China Financial Markets: When Will China Emerge From the Global Crisis?
by ilene - February 10th, 2012 4:22 pm
Courtesy of Mish
I am saddened to report that Michael Pettis' site China Financial Markets has been blocked. The link redirects to a site with a one line message "This Account Has Been Suspended". When I have more details, I will post them.
Note: I just heard back from Pettis who is unsure of what happened. Hopefully this will be cleared up soon. I am leaving the rest of this post as I originally wrote it.
This is really a shame because Pettis is invariably a great read. I am personally indebted because he has taught me most of what I know about trade.
Michael Pettis is Professor of Finance at Peking University, and Senior Associate at the Carnegie Endowment for International Peace.
When Will China Emerge from the Global Crisis?
Via email (this may have been posted on his blog but obviously I cannot tell), please consider snips fromWhen will China emerge from the global crisis? by Michael Pettis.
Caixin, one of my favorite magazines, has an interview with Liu Mingkang, former China Banking Regulation Commission chairman. In it Liu says: I've said in the past, that this economic crisis will spread from the United States to Europe and finally land in Asia. Now we can see that it's already begun influencing Asia.
In 2008 and 2009 I argued that the crisis we were undergoing would affect every major economy in the world, but not necessarily at the same pace. I suggested that the US typically is quick to adjust and, given the pace of deleveraging that was already taking place, I expected that it would be the first major economy out of the crisis, probably in the next two to three years, as private debt levels continue to decline and public debt growth slows.
By now I think the prediction that the US will be among the first and China among the last to escape the crisis no longer seems as eccentric. Others are making similar predictions. There is growing awareness that China has not yet addressed the changes forced upon it by the global crisis, and will have to do so soon. It has certainly become easier to see how the crisis has spread, as Liu points out, first from the US and then to Europe and now to Asia.
It is important to note that it is not just Liu who
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DiggPetroleum 3-Month Rolling Average Turns Sharply Lower; Negative Shipping Rates; Collapse in Global Trade
by ilene - February 10th, 2012 4:15 pm
Courtesy of Mish
On February 6, I noted (with huge thanks to reader Tim Wallace) a Huge Plunge In Petroleum and Gasoline Usage.
Tim used weekly numbers, which show, much week-to-week volatility. Instead, I proposed using rolling three-month averages, compared to the same three months in prior years.
Today I received some updated charts that are much easier to see precisely what is happening.
Gasoline Usage Last Three Months vs. Last Three Months Prior Years
click on any chart for sharper image
Gasoline Usage by Quarter Ending December 2011
Petroleum Usage by Quarter Ending December 2011
Wallace writes "Gasoline and petroleum demand recently has plunged more than at any time in the recession. When you see petroleum usage back to numbers in the 1990's, you know there is serious economic trouble no matter what the talking heads say."
Wallace willing, each month I will post the "Petroleum Rolling Three-Month Average Index". Hopefully we can get a derivative of that first chart, "Percent Change From a Year Ago".
At the end of February the comparison will be December – January – February vs. the same three months in prior years.
Negative Shipping Rents
Amazingly, shipping rates have dropped so low, shippers will pay you to ship, just to get the cargo vessels to better locations.
Bloomberg reports Charter Rates Go Negative
Glencore International Plc paid nothing to hire a dry-bulk ship with the vessel’s operator paying $2,000 a day of the trader’s fuel costs after freight rates plunged to all-time lows.
The vessel will haul a cargo of grains to Europe, putting the carrier in a better position for its next shipment, he said.
“Our other option was to stay in the Pacific and earn poor revenues or ballast to the Atlantic and pay the fuel ourselves,” Rodley said. Ballasting refers to sailing without a cargo. Charles Watenphul, a spokesman for Glencore, declined to comment in an e-mailed response to questions.
Charters for the so-called backhaul routes that reposition ships to the Atlantic Ocean region from the Pacific are falling to the lowest since indexes started, exchange data show. Rents for Capesize ships that haul ore and grain on backhaul routes were at minus $7,342 a day, the lowest
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Why Is Gasoline Consumption Tanking?
by ilene - February 10th, 2012 2:51 pm
Courtesy of Charles Hugh Smith from Of Two Minds
Why Is Gasoline Consumption Tanking?
Gasoline deliveries reflect recession and growth. The recent drop in retail gasoline deliveries is signalling a sharp contraction ahead.
Mish recently posted some intriguing charts depicting a significant decline in gasoline consumption. Then correspondent Joe R. forwarded me this stunning chart of gasoline retail deliveries, from the U.S. Energy Information Administration: (EIA)
As Joe noted, this data is interesting because it is un-manipulated, that is, it is not "seasonally adjusted" or run through some black-box modifications like so much other government data.
