. Journal, Feb 4, 2014.

In 2010, Jake George saw a market waiting to be served and staked everything on a startup: He and his wife, Lydia, sold most of their assets, downsized to a smaller apartment in Issaquah, Wash., and came up with $10,000 to fund GreenLink Collective. Sales have doubled every year.
Industry advocates are making hebigady predictions. Annual revenue for legal cannabis could run between $4.5 billion and $6 billion nationwide by 2018, up from $1.3 billion to $1.5 billion in 2013, according to projections by MMJ Business Daily, an online trade publication that covers the industry.
ArcView Group, a San Francisco-based investor network focused on the cannabis industry, estimates that the national legal marijuana market will grow 64% to $2.34 billion in 2014 and will reach $10.2 billion in five years.

Just don’t hold your breath.

2014 January

Up, up and away

Various

The Federal Reserve’s decision to slow its bond purchases seems to be timed well: US quarterly GDP rose at an annualized 4.1% rate, and housing prices are up by 13.6%. Whether rising mortgage rates will further cool sales is an open question.

2013 December

Round and round the Doha round goes

The Economist, Nov. 23, 1013

World trade talks are near a deadline/near collapse again. After coming back to life more frequently than a zombie, the round that collapsed in 2008 is being revived again. This time, the deadline is December this year. As usual, the problem is food and food subsidies. Developing countries worry about food security, and want to subsidize local food production. The US Congress has not yet given the President “trade promotion authority” whereby a treaty gets an up-or-down vote.


2013 November

No Longer a Wake for the Irish

The Economist, Oct 19, 2013

Ireland has had eight years of austerity budgets. It looks as if they are seeing light at the end of the tunnel. They have removed 17% of today’s GDP in government spending since 2008. The government has met all targets for it set by the IMF and the EU and the European Central Bank. Growth for 2014 is estimated to be 2.4%.


2013 October

Warmer then cooler, and then a bit warmer again

The Wall St. Journal, September 26, 2013

The US GDP grew at a 2.5% annual rate last quarter, continuing its anemic growth. Housing starts and sale of existing homes were up compared to last year, but the trend is downward, given the rises in mortgage rates. Rates were about 3.5% in May, and bumped up to over 4.5% in September. In the last two weeks, however, after the Federal Reserve’s surprise move not to reduce its bond-buying program, rates have declined a bit.


2013 September

A Mixed Bag of Economic News

Various

Housing prices and sales in the United States increased, but there are indications that increasing mortgage rates are cooling off this trend; Brazil’s economy picked up the pace, after a lackluster first half of the year; India’s economy is in trouble with the rupee falling 22% since May, with the weakest quarter since 2009, and limited expectations for a 5% growth this year.


2013 August

A Pinch in Housing

The Wall St. Journal, July 29, 2013

Though pending sales of US houses rose 10.9 percent from a year ago, sales in June (usually a strong month) fell .4% compared to May of this year. Realtors are blaming higher mortgage rates. They have risen 1%(from approximately 3.5% to approximately 4.5%) in the last two months. Mortgage rates the last week or two have declined to 4.31%.


2013 July

Up, Down and Up Slightly

Wall St. Journal, June 21-28.

Japan’s economy is showing signs of improvement, and away from its 15 years of deflation. Industrial production increased 2% from last month, and retail sales rose .8% from last year. Unfortunately for Europe, a consistent indicator of GDP suggests that the Euro zone will enter its 7th quarter of decline, the longest decline since the end of World War II. American GDP for the first quarter of 2013 was revised downward to a positive, annualized 1.8% rate.


2013 June

Will the Effects of Abenomics Last?

The Economist, May 18, and the Wall St. Journal, May 24, 2013

The Nikkei index has been off the last few days, but Japan’s stock market has recently risen over 55%. This in part has been due to the Bank of Japans willingness to do whatever it takes to break Japan’s deflationary spiral. Japanese company profits have soared, given the weakening Yen. Given Prime Minister Abe’s nationalistic bent though, tensions with China may get worse. It is an open question on whether the Bank of Japan’s actions will provide breathing room for structural reform, and whether there is enough political will to implement reforms that affect the sensitive rice farmers.


