Perspectives on the global economic meltdown (Jan 26 2010)

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Perspectives on the global economic meltdown (Jan 26 2010)

Postby Suraj » 27 Jan 2010 02:52

Recommendation from PIMCO's Bill Gross, manager of the PIMCO total return fund (PTTRX/PTTAX/PTTDX):
Gross recommends 'less-levered' China, India, Brazil over G7
Bill Gross, who runs the world’s biggest mutual fund at Pacific Investment Management Co., said investors should seek “less levered” countries like China, India and Brazil that are “less easily prone to bubbling.” “The old established G-7 and their look-alikes as they de-lever have lost their position as drivers of the global economy.”

Gross recommended that investors should look for “a savings-oriented economy, which would gradually evolve into a consumer-focused economy,” adding that miniature examples of China, India and Brazil would be excellent examples.

China’s growth is forecast to accelerate to 10 percent this year, the International Monetary Fund said in a forecast released today, up from the 9 percent projected in October, after 8.7 percent last year. India’s economy will expand by 7.7 percent in 2010, the report said, compared with the October forecast of 6.4 percent.

Emerging and developing economies will increase 6 percent this year, a 0.9 percentage point increase from the previous forecasts, according to the report. Next year they will expand 6.3 percent.

Gross increased the $201.7 billion Total Return Fund’s investment in developed markets outside the U.S. to 16 percent from 5 percent in December, bringing it to the most since October 2004, according to Pimco’s Web site.

The U.K. is “a must to avoid,” Gross wrote in the commentary published today. “Its gilts are resting on a bed of nitroglycerine. High debt with the potential to devalue its currency present high risks for bond investors.”

Among developed countries, Gross recommended Canada and Germany. “Given enough liquidity and current yields, I would prefer to invest money in Canada,” Gross wrote. “Its conservative banks never did participate in the housing crisis and it moved toward and stayed closer to fiscal balance than any other country.”

“Germany is the safest, most liquid sovereign alternative,” Gross wrote. However, “its leadership and the EU’s potential stance toward the bailouts of Greece and Ireland must be watched. Think AIG and GMAC and you have a similar comparative predicament.”

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Re: Perspectives on the global economic meltdown

Postby Satya_anveshi » 27 Jan 2010 04:05

Bernanke: Too big to fail

Yet even Bernanke's most vocal detractors expect him to survive the populist revolt -- largely because of fears that a change will scare the heck out of financial markets.

"I expect him to get confirmed," said Michael Pento, a critic of the Fed's easy money policies who is senior market strategist at Delta Global Advisors in Huntington Beach, Calif. "Anyone sitting on the fence saw what happened in the market last week and said, I don't think I want to be the one who pulls the rug out from under the economy." :rotfl:

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Re: Perspectives on the global economic meltdown

Postby ramana » 27 Jan 2010 04:12

More like "too big to go to jail!"

Meanwhile ProPublica's Unemployment Insurance tracker

Hari Seldon might want to dig into this.

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Re: Perspectives on the global economic meltdown

Postby Suraj » 27 Jan 2010 06:46

S&P threatens Japan govt debt rating downgrade
Standard & Poor's Ratings Services threatened Tuesday to downgrade Japan's government debt by a notch, saying the young government isn't fixing the nation's bloated finances as fast as expected.

Lowering the outlook on Japan's AA rating to negative from stable, S&P said: "The Japanese government's diminishing economic policy flexibility may lead to a downgrade unless measures can be taken to stem fiscal and deflationary pressures."

The surprise threat to Japan's rating, the third-highest that S&P assigns, hit the yen and Japanese government bond prices and prompted concern that the move might dim previously robust prospects for bond issuance throughout Asia over the near term.

"The ratings on Japan could fall by one notch if economic data remain weak and measures to boost medium-term growth are not forthcoming, given the country's high government-debt burden and its weak demographic profile," S&P said.

Japan, struggling to crawl out of recession after years of subpar growth, is saddled with the worst debt burden in the industrialized world. Promises of fiscal reform have for years taken a back seat to efforts to boost growth with government spending, while the anemic results have weighed on tax revenues.

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Re: Perspectives on the global economic meltdown

Postby ramana » 27 Jan 2010 07:50

Suraj, Can you split the thread to 100 pages?

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Suraj » 27 Jan 2010 07:58

Done. Old thread is archived here.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Neshant » 27 Jan 2010 09:15

the pimps at pimco have been right so far.

