Global Economy

[Katare]

Ford surprises with $2.1-bn profit, raises outlook

Ford Motor Co posted a $2.1 billion first-quarter profit that exceeded Wall Street forecasts as North American production and sales picked up, and it raised its 2010 outlook to “solidly profitable.”

Hihly diversified manufacturing conglomarate like 3M are a good indicator of general health of US economy.....

3M quarterly profit climbs 80% on higher sales; lifts outlook

"3M is roughly back to where it was in the first quarter of '08," according to Nicholas Heymann, an analyst with Sterne Agee. "Most companies are only halfway or two thirds of the way there."

3M raised its full-year profit outlook to a range of $5.40 to $5.60 a share, from a prior view of $4.90 to $5.10 a share.

[Sanjay M]

the Eastern European lobby in US is still adapting to the new environment. as Western Europe declines, it won't be long into the future when institutions like the NATO become useless and essentially defunct, once Germany becomes the 'normal' power. they will ruthlessly cut deals with Russia, which is an antithesis to NATO, EU, and the Eastern Europeans.

also, this new "Euro-phile" group isn't likely to pander to DP. and DP won't welcome them. even the legendary Brzezinsky has so far failed to convince the DP establishment to seriously side with Poland/East Europe.

Certainly they have - that's long been the case.

http://www.washingtonpost.com/wp-dyn/co ... 03887.html

Even now the Atlanticist hawks are up in arms over the latest "sellout" by Ukraine's new govt in extending leasing terms to Russia.

Gerhard Schroeder was deeply reviled by them for his cordial relations with Putin. Even Obama's appointees to GM's board moved to thwart Merkel from setting Opel free with the help of a Russian bank.
The Atlanticists have gotten Washington terrified of any potential German-Russian "axis", to ensure that US meddling is perpetuated on their behalf.

[steve]

Greek bonds rated 'junk' by Standard & Poor's.......Portugal's on the edge

Global stock markets tumbled after Greece's debt was downgraded to "junk" by rating agency Standard & Poor's over concerns that the country may default.


It makes the struggling nation the first eurozone member to have its debt downgraded to junk level.

Portugal's debt was also lowered on fears of "contagion", adding to the markets' rout and a fall in the euro.

Germany immediately said it would not "let Greece fall", and there were signs that an aid package could be increased.

Greece wants 40bn euros (£34bn) from eurozone governments and the International Monetary Fund (IMF) to shore up its finances.

But there are fears it will not meet conditions needed to access the funds it needs to make looming debt repayments.

Doubts intensify

When ratings agencies downgrade the country's credit rating - it means they think it is now a riskier place to invest. If it reaches junk status, a country loses its investment grade status. Some financial institutions have rules prohibiting them from investing in "junk" bonds.

Greece's 2-year government bond yield surged to almost 15% on Tuesday, making it highly expensive for the country to borrow from the debt market.

Greek 5-year yields hit 10.6%, higher than many emerging market economies, including Ecuador at 10.5% and Ukraine at 7.1%.

The 2-year Portuguese bond yield jumped to 5.23% from 4.16%.

S&P said it was lowering its rating on Greece's debt to BB+ from BBB-. It also reducing Portugal's debt rating by two notches to A- as doubts intensified about countries with substantial debt relative to GDP...........................

[steve]

http://news.bbc.co.uk/2/hi/business/8647441.stm

BBC: Greek bonds rated at junk status.

[Sanjay M]

Too little, too late - the absence of any centralized political unity continues to expose the weaknesses of the EU model. Merkel's party will surely be losing the next political by-elections over any bailout gestures she makes now. Meanwhile, the contagion is spreading faster than the divided Euro-pols can react.

Portugal, Spain, Italy - they'll all come tumbling down, no matter what. Americans have already launched their Tea Party revolt, but by the time the overburdened and under-employed Germans rouse to anger, they'll be burning the Reichstag.

Time to up India's voting share at the IMF & World Bank again?

[vina]

I hope the big three in EU would handle problems in their backyard by acting in-time and decisively. Recovery in developed world is too fragile, too slow and too young to handle another debt/credit meltdown, even if it is regional in nature.......

Nope. The party is just beginning. It wont end until the combustible fissile material in China gets blown up in a massive Kaboom.

