Posts Tagged ‘credit crunch’

CHINA’S CREATIVE ACCOUNTING: USING DEBT AS A TOOL FOR ECONOMIC DEVELOPMENT

CHINA’S CREATIVE ACCOUNTING: USING DEBT AS A TOOL FOR ECONOMIC DEVELOPMENT

Courtesy of Ellen Brown, at Web of Debt 

China may be as heavily in debt as we are. It just has a different way of keeping its books — which makes a high-profile political ad sponsored by Citizens Against Government Waste, a fiscally conservative think tank, particularly ironic. Set in a lecture hall in China in 2030, the controversial ad shows a Chinese professor lecturing on the fall of empires: Greece, Rome, Great Britain, the United States . . . .

"They all make the same mistakes," he says. "Turning their backs on the principles that made them great. America tried to spend and tax itself out of a great recession. Enormous so-called stimulus spending, massive changes to health care, government takeover of private industries, and crushing debt."

Of course, he says, because the Chinese owned the debt, they are now masters of the Americans. The students laugh. The ad concludes, "You can change the future. You have to."

James Fallows, writing in the Atlantic, remarks:

“The ad has the Chinese official saying that America collapsed because, in the midst of a recession, it relied on (a) government stimulus spending, (b) big changes in its health care systems, and (c) public intervention in major industries — all of which of course, have been crucial parts of China’s (successful) anti-recession policy.”

That is one anomaly. Another is that China has managed to keep its debt remarkably low despite decades of massive government spending. According to the IMF, China’s cumulative gross debt is only about 22% of 2010 GDP, compared to a U.S. gross debt that is 94% of 2010 GDP.

What is China’s secret? According to financial commentator Jim Jubak, it may just be “creative accounting” — the sort of accounting for which Wall Street is notorious, in which debts are swept off the books and turned into “assets.” China is able to pull this off because it does not owe its debts to foreign creditors. The banks doing the funding are state-owned, and the state can write off its own debts.

Jubak observes:

“China has a history of taking debt off its books and burying it, which should prompt us to poke and prod its numbers. If we go back to the last time China cooked the national books big time, during the Asian currency


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Meredith Whitney Sees Bleak Second Half in Stock Market, Small Business Credit Crunch, Double Dip in Housing

Meredith Whitney Sees Bleak Second Half in Stock Market, Small Business Credit Crunch, Double Dip in Housing, Says European Banks in Worse Shape

meredith whitneyCourtesy of Mish

Meredith Whitney is concerned about financial reform that will punish banks just for the sake of doing something. This she says, will hamper small business lending right at a time state and local cutbacks will cost 1-2 million jobs.

The Wall Street Journal covers this in The Small Business Credit Crunch

Over the next 12 months, disappearing state and local government jobs will prove to be a meaningful headwind to an already fragile economic recovery. This is simply how the math shakes out. Collectively, over 40 states face hundreds of billions of dollars in budget gaps over the next two years, and 49 states are constitutionally required to balance their accounts annually. States will raise taxes, but higher taxes alone will not be enough to make up for the vast shortfall in state budgets. Accordingly, 42 states and the District of Columbia have already articulated plans to cut government jobs.

So the burden on the private sector to create jobs becomes that much more crucial. Just to maintain a steady level of unemployment, the private sector will have to create one million to two million jobs to offset government job losses.

Herein lies the challenge: Small businesses continue to struggle to gain access to credit and cannot hire in this environment.

Unless real focus is afforded to re-engaging small businesses in this country, we will have a tragic and dangerous unemployment level for an extended period of time. Small businesses fund themselves exactly the way consumers do, with credit cards and home equity lines. Over the past two years, more than $1.5 trillion in credit-card lines have been cut, and those cuts are increasing by the day. Due to dramatic declines in home values, home-equity lines as a funding option are effectively off the table. Proposed regulatory reform—specifically interest-rate caps and interchange fees—will merely exacerbate the cycle of credit contraction plaguing small businesses.

If banks are not allowed to effectively price for risk, they will not take the risk. Right now we need banks, and particularly community banks, more than ever to step in and provide liquidity to small businesses. Interest-rate caps and interchange fees will more likely drive consumer credit out of the market and many community banks out


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GARY SHILLING’S FAVORITE 2010 TRADES

GARY SHILLING’S FAVORITE 2010 TRADES

Courtesy of The Pragmatic Capitalist  

The New Mutate Britain Exhibition One Foot In The Grove Is Launched

Gary Shilling has become infamous in the last few years for predicting the credit crunch and the bear market.  The bearish investor still believes deflation is the dominant force at work and that the credit crunch is in the process of unfolding.  But he isn’t bearish about everything.  The following are his 6 buys:

  1. Buy treasury bonds – the safehaven trade will return.
  2. Buy income-producing securities – high quality dividend names will be a safe place to hide.
  3. Buy consumer staples and foods – consumers won’t stop buying the necessities.
  4. Buy ’small luxuries’ – consumers are trading down.
  5. Buy the U. S. dollar – still the world’s safehaven currency.
  6. Buy eurodollar futures.