2013 May

Vanguard

Economic Week in Review, April 26, 2013, and various sources

The US economy grew at an annualized rate of 2.5% this quarter, below expectation. The surge in defense and government-related spending that was the hallmark of 2012 Q4 has been followed by a significant decline in this segment. Existing home sales dropped(though they grew 10.3% compared to March 20120, while new-home sales improved.


2013 April

A Military Surge of a Different Kind

Various sources

Durable goods orders expanded in December in the United States, usually good news. However, if you exclude military orders, orders declined. It seems the US military purchased much just before the financial sequester took place.


2013 March

The US Economic Recovery Continues

Various websites

US GDP for the last quarter of 2012 was revised upwards into positive territory. Consumer confidence is higher than it has been since November, and the housing market is continuing to improve. Perhaps, if politicians would sequester their rhetoric instead of the Federal budget, the economy will get better yet.


2013 February

Mixed Signals in the US Economy

The Wall St. Journal, various dates

The US economy contracted somewhat in December, principally due to a decline in defense spending in preparation for the “fiscal cliff”. On the other hand, the net number of new jobs created was somewhat higher than predicted, at 157000, and consumer sentiment increased as well. It is still an open question whether fiscal cliff talks coming up will resolve larger issues, or just “kick the can” down the road.


2013 January

Oh, how the shale tables have turned

SUSRIS, December, 2012

Summarizing and International Energy Agency (IEA), SUSRIS reports that “By around 2020, the United States is projected to become the largest global oil producer (overtaking Saudi Arabia until the mid-2020s) and starts to see the impact of new fuel-efficiency measures in transport. The result is a continued fall in US oil imports, to the extent that North America becomes a net oil exporter around 2030. This accelerates the switch in direction of international oil trade towards Asia, putting a focus on the security of the strategic routes that bring Middle East oil to Asian markets. The United States, which currently imports around 20% of its total energy needs, becomes all but self-sufficient in net terms – a dramatic reversal of the trend seen in most other energy importing countries” By 2030, North America may become energy sufficient in liquid fuels. With More of OPEC oil focused on the Middle East, and with the United States becoming independent of Middle Eastern oil, major geopolitical strategies will come into play by that time.


2012 December

U.S. Manufacturing Index declines

The Wall St. Journal, December 3, 2012

The Purchasing Managers’ Index dropped to 49.4, signaling a decline in new orders (anything below 50 signifies such). The effects of hurricane Sandy and the looming fiscal cliff seem to have put caution in the nation’s purchasers. On the other hand, Christmas sales are expected to increase at the long-term rate, which augers well for a future pickup in the economy. Also expect upcoming unemployment numbers to be volatile due to the loss of jobs related to the storm, and an increase in removal/recovery/construction work happening in the Northeast.

2012 November

Housing and Confidence

The Wall St. Journal, CNN

The last unemployment report for the United States should be out on Friday, barring hurricane-related delays. Consumer confidence is inching higher, with its highest level since October 2007. New housing starts are up compared to the month previous and with year-ago comparisons. Inflation is annualized at 1.7 %.


2012 October

ISM is improving

The Wall St. Journal, Oct. 1, 2012

The Institute for Supply Management released its statistics today, with its critical manufacturing index improving to 51.1 (all values over 50 indicate expansion). Most of this increase was caused by internal growth in the United States, especially in the auto and new housing sector. Whether this can be maintained is an open question, with global trade increasing only 2.5% since a year ago. 2011’s global trade had increased by 5%, and 2010s’ by 11%.


2012 September

Samsung takes a bruising, but Apple gets nibbled

Wall St. Journal, various dates.

Apple, for the most part, won its American patent fight against Samsung, though what the result will be after appeals is an open question. Courts in S. Korea and Japan gave Samsung some partial victories, but their rulings did not cover a wide a variety of patents as in the US case. Who knew you could patent the rounded corners of a rectangle?



2012 August

But on the other hand.....

The Wall St. Journal, July 31, 2012 and other various sources

The economy is any sitting President's Achilles heel, or blessing. With one of the slowest recoveries in record under his presidency, President Obama
might expect to lose the election. However, the majority of Americans do not blame him for the recession, but rather on George Bush, his immediate
predecessor. GDP growth in the United States slowed to an annualized rate of 1.5% last quarter, and while the personal savings rate jumped to 4.4% last
month, "Spending on everything from vacations to clothes was largely flat in June. Spending fell less than 0.1%, after easing 0.1% in May, even though
Americans' income after taxes rose 0.4%, the most since March. Consumer spending is the biggest single driver of the U.S. economy, accounting for
roughly two-thirds of demand."