Fundamentally, the Chinese bubble (shielded so far by the Chinese command economy controls like capital and quantitative controls and walling off from global economy) is the source of the global imbalance. Things cant set themselves right unless that blows up.

There is a limit to what the Communist party can wall off and control. Things have an uncanny way of slipping in under the radar. You don't really know what the trigger that ignites the combustible material will be. But you know, have fuel, will ignite.. .

Only when the Chinese Kaboom happens, the asset price inflation around the world will stop and the global imbalance can work itself out, unemployed Americans and Europeans can start finding work (right now China steals employment from all others) and there can be a natural order.

As Master Yoda said "Great Disturbance in the Force, I feel" (that disturbance is due to China).. "Bring back into balance the Force, the great event will".

May the Force be with you

[Neshant]

A must read!!! balanced and positive article for anyone investing in stocks........

Still $2.8 Trillion (of ~4 trillion at the peak of meltdown) is sitting in money market accounts waiting to be deployed at the next pull back. These people have already missed the best stock market rally of their lifetime but there may still be some upside left.....

I would not be suckered into going into the stock market.

It looks rigged.

There has not been any new industry in the last 10 years creating high paying jobs. Meanwhile a ton of jobs have been sent overseas from the west. This fact has not changed no matter what the hype.

The only way the stock market will stay up and keep going up is with

a) more rigging
b) more printing

[rsingh]

There is talk of Neuro..........northern Euro. So it is true that Europe spreads till Paris

[Katare]

Higher consumer spending in Q1 still lacks vigor (USA)

[Katare]

Paul Krugman in NY Times about Euro/Greece......I think when you elect to join togather you have take care of each other, that's whol point of any union IMO. Is EU a family or they are bunch of neighbors tied togather with Euro who would break away at first sign of trouble?

The Euro Trap

[Neshant]

I doubt a german guy wants to pay for spending that some greek guy is doing - family or no family.

Maybe the EU family being talked about is more along the lines of a mafia family.

If you don't pay your dues, you will be "taken care of" (for good).

[Katare]

No one pays for others in capitalistic system. German's are paying to protect their own investment and debt holdings although it also helps out Greeks.

Greece seals rescue deal, warns sacrifices needed

[shyamd]

Katare - It has always been like that. Study what the IMF did in Argentina. They only offered a bailout for Western Banks - so the bailout money never even left the US. Stiglitz explains it well in his book Making Globalisation Work.

[sampat]

Good Infographic: Europe's web of debt

Europe's web of debt

[Sanjay M]

No one pays for others in capitalistic system. German's are paying to protect their own investment and debt holdings although it also helps out Greeks.

Greece seals rescue deal, warns sacrifices needed

Germans are only paying due to lack of visible alternatives. Like I said, if they ditch the Euro and re-form a new zone that includes Russia, then they can escape the trap they're now in. Otherwise, the Germans will have to keep paying again and again, even after they have nothing left to give. If the Germans couldn't conquer Europe militarily, then they surely can't do so monetarily. They'll only get mired down and defeated.

Merkel will pay the price at the next electoral polling, and her party will steadily shrink in power, as the German socialists make a comeback. This will again lead Germany towards improved ties with Russia, which is in my opinion a good thing.

[Sanjay M]

Futures Traders Betting Heavily Against Euro

The market speaketh quite loudly

[Katare]

Katare - It has always been like that. Study what the IMF did in Argentina. They only offered a bailout for Western Banks - so the bailout money never even left the US. Stiglitz explains it well in his book Making Globalisation Work.

shyamd,
right!
Most people don't understand how IMF works (although they think they do) and what it is supposed to do. Most of the time countries that get in trouble are the socialist/left leaning countries. IMF usually derisks them by making them eat humble pie of fiscal conservatism that they so abhor. IMF is designed in such a way (like a pool) that a nation can always claim its share whenever it needs but if it wants other nation's share it must agree to derisk to ensure their money is protected. Western nations usually have surplus capital to export so more often than not their institutions end up owning the debt in troubled countries. IMF was also largely made up of western capital so they are the one who end up bailing out troubled countries.

