Rebecca Wilder: World economic updates (June 19–26) – Seeing some light … Really!

Saturday, June 27th, 2009

This post is a guest contribution by Rebecca Wilder*, author of the of the News N Economics blog.

Glimmers of hope are starting to emerge in the hard data. Exports in Asia are forming a more decided bottom; but since the trough is -20% to -30% off over the year, the recovery may be a long haul (or it may not). By some measures, home values in the UK and the US are showing signs of stabilization, as the annual pace of decline slows. German business sentiment continues its ascent, moving past its 1993 low! In contrast, inflation maintains its steady descent; Japan is hard hit.

Overall, the global economy is finding its footing on the path toward stabilization.

Exports in Asia: looking a little better, but still WAY down over the year!

UK and US home values: signs of hope? Yes and no.

The US measure, the Federal Housing Finance Agency (used to be OFHEO) includes only conforming mortgage homes; and therefore, it doesn’t capture the full market (there are other measures of home values, i.e., the S&P Case Shiller indices, that do not signal such a decided stabilization in home values). This is a weak market; and with foreclosures persisting and inventories high, prices are likely to fall a bit further.

According to the Ifo Institute for Economic Research, German business sentiment saw its fourth monthly gain! Here is an excerpt from the release:

The brightening was solely the result of the firms’ expectations - the pessimism of the survey participants with regard to the six-month business outlook has again weakened. Their dissatisfaction with the current business situation is just as strong as it was in May. The survey results confirm that the German economy is gradually stabilizing.

Inflation remains in (or is nearing) the red for Singapore, Hong Kong, and poor Japan.

The global economy this week: looks a little brighter but still bad.

Source: Rebecca Wilder, News N Economics, June 26, 2009.

* Rebecca Wilder is an economist in the financial industry. She was previously an assistant professor and holds a doctorate in economics.

Tags: Business Outlook, Business Sentiment, Business Situation, Conforming Mortgage, Dissatisfaction, Economic Research, Economic Updates, German Business, German Economy, Glimmers, Global Economy, Home Values, Housing Finance Agency, Ifo Institute, Long Haul, Pessimism, Signs Of Hope, Singapore Hong Kong, Survey Participants, Weak Market
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A Potpourri of Bulls and Bears

Saturday, June 27th, 2009

This week’s video-o-rama comes to you a day late as I make my away from Cape Town to Europe. Notwithstanding terribly slow broadband at South African airports, I have managed to compile an interesting potpourri of clips.

Topics ranged from another round of discussions about the proposed regulatory reform to Fed chairman Ben Bernanke facing a grilling on Capital Hill over the Bank of America-Merrill Lynch deal to the usual dose of debate on the outlook for the economy and financial markets.

The stars of this week’s round-up include Steven Pearlstein, Pete Peterson, Warren Buffett (US economy in “shambles”), Nouriel Roubini (US economy “sort of stabilizing”), Puru Saxena, Edmund Phelps, Mohamed El-Erian, Robert Prechter (a “lot more” bear market) and T. Boone Pickens.

The compilation kicks off with Barry Ritholtz, author of must-read “Bailout Nation” and editor of The Big Picture blog, sharing his views on the financial collapse, and concludes with Dennis Gartman, editor of The Gartman Letter, calling Warren Buffett an idiot.

TheStreet.com: Tales from “Bailout Nation”
“Barry Ritholtz, author of the new bestseller “Bailout Nation”, blames Alan Greenspan for America’s financial collapse and says troubled banks should be allowed to fail.”

Source: TheStreet.com, June 22, 2009.

CNBC: Issa versus Bernanke
“Rep. Darrell Issa (R-CA), questions Fed Chairman Ben Bernanke regarding the Federal Reserve’s influence in the Bank of America-Merrill deal, and whether the Fed actually tried to cover it up.”

Source: CNBC, June 25, 2009.

Charlie Rose: A conversation about regulatory reform with Steven Pearlstein

Source: Charlie Rose, June 18, 2009.

CNBC: Pete Peterson on the financial crisis, economy and regulation
Pete Peterson, co-founder and former chairman of the Blackstone Group, shares his thoughts on the economy, the financial crisis and regulation.”

Source: CNBC, June 23, 2009.

CNBC: US economy in “shambles”
“In a live interview on CNBC today, Warren Buffett said there has been little progress over the past few months in the ‘economic war’ being fought by the country. ‘We haven’t got the economy moving yet,’ he told Becky Quick.”