PIMCO Calls For A Hyperinflationary Collapse In Japan

http://market-ticker.denninger.net/arch ... Japan.html

But when you commit to the raw printing of money borrowing for productive investment is an idiotic premise as each of your dollars (or yen in this case) that you EARN with that investment will be worth less than the yen before! You thus must outrun not only the borrowing cost but also the intentional devaluation of your earnings with that investment, and this, when faced with a government apparatus that has explicitly announced that it will not stop until it achieves some goal you have no control over or input toward, is a dangerous game indeed

PIMCO's Bill Gross in fact just identified this same feedback loop in the United States, although he doesn't realize it. In point of fact fully $500 billion of the deficit from last year was spent directly and indirectly on handouts to an increasingly unemployed population, thereby increasing the incentives to be unemployed as opposed to seeking employment. This in turn is reflected in the participation rate which has fallen in this recession thus far to levels last seen in 1983, destroying twenty five years of labor force progress in less than 18 months!

This in turn has raised the specter that the $500 billion in outlays via these "handouts" has become structural, and thus will mutate into a similar demand that The Fed either "print more or we deflate hard", exactly as happened in Japan.

The problem is that eventually you deflate anyway as it is not possible to couple your reflationary attempt with any sort of parity (or better) into personal income. The ultimate outcome is thus certain - the economy will deflate anyway but you will destroy the purchasing power of every saver in the nation along with everyone's ability to earn a living first!

When nobody is left with a job due to the destruction of purchasing power up the wage and income scale asset prices in real terms collapse no matter how much money you print!

There is only one way out of a liquidity trap that does not involve impoverishing everyone: you force those who are overlevered, no matter who they are, through bankruptcy and by doing so you default the insoluble debt, removing it from the system.

This often causes severe asset price deflation as assets are forced into liquidation, but it restores balance between asset prices and earnings while at the same time allowing those who have been prudent and did not take on excessive leverage to survive and even prosper during the necessary period of adjustment.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Hari Seldon » 27 Jan 2010 10:32

Thx for the archival, Suraj. Yup, it would be illuminating to revisit the archives 10 yrs down.

The NYT uvacha:
President Obama will call for a three-year freeze in spending on many domestic programs, and for increases no greater than inflation after that, an initiative intended to signal his seriousness about cutting the budget deficit, administration officials said Monday.

The officials said the proposal would be a major component both of Mr. Obama’s State of the Union address on Wednesday and of the budget he will send to Congress on Monday for the fiscal year that begins in October.

The freeze would cover the agencies and programs for which Congress allocates specific budgets each year, including air traffic control, farm subsidies, education, nutrition and national parks.

But it would exempt security-related budgets for the Pentagon, foreign aid, the Veterans Administration and homeland security, as well as the entitlement programs that make up the biggest and fastest-growing part of the federal budget: Medicare, Medicaid and Social Security.


Anybody else see a problem here? Non-defence non-entitlement spending is diddly squat. Military spend has to come down bigtime for any semblance of deficit hawkishness to have any street cred at all, IMHO. And how can the deficit come under any sorta control if biggies like SS and medicare are left as is? First off I doubt Sri Obama is serious about deficit reduction at all to start with. This is merely window dressing and pretensions designed to fool voters who want to be fooled.

Sure enough, one gyani commentator laments:
There really is no good way to interpret this turn of events. From the standpoint of the purely economical, this is a huge mistake. Even if we assume that the economy will be strong enough in 2011 to handle budget balancing, this proposal is practically worthless. The administration has said this will produce $250 billion in savings over ten years, but as The Economist noted in November, the fiscal deficit will be over $700 billion in 2014 alone, and will grow from there. Non-defence discretionary spending is nothing; those who are serious about long-term budget sustainability talk about defence, they talk about entitlements, and they talk about revenues. In other words, this will do very little about the deficit, and it will do even less to convince markets of the credibility of the American effort to trim the deficit.


Even longtime Obama fans in the economystic profession are getting disillusioned: sample this from Brad DeLong:Barack Herbert Hoover Obama?

Another leftie economystic howls despair...