It is the much hated neo-con derisking program/conditions of IMF that fix the problem not the standby loans. But like a bankruptcy court IMF does a thankless job.

[Sanjay M]

RT also covers the fact that those bailing out Greece don't want it to stop buying their military technology:



So in a some ways, this is not unlike the US bailout for Pak

[Katare]

I like the part that for a change this shit is happening in the western world!

[Sanjay M]

Meanwhile, corporate Japan is afraid of growing Chinese takeovers of Japanese firms:

http://www.economist.com/business-finan ... d=16010281

Heh, what Kublai Khan and his invasion fleet were unable to accomplish in the 13th century, perhaps modern China will be successful in achieving through LBO's:

http://en.wikipedia.org/wiki/Mongol_invasions_of_Japan

[Katare]

Sanjay,

That is an entirely possible "possibility". In our world economic, religious and cultural invasions are the only options left. Invasion of civilized I guess

News from Euroland is not good......
Meanwhile panic spreads against spain which holds pretty reasonable levels of public debts and ran a surplus as recently as 2007. Are we looking at a new pan European bailout? If such a bailout is needed who would fund it? IMF+China+Japan?

Spain: The site of the next debt crisis?

[Katare]

Private sector adds jobs in April, planned cuts fall

U.S. private employers added 32,000 jobs in April, roughly in line with expectations, and revised data showed an unexpected rise in March jobs.

The March private sector figure was revised to show a gain of 19,000 -- the first increase since January 2008, according to a report by payrolls processor ADP Employer Services on Wednesday. The March figure was originally reported as a fall of 23,000.

According to a Reuters survey, nonfarm payrolls likely increased by 200,000 in April, adding to the prior month's 162,000 gain. The unemployment rate, however, is expected to remain unchanged at 9.7 percent for a fourth month. The jobs report is due Friday.

A separate report on Wednesday showed the number of planned layoffs at U.S. firms fell more than 40 percent in April to the lowest level in nearly four years, suggesting employers are more confident about economic conditions.

[praksam]

The CDS Traders' Verdict Is In - UK In Deep Shit... As Are France And Deutschland

http://www.zerohedge.com/article/cds-tr ... eutschland

[Katare]

Several months back I wrote that almost all the indicators for US economic recovery are in place except the job market. It seems the final piece of the recovery has fallen in the place. As with all the previous recoveries most reported economic data would be continuously revised upwards. People coming out of a crisis are usually very cautious and conservative in reporting/believing good news.

Largest hiring burst in years, but jobless rate u

The economy got what it needed in April: A burst of hiring that added a net 290,000 jobs, the biggest monthly total in four years.

The hiring last month of 66,000 temporary government workers to conduct the census added to overall job creation. But private employers -- the backbone of the economy -- contributed the most: A surprisingly strong 231,000 jobs, the most since March 2006, the Labor Department said Friday.

The employment picture in both February and March turned out to be stronger than previously thought. Payrolls grew by 230,000 in March, better than the 162,000 first reported. And, 39,000 jobs were actually added in February, an improvement from the previous estimate of 14,000 losses.

[SwamyG]

x-posting....

[Katare]

So in a recap of the world economy, as predicted China recovered first and fasted and now is massively over heating, Indian growth is sizzling and monetary policy is changing from one of "accommodative" to one of “friction”. Rest of the Asia, ex-Japan, is also appears to be recovering with good speed as expected/predicted.

North America is recovering slow but steady and would need continuous monetary policy and stimulus support for few more quarters to gain momentum. Chances of American breads getting buttered on both sides anytime soon are not possible with the current speed and momentum of the recovery.

The United Socialist republics of Euroland (USRE) is the one place that seems like is in deep doo-doo for now.

Latin America is unknown/untalked entity here while African continent doesn't really matter much in large scale of the things.

I think if USRE can put its house in order in next few weeks chances of world recovering from this recession appear much better now than alternative outcome like double dip or extended stagnation.

[Katare]

AIG was the most affected company during financial meltdown, it was a punching bag for all and sundry in recession. AIG served as an example of what was wrong with Banking/finacing system in western world in last two years. After almost all bailed out banks and Auto companies even AIG has reported profit and improvements in business......

Indeed a rising tide lifts all the ships.....

