Mish's Global Economic Trend Analysis |
- China Prepared to Let Housing Prices Sink in Spite of Economic Slowdown; Transition to New Regime Underway
- Newt Gingrich Fades Fast in Iowa Polls, Ron Paul in Statistical Dead Heat
- Dollar Soars vs. All Major Currencies Following FOMC No Hint of QE3; Looking Ahead, What's Next?
- Crumbling of Comprehensive Solution No. 4; Treaty "Legally Doubtful"; Cracks and Splinters Everywhere; Repeated "Pet Lies" by EC President Van Rompuy
- China’s Deserted “Fake Disneyland”; Shanghai Prices Down 40% from Peak, Inventory Clogs Market; Pollyannas Proven Wrong; Implications for US Dollar
Posted: 13 Dec 2011 11:33 PM PST If you are looking for the reason the Shanghai stock market has been one of the weakest globally, then look no further than China Affirms Property Curbs Even With 'Grim' Outlook China's leaders affirmed they will stick next year with a campaign to bring down property prices even as a "very grim" global outlook threatens growth in the second-largest economy.Transition to New Regime Underway There is a change next year in Chinese leadership. I have long speculated the next regime will be less focused on infrastructure and real estate, and more focused on supporting consumer spending. Those statements from China provide a big hint as to what is coming. Commodity bulls better think twice about the alleged "insatiable demand" of China. They also need to think twice about preposterous decoupling theories that suggest the Chinese tail will wag the US and European dogs. Bear in mind that Europe is China's biggest trading partner, and Europe is without a doubt in recession. That recession will become much more severe before it gets any better. The irony in this setup is the one nation most likely to decouple is the US. However, I am sticking with a recession call as noted in "Wall Street is Little More than Glorified Crack House"; ECRI Sticks with US Recession Call; So Does John Hussman, with Odds Above 80%; So Do I; SF Fed has 50-50 Odds Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Newt Gingrich Fades Fast in Iowa Polls, Ron Paul in Statistical Dead Heat Posted: 13 Dec 2011 10:48 PM PST Whether or not the news media pays any attention to Ron Paul, voters do and the polls show it. Ron Paul is now essentially tied with New Gingrich in the latest Iowa poll. Please consider Gingrich ahead in US poll, but slipping in Iowa Republican White House hopeful Newt Gingrich has surged ahead of rival Mitt Romney nationwide, but his lead in Iowa has faded ahead of the January 3 caucuses, two new polls showed.Blatant Reporting Bias I posted more paragraphs than necessary in the above clips. I did so on purpose to prove a point. It was not until the 6th paragraph that Ron Paul even got a mention. I also call your attention to the second-to-last paragraph. "The poll has a plus or minus 4.2 point margin of error." Given the margin of error, and the momentum, Ron Paul has surged into a statistical tie with Gingrich. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Dollar Soars vs. All Major Currencies Following FOMC No Hint of QE3; Looking Ahead, What's Next? Posted: 13 Dec 2011 12:52 PM PST I have read countless articles recently regarding the inevitability of QE3. I have disagreed for four reasons.
Why should the Fed react when hot air from Europe gave a huge lift to the markets? I would have been surprised if the Fed tossed a QE3 bone under those circumstances. And it didn't. The Forex market responded appropriately:
Euro Daily Chart click on chart for sharper image The Euro took out the October 2011 low and is in fact now at lows last seen mid-January of 2011. Forex Currency Market The US dollar rose against every Barchart-Listed Currency. Looking Ahead, What's Next? If the Fed holds off on QE3 and the ECB cuts further, both of which are likely for the near-future, the US dollar will likely strengthen more. However, and as I have pointed out, one cannot look at these things in isolation. A downgrade of the EFSF and/or France by rating agencies would be US dollar supportive as would falling demand for commodities from China as noted in China's Deserted "Fake Disneyland"; Shanghai Prices Down 40% from Peak, Inventory Clogs Market; Pollyannas Proven Wrong; Implications for US Dollar Implications for US Dollar Certainly the Crumbling of Comprehensive Solution No. 4; Treaty "Legally Doubtful"; Cracks and Splinters Everywhere is US dollar supportive regardless of repeated "Pet Lies" by EC President Van Rompuy. On the other side of the coin, US deficits are out of control. However, I believe (and the market seems to agree), the other factors are more important in the short-to-intermediate term. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 13 Dec 2011 10:39 AM PST German Chancellor Merkel and French President Sarkozy did their best to portray the results of the treaty as 26-1, Isolating the UK. Actual results are vastly different. Everywhere you look there are splinters and cracks, even in France and Germany. Here is one I just came across: France says not planning budget rule vote for now France will not schedule a bicameral parliamentary vote for a constitutional budget-balancing rule while the opposition Socialist Party remains opposed to the idea, government spokeswoman Valerie Pecresse said on Wednesday.Sarkozy Cannot Deliver French Votes, Plows Ahead Anyway Sarkozy is willing to write clauses in the treaty even though he does not have the necessary votes to deliver them. Moreover, and as I pointed out earlier, Sarkozy is going to lose the next French election and Socialist challenger François Hollande Would Renegotiate EU Deal. As I also pointed out with thanks to reader Janne from Finland, Hell Will Freeze Over Before Finland Signs Treaty. It's also important to note that the German Supreme court has not yet