Posts Tagged ‘decoupling’

Misguided Love Affair with China; China’s Massive Monetary Expansion and Crackup Boom

Misguided Love Affair with China; China’s Massive Monetary Expansion and Crackup Boom

Courtesy of Mish 

Earth with Ying and Yang symbols

China is pointing the finger at the US, complaining about "Out of Control" US dollar Printing by the Fed.

Dollar issuance by the United States is "out of control", leading to an inflation assault on China, the Chinese commerce minister said in comments reported on Tuesday.

"Because the United States’ issuance of dollars is out of control and international commodity prices are continuing to rise, China is being attacked by imported inflation. The uncertainties of this are causing firms big problems," Chen was quoted as saying by the official Xinhua news agency.

Chinese officials have criticised U.S. monetary policy as being too loose before, but rarely in such explicit language.

Decoupling Theories Renewed 

I will get to loose monetary policy in just a bit, but first consider More than decoupled, China is in league of its own

Two years on from the global financial crisis, the contrast with the rich world is striking. In the United States and Europe, growth is sluggish, a slump into outright deflation is a real risk and central banks look set to loosen policy further.

So the evidence is in: China is decoupled, influenced by, but ultimately independent from other major economies.

"The crisis was a test and China passed the test. Decoupling has become a much more solid thesis now than three years ago when we only talked about it hypothetically," said Qing Wang, Morgan Stanley’s chief economist for greater China.

Chinese Money Supply Numbers from People’s Bank of China

Money and Quasi Money Jan 2009 – 496135.31
Money and Quasi Money Sep 2010 – 696384.86

"Out Of Control" Monetary Expansion Irony

I am certainly not about to defend the Fed’s misguided policies, but the complaint from Chinese commerce minister that US monetary printing is "out of control" is the ultimate in "pot calling the kettle black" irony.

Over the past few weeks I have exchanged quite a few Emails regarding China with my friend "BC" who writes …

Total Chinese money supply is up over 4 times since ’03, a 17%/yr. rate at a doubling time of just 4 years; up 66% since Jan. ’08, a 19%/yr. rate at a doubling time of 43 months; and


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Trade Deficit Widens, Signals Weaker U.S. Economic Growth

Trade Deficit Widens, Signals Weaker U.S. Economic Growth

Courtesy of Rom Badilla at Bondsquawk

Stacked Red Cargo Containers

The trade deficit widened for the fourth consecutive month on a jump in imports of consumer goods from China, signaling weaker economic growth for the U.S.  The Department of Commerce revealed that the U.S. Trade Balance for June totaled a deficit of $49.9 billion from a revised prior period gap of $42.0 billion.  The widening was driven by both a 1.3 percent fall in exports and a 3.0 percent increase in imports.  The June number disappointed the market as economists forecasted a negative trade balance of $42.1 billion.

Since January of 2010, the trade gap has widened 42 percent suggesting that economic activity during that period was weaker than originally thought.  Imported goods from China and Mexico highlight much of the activity as the numbers reveal.  Year to date, the trade balance with China totaled a deficit of $119.5 billion, a year over year increase of nearly 16 percent.  Similarly, trade with Mexico reflects a negative balance of$33.1 billion for an increase of 56 percent from a year ago.

Today’s widening suggests that economic growth in 2010 may be weaker than originally estimated due to a change in assumptions of the calculation of GDP data.  BNP’s chief economists, Julia Coronado stated in an email to clients that the widening deficit “has been a significant weight on GDP in 2010.”  Furthermore she added that the “advance estimate of Q2 GDP had assumed a widening in the trade deficit in June; however the data showed an even greater deficit than assumed. Combined with other incoming source data that has been weaker than assumed, Q2 GDP looks to be tracking 1.5% q/q saar, down from the 2.4% advance estimate.”

In addition, the Mortgage Bankers Association released its weekly applications index.  For the week ending August 6, mortgage applications increased by only 0.6 percent from a prior period increase of 1.3 percent.  This anemic numbers partially coincides with stagnant mortgage rates, which influences demand for home purchases and mortgage refinancings.

According to Bankrate.com, the 30 Year Conventional National Average Rate was unchanged at 4.56 percent from the prior week.  Interestingly and given that interest rates are generally correlated, the 10-Year U.S. Treasury dropped 9 basis points to 2.82 percent during the same time-period.

