tag:blogger.com,1999:blog-70193813187407171692024-08-29T12:07:09.120+09:00Independent analysis of global economic and geopolitical events.Unknownnoreply@blogger.comBlogger80125tag:blogger.com,1999:blog-7019381318740717169.post-21804162771652312852012-07-31T17:33:00.001+09:002012-07-31T17:33:01.910+09:00

An article on Caixin Online is an interesting example of how national and provincial statistics are "compiled" in China. Schoolhouse Shock exposes the dismal state of public education in poor rural areas. This is of course terrible for the long-run economic prospects of the residents (and the overall economy). But it also shows how all the educational statistics are completely fabricated.

Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7019381318740717169.post-81388412271201992722012-07-23T17:56:00.004+09:002012-07-23T17:56:57.188+09:00

Asian stock markets have opened the week extremely weak (no pun intended). No doubt much of that is due to the SPX rolling over on Friday, but there is more. The Nikkei is down 1.8%, Hang Seng almost 3% and Shanghai 1.2% - all of them more than the 1% or so drop of the S&P in the last trading session of last week. The mainstream media is quick to blame the noise out of Europe, but there is

Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7019381318740717169.post-15458154389718469502012-07-18T17:54:00.003+09:002012-07-22T15:22:51.950+09:00

This has been the trend over the last week - bad economic data comes out, yet the market plows on onwards and upwards. Last Friday, Univ. of Michigan Consumer Confidence disappointed by a point and a half (72 vs 73.5 expected). Ignoring that completely, the SPX rallied hard, investors choosing to focus on the positive but heavily engineered JPM earnings instead. It was a similar story when July

Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7019381318740717169.post-5552247356805108702012-07-17T11:01:00.003+09:002012-07-17T18:10:48.074+09:00

The Reserve Bank of Australia published the minutes of its July 3rd Monetary Policy Meeting (at which they left the overnight rate unchanged at 3.50% - which was market consensus at the time). After presenting various reasons that the economy is slowing but not catastrophically so, that inflation is contained and will probably continue to be for awhile, the RBA concludes that

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-77306909048435155682012-07-16T13:10:00.001+09:002012-07-17T11:22:52.020+09:00

Using the time-honored headline test, this may mean that the Euro's woes are coming to an end. Technically the chart appears to be stabilizing as well. In addition, the market's focus is shifting to the inconsistencies in China's economic statistics, leading some to believe that the whole data set is actually the product of the propaganda department and not the National Statistics Bureau.

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-88750972915010435982012-07-07T18:03:00.002+09:002012-07-16T13:22:23.959+09:00

On Friday Non-Farm Payrolls for June showed an increase of 80k versus a (revised upwards) expectation of 100k. Not surprisingly the stock market sold off on the news, but eventually closed less than 1% down on the day. The US economy is growing very slowly but it is nevertheless growing. Which in some sense is a bad thing, as it means that Big Ben will probably not have an opportunity to come to

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-27937946177185025962012-07-03T15:40:00.000+09:002012-07-03T15:40:33.048+09:00

OK, this headline was probably guilty of deliberate catchiness. Of course the Fed will not sink the market. But Wall Street's easy-money addiction might. Relying on "Big Ben" to save the day  has become an instinctive thought process on Wall Street ever since the launching of QE2. When bad data comes out, it is taken as a positive development, because it just might be the last straw that

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-89562665537418113412012-07-02T15:16:00.001+09:002012-07-02T15:16:34.282+09:00

It is human nature to selectively focus on the evidence that supports one's position and to ignore the rest. This is a layman's explanation of what behavioral psychologists refer to as "confirmation bias". It is also a very common reason why inexperienced traders lose money - they get "married" to their position and hold it long past the point at which their reason for entering it has lost

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-43548627904864987202012-07-01T15:09:00.002+09:002012-07-01T15:11:32.694+09:00

Back in January we wrote a post highlighting that money has now started exiting commodity funds for the first time in the past ten years. (See Commodities Super Cycle Reversing Course.) This event has proven quite significant, as can be seen by observing the price action of most non-agricultural commodities this year. Gold and Oil are down significantly year-to-date, despite continued calls

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-23236634839809958422012-06-29T14:18:00.001+09:002012-06-29T14:36:14.736+09:00

We have thought for some time that data published by the National Bureau of Statistics and other official organs of the Chinese government should not be taken at face value. See for example Can One Trust China's Economic Statistics? written in early February. A week ago The New York Times came out with a detailed account of much of the mounting evidence in Chinese Data Mask Depth of Slowdown,

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-86583493911552207082012-06-26T16:22:00.002+09:002012-06-26T16:22:40.918+09:00

Just a quick reminder that those who only read the blog and not the twitter feed may be missing important timely changes of our market calls. For example on Jun 19th we called for the Australian dollar to appreciate following the RBA statement. Aud/Usd did indeed rally to 1.02 on June 21st, after which we reversed our position with a tweet calling for a sell-off. To avoid missing up-to-the-minute

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-52329146660080845912012-06-19T20:14:00.000+09:002012-06-23T16:02:02.082+09:00

Before the June RBA meeting, the market was predicting even chances of a quarter and half point cuts. This was despite the fact that relatively speaking Australia's economy has been faring quite well despite the recent weakness in China. Well so much for that, as the minutes of RBA's monetary policy meeting showed today. The Board considered whether the recent information warranted a further

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-49692756339363477902012-05-15T16:58:00.001+09:002012-05-18T14:49:44.103+09:00

