Central Perk: 20 aug. 2014

miercuri, 20 august 2014

Mish's Global Economic Trend Analysis

China Manufacturing PMI Treads Water
Election Jackpot Scratch and Sniff: LA Proposes Free Lottery Tickets if You Vote; Romney Says Obama Worse Than Expected
Argentinian Peso in Massive Slide; Argentina’s Bonds Decline on Plan to Offer Local-Law Swap

Posted: 20 Aug 2014 10:41 PM PDT

Chinese manufacturing is once again treading water, barely above contraction according to the HSBC Flash China Manufacturing PMI.

Key points

Flash China Manufacturing PMI™ at 50.3 in August (51.7 in July). Three-month low.
Flash China Manufacturing Output Index at 51.3 in August (52.8 in July). Three-month low.

click on chart for sharper image

Comments

Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said ...

"The HSBC Flash China Manufacturing PMI moderated to 50.3 in August, down from 51.7 in July. Both domestic and external new orders rose at slower rates compared to the previous month. Meanwhile, disinflationary pressure returned as input and output prices contracted over the month. Today's data suggest that the economic recovery is still continuing but its momentum has slowed again. Therefore, industrial demand and investment activity growth will likely stay on a relatively subdued path. We think more policy support is needed to help consolidate the recovery. Both monetary and fiscal policy should remain accommodative until there is a more sustained rebound in economic activity."

Mish Translation of Comments

China PMI has gone nowhere. The last uptick Qu raved about is now in the ashcan. Thus, Qu wants more "policy support" AKA loose money from the China central bank to "consolidate the recovery".

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

Election Jackpot Scratch and Sniff: LA Proposes Free Lottery Tickets if You Vote; Romney Says Obama Worse Than Expected

Posted: 20 Aug 2014 01:33 PM PDT

Turnout in some Los Angeles elections is so low that LA Considers Giving Citizens Lottery Tickets if they Vote.

With as few as 8% of registered voters showing up to vote in some recent elections, the Los Angeles Ethics Commission has urged the City Council to consider improving turnout with a lottery pilot program. No actual vote would be required, but those participating would have to show up at the polls to participate. There was no decision on what the grand prize for participating in the democratic process. "Maybe it's $25,000, maybe it's $50,000," Ethics Commission President Nathan Hochman told The Los Angeles Times. "That's where the pilot program comes in—to figure out what...number and amount of prizes would actually get people to the voting box."

It would seem that almost any prize would draw more voters than are currently participating in municipal elections. Only 23% of registered voters cast ballots in the 2013 mayoral election, according to the Times.

Detractors of that initiative, and the Los Angeles proposal, say it would bring people to the polls who were interested only in the prize, not in the issues.

"That might produce better results," Fernando Guerra, a researcher at the Center for the Study of Los Angeles at Loyola Marymount University, told Southern California Public Radio. "There is no data to show that uninformed voters make worse decisions than informed voters."

Los Angeles is also considering a more mundane solution to the problem of voter turnout. It's looking at moving its municipal elections to even-numbered years to coincide with state and federal elections.

Is there any data that says it matters how people vote?

Speaking of which, look at the pathetic choices in the last presidential election. Romney vs. Obama how did it matter?

Romney Says Obama Worse Than Expected

The laugh of the day is Mitt Romeny Claims Obama Worse Than Even I Expected.

It's easy enough to cite failures of Obama. There are dozens of them. But at no point in the interview did Romney say what he would have done differently.

For starters, Obamacare is Romneycare no matter how much he tried to distance himself from that simple fact. Would Romney have given arms to Syrian rebels like Hillary proposed? Would the US be at war with Iran now since Iranian sanctions did not do a damn thing?

Would we be at war with Russia? Economic war with China? In what ways would anything be different under Romney?

Might Things Under Romney Actually Be Worse?

On the military front, I suspect we would be in more wars. We would also be in more trade wars if Romney did what he said with China.

Would anything on immigration have passed in a split Congress?

In what ways, others than birth control, abortion, and the like, would anything be different under Romney?

"None of the Above"

Is it time to consider adding "none of the above"as an option on every ballot? And if "none of the above" wins, should we just do away with the office?

That would actually give people a reason to vote.

The problem with such proposals is the only safe politicians will be in gerrymandered districts.

