The Trade Factor

Date: 06-01-2010
 Source: Businessworld
Subject: The Trade Factor

The precipitous drop in trade last year as a result of the global financial crisis was evidence of the heightened interconnectedness of the world’s major economies. But such interconnectedness was also one reason why trade protectionism – the bogey everyone feared would send the globe into another Great Depression – never rose to a level that threatened a recovery. Indeed, there were many calls by domestic businesses to erect trade barriers. But policymakers chose not to heed such calls either out of fear of falling foul of WTO rules, or, more likely, recognizing that since the supply chain for many businesses crosses many borders, trade barriers would eventually harm the home country. Nevertheless, while trade may eventually return to pre-crisis levels, global imbalances – one of the factors that led to the crisis – remain. The US still spends; China still saves; and the Yuan remains undervalued. As long as these imbalances obtain, the risk of a protectionist backlash remains. Disaster was averted, but the nature of the recovery still remains in question. – YaleGlobal

While the US has been working to reform its financial system, trade remains a worrisome area

Nayan Chanda

Global bear rally of 2009 will end as Japan’s hyperinflation rips economy to pieces

 We start with a short column by Ambrose Evans-Pritchard of the London Telegraph giving us a quick run down of the problems faced around the globe. He thinks the #1 problem is Japan, and I more or less agree. I have written about Japan many times in the past few years. In my speeches I refer to Japan as a bug in search of a windshield. I am not so sure about the timing, however, as the economic and fiscal insanity that is Japan may be able to go on for longer than many think possible. But to me it is not a question of whether there will be a crisis, but when there will be one. This year? 2011? 2012? I doubt Japan makes it to the middle of the decade with a very serious and sad day of reckoning.

PMI Shows Continued Expansion of Chinese Manufacturing

• Data collected by the Chinese Federation of Labor (CFL) showed the PMI strengthened to 56.6 in December from 55.2 in October and November 2009. This marks the tenth month above the 50 threshold that indicates expansion, following a bottoming out of the index at a level of 38.8 in November 2008. All but two of the 11 subindices showed improvement, with output and new orders above 61%. This follows a plateau in the previous month when some sub-indices showed declines. CFL data are thought to do a particularly good job capturing trends among state-owned companies. (Li & Fung, 01/01/10)

2009: The Year Wall Street Bounced Back and Main Street Got Shafted

Robert Reich, Dec. 27, 2009.

In September 2008, as the worst of the financial crisis engulfed Wall Street, George W. Bush issued a warning: „This sucker could go down.“ Around the same time, as Congress hashed out a bailout bill, New Hampshire Sen. Judd Gregg, the leading Republican negotiator of the bill, warned that „if we do not do this, the trauma, the chaos and the disruption to everyday Americans’ lives will be overwhelming, and that’s a price we can’t afford to risk paying.“

In less than a year, Wall Street was back. The five largest remaining banks are today larger, their executives and traders richer, their strategies of placing large bets with other people’s money no less bold than before the meltdown. The possibility of new regulations emanating from Congress has barely inhibited the Street’s exuberance.

Will The Three Trends of 2009 Prevail in 2010?

GaveKal Five Corners

Looking back at the past year, we can conclude that three inter-related trends have dominated financial markets: 1) an impressive weakness in the US$, 2) a significant rally in commodities, and 3) a pronounced out-performance of emerging markets, including Asia. Today, these three trends appear to be running out of steam: the US$ has been rallying, commodities have rolled over and, in November, for the first time in what feels like an eternity, the US MSCI actually out-performed all other countries in the World MSCI index. For us, this begs the question of whether the trends of 2010 will prove different to those of 2009? And the answer to that question may be found in the most unlikely of places, namely the Middle-East.

How Strong Is the Chinese Growth Recovery?

China’s economy rebounded sharply in Q2 2009, growing 7.9% y/y after slowing to 6.1% in Q1. The recovery gained steam in Q3, growing 8.9%, and growth could reach 10% y/y in Q4. Government-linked investment led the recovery, contributing the bulk of growth so far in 2009, and data from November suggests domestic private demand is still weak. Although there are questions about the quality and sustainability of the expansion, China seems likely to easily surpass the government’s target of 8% growth in 2009. Consequently, the debate over how to remove accommodative policy is heating up.

Staatsverschuldung

Quelle: Credit Suisse. Dank an Dr. Richter

Hongkong warnt Investoren vor Immobiliencrash

73 Mrd. Dollar 2008/2009 investiert – Preise steigen um 40 Prozent

Gigantomanie stößt an Grenzen (Foto: pixelio.de, Samoht Les Seuf)

Hongkong/Erkrath (pte/07.12.2009/13:40) -

Weil sich die Preise für Wohnungen in Hongkong seit Beginn des Jahres um rund 40 Prozent gesteigert haben, bekommt die Regierung nun kalte Füße und warnt Anleger eindringlich vor dem Platzen der Immobilienblase.

A Conversation with John Mauldin

With Damien Hoffman www.wallstcheatsheet.com.

John Mauldin coined the incredibly popular phrase, „Muddle Through Economy.“ If the next few years continue to drag along as we rebuild from the greatest credit bubble in history, then John’s term may become the catch phrase used by every financial journalist and economist in the land.

John is a passionate traveler with business partners all over the world. He also puts out a free newsletter to over one million people worldwide. This reach of friends and travels give John an excellent macro view of the world economy. Further, his multidisciplinary interests offer some unique insights into economics and human behavior.

Repairing China’s Financial System

Michael Pettis | Nov 30, 2009

 The stock market had a bad day today, with the SSE Composite down 3.62%, mainly on rumors that banks will be seeking to raise equity capital next year in response to their loan surge this year. On Tuesday Bloomberg reported that the five largest banks were supposed to have submitted plans to regulators for raising money, after unprecedented lending eroded their capital.

 I would argue that a more compelling reason to raise capital is the almost-certain surge in NPLs over the next three or four years.