Click here for the transcript.

Source: CNBC, June 24, 2009.

Bloomberg: Nouriel Roubini - US economy “sort of stabilizing”
“Nouriel Roubini, professor at New York University’s Stern School of Business, talks with Bloomberg’s Deirdre Bolton and Tom Keene about the state of the US economy. Roubini, speaking from London, also discusses Federal Reserve monetary policy, personal savings and the outlook for the US unemployment rate.”

Source: Bloomberg, June 24, 2009.

John Authers (Financial Times): Market’s reaction to Fed’s rate announcement

Click here for the article.

Source: John Authers, Financial Times, June 24, 2009.

CNBC: Credit market problems to creep up again?
“‘We are now returning to some distress in the credit markets,’ Puru Saxena from Puru Saxena Wealth Management said, adding that is why he has sold off all of his long positions. Saxena told CNBC the market is wrong to expect hyperinflation. Christian Blaabjerg from Saxo Bank joins the discussion.”

Source: CNBC, June 23, 2009.

Bloomberg: Phelps says US wealth may take 15 years to rebound
“Edmund Phelps, a professor at Columbia University and winner of the 2006 Nobel Prize in economics, talks with Bloomberg’s Elliott Gotkine about the outlook for the US economy. Phelps said, ‘The only way we’re going to get a healthy, full recovery is over a long period of time, involving households rebuilding their balance sheets and companies in trouble rebalancing their balance sheets.”

Source: Bloomberg, June 22, 2009.

Consuelo Mack (WealthTrack): Lo & Asness - applying hedge fund skills to mutual funds
“On this week’s Consuelo Mack WealthTrack: two innovative hedge fund managers challenge conventional investment wisdom and explain why they have recently brought their hedge fund skills to the mutual fund world. MIT’s Professor of Finance and portfolio manager of the ASG Global Alternatives Fund, Andrew Lo, and AQR Capital Management’s Cliff Asness, portfolio manager of the recently launched AQR Diversified Arbitrage Fund discuss their investment outlook and strategies.”

Source: Consuelo Mack, WealthTrack, June 26, 2009.

CNBC: El-Erian on the markets
“Mohamed El-Erian, CEO and co-CIO at Pimco, shares his market insight.”

Source: CNBC, June 25, 2009.

Bloomberg: Robert Prechter sees a “lot more” bear market, deflation
“Robert Prechter, chief executive officer of Elliott Wave International Inc., talks with Bloomberg’s Betty Liu about the outlook for the US stock market. Prechter, speaking from Atlanta, also discusses his expectations for inflation and emerging markets.”

Source: Bloomberg, June 19, 2009.

John Authers (Financial Times): Swiss franc intervention
“FT’s John Authers on why the Swiss National Bank decided to intervene in foreign exchange markets to weaken its currency.”

Click here for the article.

Source: John Authers, Financial Times, June 24, 2009.

MoneyNews: Pickens - oil could go to $300 a barrel
“Legendary oil man T. Boone Pickens says that if the US doesn’t take major steps to curb its reliance on foreign oil, the consequences will be drastic. ‘Let’s say in 10 years, you do nothing,’ Pickens tells Fortune. ‘You will be importing 75% of your oil (up from 68% now), and you’ll be paying $300 a barrel. That’s $2 trillion a year going out of this country.’”

Source: Dan Weil, MoneyNews, June 16, 2009.

Chris Giles (Financial Times): OECD foresees end to global slide
“The OECD has revised its World Economic Outlook upwards for the first time in two years, concluding that the global economic slump is approaching a nadir. Chris Giles, economic editor, explains the significance of the findings for the ‘green shoots’ debate.”

Click here for the article.

Source: Financial Times, June 24, 2009.

CNBC: China could outdo its 8% growth target
“China could do better than 8% growth this year, says Kenneth Courtis, chairman of Next Capital Partners & also former vice chairman of Goldman Sachs. He explains his optimistic view to CNBC’s Martin Soong and Amanda Drury.”

Source: CNBC, June 23, 2009.

CNBC: Another thorn on China’s side?
“The US and European Union have filed a complaint to the World Trade Organization over China’s export curbs. Jing Ulrich, MD & chairman of China equities at JPMorgan, assesses this news, with CNBC’s Martin Soong and Cheng Lei.

Source: CNBC, June 24, 2009.