AIG returns to profitability in 1st quarter

[Satya_anveshi]

It has not made its foray here in this thread yet but IMO it will be a major news/incident that will define some of the global economy related moves in the very near future.

The oil spill off the Louisiana gulf coast has been spilling oil for weeks and the latest amounts surpass all the previous estimates that were provide by BP as well other "experts". Not 1,000 bbl/day nor 5,000 bbl/day, there are now estimates of 60,000 bbl/day since Apr 20, 2010 explosion. There is no clear solution and end in sight.

In terms of magnitude by the amount of oil spilled, this one has surpassed Exxon Valdez incident off Alaska and became the worst oil spill disaster in the history.

Here are some images from Huff post of May 06 and some images clearly show the spill has reached shores already

Where are the Effing environmentalists in US? No debate / coverage about the ill effects this would leave on global and local economy, environment, oil market and prices? As everything with US, the timing of this disaster could not have come at worse time - that is when Obama admin is trying to encourage drilling in Gulf of Mexico where there is abundant oil and stop killing people in the mid-east and at various places in their resource grab.

I am shocked by the lack of media coverage in US for this grave disaster that is happening/unfolding right before our eyes. Is it because the company that is responsible for the prevention of this disaster belongs to their master British or is a baby of standard oil(?) ? Would they have given the same response of the company had been a Chinese or a Brazilian or a Venezuelan firm?

[Sanjay M]

Would the activist outcry have been so limited if Bush had still been in office? We both know the answer to that.

[Neshant]

I am shocked by the lack of media coverage in US for this grave disaster that is happening/unfolding right before our eyes. Is it because the company that is responsible for the prevention of this disaster belongs to their master British or is a baby of standard oil(?) ? Would they have given the same response of the company had been a Chinese or a Brazilian or a Venezuelan firm?

One can only imagine what the media circus would be had it been Indian Oil Corporation or Reliance or some such Indian company drilling.

Its a big mistake to be pushing through that nuclear non-liablility bill. If just oil can cause this much of a mess, just imagine what would happen if a nuke reactor went off due to terrorism or bad design. The consequences would be of biblical proportions.

[Prem]

CHINDIA Auto Sales Top U.S
http://seekingalpha.com/article/204310- ... es-top-u-s

China and India -- CHINDIA, in popular lingo -- are now automobile market leaders in passenger cars by posting a staggering 34% increase to 1.11 million vehicles and 39.5% to 143,976 vehicles, respectively, during April. In contrast, passenger car sales in the U.S. during the month rose 20%.India, Maruti Suzuki, accounting for 47.7% of sales, dominated sales of 143,976 cars in April. A rapidly growing economy, easy availability of credit and bulk purchases at the end of the financial year in March in order to take advantage of tax breaks on depreciation were the driving factors behind the sale growth in the country
The results will no doubt attract global automakers to continue to seek refuge in these countries to drive revenues in a sluggish auto industry and to tap the growing market potential in two of Asia’s largest economies

[RoyG]

Several months back I wrote that almost all the indicators for US economic recovery are in place except the job market. It seems the final piece of the recovery has fallen in the place. As with all the previous recoveries most reported economic data would be continuously revised upwards. People coming out of a crisis are usually very cautious and conservative in reporting/believing good news.

Largest hiring burst in years, but jobless rate u

The economy got what it needed in April: A burst of hiring that added a net 290,000 jobs, the biggest monthly total in four years.

The hiring last month of 66,000 temporary government workers to conduct the census added to overall job creation. But private employers -- the backbone of the economy -- contributed the most: A surprisingly strong 231,000 jobs, the most since March 2006, the Labor Department said Friday.

The employment picture in both February and March turned out to be stronger than previously thought. Payrolls grew by 230,000 in March, better than the 162,000 first reported. And, 39,000 jobs were actually added in February, an improvement from the previous estimate of 14,000 losses.

I actually don't agree with you at all. I feel that these numbers are temporary b/c of the stimulus and that we are very close to economic collapse. We have more debt than when the recession began and around 70% of our GDP is consumer spending money which is borrowed. I think what we'll see toward the end of this year is higher interest rates, taxes, unemployment, and inflation. The US cannot hope to get out of this without much higher savings, less government spending, and manufacturing.