2012 July

Will one more twist of the rope stop us from hanging?

The Wall St. Journal, and the Economist

The Federal reserve last week decided to extend for six more months its “Operation Twist”, where is sells its short-term securities and buys long-term ones, in an attempt to keep the “yield curve” flat and keep long-term interest rates low. Consensus among economists is that will provide at best modest boost(or floor) for the economy, given the headwinds caused by the European debt crisis, and possible slowing of the US economy. All major world economies showed slowdowns in their Indices of Purchasing Managers.

Table of Contents

Nicholas Taleb, the author of the “Black Swan”, is pessimistic about the world economy and it seems that the Chinese (via their China Investment Corporation, or CIC) might agree, to the tune of perhaps several billion dollars Mr. Taleb’s investment vehicle, Universa, is looking for things that grow, specifically, food. Regardless of economic conditions, it seems a growing populations needs to eat. With UN projections of the world’s population to be 8 billion by 2040, it seems a food is a safe bet. On the other hand, farmers in Brazil just might be able to help. According to the Economist, Brazil’s extensive use of their cerrado, the vast plains that encompass much of the country, has significantly boosted exports, with grain exports increasing from 80 million metric tons in 2000 to 150 million metric tons in 2010. Brazil has a chance to break into the “big 5” of food exporters. Interestingly enough, they have done this by not doing what so many advocate: They focus on global markets, plant “monocultures” on huge farms, and use genetically-modified crops. And, oh by the way, their non-subsidized methods could very well work in Africa and substantially improve food production there. So the question becomes, will the black swan of foot shortages be fed by the farms of Brazil?

2012 June

Growth, barely

(from various sources)

Private, non-farm payrolls barely budged last month, with only a net 69,000 jobs added(seasonally adjusted). The unemployment rate edged upwards to 8.2%. China’s purchasing manager’s index decreased to almost even, meaning slowdowns in purchases about equaled increases in purchases by other firms. The Eurozone’s PMI slumped to 45.1 Any reading above 50 signals expansion of purchases by business; A reading below 50 signals contraction. On the other hand, US automakers showed a 26% annualized increase in sales.


2012 May

Recovery puttering along, but just down for a little while??

The Wall St. Journal, Friday, April 20, 2012

New data Thursday provided fresh evidence that the job market is losing the momentum it built earlier this year, which could pressure fragile housing markets that have been showing signs of life. Separate reports this week suggested that the factory sector, a source of strength in the recovery, now is being hurt by weak growth overseas. New unemployment claims rose to 374, 000, and the four-week moving average has moved up slightly as well.

Economists cautioned that a range of factors, from a historically warm winter to an early Easter, have muddied the weekly unemployment figures and made it difficult to identify clear trends. Nonetheless, the recent figures, combined with an unexpectedly weak March jobs report, suggest the job market is cooling. "It adds to concern about backsliding in job creation after faster employment gains earlier in the year," Credit Suisse economist Jonathan Basile wrote in a note to clients.


2012 April

How fast is the US employment picture getting better? That depends on who you ask

The Wall St. Journal, April 3, 2012

The US economy gained a net average of 245,000 jobs per month for the last three months. This number, certainly better than it being negative, isn’t that great. This number is taken from the US Dept. of Labor Statistics, who asks a broad-based list of established companies how many payroll gains or losses they had. Interestingly though, this tends to undercount the actual number, because their survey doesn’t include new businesses. Another survey, this time of households, asks people directly whether they are employed. Though more accurate in one sense, it is a small sample, and so suspect in that way. These numbers are diverging, and this may be good news, and helps explain the uptick in consumer confidence and “Adjusting the data to make them roughly comparable, the quarterly report suggests the economy gained about 300,000 more jobs in the year ended September than the payroll figures suggested.” One thing the article didn’t mention though, is that new businesses go bankrupt more easily than established ones, and lay off people more quickly. If the economy flattens again, these newly hired may become newly fired.


2012 March

The World Bank and a warning about China

The Wall St. Journal, various dates.