With yesterday’s FOMC announcement that they will reinvest maturing mortgage and agency…
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Outsourcing Unemployment To China

Outsourcing Unemployment To China

Courtesy of Mish

As goes the US consumer so goes Chinese manufacturing. Here is a long but educational video produced by Vanguard on several Chinese manufacturing cities and what the economic downturn has meant for them. It’s well worth a play.

 

That video is more confirmation of the Chinese manufacturing and unemployment woes outlined in How Will China Handle The Yuan? and over a year ago in Is China’s Growth Story Coming Unglued?

Yet the myth of Chinese decoupling still persists.

Some day China will be far less dependent on the US but that day is not in the immediate foreseeable future. The videos are proof enough. Moreover, a strong case can be made that Obama Risks Global Trade War With Misguided Tariffs.

For now, stock are rising along with the biggest global reflation in the history of the world, by central bankers in nearly every country in the world, including China.

However, such stimulus is not infinite and is not without cost. Nor can temporary increases in demand caused by massive give-away programs be cause for permanent celebration. At best, stimulus programs shift demand forward stretching out the recovery period.

At worst, such programs add to malinvestments in housing, commercial real estate, and other areas. Government programs seldom, if ever, allocate resources effectively. The wildly popular cash-for-clunkers program actually destroyed productive assets, a repeat on a small scale of misguided efforts by FDR in the great depression to drive up prices of goods.

Yet for all these efforts unemployment is still rising, and even Fed officials admit the outlook for employment and consumer spending is far from rosy. Please see The Problem with Janet Yellen’s Recovery Outlook for details.

Mike "Mish" Shedlock

 


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Don’t Count On Asia To Lead Worldwide Recovery

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Don’t Count On Asia To Lead Worldwide Recovery

Japan, from National GeographicCourtesy of Mish

Those who think Asia is going to lead the recovery need to think again. Please consider Japan Export Slump Deepens, Casting Doubt on Recovery.

Japan’s export slump deepened in May, casting doubt on the nation’s growth prospects as the economy struggles to emerge from its worst postwar recession.

Shipments abroad dropped 40.9 percent from a year earlier, more than April’s 39.1 percent decline, the Finance Ministry said today in Tokyo. The median estimate of economists surveyed was for a 39.3 percent decrease. From a month earlier, exports fell 0.3 percent, the first deterioration since February.

Declines in shipments to Asia accelerated for the first time since January, damping hopes that demand from the region will spur a recovery in the world’s second-largest economy. A worldwide stock market rally stalled this month on concern that the global recession will deepen.

“Final demand just isn’t picking up and it’s still hard to expect a very strong economic recovery,” said Azusa Kato, an economist at BNP Paribas in Tokyo. Kato said the economy will “barely expand” in 2010 once the effect of Japan’s own economic stimulus measures fades.

Steel, autos and semiconductors led the slump. Shipments to China, Japan’s biggest trading partner, fell 29.7 percent, more than April’s 25.9 percent. Exports to Asia slid 35.5 percent from 33.4 percent a month earlier.

China’s 4 trillion yuan ($585 billion) in stimulus measures haven’t been enough to offset sales declines in the U.S. and Europe.

Far too many have equated a rise in the price of commodities for sustainable growth in China independent of demand in the US and Europe. The idea is as silly now as it was in 2008 when various books were promoting decoupling theories. It’s important to remember that Speculation In China Does Not Mean Inflation In The US or sustainable growth anywhere.

Those looking for significant decoupling are still many years, perhaps even a decade or more early.

Mike "Mish" Shedlock


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ValueWalk

The Booming Industries Hiring In A COVID-19 World

By Luke Fitzpatrick. Originally published at ValueWalk.

The pandemic, and let’s face it, 2020 in general, were a total car crash for a lot of people’s jobs, businesses, and general sanity. However, not all sectors suffered during the COVID-19 crisis

The whole thing may have been a natural disaster, but it really wouldn’t be natural if some industries didn’t experience an uptick in a downturn, and one of the primary areas we saw growth was in warehousing and distribution.

Many shoppers intend to shun stores after the pandemic

Many of us got locked down during the crisis at various times, and we had to change our shopping habits. Perhaps the best news for warehouse workers is that it’s not looking likely consumers ...



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Phil's Favorites

How the world ran out of semiconductors

 

How the world ran out of semiconductors

Courtesy of Hamza Mudassir, Cambridge Judge Business School

There’s a global shortage in semiconductors, and it’s becoming increasingly serious. The US is currently reviewing of its supply of the technology, following a landmark executive order from President Joe Biden.