So the whole charade is seen as a method to soften the public up for Medicare and Social Security cuts. For sure, health care spending including Medicare can't grow as projected simply as a matter of Stein's Law. But a system of reasonably universal, reasonably affordable health care is not obviously going to involve lower Federal spending on health care entitlements. On the Social Security front, Yves Smith recently groaned over a report (via Jesse's Café Américain) that the Obama administration was seeking to promote conversion of retirement accounts to annuities. The problem with such a proposal, though, is more that private annuities tend to suck (for insurance market failure type reasons) than that senior citizens have too much secure, inflation-protected retirement income. A logical, and maybe even efficient, solution that happens to be off-limits in most of polite society would be to add resources to Social Security to increase benefits. You may see these programs less charitably — you may also have elderly relatives who would be in less dire financial straits without them than I do. The bottom line is that entitlement spending cuts shouldn't be ends in themselves to anyone left-of-center with half a brain.


And all this angst when the right thing to do, agreed across the partisan divide in umrika is simply to do this:
In any event, I have had enough. Fire Larry Summers. Fire Tim Geithner. Give Peter Orszag time to spend with his children. End the one-sided pseudo-post-partisan Kumbaya bullshit. Do it now.

Amen.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Hari Seldon » 27 Jan 2010 12:02

Bloomberg uvacha:Fed Weighs Interest on Reserves as New Benchmark Rate

Jan. 26 (Bloomberg) -- Federal Reserve policy makers are considering adopting a new benchmark interest rate to replace the one they’ve used for the last two decades.

The central bank has been unable to control the federal funds rate since the September 2008 bankruptcy of Lehman Brothers Holdings Inc., when it began flooding financial markets with $1 trillion to prevent the economy from collapsing. Officials, who start a two-day meeting today, have said they may replace or supplement the fed funds rate with interest paid on excess bank reserves.

“One option you might want to consider is that our policy rate is the interest rate on excess reserves and we let the fed funds rate trade with some spread to that,” Richmond Fed President Jeffrey Lacker told reporters on Jan. 8 in Linthicum, Maryland.

The central bank needs to have an effective policy rate in place when it starts to raise interest rates from record lows to keep inflation in check, said Marvin Goodfriend, a former Fed economist.

Policy makers are concerned that the Fed funds rate, at which banks borrow from each other in the overnight market, may fail to meet the new target, damaging their credibility and their ability to control inflation as the economy recovers.


Aha. Chickens coming home to roost anybody? QE effectively slew the traditional mechanism of central banks adding and draining liquidity w.r.t. the financial system. No wonder the fed funds rate has become ineffective totally.

Sri Jesse says it perfectly here:
This article from Bloomberg is an indirect pre-announcement from the Fed that they may abandon the notion of 'target rates' altogether, and set interest rates by fiat, rather than achieving them in the marketplace by adjusting levels of short term liquidity. This marks a transition from 'Phase I' to 'Phase II' of Bernanke's monetary experiment.

I want to emphasize the significance of this change.

This is becoming a pure 'command and control' economic financial engineering by the Fed, in which it sets rates by its decision, without engaging in market operations which could encounter headwinds against those policy decisions. It is similar in magnitude to the Fed monetizing Treasuries directly without subjecting interest rates to the direct discipline of the market. This is of a pedigree more in keeping with a command and control Five Year Plan than a market economy. Extraordinary times call for extraordinary measures the Fed and its apologists might say.


Scary. Something is afoot and insiders have smelt it. Hence the seeming panic in headless chicken mode.
This is an 'experiment' on the part of the UK and US in their own go at quantitative easing. The risk is obviously inflation, and they are seeking to downplay that at every turn. It is the perception of inflation that the Fed will seek to quell, as it continues to adjust the money supply in ways and with tools that it thinks it understands, but which it has never used before. Perception of inflation is their greatest fear. Once it takes hold it is difficult to stop.

One has to wonder what the anticipated endgame might be.


I doubt if they are even thinking in terms of an endgame. Day after tomorrow too far into the future when tomorrow is at risk. Firefighting has become routine. Adrenaline replacing carbohydrates. Apna kya hoga kalia??? Ghor kalyug is upon us, almost.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby ss_roy » 27 Jan 2010 12:19

On China’s Overinvestment
http://www.nakedcapitalism.com/2010/01/ ... tment.html

"China’s economic stimulus programme has accelerated the already aggressive pace of urban development in the country. But while investment in construction is creating much-needed infrastructure in some cities, it is also adding to the number of ghost towns with nearly empty facilities in other parts of the mainland…. Over in Guangdong, many residential units sit empty, said Neeraj Sawhney, a Hong Kong textile trader who often travels to the province. “I have seen houses and shops built in second and third-tier cities in Guangdong in 2005 that are still empty,” he said…