Retail gasoline deliveries, already well below 1980 levels, have absolutely fallen off a cliff. Is the plunge inventory-related, i.e. are storage facilities so full that retailers are simply putting off deliveries?
Though I don't have data on hand to support this, I know from one of my correspondents who is in the gasoline distribution/delivery business that gasoline is very much a "just in time" commodity: gas stations are often close to running out of fuel when they get a delivery. Stations aren't holding huge quantities of surplus gasoline; that's not how the business works.
Given the absence of "extra storage" in gas stations (and the fact that the number of gas stations has fallen dramatically since 1980), it is reasonable to conclude that retail delivery is largely a function of demand, i.e. gasoline consumption.
Even if you dismiss the recent plunge as an outlier, the declines in retail gasoline deliveries are mind-boggling. If you look at the data from 1983 to 2011 on the link above, you will note that delivery declines align with recessions.
For example, deliveries jumped from 50.1 million gallons per day (MGD) in November 1983, when the nation was emerging from the deepest postwar recession then on record, to 58 MGD the following November (1984).
Deliveries steadily rose to a peak of 67.1 MGD in July 1998, declined marginally in the 2001-2 recession and then surged to 66.8 MGD in August 2003. If we just look at one month--say November--then we see that deliveries remained in a remarkably consistent channel from 1994 to 2008, between 54 MGD and 63 MGD, with the higher numbers occuring in the "peak bubble years" of 1998 and 2003.
In 2010, gasoline deliveries declined to the low 40s--literally falling off the charts. In November 1983, deliveries were 51.1 MGD; in November 2010,…
Obama Revises CBO Deficit Forecast, Predicts 110% Debt-To-GDP By End Of 2013
by ilene - February 10th, 2012 12:54 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
While we have excoriated the unemployable, C-grade, goalseeking, manipulative excel hacks at the CBO on more than one occasion by now (see here, here and here), it appears this time it is the administration itself which has shown that when it comes to predicting the future, only "pledging" Greece is potentially worse than the CBO.
WSJ reports that "President Barack Obama's budget request to Congress on Monday will forecast a deficit of $1.33 trillion in fiscal year 2012 and will include hundreds of billions of dollars of proposed infrastructure spending, according to draft documents viewed by Dow Jones Newswires and The Wall Street Journal. The projected deficit is higher than the $1.296 trillion deficit in 2011 and also slightly higher than a roughly $1.15 trillion projection released by the Congressional Budget Office last week.
The budget, according to the documents, will forecast a $901 billion deficit for fiscal 2013, which would be equivalent to 5.5% of gross domestic product. That is up from the administration's September forecast of a deficit of $833 billion, or 5.1% of GDP." Where does the CBO see the 2013 budget (deficit of course): -$585 billion, or a 35% delta from the impartial CBO! In other words between 2012 and 2013 the difference between the CBO and Obama's own numbers will be a total of $542 billion. That's $542 billion more debt than the CBO, Treasury and TBAC predict will be needed. In other words while we already know that the total debt by the end of 2012 will be about $16.4 trillion (and likely more, we just use the next debt target, pardon debt ceiling as a referenece point), this means that by the end of 2013, total US debt will be at least $17.4 trillion. Assuming that US 2011 GDP of $15.1 trillion grows by the consensus forecast 2% in 2012 and 3% in 2013, it means that by the end of next year GDP will be $15.8 trillion, or a debt-to-GDP ratio of 110%. Half way from where we are now, to where Italy was yesterday. And of course, both the real final deficit and Debt to GDP will be far, far worse, but that's irrelevant.
More from WSJ:
"The Administration forecast is used to develop the Budget, and at
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Heroes
by ilene - February 10th, 2012 11:48 am
Heroes
Courtesy of Bruce Krasting
I know a man. Call him Eddie. He’s African American, going on about 63. When he was a boy he had no real home or much education, so when he was eighteen he took the only option available to him. He joined the military. That was 1967.
He must have been a hell of a soldier. He ended up in the Army’s 1st Cavalry Division. (One of the toughest outfits around.)
In February of 1968 he fought in the battle of Hue during the Tet offensive. He was in non-stop firefights for three weeks. He said half his platoon were killed or wounded. He told me about the time he held onto a fellow soldier, while he bled to death from a sniper round through the throat.