Last week, the World Bank issued its report on the Chinese economy (The China 2030 report):

“There is broad consensus that China’s growth is likely to slow, but when and at what pace is uncertain, and there is no saying whether this slowdown will be smooth or not”….“Any sudden slowdown could unmask inefficiencies and contingent liabilities in banks, enterprises, and different levels of government—heretofore hidden under the veil of rapid growth—and could precipitate a fiscal and financial crisis.”…“The implications for social stability would be hard to predict in such a scenario.”
China’s growth will probably slow to 6.6%, its workforce is shrinking, and China is rapidly approaching the “middle income ceiling” where many countries find it hard to increase an average salary. Sobering news for the incoming president, Mr. Xi.


2012 February

Through a glass, darkly.

The Wall St. Journal, various dates.

Anxieties on Wall St this week show how nervous some of us can be, and react to the slightest of news: DP growth in the last quarter was reasonable (annualized) rate of 2.8%, but was below expectations. Consumer confidence declined somewhat, from 64 in December to 61.1 in January. Economists' expectations were that its rise to 68.


2012 January

A Roller Coaster, with an up Trend

The Wall St Journal, various dates

So goes the economic news: The Purchasing Manager’s index of Germany and China up, signaling increased economic activity; the US unemployment rate drops to 8.6 percent, with small businesses beginning to hire; Europe will start a recession the first quarter of 2012, and Italy’s bond auction produced mixed results (good results for short-term bonds, less so for long-term bonds).


2011 December

A bit of sunshine before the Fall?

(from various sources)

“Black Friday” Christmas sales in the United States were up 6.6% compared to last year; Saudi Arabia’s GDP grew at an annualized rate of 6.7%; China’s Purchasing Manager’s Index stalled, continuing its slow decline, possibly giving China room to ease monetary policy. And on the other hand… Europe’s GDP is expected to decline 0.2% if the euro DOESN’T implode.


2011 November

Where’s the Beef, or Will the European Bailout work?

The Wall St. Journal, October 28, 2011

With interest rates on Greek bonds only down slightly, the question arises whether the markets believe European politicians and bankers(read Germans and French) will do as they say, and if they do, will it have the desired effect? Questions include: how much money the fund would have available, whether the 20% guarantee by these (now to be leveraged) funds will entice investors, and how much China and Japan will contribute. Japan so far has already bought 20% in the European Stability Fund.


2011 October

A few signs of hope, with a twist

(from various sources)

Germany and Finland approved an expansion of Europe’s stability fund, a significant achievement because of its unpopularity in those countries. With Greece passing its tax collected on utility bills, Europe just may have a chance to smooth markets enough to begin making the long-term structural changes necessary for stability. Whether the long-term changes involve Eurobonds, the ECB (European Central Bank) giving unlimited backstops to sovereign debt, and/or the European Commission having veto power over sovereign budgets are open questions to problems not easily resolved. The Federal Reserve’s “Operation Twist”, designed to flatten the US bond curve and encourage lower mortgage rates, takes effect. At most, it will decrease long-term interest rates by .2 to .3 %.


2011 September

Not Quite the Same as 2008

The Wall St. Journal, and the Economist

While emerging market growth helped developed economies pull out of the 2008-2009 recession, heightening inflation a flattening of growth will not allow the Europeans and Americans a lift this time. Though industrial orders in Germany showed a surprising gain, as did employment in the US service sector(90% of those employed in the US are in the service sector), most indicators point to a flattening of what little growth happened in 2011. Looking at "momentum" indicators of the US economy, it looks as if we will avoid a recession, but it will still be slow going. President Obama's fate rests not on current economic figures, but those coming out in August and September, 2012.


2011 August

The pause that refreshes, or….

The Wall St. Journal, August 1, 2011

With the ISM index of US manufacturing activity dropping more than expected to a 50.9 value(> 50 means expanded business purchasing), the first quarter GDP revised downward to .4 percent, and this last quarter annualized value only 1.3 percent, one wonders how long this slowdown will continue. This decrease in growth is not limited to the United States: England’s annualized GDP last quarter was only .2 %. About .3% of the US’s downturn was due to fewer Japanese vehicles being sold. This, the hot weather, and hesitation about raising the debt ceiling may have been major causes. The real proof of its evanescence will be 3rd quarter GDP.

2011 July

Will We Skid on the Soft Patch, or It's Better Than You Think, But Is It Good Enough?