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Hari Seldon » 27 Jan 2010 15:28

Awrite, in continuation of moi above post, strictly just for guffaws only...
clicky

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby kmkraoind » 27 Jan 2010 19:48

China Central Banker Zhu Says Stable Yuan ‘Important’

China is firing salvos that Yen-Dollar will be maintained to its advantage. The world and US has only two options, either reduce their currencies vis-a-vis dollar or face China in trade war. It is interesting if major economies weakens their currencies with dollar what China will say, whether it will stick to its old version "stable currency" or do changes with dollar. If it fixes, then it will loose its positivity if not it will loose its credibility openly.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Satya_anveshi » 27 Jan 2010 19:50

I have an eerie suspicion (CT) that this is linked to global meltdown. I visited Toyota dealership last weekend (Saturday) and I was told that *all* of their their salesmen are on leave. I was like WTF?

Toyota Sales Halt Raises Quality Questions

==added later - Begin==

The auto company said the sales suspension wouldn't affect Lexus or Scion vehicles. Toyota said the Prius, Tacoma, Sienna, Venza, Solara, Yaris, 4Runner, FJ Cruiser, Land Cruiser and select Camry models, including all Camry hybrids, would remain for sale. Those vehicles contain gas pedals produced by a different North American supplier from the one whose parts are invovled in the current sales halt, Toyota has said.

==added later - end==

However, I browsed thru the cars. Each one was superb in its class. I especially liked VENZA; wish I had that many $$$:).

After all Chevy's slogan "May the best car win" may have decidedly convinced *them* that it is game over. It was funny in that after thorough drubbing all these years leading to bankruptcy, they signaled a restart with that slogan. Having the restart too gone nowhere (not that anyone had any doubts), this is coming to the fore. I am remain unconvinced about the defect that was talked in the press ( the pedal issue). I have been driving Camry for years and so do so many of my friends. none has noticed any such issue.

Who would have thought that “quality” will be used as a weapon to destroy Toyota? The very success story that made it world #1.

This and the whole of Japan needs a close watch in the coming weeks/months. If anyone here knows better on this topic please do post and I will shutup with my CT.
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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Hari Seldon » 27 Jan 2010 20:13

Ilargi @ automatic earth sounds like a ghor pessimist but is among the more realist khanomic commentators as any I've seen. Scarily enough. In this piece he literally rips apart the BS all around.

Nowhere to go and going nowhere

And as with all TAE posts, I'll likely find myself quoting almost the entire post only. So what, all in service of satyamev jayte only. This post saddens me a lot, must admit.

Let's start with the recently raised debt ceiling for this yr...
I'm not going to try and find what the CBO this time last year projected the 2009 US budget deficit to be, but I'm willing to bet a lot of bread crumbs that it was a lot less than the $1.4 trillion it turned out to be (three times the 2008 deficit). Today's CBO projection of a $1.35 trillion 2010 deficit inevitably needs to be seen in that pale shade of light.

If you can find any government projection number these days that turns out to be more positive after time, congrats: you're a rare species. With present policies in place, the known total deficit one year from now may well be sharply higher than $1.35 trillion. Even if interest rates don't rise. Which they will.


Re Sri Obama's courageous (not!) deficit cutting proposals....
Obama will announce a "discretionary budget freeze" in the State of the Union, but that's really just for showcase purposes, and not the smartest ones either, by the looks of it. For one thing, 83% of the budget will not be affected at all by the freeze.
{Told ya so. The non-security non-entitlement discretionary spending cut sounded like a 400% PJ the first time I read abt it....}

For another, the 3-year freeze is expected to save $10-15 billion per year initially, and a total of $250 billion over 10 years. If the budget deficit averages $1 trillion for that next decade, the freeze will shave 2.5% off of the overall deficit. And to achieve that, the president will have to fight bitter battles with representatives who rely on that part of the budget to look good in their districts.

I’d say you’d need to save at least 10 times the $250 billion to have any effect (not that that would suffice), but while this can be put up for debate, I would suggest when the President gets to that part of his speech tomorrow night you might as well go get some cold ones. And then take a deep breath and let reality sink in.


And then there's the job picture. Suffice to say it ain't so bright that you'll need shades.
Not only has Obama already committed himself to runaway deficits, he now urgently needs to come with a job creation plan that produces real results. And that will cost. A lot. Of money. That’s not there.

