Thu, Mar 20 2008
THE WORLD CATCHES COLD
Speaking of teevee, I just heard some spritzhead on the tube gush, "now that the financial crisis is over, what's next for the markets?"
There is coffee-flavored smoke coming from my keyboard now...
World trade decelerates almost to standstill
Financial Times - Global trade slowed almost to a standstill over the new year, threatening to shrink for the first time since the US economy went into recession in 2001.
An indicator produced by the Bureau for Economic Policy Analysis, a Dutch research institute, showed that in the three months to January world trade in goods rose at annualised rate of 0.2 per cent over the previous three months.
The equivalent growth rate in the three months to October was 6.9 per cent
"This is a substantial deceleration," the institute said. "World trade volume growth is on a downward trend."
Trade figures tend to be volatile but even on a longer-term smoothed basis, comparing the three-month average with the same period a year earlier, the growth in goods trade is at its lowest since 2003.
The data appear to provide further evidence that global economic activity is slowing, as growth in emerging markets has failed to compensate for weaker demand in the US.
The last time annual growth in trade went negative was in 2001, when the shallow US recession that followed the bursting of the technology bubble and the shock of the September 11 attacks caused global commerce to contract.
Trade growth is consistently higher on average than overall economic growth but it also tends to be more variable, dropping sharply during recessions.
Julian Jessop, chief international economist at the consultancy Capital Economics, said there were one-off factors that might explain the weakness in world trade in recent months, including disruptions to shipping and damage to Chinese trade caused by the winter storms.
However, he added: "Global trade growth tends to do twice whatever global GDP [gross domestic product] is doing, so with the world economy slowing it doesn't surprise me at all that there is a slowdown in trade."
The indicator - which is monitored by economists at the International Monetary Fund and other official bodies - is compiled from official data that are published by both industrialised and emerging market countries.
It covers more than 97 per cent of trade in goods, which itself constitutes more than 80 per cent of total world trade.
The institute said that imports into both the US and European Union fell in the three months to January.
Year-on-year trade growth hit a record high of 9.7 per cent in November 2006, at a time when the US and Chinese economies were both growing briskly.
Thu, Mar 20 2008
PPT PARTY ON, DUDE!
The reality:
What the moneyboys want you to focus on:
What has just occurred this week in the markets is the central banks in full panic mode, madly prolonging the rowdiest frat party ever.
Think of this analogy: the party has been an all-nighter. The house is completely trashed, and the back bedroom is on fire. The sun is coming up, and some partiers are sobering up and realizing they are starting to get the mother of all hangovers. People are starting to look for their coats and underwear and heading for the door.
In comes the firemen with a gallon of ultra-cheap vodka and a new mix CD. They crank up the 120bpm jams, pour cheap booze down everyone's throats, and declare the smoke, wrecked furniture and sunlight the best party special effects ever. Plus, it's not a hangover, dude, its righteous party buzz, and if you have one, wow are you cool.
The firemen are the PPT (Plunge Protection Team: Sec Treasury Paulson, Fed chair Bernanke, SEC chair Cox, Commodities chair Lukken) and the US & Euro central bankers. Henry Paulson was not joking when he flat-out stated last week that they were ready to do "anything it takes" to prevent a meltdown. Anything.
The cheap vodka is the taxpayer-subsidized 'liquidity'.
The party mix CD is manipulation of the still-small precious metals markets, which has a big influence in the huge forex (currency) markets.
The ego-stroking bullshit is the just-released 'good' production, employment, and inflation figures, more heavily and blatantly doctorerd than ever before in history.
Watch the markets - the asia markets keep going down, selling dollars down and buying gold up. The european and american markets are doing the opposite, drinking 'liquidity' and partying to 'sound dollars' and 'good economical indicators'. The house is wrecked and on fire, and the party is over, and the firemen are pouring gasoline on the flames.
The "fixes" benefit only the bankers. Although the underlying conditions have not changed in any way, perceptions have been successfully manipulated in enough 'investors' to accomplish the following:
- the equities market has stabilized a little bit, allowing companies that are on the verge of imploding a la Bear Sterns to last a bit longer,
- the dollar has stopped its downward slide, so that these same near-bankrupt entities can now take their worthless toxic derivatives to the Fed and exchange them for dollars,
- gold has been successfully pushed down somewhat, so that these same entities can exchange their dollars for cheap gold
- emerging markets have been depressed (they hold a lot of dollars), so their equities, though solid, have become attractively cheap,
- once the exchange of garbage for gold and solid foreign equities has played out, who cares? We got ours!
And in the end, the USA, Inc goes bankrupt and Joe Sixpack gets stuck with the bill. Brilliantly played!
Economists the world over are just shaking their heads in disgust at these machinations, and re-iterating that the house is still on fire and the sun is indeed going up. No doubt the PPT will try anything and everything to squeeze out a few more minutes of party time, but it's all illusion.
Here's what Citigroup, a seriously major player had to say last night:
"The Great Unwind has begun, Citigroup warns
Avoid leveraged companies, countries and consumers, bank's strategists say"
http://www.marketwatch.com/news/story/great-unwind-has-started-avoid/story.aspx
This is the closest you will ever get to seeing a major world bank put a "sell" recommendation on itself. It explicitly says to sell the U.S.: "Leveraged economies, like the U.S., should also be avoided".
Gads. This would make an awesome TV movie of the week.
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