The Vanguard Group, and the Wall St. Journal

The US Economy grew at a slightly revised higher rate of 1.9% the first quarter of 2011. Durable goods rose at an annualized 1.9% in May, with April’s revised number showing a smaller decline. Non-defense capital goods, excluding aircraft (that is the big stuff the US produces, except for large, volatile aircraft orders, and military goods), a measure of business investment, rose at an annualized 1.6%. “While the economy is still growing, its pace has slowed considerably from the 3.1% posted in the fourth quarter of 2010. This is partly a result of temporary factors such as gas prices that have sapped consumer spending and a manufacturing sector constrained by supply disruptions due to Japan's earthquake in March. Still, the economy still faces hurdles that have kept it from growing faster, such as the faltering housing and construction sectors. Economists forecast second-quarter growth of about 2.0%, essentially identical to the first quarter, but expect the pace to pick up in the second half of the year.”


2011 June

A Pause, or a Slowdown?

Wall Street Journal. Retrieved from WSJ.com (various dates)

USD first quarter GDP was reduced to an annualized 1.8% rate, throwing into doubt the speed of economic recovery. A decrease in personal spending growth and increase in imports led to the slowdown along with a reduction in spending from the federal government. This revised statistic set various economic indicators gyrating. However, most did not realize that this number reflects the significantly bad weather and the lingering effects of Japan’s weather, nuclear and economic problems.


2011 April

A Pause that Refreshes?

CNN and the Wall Street Journal

US GDP growth slowed to an annualized rate of 1.8% in the first quarter, slightly higher than reduced expectations. Most of the slowdown can be attributed to the effects of the Japanese earthquake and tsunami on car manufacturers, severe weather in the Midwest, and a 35% increase in gasoline prices. Despite this, the Federal Reserve is estimating the economy will grow between 3.4 and 3.8 percent this year. Initial jobless claims rose to 429,000, but the unemployment rate is expected to decline to about 8.4% by the end of the year from its current 8.8%.

2011 March

American CEO’s Optimism on the Rise

Chief Executive Magazine

The CEO Confidence Index rose to 6.25(on a scale of 1 to 10, where 10 is excellent), 6.8% higher than the previous month(December). More than 78% of the 377 CEOs survey rated their expectations for business “good” or higher. 77 percent of CEOS anticipated revenue growth, while more than 70% anticipating profit growth. CEOs of larger firms were more optimistic than small firms: CEOs of companies with more than a billion(USD) in revenue averaged a 6.5 rating, while those in the 25 to 50 million(USD) rated their expectations at a 5.79.

2011 March

US Jobless claims drop in latest survey

The Wall Street Journal. Retrieved from WSJ.com

Initial jobless claims fell by 20,000 to 368,000 in the week ended Feb. 26, the Labor Department said Thursday in its weekly report. It was the lowest level since May 2008. The previous week's figures were revised down to 388,000 from an original estimate of 391,000. Dow Jones Newswires surveyed economists: They had expected claims would rise by 9,000 to 400,000.

Following a surge in the week ending Jan. 22, new claims have been on a declining trend. For three of the last four weeks, claims have remained under 400,000, widely considered the point in which the economy is gaining more jobs than it's shedding.

The four-week moving average of new claims, considered a more reliable indicator because it smooths volatile weekly data, dropped 12,750 to 388,500 in the week ending Feb. 26. That was the lowest level since July 2008. The Labor Department said in Thursday's report that the number of continuing claims--those drawn by workers for more than a week--fell by 59,000 to 3,774,000 in the week ended Feb. 19.


2011 February

The World-Wide Recovery in Manufacturing Continues

The Wall Street Journal. Retrieved from WSJ.com


The World-Wide Recovery in Manufacturing Continues

Factory activity ratcheted up worldwide in December, providing a boost of momentum to the global economy as it entered a new year."

A closely watched index of U.S. manufacturing inventory —based on a survey of purchasing managers by the Institute for Supply Management.—rose to 57 in December from 56.6 the month before. A reading above 50 indicates expansion. A euro-zone index rose to 57.1 from 55.3 in November. In Asia, manufacturing remained strong, though the pace of growth slowed in China and India.

"You're getting a pretty consistent message that output's accelerating," said David Hensley, a JPMorganChase analyst. Although growth in factory activity around the world slowed in the middle of 2010 amid Europe's sovereign debt crisis, it now appears to be reviving. For manufacturing, said Mr. Henlsey, "I think that the coast is pretty much clear." The firm's global aggregation of purchasing-manager surveys ended the year at a six-month high.