ruled on some of the proposed treaty modification, notably the 85% rule that has Finland upset. Nonetheless, Sarkozy and Merkel will plod along with their attempt to ram a treaty down the throats of the 17 at complete taxpayer expense (thanks to Merkel caving in to a Sarkozy demand) when it is highly likely their own countries cannot deliver the votes. But wait, there are still more cracks and splinters, including some major ones. Treaty "Legally Doubtful" EuroIntelligence reports on the Crumbling of Comprehensive Solution No. 4 It is surprising how long it took the markets to see through last week's agreement to set up a separate treaty to reinforce the current one. As Frankfurter Allgemeine reports, the European Commission believes the whole thing is legally doubtful, and mostly irrelevant. The rating agencies, too, are underwhelmed.I added the first two bold headlines in the above quotes for ease in understanding. The the rest of the text was not altered. Nonsensical Headlines Nonetheless, the most common headlines in mainstream media after this complete debacle look something like this: EU, without Britain, moves towards fiscal deal. Deal? What deal? There is no legally enforceable deal, and with all the cracks, splinters, splits, and discord, there is likely no deal at all. Repeated Bald-Faced Lies by EC President The arrogance and outright lies by EC president Herman Van Rompuy stand alone. Please consider New fiscal treaty ready by march says Van Rompuy "Early March at the latest, this fiscal compact treaty will be signed," Van Rompuy said in a speech to the European Parliament in Strasbourg.For starters, the objections of Finland are no "mere formality". And it still remains to be seen if Sweden, Hungary and the Czech Republic parliaments are willing to go along. They would be foolish to do so. Moreover, I am tired of this arrogant buffoon's repeated lies that the ECB is willing to step up purchases of European bonds. The ECB will not do so and the Bundesbank is adamantly opposed as well. Yes, the ECB presumably hinted that might happen, but ECB president Mario Draghi took that idea back in no uncertain terms, even repeating the message. Market Rout as ECB Dashes Bond Hopes Please consider Market rout as ECB dashes bond hopes Mario Draghi, the ECB's president, said the bank had not agreed to any sort of "Grand Bargain" with EU leaders to act as lender of last resort for sovereign states, insisting that it does not have a legal mandate to rescue sovereign states in trouble.Pet Lies Van Rompuy likes to alternate between his two pet lies.
Someone needs to stand up to Herman Van Rompuy and call him a disgusting liar straight to his face in an interview. Three Things
One would never glean any of that from listening to Van Rompuy. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 12 Dec 2011 11:54 PM PST About 45 minutes outside of Beijing are the deserted ruins of what was supposed to be the world's largest amusement park. Instead, farmers have reclaimed the land planting corn and digging wells next to spires modeled after Disneyland. Please consider China's deserted fake Disneyland Along the road to one of China's most famous tourist landmarks – the Great Wall of China – sits what could potentially have been another such tourist destination, but now stands as an example of modern-day China and the problems facing it.More pictures and text in an excellent article by David Gray. China has the dubious honor of the world's largest vacant malls, vacant cities, and vacant amusement parks. Amazingly people insist there is not a property bubble in China. I have news, there is a bubble and it has now popped. 'Long-term Pain' For Chinese Property Market Credit Suisse says 'Long-term Pain' For Chinese Property Market China's overheated real-estate market has become a source of fascination and dread for investors. With a significant share of the economy tied up in construction, and global commodity prices hanging on Chinese demand, the recent drop in property prices could prove a turning point. China Vanke, the largest developer and a bellwether for the industry, said Monday that sales in November fell down 36%, year-on-year. This marks the company's fourth consecutive month of double-digit drops in revenues. So how much further might house prices fall, and what would be the impact on developers' balance sheets? Is it time to push the panic button? In a new report, Credit Suisse predicts an average drop of 20% from a peak in mid-2011 to the end of 2012.20% does not sound "dire", it sounds like a cakewalk. Heck, not even 40% is dire. 70% is dire. 40% is right here right now in Shanghai. Shanghai Prices Down 40% from Peak, Inventory Clogs Market The LA Times reports China's housing bubble is losing air Home prices and sales plunge after China's government intentionally slams on the brakes. Some recent buyers stage demonstrations, destroy real estate offices and demand refunds of up to 40%.Crash in Progress, Pollyannas Proven Wrong China's property bubble is clearly in free-fall. Just as happened in the United States, developers are offering "free" cars, BMW's no less, for those willing to take the plunge. The numerous Pollyannas who said this would not happen have been proven wrong. China did not "decouple" and home prices cannot stay elevated over wages and rental prices forever. Implications for US Dollar I have said on numerous occasions, China's shift from a real estate and construction economy is going to send many commodity prices tumbling. In isolation, this is good for the US dollar, but things cannot be viewed in isolation. Currency movements will depend on how central banks in the US, China, Europe, and Japan react to the global slowdown. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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