By now it is clear to everyone that there is nothing fundamentally "safe" in Gold or any other precious or industrial metals. As a non-productive asset its value is only based on expectations of future demand. There is nothing inherently wrong with that, if the demand was real - say for jewelery or industrial uses. However when an investment's value is only derived from expectation of even more

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-1824680850779543942012-04-27T21:17:00.000+09:002012-04-27T21:17:40.470+09:00

Facebook's acquisition of Instagram has raised a few eyebrows but also has plenty of VC's and entrepreneur-wannabes salivating. If a 2-year old company with 13 employees and no revenue can be worth a billion dollars, well then the sky is the limit! As long as you are in the right space. Since any of the staid cashflow or income-based models do not apply to this amazing growth

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-37092214824907007072012-04-24T13:53:00.000+09:002012-04-24T13:55:24.936+09:00

This week it feels like the AUD was punished twice for what is essentially the same "crime". On Monday morning Asian time, the Producer Price Index (PPI) disappoints, coming out 0.6% lower than expected. The Australian dollar promptly sells off against the USD and JPY. This makes perfect sense - lower PPI generally feeds into lower inflation, thus an increased likelihood of a rate cut at the next

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-34885143890524885552012-04-16T11:32:00.000+09:002012-04-23T15:26:56.413+09:00

The latest push by Beijing to accelerate the opening of China's capital account to foreign investment is undoubtedly a good thing. A good thing for the world as it helps reballance the global economy. However it is being hailed as a cure-all for China's slowing economy in China Currency Move Nails Hard Landing Risk Coffin. Not meaning to pick on Paul Markowski here (although as long-term

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-88163299235342908842012-04-10T17:46:00.001+09:002012-04-23T15:20:18.445+09:00

It is starting to hit home that most sectors of Australia's economy are not benefiting from the riches generated by the export of natural resources to China. National Australia Bank, one of the big four banks in the country has lowered its GDP estimate for 2012, saying that Despite a mining boom, the Australian economy has performed poorly in the first few months of 2012, and policy makers are

Unknownnoreply@blogger.comtag:blogger.com,1999:blog-7019381318740717169.post-55529323743240153922012-04-04T14:50:00.003+09:002012-04-23T15:17:19.840+09:00

Australia continues to suffer from the "Dutch disease" with export revenues from the resource extraction industries pushing up the value of the local currency and thereby making manufacturing and the services (such as tourism) uncompetitive. This is a theme we have discussed before - see for example Australia's Two Speed Economy. The situation continues worsening, with an anticipated return

Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7019381318740717169.post-77363204274498465952012-04-02T18:09:00.002+09:002012-04-02T18:09:56.991+09:00

Very often the simplest explanation is the best. Why did HSBC's China PMI show a 4th consecutive month of contraction in March, while the official numbers generated by the National Bureau of Statistics indicate continuing growth? Two months ago in Can One Trust China's Economic Statistics? we looked at some indications that the official government statistics may be

Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7019381318740717169.post-1007593842856399082012-04-02T00:00:00.000+09:002012-04-23T15:15:03.098+09:00

Ever since the neo-Maoist princling Bo Xilai was dismissed from the top Communist Party post in Chongqing, rumours have been circulating of a military coup in Beijing. Asia Times writes Rumor mills on China's active blogosphere were rife with claims that a military coup had occurred in Beijing, with gunfire, tanks and soldiers on the streets. They do appear far fetched, and could be

Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7019381318740717169.post-75160854153662148152012-03-28T10:03:00.000+09:002012-04-23T15:25:24.415+09:00

Everyone is talking about The Yen's Looming Day of Reckoning by Andy Xie in which he spells gloom and doom about Japan and the yen. Japan's economy has indeed been trapped in a prolonged period of sub-trend growth and deflation. The strong yen makes things worse by reducing the competitiveness of the country's exporters. But why a catastrophic collapse? In late Dec in Japan Nov Trade

Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7019381318740717169.post-42959314943345649192012-03-26T14:17:00.001+09:002012-04-23T15:07:12.896+09:00

We have long maintained that the ongoing sovereign debt crisis in Southern Europe will precipitate further European integration. (See Another Step Forward in the Creation of the United States of Europe). With the second Greek bailout a done deal, the market's attention has again shifted to Spain. Last week yields on Spanish government bonds were once again up at 5.5%. Today Dow Jones

Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7019381318740717169.post-28909130900188258052012-03-24T16:19:00.000+09:002012-04-23T11:24:09.953+09:00

As we have opined in previous posts on its banking system and real estate market, China's economy is in a pretty bad shape. This is corroborated by a couple of recent economic statistics. Last Sunday, China's National Bureau of Statistics published the new housing numbers for February, saying that Comparing with the previous month, among 70 medium and large-sized cities, the sales

Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7019381318740717169.post-83005028505047130872012-03-15T12:52:00.000+09:002012-03-15T12:52:32.749+09:00

China's outgoing premier Wen Jiabao seems to have struck a sentimental note in his closing remarks at the NPC (China's parliament). This is completely normal but what is a bit surprising is that he pretty much admits China's system of financial intermediaries is dysfunctional. According to Caixin he said: The problem is that companies, especially the smaller ones, need huge amounts of

Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7019381318740717169.post-49162973541491920002012-03-14T16:09:00.000+09:002012-04-23T15:24:25.721+09:00

The guardedly upbeat comments in the March FOMC report yesterday pushed equity markets to new multi-year highs. At the same time Gold bugs were disappointed by the lack of any mention of QE3. The statement starts with the following comments about the general economy: Information received since the Federal Open Market Committee met in January suggests that the economy has been expanding

Unknownnoreply@blogger.com0