CNBC: Japan’s exports show deeper slide in May
“Japan’s exports fell 40.9% in year-ago terms in May, showing a slightly deeper slide, but its trade surplus came in stronger than expected, though it continued to fall. Luca Silipo, chief economist at Natixis digests the data, with CNBC’s Amanda Drury and Martin Soong.”

Source: CNBC, June 24,2009.

Charlie Rose: Update on Iran
“Update on Iran with Roger Cohen of ‘The New York Times’ and ‘International Herald Tribune’ from Iran, and Robin Wright of ‘The Washington Post’ from Washington.”

Source: Charlie Rose, June 22, 2009.

CNBC: Warren Buffett an idiot?
“Dennis Gartman, The Gartman Letter, says Warren Buffett made some terrible mistakes last year.”

Source: CNBC, June 22, 2009.

Tags: Emerging Markets, oil
Posted in Emerging Markets, Gold, Markets | No Comments »

Richard Russell: Competitive devaluations to spur on gold

Saturday, June 27th, 2009

I often quote Richard Russell, the 85-year-old writer of the Dow Theory Letters, in my blog posts. Although I may not necessarily always agree with his views, they are always stimulating and important to consider when piecing together the financial puzzle. His article on competitive devaluations and the implications for fiat currencies and gold bullion makes for particularly interesting reading and the paragraphs below have been excerpted from it.

“Every nation wants to export. The obsession to export has resulted in filling the world with products, things, and merchandise of every kind. There’s a world overflow of products, and the result is deflation. Just too much stuff being manufactured. Buyers from importing nations can’t handle it all. The result is asset deflation.

“One reason why every nation wants to export is to lift employment. Nothing scares politicians like unemployment. Why? Because unemployed workers VOTE just the way employed workers do. The lesson - if you want high employment, learn to export. Exporting creates jobs. China and Asia learned that lesson, and they captured world export markets with the help of one valuable item - low wages - that along with no Social Security, no medical, no pensions, no anything, just plain low wages with none of the extras.

“Ooops, I left something out. What I left out was the big second advantage - cheap currency. Every nation, particularly the exporters, wants a cheap, competitive currency. The US is no exception. Obama tells the world that the dollar is a strong, hard currency, but the dollar has been weak. The administration’s policy is to talk a “hard dollar” but hope for a soft dollar.

“The result of all this is competitive devaluations. Nations no longer devalue their currencies against gold, they simply print oceans of their own currencies, and with that paper they buy dollars, hoping to raise the price of dollars against their own currencies. The result is a growing sea of fiat junk paper.

“The greater the world ocean of fiat paper, the higher gold goes. You see, gold is the secret, unstated world standard of money. Gold can’t be devalued or multiplied out of thin air. So as the various currencies of the world decline in relation to each other, gold stands alone. It can’t be cheapened or devalued or bankrupted. While the currencies of the world decline in purchasing power in relation to each other, they all decline in purchasing power against gold. In other words, as time passes, it requires more of each currency to purchase one ounce of gold.

“In the meantime, the US continues to spend outrageously, not only running up debts for the present but also for the children of the future. The US deficits and national debt will run into the multi-trillions in coming years.

“How will these monster debts ever be paid off? They’ll be paid off by devalued dollars, they’ll be paid off by additional borrowing, they’ll be paid off by inflation, they’ll be paid off with higher taxes and probably a VAT tax, they’ll be handled by projecting them into the future for other administrations to struggle with.

“As they say in New York, ‘all right already, so what do we do about it?’.
“Short and medium term, you want dollars, as many of them as you can save. Long-term you want gold. Somewhere ahead gold will come into its own. I can’t time gold, but I can identify the time when gold is ready to ‘take off’. When gold climbs above 1,004 it will be the signal for the beginning of the third phase gold rush. What I’m saying is forget quick profits in gold, forget timing gold, just own some.

“The way the world is going, ‘gold will be the last man standing’. Gold will be wanted because unlike everything else, gold can not go bankrupt. Gold has no debt against it, gold is not the product of some nation’s central bank. Gold is pure intrinsic wealth. It needs no nation to guarantee it. Gold is outside the paper system.”

Source: Richard Russell, Dow Theory Letters, June 25, 2009.

Tags: Cheap Currency, Dow Theory Letters, Export Markets, fiat, Fiat Currencies, Financial Puzzle, Gold Bullion, Hard Currency, Hard Dollar, Obama, Obsession, Oceans, Paragraphs, Pensions, Richard Russell, Soft Dollar, Unemployed Workers, Wages, World Export, World Overflow
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