In the U.S., the purchasing-manager survey suggested that orders are growing faster than inventories, an indication that manufacturing will remain strong into the first quarter.

After dropping a precipitous 17.5% between the end of 2007 and mid-2009, output of U.S. factories has rebounded — but only to late 2008 levels, according to the Federal Reserve's measure of industrial production.”

2010 December

And the son will surpass the father….


Because of China’s voracious demand for commodities such as iron and coal, net immigration, its business friendly environment and low tax rate, Australia, the once-colony of England, will surpass its mother country’s GDP by 2020 according to the Wall St. Journal. It may also be that over half of Canadians by that time will be of Asian descent. Perhaps the Sun will never set on the (former) British colonies??

2010, November

Will the last Japanese please turn off the lights?

The Economist. Retrieved from Economist.com

To quote the Economist, “Japan is heading into a demographic vortex. It is the fastest-ageing society on Earth and the first big country in history to have started shrinking rapidly from natural causes. Its median age (44) and life expectancy (83) are among the highest and its birth rate (1.4 per woman) is among the lowest anywhere. In the next 40 years its population, currently 127m, is expected to fall by 38m. By 2050 four out of ten Japanese will be over 65.” Its population in 2050 will be about the same as it was in 1950. Though Japan is not the only country facing this problem, (western Europe and Russia come to mind, though China will begin population decline by about 2006.), they are the first the face the downslide . This is a problem not only for society, and the aging in society, but the young as well. Japan has only about two workers per retired person now, and it will get worse later. The seniority system is proving a major barrier for the young to advance. Its vaunted savings rate to prepare people for their own retirement is something of an illusion. The savings rate is only 2% of income: the rest of their “savings” rate is from corporations hoarding what they have, not quite knowing what to do in an environment of deflation and declining domestic demand. The economic consequences of this are enormous, but what will Japan do? There is no sign of sudden action: Even if Japanese would produce children like rabbits, the effects would not be felt for 20+ years. With their aversion to immigrants, the only option they have may be to encourage more women to work: Currently, only 62% of women return to work after the first child.

2010, November 29

Will fighting rising inflation pop the bubble?

The Wall Street Journal. Retrieved from WSJ.com


China is facing a 4.4% inflation rate: This, combined with a surge in energy and other commodity prices, presages inflation and potentially the overheating of economies trying to fight a weakening dollars. China has already made several attempts to reduce inflation, such as increasing the reserves that banks must hold, and increasing its lending rate to banks. The question is, will this be enough? This inflation may provide the death-knel for the Chinese property bubble. India’s inflation rate is now running at 8.6%; Indonesia’s, 5.8% and Singapore’s at 3.5%. Quoting the WSJ: “This could throw a monkey wrench that emerging-marketing assets and commodity prices will rise as investors chase high-yielding assets. It could also create periods of disruption that send investors to so-called safe havens, such as the US dollar.

2010, October

All Eyes on the Fed


The Federal Reserve in the United States decided today to begin another round of “quantitative easing” (known now by its moniker , “QE2”), that supplements is purchases of Treasuries last year. This 600 billion dollar purchase will potentially keep long-term interest rates low, and according to the Wall St. Journal, perhaps, just perhaps, increase US GDP by .5 percentage points this next 12 months. The purchase of these federal securities does not in itself cause risks: Where the risks come from is how the Federal Reserve will sell these securities. It also faces the specter of losing a significant amount of money when it does so, because if inflation rises significantly, it will decrease the value of what securities it holds. If its sales are too rapid, or done with poor timing, it may cause this inflation to occur that otherwise would not.

2010, October

Narrows Role of Nuclear Arm


The Federal Reserve in the United States decided today to begin another round of “quantitative easing” (known now by its moniker , “QE2”), that supplements is purchases of Treasuries last year. This 600 billion dollar purchase will potentially keep long-term interest rates low, and according to the Wall St. Journal, perhaps, just perhaps, increase US GDP by .5 percentage points this next 12 months. The purchase of these federal securities does not in itself cause risks: Where the risks come from is how the Federal Reserve will sell these securities. It also faces the specter of losing a significant amount of money when it does so, because if inflation rises significantly, it will decrease the value of what securities it holds. If its sales are too rapid, or done with poor timing, it may cause this inflation to occur that otherwise would not.