To get from today's U3 number of 15.3 million unemployed, a 10% rate, to a 5% rate and 7.65 million jobless by 2015, the US needs to add 1.53 million jobs each year, on top of the 150,000 per month or 1.8 million per year needed just to play even. That means needing 277,500 jobs every month for 60 months. And that's just if you use U3. Take the far more realistic U6 number, and you're looking at a demand of around 400,000 jobs every single month.


Oh, I'll trust G_d and BLS creativity on this one. They'll find a way to keep U3 below 12% by shrinking the labor pool size at will, betcha. They've already gained experience at it recently.

And that brings us to the T-Rex in the room - housing. The asset class most primed to resume exploding through the Fed's hurriedly placed band-aid piles only.

Really, do you believe it? Well, whether you do or not, you’ll hear a lot about job creation in the President's speech, and in the weeks and months that follow. Me, I’m wondering what all those people would do in their new jobs. How many burgers does one nation need flipped? And what would they be paid? Enough to pay for health care? To buy a home?


{OMG. Ilargi pretty much nails it here. Aur kehne ko kuch nahi raha types.}

Speaking of homes. Mortgage rates are at a record low, the government buys and guarantees just about any and all loans in the market, gives $8000 premiums to buyers, and settles for a 3.5% downpayment.

And in that environment, the November-December monthly drop in the number of existing homes sold was 16.7%, the biggest in over 40 years, in fact since records began.

Now you ask yourself: how much more attractive can you make buying a home? And, alternatively, if and when the government withdraws and interest rates go up, what will happen to housing market prices? And if those go down, as they are bound to do, what happens with the taxpayer trillions put into Fannie and Freddie et al?


Blood chilling-ish only. Re interest rates, shall follow-up below with a separate post on CBO expectations of a interest rate rise. Madness!

"But but but" you may clamor, "if it's really all *that* terrible, how come we don't hear about it 24x7 on the news? How come it doesn't show up in non-BLS stats like the poverty and the crime rate, eh?" you assert.

Well, it has shown up.

And nobody noticed.

Nobody wanted to, perhaps.

The traditional news disseminators are together, resolutely silent on this one. Wonder why, eh?
{Reminds me of our own desi Dilli media going all silent on the phenomenal development transformation happening as we speak in Modi's Gujrat. Doesn't align with their agenda, apparently.}

30% of Americans are hovering around the poverty line, and their numbers are growing rapidly. But poor as they may be, they still stand to lose a lot more money through their federal mortgage "possessions" when that housing market inevitably starts tanking for real. Oh, and Washington needs to bail out state and local governments. So when the poor have become the destitute, the government will start raising taxes. It will have no choice. And how do you think that will influence the pool of prospective home buyers?

I happens to me quite often these days that when I read through the numbers, I see these images of Katrina in my mind's eye, but this time the destruction's nationwide, and there's nowhere to go, even as the country's going nowhere.


Ilargi's a true patriot to be saying it like he sees it. Too many media talking heads, acadhimmis, sarkari ekhanomystics etc have soldout their conscience on this one. Ackthoo only.

And everybody keeps having the wrong conversations. It’s no longer about how to return to prosperity, it’s about how to stave off mayhem, misery, hunger, violence. But that’s not what the president will talk about. And why, then, would his people? It's much more attractive to deny it all a while longer. And be as unprepared as you can be.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Hari Seldon » 27 Jan 2010 20:19

Here's the promised follow-up. Only.

More red ink: CBO projects $1.35 trillion 2010 deficit

New deficit estimates Tuesday project a $1.35 trillion shortfall for the coming year even as Congress debates creation of a bipartisan commission to propose long range steps to relieve the mounting debt facing the nation. The 2010 deficit projection is only modestly less than the $1.4 trillion wave of red ink that the government experienced in 2009, as revenues continue to lag with the slow economic recovery forecast by the Congressional Budget Office

Even in 2011, the Congressional Budget Office is projecting a nearly $1 trillion shortfall, and that picture could well be worse depending on the costs of the war in Afghanistan and what Congress decides on long term tax policy. CBO projects that unemployment will average slightly above 10 percent in the first half of 2010 and then turn downward in the second half. But the building debt carries with an added burden.


OK. "Blah blah" you might say, disinterestedly. Here's the 'interest'-ing part though, both literally and figuratively only.....

