US-China Trade Visualized

Thursday, May 21st, 2009

Mint.com creates great, attention getting charts. As the old saying goes, a picture says a thousand words. The US-China trade chart below does a great job of presenting how both countries trade with each other and the rest of the world.

Introduction by Mint.com

Like it or not, the US and China have a trading relationship that has global repercussions. The plastic US flags that say Made in China don’t tell the whole story. No, not everything is made in China. In fact the US manufactures and exports almost as much as China but it consumes a great deal more. Hence, the trade imbalance. What’s interesting is exactly what the US imports, stuff like machinery and toys and as much steel and iron as it does shoes. And what we export — high-tech stuff like airplanes and medical equipment and, for some reason, 7 billion dollars worth of oleaginous fruit which is used to make cooking oil, presumably for Chinese food.

Click On The Image For A Larger Version (Note:Image accessed via Mint.com)

Tags: Airplanes, Billion Dollars, China Trade, China Trading, Chinese Food, Cooking Oil, Countries, Flags, Global Repercussions, Job, Medical Equipment, Mint, Reason, Relationship, Rest Of The World, Shoes, Stuff, Toys, Trade Imbalance, World Introduction
Posted in Economy, Emerging Markets, Markets, Oil and Gas | No Comments »

FRONTLINE: Ten Trillion and Counting

Friday, March 27th, 2009

In case you missed it, you can view last week’s PBS FRONTLINE, Ten Trillion and Counting, here:

Summary courtesy of PBS.org:

All of the federal government’s efforts to stem the tide of the financial meltdown have added hundreds of billions of dollars to an already staggering national debt, a sum that is expected to double over the next 10 years to more than $23 trillion. In Ten Trillion and Counting, FRONTLINE traces the politics behind this mounting debt and investigates what some say is a looming crisis that makes the current financial situation pale in comparison.

The journey begins as FRONTLINE correspondent Forrest Sawyer takes viewers to a secret location: the Treasury’s debt auction room, where the U.S. government sells securities backed by the “full faith and credit of the United States.” On this day, the government is auctioning $67 billion of Treasury securities. The money borrowed will be used to fund services and programs that the government cannot pay for through tax revenues alone.

Observers warn that the United States’ reliance on borrowing to fund essential programs is a dangerous gamble. For the first time, investors are beginning to question the ability of federal government to meet its growing financial obligations, and fading confidence can have dire consequences. “You might have a situation where there is one day when the government says we need to sell several billion dollars of bonds, and nobody shows,” Economist reporter Greg Ip tells FRONTLINE. “No money to pay the Social Security checks, no money to give to the states for their Medicaid programs. Cut, cut, cut, cut, cut.”

Yet more borrowing is exactly what the Obama administration plans to do: hundreds of billions to bail out the banks and other financial institutions; tens of billions more for the auto industry; $275 billion for homeowners and mortgage lenders; and a giant $787 billion stimulus package to jump-start an economy spiraling downward. Just like the Bush administration before it, Obama and his team are going to borrow big. “That’s the paradox of the situation that we’re in now,” observes Matt Miller, author of The Tyranny of Dead Ideas. “Government has got to run big deficits to stimulate the economy, deficits that would have been unthinkable … because government’s the only entity with the wherewithal to prop up a demand in the economy when businesses and consumers are all pulling back.”

Tags: Auction Room, Auto Industry, Billion Dollars, Dangerous Gamble, Financial Institutions, Financial Meltdown, Financial Obligations, Financial Situation, Forrest Sawyer, Full Faith And Credit, Medicaid Programs, Mortgage Lenders, National Debt, Pbs Frontline, Secret Location, Social Security Checks, Stimulus Package, Tax Revenues, Time Investors, Treasury Securities
Posted in Bonds, Credit Markets, Economy, Markets | No Comments »

Crispin Odey: No Recovery Until Consumers Unwind Debt

Thursday, March 5th, 2009

Crispin Odey, CIO, Founder of Odey Asset Management, in the UK, released his outlook for 2009 in his 2008 year-end letter to shareholders. Odey, a high profile hedge fund manager, and Hugh Hendry’s (Eclectica AM) former mentor, made a fortune last year shorting UK banks, shares some of his insights and observations on last year and the coming year. Here is an excerpt from that letter:

“2008 was a difficult year. As our shareholders remarked, it was not the year of the rat for nothing. If something could go wrong it did go wrong. No asset class rose but some currencies fell. Stock markets on average fell by 50% in US dollars. Commodities fell by 70% from their highs in June, admittedly after rising by 30% in the first five months. Hedge funds saw on average redemptions of 40%”.