2010, October 5


In a bind with bonds?

Anglo-Irish Bank’s recent bond downgrade has caused even further pressure on the Irish economy. The Irish government has spent 13% of its GDP supporting troubled banks, and may be the first country to use the $950 billion Euro Stabilization Fund. The markets have begun to require interest rates on Irish sovereign bonds close to those during the Euro-panic days this last Spring.
Dubai World, whose halt in bond payments last November sparked the sovereign debt crisis months later, is coming to the bond markets again. To quote from the 9/28/10 Wall. St. Journal, “Details on the size of the offering or the terms of the bonds weren't released. The bond offering is part of Dubai's euro medium-term note program, which was updated in October of last year to raise $4 billion.” “This is despite, Dubai's real-estate sector, which comprises 25% of the emirate's economy, is showing few signs of recovery. A report published earlier this month by international property consultant Jones Lang LaSalle said new office stock has flooded the market, resulting in vacancy rates of 38% citywide. Newly constructed glass-and-concrete retail and office buildings along Dubai's trendy Jumeirah Beach Road sit empty. The glut is such that Jones Lang LaSalle recommended in its report that Dubai tear some office space down to throttle supply.”

2010, September 1

Food for a Black Swan?

Nicholas Taleb, the author of the “Black Swan”, is pessimistic about the world economy and it seems that the Chinese (via their China Investment Corporation, or CIC) might agree, to the tune of perhaps several billion dollars Mr. Taleb’s investment vehicle, Universa, is looking for things that grow, specifically, food. Regardless of economic conditions, it seems a growing populations needs to eat. With UN projections of the world’s population to be 8 billion by 2040, it seems a food is a safe bet. On the other hand, farmers in Brazil just might be able to help. According to the Economist, Brazil’s extensive use of their cerrado, the vast plains that encompass much of the country, has significantly boosted exports, with grain exports increasing from 80 million metric tons in 2000 to 150 million metric tons in 2010. Brazil has a chance to break into the “big 5” of food exporters. Interestingly enough, they have done this by not doing what so many advocate: They focus on global markets, plant “monocultures” on huge farms, and use genetically-modified crops. And, oh by the way, their non-subsidized methods could very well work in Africa and substantially improve food production there. So the question becomes, will the black swan of foot shortages be fed by the farms of Brazil?



Table of Contents

Nicholas Taleb, the author of the “Black Swan”, is pessimistic about the world economy and it seems that the Chinese (via their China Investment Corporation, or CIC) might agree, to the tune of perhaps several billion dollars Mr. Taleb’s investment vehicle, Universa, is looking for things that grow, specifically, food. Regardless of economic conditions, it seems a growing populations needs to eat. With UN projections of the world’s population to be 8 billion by 2040, it seems a food is a safe bet. On the other hand, farmers in Brazil just might be able to help. According to the Economist, Brazil’s extensive use of their cerrado, the vast plains that encompass much of the country, has significantly boosted exports, with grain exports increasing from 80 million metric tons in 2000 to 150 million metric tons in 2010. Brazil has a chance to break into the “big 5” of food exporters. Interestingly enough, they have done this by not doing what so many advocate: They focus on global markets, plant “monocultures” on huge farms, and use genetically-modified crops. And, oh by the way, their non-subsidized methods could very well work in Africa and substantially improve food production there. So the question becomes, will the black swan of foot shortages be fed by the farms of Brazil?

2010, May 3

Greece Gets Aid, Promises Austerity

The Wall Street Journal. Retrieved from WSJ.com

Agreement has been made to provide Greece with over 145 billion dollars in loans. The loan money will be provided by the 15 remaining Euro-zone countries and the International Monetary Fund. This is the largest monetary rescue of a country in history. The loan is not without its price. Greece must cut expenditures drastically as a prerequisite to the financial bailout, however, even with drastic cut backs it is uncertain that Greece will cover all its financial expenditures in the three years the monies will be dispersed. Currently, the debt of Greece is at Junk Status. With this being said, the country can no longer make any agreements with any capital markets.

Approval of the loan must meet with acceptance by all the leaders of the 16 euro-zone countries. In addition, some countries must also approve this loan through their own parliaments.