After the Tet Offensive his tour was up, but for some stupid reason (probably a few thousand dollars) he did a second tour. In April of 1968 he went back “up country” with the 1st Cav. This time he fought in the A Shau Valley. (This was referred to at the “Valley of Death". The fighting was as bad as any combat in history). He once talked of the time that he spent a night in a bomb crater with two dead comrades while the Viet Cong were shooting AK47s with green tracers over his head. He also talked about killing his enemy in hand-to-hand combat. His buddies did the same. For some reason, Eddie walked away from it.
But he was a broken man. He has Post Traumatic Stress Disorder (PTSD). He has never been able to function properly. He is afraid of everything. On the Fourth of July he has to be sedated. He’s terrified by the noise of the fireworks.
The Army never questioned that he was damaged goods, and that it was his time in battle that was responsible. They gave him antidepressants; after a while he got a half disability pension. Life was just a struggle. Eight years ago I banged on a bunch of doors and helped him get a full disability pension. He’s okay these days, sort of.
I bring up Eddie’s story in connection with a new report from the Congressional Budget Office (CBO).
The wars we fight today are no different than those of 1968, or any other war. Almost one in four (21%)…
The Shorts Have Left the Building
by ilene - February 10th, 2012 10:12 am
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Following the market's "sudden" realization in December that the ECB had been quietly pumping $800 billion, or more than the entire QE2, into the market (sterilized? yeah right – when one lends out cash in exchange for worthless crap nobody else wants, and certainly not the Bundesbank, it is not sterilized), it became all too clear that the market's response in 2012 would be a deja vu of 2011, if only for a while.
Sure enough 2012 has been a tic-for-tic transposition of the market move in 2011. The only question is how far it would go, before, like back in 2011 again, it rolled over. To get a sense of one of the best indicators of an overextended rally, we go to the NYSE whose short interest update confirms that the rally, at least based on ongoing short squeeze dynamics (which as we said in mid-January has been the best strategy for a bizarro market) is now over. Sure enough, according to the latest data, short interest has collapsed from a multi-year high in September of 16 billion shorts, which coincided with the market lows, to essentially the lowest print seen in the past 4 years at 12.5 billion shares, a level which has not been breached once in the New Normal phase of market central planning. In other words, those who look at short interest and covering as a market inflection point, the time has come to take advantage of the short mauling, and bet on the market rolling over. That said, all it takes is for a central bank chairman somewhere to sneeze the wrong way, and this best laid plan will promptly collapse.
JPMorgan Chase Caps Martin Luther King PR Campaign By Foreclosing on Civil Rights Activist
by ilene - February 10th, 2012 5:42 am
Courtesy of Jesse's Cafe Americain
It's not really about the money, its the hypocrisy.
$9,000 is not a lot of money to many people in America these days. And certainly such an amount could be raised fairly quickly with an online drive for funds. Over 40,000 people have signed the online petition protesting this.
What has people upset is the blatant hypocrisy of JPMorgan, in this and so many other things. It is what drives the Occupy people. It is the entirety of the bank bailout with public money, despite the propaganda campaign and deceit of the Fed to the contrary, and the subsequent massive manipulation of the political and legal process especially in regard to the foreclosure frauds, not to mention the theft of customer funds.
The Banks even cheated returning war veterans. So why should an elderly black woman be treated any better?
Back in the 1950's and 1960's people could have raised bus fare to take Helen Bailey to a less hostile envinronment in which to live. But she chose to stand her ground and fight. It was a matter of principle to her. And such principled stands mystify those without any moral principles, such as the TBTF banks and the pampered princes of Wall Street, whose only principles are self-delusional superiority, self-centered excess, deceit, fraud, and greed.
Helen Bailey does not stand alone, then and now. That is the message that the Banks just don't get. But they will.
MFI-Miami
Chase Refuses To Give 78 Year Old Hero A $9000 Principal Write Down
By Steve Dibert
February 7, 2012JPMorgan Chase, like their competitors, has been attempting to improve their public image with an American public who blames them for the recession. In order to show their commitment to some of the hardest hit segments of economy, JPMorgan Chase has reached out to African-American communities across the U.S. by starting a public relations campaign to help “fulfill” the “vision” of Martin Luther King Jr. to coincides with Black History Month.
Now that campaign is turning into a public relations nightmare for the banking behemoth. Chase is now threatening to foreclose on 78-year old, Helen Bailey, a former Nashville area
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The insiders are selling heavily
by ilene - February 10th, 2012 2:01 am
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — Corporate insiders are now selling their companies’ stock at a rate not seen since late last July.
That’s a scary parallel indeed, since that late-July spike in selling came just days before one of the more painful two-week periods in the stock market in years.