Once the economy improves, CBO says, higher interest rates will come back and bite the Treasury trying to finance the accumulated deficits. “Interest payments on the debt are poised to skyrocket,” CBO says. From 2010 through 2020, it projects the annual costs will triple in nominal terms from $207 billion to $723 billion and more than double as a share of GDP.


Digest that. Now head straight for the emergency exits.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Chinmayanand » 27 Jan 2010 22:05


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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Neshant » 27 Jan 2010 22:11

Once the economy improves, CBO says,


... which is a long ways off barring fake statistics.

2014 perhaps?

The only question remaining is who is going to be stuck with the bill via taxation and destruction of savings through inflation even while wages and job opportunities decline.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby paramu » 28 Jan 2010 01:30

Satya_anveshi wrote:This and the whole of Japan needs a close watch in the coming weeks/months. If anyone here knows better on this topic please do post and I will shutup with my CT.


American Airlines wanted to invest in JAL but they refused that and instead filed for bankruptcy. Could be a subtle trade/finance/investment war.
Last edited by paramu on 28 Jan 2010 04:08, edited 1 time in total.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Suraj » 28 Jan 2010 01:46

Bill Gross is really going at the developed economies. PTTRX moving nearly 20% into developing world debt is a major change. His article in Morningstar today has some interesting graphics:
The Ring of Fire
Image
Image
Image

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby ramana » 28 Jan 2010 02:10

So the BIC are developing countries with developed countries risk? they should be in blue zone but are in red zone?

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby ramana » 28 Jan 2010 02:52

About Toyota Recall in US, the pedal mfg CTS claims to WSJ, that he wasn't told about it and that Toyota is only 3% of his business. So more like a pro-active self strike by Toyota.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Suraj » 28 Jan 2010 02:56

ramana wrote:So the BIC are developing countries with developed countries risk? they should be in blue zone but are in red zone?

No, Gross is saying that the BIC countries are lower risk than a most G7 countries, and in particular, the ones in the ring of fire. He's apparently putting his (rather our - I do have a PTTRX position) money where his mouth is.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby SwamyG » 28 Jan 2010 02:57

Ramana gaaru: No, no, no. I think you got it wrong.

His red zone corresponds to those countries that are in the red ring of fire - those are the G7 developed countries which are at higher risk. The other zones are the two circles containing Green and Yellow dotted countries. The chart with blue and red lines are different.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby ramana » 28 Jan 2010 03:39

Thanks. See no wonder I am not an economist.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby svinayak » 28 Jan 2010 03:50

http://www.youtube.com/watch?v=GBenmBCbKFU

Video: American people misled about financial situation RT

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Satya_anveshi » 28 Jan 2010 03:56

Again not to hog up a lot of b/w but to continue on my above post:

Toyota Quality Image May Be ‘Finished’ as Sales, Output Halted

Tata Company must/should be watching this with utmost care besides others.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby paramu » 28 Jan 2010 04:07

Satya_anveshi wrote:Again not to hog up a lot of b/w but to continue on my above post:

Toyota Quality Image May Be ‘Finished’ as Sales, Output Halted

Tata Company must/should be watching this with utmost care besides others.

In the original report that appeared some time back, it reported the accelerator pedal stuck on the floor mat and Toyota is redesigning the floor mat for those models. Now the issue has changed that it is a mechanical problem with gas pedal. Interesting...

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby ramana » 28 Jan 2010 04:27

Not really. this is a new issue. however;
Toyota Part Maker says Incidents are few

Supplier CTS Corp. said Toyota told it about fewer than a dozen cases in which drivers struggled with pedals. It knows of no accidents or injuries tied to the problem. The supplier also said it's not aware of any cases where the pedal became stuck after drivers pushed it down, potentially causing unwanted acceleration.


Apparently the Federal Regulations require a total recall.
Also note its those autos made in North America. Those made elsewhere are still OK. Its a sub-tier supplier supplying a sub-standard part.
Its not Totyota Quality in a Toyota plant itself that is at stake here.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Satya_anveshi » 28 Jan 2010 06:06

As expected:

GM Offering Incentives To Toyota Owners To Switch Vehicles
"It gets down to having customers in the showroom, and we have customers saying 'We don't want these cars anymore,'" said Steve Hill, general manager of GM retail activities. "There are some customers looking to find out more about us right now."