2010, March 31

The Truth Hurts

The Economist. Retrieved from Economist.com

The American Treasury department must report which country, if any, chooses to play around with their exchange rates at the worlds expense. This report must be made twice a year yet China last reported their exchange rates in 1994. Thus, for the past 16 years the treasury department has decided that reporting these rates would do more harm then good. Currently, China has an export-centric approach and is trying to shut American technology companies out of Chinese government procurement all together. Basically, China is on the verge of becoming a currency manipulator. It is hopes that China will take action sooner rather than later when action must be taken by confrontation.

2010, March 1

Consumer Spending Increases

The Wall Street Journal. Retrieved from WSJ.com

January was good month for Americans. It seems some consumers are actually letting go of they money and deciding to make purchases. The Commerce Department states that personal spending climbed to 5% in January. In actuality, personal spending has seen an increase over the past four months. What are Americans spending their money on? Consumption expenditures, such as food and energy, are where those dollars are going.

Some reasons why personal spending has increased is partly due to an increase in employment and an increase in wages for January. According to the employment index, the numbers indicate a 2.8 increase from 53.3. In addition the PCE income report indicates an increase in wages and salaries.

Americans are becoming increasingly employed and those who are already employed are getting raises and promotions. The additional money flowing into the American pocket has been a contributor to increases in food and energy consumption.

2010, January 28

The White House's Latest Salvo Against Banks Misses the Target

The Economist. Retrieved from Economist.com

President Barack Obama presented a proposal on January 21, 2010 to put a halt on banks that trade on accounts held by themselves. The proposal also states that governments want to impose limits on hedge funds and private equity involvement. The reason for the proposal comes at a time when "investment banks, credit-card operators, insures, and car makers financial arms" all needed to be bailed out with taxpayer monies. The systems were all interconnected and therefore their risk was interconnected too.

The Barack administration proposes banks become safer in their dealings. However, becoming safer requires a reliance on new capital and liquidity buffering systems that primarily do most of the work. In actuality, what is really needed is a system where creditors are accountable for their losses without endangering all the systems that interconnect with it.

2010, January 7

Asset Markets: The Danger of the Bounce

The Economist. Retrieved from Economist.com

When borrowing money becomes cheap, investors borrow to use toward assets. As a result, the prices of assets becomes inflated, which sets the market up for a bust. With current interest rates so low, it is feared that a similar set-up is occurring. The rise and fall of these "bubbles" is an age-old problem that needs to be considered, especially in a sensitive economic market.

2010, January 4

US Data Offers an Uncertain Compass

The Wall Street Journal. Retrieved from WSJ.com


Although the first week of the 2010 is a good indicator of the economical situation, it is obvious that there are a couples of months ahead that also predict economical improvement. The econorama announced on Monday by Institute for Supply Management in December that overall factory activity rose to 54 from 53.6 in November.

2009, December 17

The World Economy: The Great Stabilization

The Economist. Retrieved from Economist.com

Although the economy has stabilized, it is in a fragile state. Debt still looms upon the so-called "rich," and spending is still low. Government support will ultimately play a large role in recovery. In the upcoming year 2010, policymakers will face the challenge of keeping the stabilization afloat, which will involve decisions around the increasingly powerful Chinese yuan and how to deal with domestic bankers and bail-outs.

2009, November 28

An Economist's Invisible Hand

Wall Street Journal. Retrieved from WSJ.com

The conventional definitions of economics ignore an important aspect of the field. Economists are not interested in examining every case of actions based on costs and benefits, but only on those that have some sort of unexpected or unintended consequences. Because we live in systems so complex that we cannot fully understand them, our choices can have system-wide implications that we neither intended nor expected. Economics starts with individuals making choices based on self-interest, but it is primarily interested in how these actions affect society as a whole. Do these choices lead to chaotic results or to harmonious ones?

2009, November 19

The Rot Spreads: A Survey Reveals that Desperate Times Have Led to Illegal Measures

The Economist. Retrieved from Economist.com

According to a recent study by PriceWaterhouseCoopers (PWC), during this economic downturn, the instance of corporate crime seems to be rising, particularly in developing countries. This is especially the case in firms with performance-based incentive systems, which reward employees for meeting certain targets. In a down economy, meeting those targets has become more. In addition, a shrinking workforce is putting more pressure on the employees that remain and have decreased the number of people who are monitoring the activities of other employees.




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