Unfortunately for market bulls Shilling is generally bearish about stocks and the global economy.  His 11 sells:

High angle view of a globe on a heap of Indian banknotes and Euro banknotes

  1. Sell U.S. stocks in general – U.S. stocks are just too expensive.
  2. Sell home-builder and selected related stocks – home prices will fall 10% in 2010 and the stocks will tank with it.
  3. Sell big-ticket consumer discretionary equities -  consumers aren’t buying luxury goods due to the trade down.
  4. Sell banks & other financial institutions – the days of big bank profits and bailouts are over.
  5. Sell consumer lenders’ stocks – consumers will continue to deleverage.
  6. Sell many low- and old-tech capital-equipment producers.
  7. If you plan to sell a home or investment house, do so yesterday.
  8. Sell junk bonds.
  9. Sell commercial real estate – the real estate bubble is a slow motion train wreck.
  10. Sell most commodities – the dollar rally will crush commodities.
  11. Sell developing country stocks and bonds – there will be no decoupling.

 


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Zero Hedge

US Foreclosures Rise For First Time In 36 Months

Courtesy of ZeroHedge. View original post here.

One month ago we discussed why according to the recent data, the "Housing Market Headed For "Broadest Slowdown In Years." Fast forward to today, when we received the latest confirmation that the US housing market appears to have recently hit a downward inflection point: according to the just released July 2018 U.S. Foreclosure Market Report released by ATTOM Data Solutions, foreclosure starts in July increased by 1% from a y...



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Saudi showdown spotlights Canada's energy insecurity

 

Saudi showdown spotlights Canada's energy insecurity

Khalid Al-Falih Minister of Energy, Industry and Mineral Resources of Saudi Arabia, has said the diplomatic dispute won’t affect oil exports to Canada. (AP Photo/Ronald Zak, File)

Courtesy of Larry Hughes, Dalhousie University

In mid-August, Khalid al-Falih, Saudi Arabia’s energy minister, announced that the diplomatic rift with Canada wouldn’t affect the flow of Saudi crude oil to the Irving refinery in Saint John, N.B.

There are at least two reasons why this decision should ...



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ValueWalk

Whitney Tilson:Tesla Should Raise Money Now

By Jacob Wolinsky. Originally published at ValueWalk.

Excerpted from Whitney Tilson’s latest email to investors

1) As part of our seminar on How to Launch and Build an Investment Fund, we teach an in-depth module on how to create a first-class, compelling investor pitch deck, using multiple real-world examples (as we do with everything we teach). The first example is my own deck, which I think was at best a B – decent but a lot of room for improvement, as I discussed in our webinar earlier this month – here’s the video of it: https://player.vimeo.com/video/285653427 (8 min).

Pease use “VW10” for a discount!

If you find what we’...



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Digital Currencies

Stop worrying about how much energy bitcoin uses

 

Picture via Pixabay

Stop worrying about how much energy bitcoin uses

Courtesy of Katrina Kelly-Pitou, University of Pittsburgh

The word “bitcoin” is as likely to garner feverish excitement as it is glaring criticism. The financial community sees speculative promise in the form of trade that currently has little to no regulation. Meanwhile, others argue that it’s a distraction that detracts from the overall longevity of U.S. financial institutions.

Bitcoin’s energy consumption has become a recent talking point in the debate. ...



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Kimble Charting Solutions

Doc Copper down 20%, sending a macro message?

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

Doc Copper has had a rough go of it over the past 7-years and especially of late.

Since the highs back in 2011, Doc Copper has created a series of lower highs and lower lows.

Since the lows in 2015, it has experienced a strong rally, creating a series of higher lows, as interest rates and several commodities did the same.

In June Doc Copper may have created a double top at (1), as it was testing last years highs. Since hitting 2017 highs at (1), Doc Copper has declined nearly 20% in the past 10-weeks.

The decline now has it testing potential dual support at (2...



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Insider Scoop

Goldman Sachs: Newly Public Aurora Mobile Set To Gain Market Share

Courtesy of Benzinga.

Related 28 Stocks Moving In Monday's Mid-Day Session Benzinga's Top Upgrades, Downgrades For August 20, 2018 ...

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Biotech

Approval of first 'RNA interference' drug - why the excitement?

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Approval of first ‘RNA interference’ drug – why the excitement?

Single strands of ribonucleic acid (RNA) are now being used to treat disease. By nobeastsofierce / shutterstock.com

Courtesy of Thomas Schmittgen, University of Florida

Small interfering RNA sounds like something from a science fiction novel rather than a revolutionary type of medicine. But this odd-sounding new drug of...



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Chart School

Weekly Market Recap Aug 19, 2018

Courtesy of Blain.

A good amount of volatility this past week, but once again indexes are just sort of hanging around as we work through some news items, specifically facing trade issues.  We ended last week with some hand wringing over Turkey – while nothing was really resolved, U.S. markets looked past that… however emerging markets continue their struggle.  The U.S. indexes have simply been range bound for weeks on end.

The Turkish central bank pledged in a statement Monday to provide “all the liquidity the banks need.” It also said banks would be able to borrow foreign-exchange deposits from the central bank at one-month and one-week maturities. Analysts said T...



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Members' Corner

There Are 3 Main Theories That Explain Trump's Approach to Putin and Russia-Which One Makes the Most Sense?

What do you think?

Thom Hartmann suggests that the "Manchurian Candidate theory" is the least likely explanation for Trump's pro-Russia behavior in "There Are 3 Main Theories That Explain Trump’s Approach to Putin and Russia—Which One Makes the Most Sense?" (below).  disagrees and suggests that Putin probably has "the goods" on Trump in "Trump’s Plot Against America". (To be fair, Hartmann acknowledges that his three theories are not mutually exclusive.) Jonathan Chait argues ...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

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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