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Hari Seldon » 28 Jan 2010 06:14

Was intrigued when Ilargi made the comment that US poverty had hit the 30% level. Was incredulous, actually. Turns out, it was more rhetorical than real:

In 2008, 91.6 million people—more than 30 percent of the nation’s population—fell below 200 percent of the federal poverty level. More individuals lived in families with incomes between 100 and 200 percent of poverty line (52.5 million) than below the poverty line (39.1 million) in 2008. Between 2000 and 2008, large suburbs saw the fastest growing low-income populations across community types and the greatest uptick in the share of the population living under 200 percent of poverty.


Here's the source report:
30% Of Americans Rapidly Approach Poverty, Or Are Already There

A shocking report from Brookings exposes just how massive America's poverty problem is. While substantial reductions in poverty were made during the 1990's, America's poor have been rocked by the dual economic downturns since 2000.

The result is that poverty grew at twice the rate of U.S. population growth from 2000 - 2008, and now encompasses 39.1 million Americans.


Sure, one may argue that it all depends on the relative definitions of 'poverty'. In India poverty==destitution, in umrika poverty means not having a TV. Still, what concerns me is more the 'flow' part in the stock and flow framework. Umrika starts with a high wealth 'stock' (like Japan in 1990) but the flow seems outward. IOW, trends are against them, at present.

Finally, this bad news has likely become far worse already. This research doesn't include 2009 since full data hasn't come out yet. When it does, expect a huge up-tick in poverty rates given since that's when the real brunt of the recent crisis hit 'Main St.'.


Unkil will ride out this storm. I expect things to get worse before they get better but eventually they should get better, for all our sakes.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Hari Seldon » 28 Jan 2010 06:18

x-post:

China's runaway growth train on a dangerous course

Professor Yu Yongding says he is ''one of 50 well-known Chinese economists in China''. Some respected market economists say he has a better grasp of China's macro-economy than anybody else, full stop.


OK, creds established, I see.

"When a country has an investment rate over 50 per cent [of] GDP and rising, you say this country is not suffering from overcapacity! … are you serious?"


Yu has elaborated further on his views. He believes China is trapped in a cycle where constantly rising growth in investment is constantly increasing China's supply, but consumption has conspicuously failed to grow fast enough to absorb it. And so China is forced to increase investment in order to provide enough demand to absorb the previous round of increased supply, thus creating ever-widening cycles of oversupply. In this manner, the investment share of gross domestic product has increased from a quarter of GDP in 2001 to at least half. "There is sort of a chase - demand chasing supply and then more demand is needed to chase more supply," he says. "This is of course an unsustainable process."

From 2005 China's overcapacity problem had been "concealed" by ever-increasing net exports - but that strategy was interrupted by the financial crisis. Then came last year's globally unprecedented stimulus-investment binge, which might not have been so worrying if it were delivering things that people needed. But the Government's hand in resource allocation has grown heavier since the crisis without reforms to make officials more responsible for what they spend. "As a result of the institutional arrangements in China, local governments have an insatiable appetite for grandiose investment projects and sub-optimal allocation of resources," as Yu previously said, in his Richard Snape lecture for the Productivity Commission in November.

So there are now airports without towns, highways and high-speed railways running parallel, and towns where peasants are building houses for no reason other than to tear them down again because they know that will earn them more compensation when the local government inevitably appropriates their land. It's great for Australia in the short term, because we supply the materials, but it's unsustainable. One day China's overcapacity problem will become real.

That will be the Wile E. Coyote moment: when the resource-exporting world falls off a cliff.


Read it all.

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Satya_anveshi » 28 Jan 2010 06:46

OK.. Folks I found something interesting from almost about an year ago. This article refers about a 12 month reprieve on imposing trade wars which seem to have ended Nov 2009. It is a coincidence that all this $hit began to happen since around the same time? Toyota's first recall came out on Sep 29, 09.

Only Obama can avert trade war - Jan 30, 2009

At a meeting of the G20 nations in Washington, the leaders of the world's most powerful countries pledged to support free trade. "In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services."

Setting only a 12-month limit was alarming enough, but the speed with which key signators of the G20 agreement breached even that pledge, raising the risk of trade wars, has been astonishing. The U.S. steel protectionism measure clearly breaks the G20 commitment. Russia imposed tariffs on imported automobiles, Brazil brought in an import licencing system, Europe reinstated subsidies for dairy products, and just about every nation has rolled out subsidy schemes to aid key auto firms and sectors, such as aircraft manufacture, that face difficulties.