In early August, as you may recall, the U.S. government lost its triple-A credit rating, and the bottom dropped out of the stock market. Between the last week of July and the second week of August, the Dow Jones Industrial Average DJIA +0.05% dropped 2,000 points.
Keep reading here: The insiders are selling heavily – Mark Hulbert – MarketWatch.
Wired’s Embarrassing Whitewash of Foxconn
by ilene - February 9th, 2012 10:08 pm
Courtesy of Yves Smith of Naked Capitalism
Wired’s Joel Johnson has written a stunning bit of PR for Foxconn, now-controversial supplier to the consumer electronics industry, duly wrapped in credibility-enhancing guilt over Western materialism.
The article, “1 Million Workers. 90 Million iPhones. 17 Suicides. Who’s to Blame?” pretends to be about Foxconn’s factories. But Johnson admits he’s a tech toy writer who apparently has no knowledge of manufacturing (I know I’ve had only limited contact with manufacturing, yet reading his piece, I’d bet serious money that I’ve seen more manufacturing operations than he has by dint of being a coated paper brat and doing due diligence on some oddball tech deals over the years, as well as visiting a motherboard maker back in the stone ages when motherboards were made in the US). Yet he’s remarkably uninhibited in using his fantasies and abject ignorance as a basis for making sweeping generalizations about the Taiwanese powerhouse. For instance:
In the part of our minds where Americans hold an image of what an Asian factory may be, there are two competing visions: fluorescent fields of chittering machines attended by clean-suited technicians, or barefoot laborers bent over long wooden tables in sweltering rooms hazed by a fog of soldering fumes.
When we buy a new electronic device, we imagine the former factory. Our little glass, metal, and plastic marvel is the height of modern technological progress; it must have been made by worker-robots (with hands like surgeon-robots)—or failing that, extremely competent human beings.
But when we think “Chinese factory,” we often imagine the latter. Some in the US—and here I should probably stop speaking in generalities and simply refer to myself—harbor a guilty suspicion that the products we buy from China, even those made for American companies, come to us at the expense of underpaid and oppressed laborers.
Huh? Is he serious about this? Anyone who has been following China even slightly would imagine Chinese factories aren’t like Japanese car-makers, heavy on robotics, but are mainly labor intensive (with the exception of some sparkling new capital intensive factories where China is trying to go up the value added chain), and if they are in the Pearl River Delta, makers of watches, clothing and toys (hence not much soldering). And if higher tech, the operations HAVE to be pretty to very clean. But no, everyone in the Wired readership is assumed
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Treasury Market Panic Reversal Due To Little Known Forces Called Supply and Demand
by ilene - February 9th, 2012 8:35 pm
Treasury Market Panic Reversal Due To Little Known Forces Called Supply and Demand
Courtesy of Lee Adler of the Wall Street Examiner
The Treasury market panic saw a bit of a reversal this week, partly due to an unexpected, large increase in supply because of a sharp drop in Federal tax revenues over the past couple of weeks, and partly due to the market misunderstanding of Thursday morning’s news. The “better than expected” weekly unemployment claims data was one thing. Some piling on the “risk on” trade as a result of news of a deal for another Greek bailout, was another. But we are more interested in the more esoteric and little known drivers of prices, such as “supply” and “demand.”
The short term knee-jerk reactions of hedge fund traders to news “don’t impress me much.” For one thing, today’s news has a shelf life of about 20 seconds. Likewise, traders are prone to misinterpreting “news” depending on their currently predominant position.
Since the boat is loaded long Treasuries, any “good” economic news triggers a one day selloff. When those selloffs come within the bounds of a trading range, they’re nothing more than noise. To confirm a reversal in Treasuries we need a bona fide breakout. First, the 10 year yield needs to break 2.10, and then it needs to break 2.40. If that were to happen, it would signal a long term reversal. There are some signs that we’re headed there, but we’re not there yet. The jury is still considering the case.
In recent weeks the Treasury buying panic was helped by reduced supply triggered by a massive bulge in withholding taxes from late December to late January. That bulge has now subsided, and the Treasury suddenly appears to be running short of cash. It made a surprise announcement today that it would need to raise a quick $20 billion in a 64 day CMB to be auctioned next week. What had been the beneficial impact of reduced supply could reverse into greater than expected supply in the weeks ahead if tax revenues fall short of the government’s optimistic estimates. The daily withholding data shows those revenues dropping but then pausing over the last few days, so it’s not completely clear yet where that trend is headed. The data for the coming week should give us a better handle.
We’ll also keep an eye on the…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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