“Whatever they might still say all clients started to view cash as their benchmark. Noted individuals were badly caught out. Joe Lewis, a legendary currency trader, lost a billion dollars in Bear Stearns. Kirk Kerkorian famously declared that he should have died a year ago and he would have saved both his fortune and his reputation”.

“So what does 2009 promise? Firstly it has to be said that governments, institutions and regulators have been slow to understand the credit cycle. At each turn they have believed that it was not part of anything greater. What was nothing more than a problem in the interbank market became a lending problem for the major banks and in September caused a slump in the economic activity worldwide”.

“The numbers are now so bad that they are not worth repeating. In January 2009, Japan’s exports were down 40% year on year. A combination of not understanding the credit cycle and no interest in history has served our leaders poorly. As John Train recently remarked “just as Keynes said that leaders thinking they were acting in good sense were in fact slaves to some defunct economist, so today these politicians have been slaves to Keynes.”

“Even if they could find solutions to the problems we have, we cannot now escape the most painful recession post-war. However, there is also no consensus over the solution necessary. What is true is that politicians will not stand by whilst unemployment rises and activity dwindles and that is precisely the outlook we face with current policies. Current policies are helping to contain the worst effects”.

But his main point is that there will no recovery until consumers start to unwind their indebtedness, which is going to take time and pain. “There will be a rise in prices in those countries that have devalued, despite current widespread belief to the contrary, which will be felt when companies re-order. We may be in recession in the UK, but a 25% fall in our currency will result in a 10% rise in prices at some point. It is the fact that no economy is remotely in the recovery position which makes me still quite depressed for this year. I am happy to buy when faced with irrational fear, but the fear that I see around me today appears reasonably rational”.

Hat Tip: Jonathan Davis, Independent Investor

Tags: Array, asset class, Bear Stearns, Billion Dollars, Crispin Odey, Currency Trader, Defunct Economist, Eclectica, Economic Activity, Five Months, Good Sense, Hedge Fund Manager, Hedge Funds, Hugh Hendry, Interbank Market, Joe Lewis, John Train, Keynes, Kirk Kerkorian, Legendary Currency, Letter To Shareholders, Post War, Redemptions, Stock Markets, Uk Banks, Year Of The Rat
Posted in Commodities, Credit Markets, Economy, Markets, Outlook | No Comments »

How the (financial) world nearly ended at 2:00 p.m., September 18, 2008

Wednesday, February 18th, 2009

At 2 minutes, 20 seconds into this C-Span video clip, Rep. Paul Kanjorski of Pennsylvania explains how the Federal Reserve told Congress members about a “tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars.” According to Kanjorski, this electronic transfer occurred over the period of an hour or two. Its enough to put a knot in your stomach.

Kanjorski discusses the following disclosure by Bernanke and Paulson:

On Thursday (Sept 18), at 11am the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there.

If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.

We are no better off today than we were 3 months ago because we have a decrease in the equity positions of banks because other assets are going sour by the moment.

This is further confirmed on September 24, 2008, in a House Sub Committee Meeting at which both Bernanke and Hank Paulson are present, and Rep. Kanjorski confirms the facts with Paulson.

http://financialserv.edgeboss.net/wmedia/financialserv/hearing092408.wvx

Go to 1hr 50 mins 48 secs. into the video. Paulson answers Kanjorski’s questions about the $550-billion run, but waffles a fair bit. You be the judge.

Hat tip: Live Leak, Zero Hedge

Tags: 2pm, Bernanke, Billion Dollars, C Span, Committee Meeting, Congress Members, Economic System, Electronic Transfer, Equity Positions, Federal Reserve, Hank Paulson, Hat Tip, Money Accounts, Money Market Accounts, Money Market System, Paul Kanjorski, September 18, Trillion, Waffles, Wmedia, World Economy
Posted in Economy, Markets | No Comments »