[Neshant]

Several months back I wrote that almost all the indicators for US economic recovery are in place except the job market.

That's like saying you are attending a board meeting fully dressed but without your pants on.

I think you have bought too much into this recovery - yet there is not a single new industry since 2000 which is creating high paying jobs on a large scale. House flipping is gone, financial "industry" (more like con artistry) will soon be history, some real industry needs to emerge soon or its down hill all the way. Govt spending is just wracking up debt, destroying saver's capital and setting the economy on a path to ruin.

[svinayak]

I think you have bought too much into this recovery - yet there is not a single new industry since 2000 which is creating high paying jobs on a large scale. House flipping is gone, financial "industry" (more like con artistry) will soon be history, some real industry needs to emerge soon or its down hill all the way. Govt spending is just wracking up debt, destroying saver's capital and setting the economy on a path to ruin.

This actually stagflation and fall in income in the economy. All the recovery is the same business with lower income and lower transaction cost compared to the previous period.

[Pulikeshi]

^^ Agree! Like a direct current bias that is now at a lower level.
The signal riding the bias is happily oblivious

[Chinmayanand]

India, Brazil drag EU to WTO

HTC sues to block iPhone, iPad, iPod sales in US

[Neshant]

This actually stagflation and fall in income in the economy. All the recovery is the same business with lower income and lower transaction cost compared to the previous period.

i don't see any fall in transaction cost. Transaction of what?

if anything there is a rise in costs as the federal reserve shifts the losses of their shareholder banks onto the backs of taxpayers and encourages the govt to raise tax on people to pay for it. So transaction costs will rise in the form of all kinds of taxes & fees. Also they are printing money to rig asset prices and keep them artificially high while income is falling.

[praksam]

Greek tragedy is first act of longer global drama

http://www.thenational.ae/apps/pbcs.dll ... 39930/1080

Nice Article. Quoting some excerpts.

Unfortunately for the European Union, sentiment among economists and bankers is tending towards the view that the whole system needs fixing.Just as that view sinks in, a leading global economist has set out his vision for the comfortable societies of the US and Europe: however hard they try to boost living standards, they are fated to economic decline and loss of power to China and India.These predictions are set out by Stephen King, the chief economist for HSBC, in Losing Control: The Emerging Threats to Western Prosperity

As global power seeps away, it will be impossible for the US to impose its will on developing countries by military force. At the same time, the West’s ability to rig markets to keep its citizens happy will decline.

[Chinmayanand]

Ultra-rich are the biggest pessimists

Ultra-high net worth individuals are more pessimistic about the global economy than less-wealthy peers or even professional economists, according to the results of a new survey.

The very wealthy, or those with liquid assets of more than £10m ($14.4m), are more downbeat about global economic prospects than anyone else, despite being the least affected by the downturn, according to research published to today by UK wealth manager Barclays Wealth.
A quarter of UHNWIs think the global economy will deteriorate over the next five years, compared with an average of 17% of respondents, according to 'Barclays Wealth Insights Volume 11: The Changing Wealth of Nations', co-written by consultant Ledbury Research.
Only 15% believe it will grow, versus an average of 18%.
Individuals in certain geographies were gloomier than others. The top five most optimistic regions were Spain, Qatar, Saudi Arabia, Ireland and India. Among Spanish respondents 40% believed the economy would grow over the next five years, despite Spanish HNWIs being the most impacted by the downturn, with two thirds of Spanish respondents saying their personal net worth was very or quite negatively impacted by the recession.
The most pessimistic regions were Monaco, Japan, the US, Switzerland and the UK. Over half of Monegasque interviewees said they expect the economy to deteriorate over the next five years.
The source of wealth does not seem to make much difference to respondents’ views on global economic prospects. Entrepreneurs are not markedly more optimistic than those who have accumulated wealth through investment gains, said the report.
Over 2,000 high net worth individuals with over £1m in investable assets and 200 with more than £10m were interviewed for the survey, along with a panel of experts. Respondents were drawn from 20 countries around the world. Interviews took place between February and March 2010.

[abhishek_sharma]

The economics of Obama's national security doctrine

http://shadow.foreignpolicy.com/posts/2 ... y_doctrine