The G20 meeting referred has happened on Nov 15, 2008 and the wording/declaration can be seen here: Washington Declaration

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby paramu » 28 Jan 2010 08:11

ramana wrote:Not really. this is a new issue. however;
Toyota Part Maker says Incidents are few


Looks like it is the same issue:
Toyota expands recall to 1 million more units: report
TOKYO (MarketWatch) -- Toyota Motor Corp. expanded its recall to another one million vehicles to replace floor mats that risk trapping accelerator pedals and causing sudden acceleration, the Detroit Free Press reported on its Web site Wednesday, citing a letter from Toyota to U.S. regulators.


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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby amol.p » 28 Jan 2010 09:51

US new home sales fall in Dec for 2nd month in a row

Sales of newly built US single-family homes fell unexpectedly in December, data showed on Wednesday, the latest indication that the government-led housing recovery might be losing some steam. The Commerce Department said sales fell 7.6% to a 342,000 unit annual rate from an upwardly revised 370,000 units in November. It was the second straight month that new home sales declined. US stock indexes fell on the data, while government bond prices held at higher levels.

“This isn’t good news. It should put some pressure on the market, especially coming after the disappointing outlooks we saw,” said Dan Cook, senior market analyst at IG Markets in Chicago.This was again related to the potential ending of the home buyer tax credit

http://economictimes.indiatimes.com/new ... 507125.cms

.....Imagine what will happen when Fed stops supporting mortgage insuarnce companies Fannie & Freddie......which it plans to do, so that mortgage & mortgage based insurance companies stand on there own........

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby amol.p » 28 Jan 2010 10:01

China Shouldn’t Rescue Greece Through Debt Purchase

.........means China is buying greece debt & trying to rescue greece.....another longterm play to get hold in EU

http://www.bloomberg.com/apps/news?pid= ... eu9M&pos=4

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby amit » 28 Jan 2010 10:35

amol.p wrote:China Shouldn’t Rescue Greece Through Debt Purchase

.........means China is buying greece debt & trying to rescue greece.....another longterm play to get hold in EU

http://www.bloomberg.com/apps/news?pid= ... eu9M&pos=4


Interesting, interesting.

This gentleman Yu Yongding is the same guy in the SMH over-capacity story posted by Hari ji.

Now the SMH story is datelined Jan25 while the Bloomberg one is dated Jan28. Which means Shri Yu ji has been quite busy of late criticising government policies.

Now I wonder why?

Shir Yu ji, according to the SMH article is among the top 50 economists in China. But does that give him immunity to go forth and criticise? So is he playing lone ranger?

Or is Shri Yu ji backed by a powerful section of the CCP which are themselves rather alarmed with what's going on?

I guess we SDREs should keep an eye on whether we're seeing a Made-In-China version of glasnost? Or is it something more sinister? What are the SFREs up to? [SFRE: Short Fair Rice Eating; can I claim copyright?]

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Satya_anveshi » 28 Jan 2010 10:56

I am thinking US has decidedly shifted gears towards protectionism. It is firing from multiple cylinders China, Japan, Euro, India (well there is some new USCIS memo on H1B that is playing havoc among IT/Vty desis and desi companies).

I am looking for visible signs for its alignment with UK and we should see it any time now (again UK will get to ride free).

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby svinayak » 28 Jan 2010 12:25

paramu wrote:
ramana wrote:Not really. this is a new issue. however;
Toyota Part Maker says Incidents are few


Looks like it is the same issue:
Toyota expands recall to 1 million more units: report
TOKYO (MarketWatch) -- Toyota Motor Corp. expanded its recall to another one million vehicles to replace floor mats that risk trapping accelerator pedals and causing sudden acceleration, the Detroit Free Press reported on its Web site Wednesday, citing a letter from Toyota to U.S. regulators.


There is a economic cold war between Japan and US. Japan products are not really welcome inside US as freely as before

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Re: Perspectives on the global economic meltdown (Jan 26 2010)

Postby Satya_anveshi » 28 Jan 2010 13:01

If the -ve media attention we are seeing about Toyota gets uncontrolled, I am sure soon we will see people asking toyota drivers to get out and leave the vehicle on the highway or whichever road it is seen and stop driving as the risk is not limited to just the driver but passed onto second and third parties also. At that point, the $hit might have truly hit the fan and Toyota will be history.

Intersting to see how this is going to end finally.


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