Some propose term limits. But how does that help in a district that votes overwhelmingly for the same political party every year, and the candidates are all clones of each other?

"If voting changed anything they'd make it illegal"

That phrase has been attributed to Mark Twain, but more likely it belongs to anarchist Emma Goldman.

You can pay people to vote, but what we really need is non-gerrymandered, real choices, not politicians owned by party demagogues, not politicians bought and owned by special interests.

Given the Supreme Court ruled corporations are people, and given special interest groups bribe politicians with huge campaign contributions, I don't see any impetus for reform unless and until there is campaign finance reform and non-gerrymandered districts.

Nonetheless, I keep hoping. I have voted in every national election since the age of 18.

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

Argentinian Peso in Massive Slide; Argentina’s Bonds Decline on Plan to Offer Local-Law Swap

Posted: 20 Aug 2014 11:48 AM PDT

In June, the US Supreme Court ruled that Argentina Cannot Selectively Default on a small group of hold-outs demanding full payment on otherwise restructured government bonds.

The problem with the ruling is that if Argentina pays the vulture fund full value, it will have to pay all the bondholders full value, and that would wreck the country again.

In the future, bond agreements will force everyone to go along with a majority decision.

In the meantime, US courts ruled Argentina must negotiate will all the parties, including the vulture funds that own roughly 8% of Argentine debt and demand full payment on it.

The ruling meant, and banks enforced, the all or none principle. Argentina defaulted on all the bonds, not because it wanted to, but because US courts forced that outcome.

Local-Law Swap

In an attempt to circumvent the ruling, Argentina will swap the bonds in question for new bonds. It will then hope to pay the 92% according to the prior workout agreement, leaving the vulture funds in limbo.

With that backdrop it will be easier to understand today's Bloomberg report Argentina's Bonds Decline on Plan to Offer Local-Law Swap.

Argentina's bonds sank to a two-month low after the government said it plans to pay foreign-currency notes locally to sidestep a U.S. court ruling that blocked payments and caused its second default in 13 years.

The government will submit a bill to Congress that lets overseas debt holders swap into new dollar-denominated bonds governed by domestic law, President Cristina Fernandez de Kirchner said in a nationwide address yesterday. Payments will be made into accounts at the central bank instead of through Bank of New York Mellon Corp., the current trustee.

Fernandez's move flies in the face of orders from U.S. District Judge Thomas Griesa that a swap would be illegal. He has said the nation must pay $1.5 billion to holders of debt defaulted on in 2001 or reach a settlement before resuming payments on restructured notes.

The country's benchmark restructured bonds due in 2033 fell 2.58 cents to 80.16 cents on the dollar as of 11:47 a.m. in New York, the lowest level since June 19. The price is still above the 74.03-cent average of the past five years.

On June 20, Griesa said that Argentina is prohibited from paying the overseas bonds in Argentina under a local law. Any intermediaries assisting Argentina in the process could be sued for contempt of court, while investors who aren't able to hold local bonds would have to sell their holdings.

The Argentine president has argued that obeying the ruling by paying the holdouts would trigger a Rights Upon Future Offers clause in the exchange bond contracts that obliges Argentina to match any improved offer to all bondholders. That could trigger claims of at least $120 billion, according to the proposal.

Intermediaries Now Gone

The trustee and primary intermediary was Bank of New York Mellon Corp. Kiss that intermediary goodbye. Bondholders can get payment directly from Argentina's central bank.

The fact that debt is above average valuation of the past five years looks promising. The article suggests Argentina will be shut out of the credit markets.

Is that necessarily the case?

After all, Argentina is going out of its way to pay 92% of the bondholders who agreed on the initial restructuring.

Nonetheless, Bloomberg reports "U.S.-based investors may be wary of taking part in the swap over concern they will be held in contempt of court, according to Casey Reckman, an economist at Credit Suisse."

If so, it's ridiculous. In fact, the Supreme Court ruling is ridiculous. When you make risky bets, some of them work, some of them don't.

The idea that bondholders or even certain bondholders can never take losses is idiotic, yet that is what the court ruled.

Argentinian Peso in Massive Slide

Inquiring minds may be interested in how the Argentinian Peso has been holding up under the circumstances.

