Central Perk: 10 mai 2013

vineri, 10 mai 2013

Mish's Global Economic Trend Analysis

Germany France Feud Erupts Again; German Central Bank Head Blasts France
Huge Bubble in India Home Prices Ready to Burst
US Crude Exports to Canada Triple; Brent WTI Crude Spread Lowest in Over Two Years
Nikkei up another 3% as Yen Breaks .99; Japanese Bonds Halted; Be Careful of What You Ask

Germany France Feud Erupts Again; German Central Bank Head Blasts France

Posted: 10 May 2013 10:29 PM PDT

The simmering stew between Germany and France boiled over again this week as German Central Bank Head Blasts France.

France needs more time to get its budget deficit under control. That much was made clear last Friday when the European Commission announced it was granting Paris until 2015 to bring its budget deficit below the maximum 3 percent of gross domestic product allowed by European Union rules ensuring the stability of the euro.

But on Wednesday evening, Jens Weidmann, the president of Germany's central bank, the Bundesbank, said he is adamantly opposed to the move. "You can't call that savings, as far as I am concerned," he told the daily Westdeutsche Allegemeine Zeitung in an interview. "To win back trust, we can't just establish rules and then promise to fulfil them at some point in the future. They have to be filled with life," Weidmann said.

France had originally hoped to reduce its budget deficit below the 3 percent limit this year, but with its economy suffering, the deficit is likely to be closer to 4 percent and slightly higher in 2014.

Immediately following the announcement from Brussels, French Finance Minister Pierre Moscovici said that Paris planned to scale back its austerity measures. "We don't want excessive consolidation for our country, we don't want austerity beyond what is necessary," he said.

Expect Budget Failure in 2013, in 2014, in 2015

With socialists in complete control of France, especially with Francois Hollande at the helm, do not expect France to meet its deficit targets this year, next year, or in 2015.

Indeed, given that French presidential terms are 5 years in length, it may be quite some time before France shows any economic improvement at all, let alone be able to meet terms of the eurozone treaty.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Huge Bubble in India Home Prices Ready to Burst

Posted: 10 May 2013 11:50 AM PDT

Here are some interesting charts by Deepak Shenoy on the India Housing Bubble.

India HPI

click on any chart for sharper image

India home prices have been going up at a compound annual growth rate (CAGR) of 26% since March of 2009.

Mumbai and Delhi

Shenoy reports Mumbai is growing at a CAGR of 30%, and Dehli is up 47% from a year ago and 250% since March 2009.

Note the transaction volume in Delhi. Transaction volumes and prices are interesting in Bangalore and Chennai as well.

Bangalore and Chennai

Shenoy has details on five other cities as well. Inquiring minds may wish to take a look.

He writes "While India as a composite country is not at a bubble stage right now, it's important to note that various bubbles are building up in individual cities. If any of these bubbles worsens, then it is likely that other cities will follow. There are no un-correlated prices in a crisis."

I would suggest that India as a composite certainly is in a housing bubble. The overall HPI shows just that.

India Inflation

India Consumer Price Index data by YCharts

Home prices have increased far more rapidly than reported inflation, which I propose is hugely understated.

Inflation measures typically do not reflect actual property prices and certainly do not reflect other asset bubbles.

For a discussion, please see Hugely Negative Real Interest Rates Fuel Yet Another Housing Bubble; A Word About "Inflation" and Treasury Yields.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

US Crude Exports to Canada Triple; Brent WTI Crude Spread Lowest in Over Two Years

Posted: 10 May 2013 10:07 AM PDT

Brent vs. WTI

Brent Crude Oil Spot Price

Brent WTI Spread

Brent WTI Spread

Note the drop in the spread between the US West Texas Intermediate (WTI) crude future and the Brent future, a benchmark price of European, African and Middle Eastern oil.

The futures diverged sharply in late 2010 and are now converging.

US Crude Exports to Canada Triple

Bloomberg reports Brent Pressured by U.S. Tripling Crude to Canada.

U.S. oil exports are poised to reach the highest level in 28 years as deliveries to Canada more than triple, helping bring down the price of the global benchmark Brent crude relative to U.S. grades.

The shipments will rise to at least 200,000 barrels a day by the end of the year, according to Ed Morse, head of global commodities research at Citigroup Global Markets Inc. Exports were 59,600 in 2012 and haven't averaged more than 200,000 since 1985. The U.S. restricts companies from sending American crude abroad, with Canada an exception.

The premium for Brent, used to price European and West African crude, over U.S. West Texas Intermediate narrowed to less than $8 a barrel this week from $25.53 in November.

Exports to Canada doubled in February from a year earlier to 124,000 barrels a day, the highest level since 1999, according to U.S. Energy Information Administration data. Canadian refineries might be able to process "a couple hundred thousand barrels a day" from the U.S., Adam Sieminski, the EIA's administrator, said in an interview in Houston.

Gasoline Prices

The government probably won't change export rules while parts of the country still pay $4 a gallon for gasoline, said Stacey Hudson, a senior research associate with Raymond James & Associates Inc. in Houston. Shipments to Canada are a way to tap into a foreign market while avoiding that debate.

Does This Debunk Peak Oil?

Inquiring minds may be wondering if this debunks peak oil theory. No it doesn't. Here's a quick three-point explanation.

US energy consumption has fallen yet price is still high.
High prices allows for marginal production.
New techniques allow production in previously unworkable oil fields.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Nikkei up another 3% as Yen Breaks .99; Japanese Bonds Halted; Be Careful of What You Ask

Posted: 09 May 2013 11:07 PM PDT

The Yen continued its plunge Wednesday evening (Thursday in Japan) dipping below the .99 level after having busted the 1.00 level to the downside for the first time since April 2009.

click on chart for sharper image

In response, the Nikkei rose as much as 3%, now up a "modest" 375 points (2.65%) as of 1:00AM Central.

Zerohedge reports Japanese Government Bonds Halted Limit Down; Yields Spike To 10 Week High; Worst Day In 5 Years.

Prime Minister Shinzo Abe is playing not with matches but with dynamite with his 2% inflation mandate widely known as "Abenomics". So far, Abe's policies are popular (at least from exporters), yet I caution once again "Be Careful of What You Ask, You May Get It".

There is no reason at all to believe Japan can easily contain this mess should inflation get out of hand. A mere rise in interest rates to 3% would consume Japan's entire tax revenue just on interest on its national debt.

This will not end well for Japan.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Damn Cool Pics

90's Rave Kids vs Today's Rave Kids
DIY Batmobile
Travel Hacking Vegas: Las Vegas Deals [Infographic]
Geometric Tattoos
Living in a Ghetto

90's Rave Kids vs Today's Rave Kids

Posted: 10 May 2013 08:59 AM PDT

A lot has changed during the last 15-20 years.

DIY Batmobile

Posted: 10 May 2013 08:24 AM PDT

How to build a Batmobile for your kid.

Travel Hacking Vegas: Las Vegas Deals [Infographic]

Posted: 10 May 2013 08:08 AM PDT

Ahhh, Las Vegas. Land of gambling, buffets, and wedding chapels. It's easy to spend a lot of dough in Sin City, but we've teamed up with our friends at Marriott to help you 'travel hack' your way through Vegas and save some cash. Check our handy infographic for some Las Vegas deals and tips for your next trip to Sin City. You (and your wallet) will be glad you did. Even on a budget, you can find plenty to do and enjoy in Vegas, baby!

Click on Image to Enlarge.