The president also pledged US$37 billion (£26 billion) to cover the short-term costs of rebuilding and securing America’s supply of ...



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Zero Hedge

Morgan Stanley: 3 Reasons Why The Correction Has Further To Go Before It's Over

Courtesy of ZeroHedge

By Michael Wilson, Morgan Stanley chief US equity strategist

The Moment of Recognition

It’s hard to believe a year has passed since the lockdowns first began. The good news is there appears to be light at the end of the tunnel, with case counts and hospitalizations plummeting. At the current pace of vaccinations and with spring weather right around the corner, several health experts are talking about herd immunity by April.

Meanwhile, Congress is putting the finishing touches on another fiscal stimulus which may top US$1.5 trillion. When combined with the progress on the virus, it’s hard not to imagine an economy that’s on fire later this year. Finally, earnings results for 4Q proved to be spectacula...



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Chart School

Who is King? The Bond Market or the FED

Courtesy of Read the Ticker

The King Arthur story is battle between a false KING and the true KING. Generally the movie involves surprises, love and violence, and all this coming to the risk on markets very soon. 

The financial blog space expects the FED to do some sort of Yield Curve Control (YCC) to hold interest rates down while inflation moves higher, this is allowing inflation to run hot. The FED wishes to do this over time to deflate the debt away. Very similar to the 1940's post WW2, yields were pegged to 2% and risk on assets went sky high.

However Peter Boockvar suggest the FED may soon learn it is not in control and the true king of the markets is the BOND MARKET. Peter says simply the bond market is telling the FED to bite me!

The FED is not us...

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Biotech/COVID-19

88% Of COVID Deaths Occurred In Countries Where Over Half Of Population Overweight

Courtesy of ZeroHedge View original post here.

A new report by the World Obesity Federation found that 88% of deaths in the first year of the pandemic occurred in countries where over half of the population is classified as overweight - which is defined as having a body mass index (BMI) above 25. Of note, BMI values above 30 - considered obese - are associated with 'particularly severe outcomes,' accor...



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Kimble Charting Solutions

Tech Indicator Peaking Again At Dot.com Highs? Joe Friday Says Watch This Index!

Courtesy of Chris Kimble

Technology is at the heart of our economy… the same way that industrials were 100 years ago.

And that leadership has been present in the stock market for the past two decades. Today’s chart illustrates this… as well as a potential “pause” in that leadership vacuum.

Below is a long-term “monthly” ratio chart of the Nasdaq Composite versus the S&P 500 Index. Here you can see how technology stocks...



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Politics

Why repressive Saudi Arabia remains a US ally

 

Why repressive Saudi Arabia remains a US ally

A demonstrator dressed as Saudi Arabian Crown Prince Mohammed bin Salman with blood on his hands protests outside the Saudi Embassy in Washington, D.C., on Oct. 8, 2018. Jim Watson/AFP via Getty Images

Courtesy of Jeffrey Fields, USC Dornsife College of Letters, Arts and Sciences

Saudi Crown Prince Mohammad bin Salman “approved an operation … to capture or kill Saudi journalist Jamal Khashoggi,” according to a...



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Mapping The Market

Which Governments Ordered Johnson & Johnson's Vaccine?

 

Which Governments Ordered Johnson & Johnson's Vaccine?

Courtesy of Niall McCarthy, Statista

On Wednesday, U.S. regulators announced that Johnson & Johnson's Covid-19 vaccine being developed by its subsidiary Janssen Pharmaceuticals in Belgium is effective at preventing moderate to severe cases of the disease. The jab has been deemed safe with 66 percent efficacy and the FDA is likely to approve it for use in the U.S. within days.

The Ad26.COV2.S vaccine can be stored for up to three months in a refrigerator and requires a single shot, ...



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Digital Currencies

Crypto - It Is Different This Time

 

Crypto – It Is Different This Time

Courtesy of Howard Lindzon

?I have been astonished as you know by the growth of crypto.

I remember back in 2017 when I noticed that Stocktwits message volume on Bitcoin ($BTC.X) surpassed that of $SPY. I knew Bitcoin was here to stay and Bitcoin went on to $19,000 before heading into its bear market.

Today Bitcoin is near $50,000.

Back in November of 2020, something new started to happen on Stocktwits with respect to crypto.

After the close on Friday until the open of the futures on Sunday, all Stocktwits trending tickers turned crypto. The weekend messages on Stocktwits have increased 400 percent.

That has continued each weekend...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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