Peso vs. US Dollar

Since late 2007, the peso has fallen from 3.02 to the dollar to 8.32 to the dollar. That's a decline of 63.7%.

Question of Reserves

Argentina has about $29 billion in foreign currency reserves. Is that enough?

The Wall Street Journal discussed the issue the other day in Argentine Bonds Fall Further as Talks Stall.

Investors are more focused than ever on Argentina's reserves, which the central bank uses to defend its currency and fund imported goods.

Unable to borrow hard currency abroad because of a debt dispute in U.S. courts, President Cristina Kirchner has instead borrowed $31 billion from the central bank to pay public- and private-sector creditors since 2010.

Reserves stood at just under $29 billion on Thursday, up about $2 billion since the end of March thanks to exports of a record soy harvest and import restrictions.

Payments to multilaterals this year won't necessarily mean a net decline in reserves because Argentina frequently gets new loans as it pays back those lenders.

Even so, Argentina's reserves are among the lowest of major Latin American economies due to government borrowings and capital flight by investors weary of Mrs. Kirchner's populist policies.

Inflation thought by many to be around 40%, dollar shortages that have forced the government to restrict vital imports, and sluggish trade with neighboring Brazil pushed Argentina into recession earlier this year. The economy is expected to contract about 0.9% in 2014, according to the latest monthly survey of analysts by FocusEconomics.

Argentina defaulted on some of its bonds on July 30, after it missed a roughly $539 million interest payment due to its restructured bondholders. U.S. District Judge Thomas Griesa has ruled that Argentina can't pay its restructured bondholders until it pays the holdouts, which are a group of hedge funds suing the country for full payment on bonds it defaulted on in 2001.

Argentina has argued that it isn't in default because it deposited on June 26 with Bank of New York Mellon BK +0.36% the money necessary for the interest payment. The deposit was made in both dollars and euros. However, BNY Mellon hasn't passed the money along to bondholders because Judge Griesa also warned that any bank who helps Argentina process the payment would be violating a U.S. court order.

Judge Griesa reiterated in an Aug. 6 order that BNY Mellon will keep the money in its account until otherwise ordered by the court. He also said BNY Mellon wouldn't be held liable for claims by bondholders.

On Friday, a group of restructured bondholders who own Argentine bonds denominated in euros appealed Judge Griesa's Aug. 6 order to the U.S. Court of Appeals for the Second Circuit. The euro bonds were among the ones Argentina defaulted on two weeks ago because BNY Mellon wasn't allowed to process the interest payment Argentina deposited. These bondholders have tried to get their interest payment by suing BNY Mellon in Belgian courts, and they have threatened to sue the bank in U.K. courts.

As noted above, US courts ruled the holdouts must be paid in full, or nobody paid at all.

Yet, if Argentina paid the holdouts, it would trigger $120 billion in other claims, and Argentina only has $29 billion in reserves.

Inane US court ruling? I think so.

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

Damn Cool Pics

Houses And Buildings That Look Like Animals
Famous Rebrands Made In The Last 100 Years [Infographic]
Chinese SWAT Officer Takes Wedding Photos At Work
How To Take A Mugshot Like A Boss

Houses And Buildings That Look Like Animals

Posted: 20 Aug 2014 11:43 AM PDT

Because who wouldn't want to live in a giant turtle?

Famous Rebrands Made In The Last 100 Years [Infographic]

Posted: 20 Aug 2014 11:28 AM PDT

Online hosting site WebHostingBuzz has created a new infographic that documents some of the most famous rebrands from the past century. Categorizing the rebranding projects by the decades in which they took place, this infographic shows how the branding of well-known brands like KitKat, Nike, UPS and IBM looks like before they took on their now-iconic names and logos.

Click on Image to Enlarge.

Chinese SWAT Officer Takes Wedding Photos At Work

Posted: 20 Aug 2014 10:32 AM PDT

This Chinese SWAT officer had to work a 24 hour shift but he also had to take some wedding photos. When you put those two events together, something awesome happens.

How To Take A Mugshot Like A Boss

Posted: 20 Aug 2014 10:20 AM PDT

Robert Burt is only 19 years old and a few months ago he got busted for drunk driving. When he had to go back to the police station to do 48 hours in a cell, he came prepared with an awesome t-shirt which features his first mugshot.

June