Central Perk: 6 ian. 2015

marți, 6 ianuarie 2015

Mish's Global Economic Trend Analysis

Germany Wins Race to Negative Yields on 5-Year Bonds; Japan Leads Germany in 10-Year Yield Race
Economists Upbeat Despite 4th Consecutive Decline in Factory Orders; Auto Orders vs. Expectations
Harvard Professors in "Uproar" After Learning Obamacare Applies to Them!

Germany Wins Race to Negative Yields on 5-Year Bonds; Japan Leads Germany in 10-Year Yield Race

Posted: 06 Jan 2015 01:13 PM PST

Curve Watcher's Anonymous has been watching the race to zero or negative yields in government bonds.

In the race to see which country will be first to hit zero percent or below on 10-year government bonds, Japan is currently in the lead at 0.295%, Germany is in second place at 0.447%, and the US trails mightily at 1.963%

Japan 10-Year Bond Yield

click on any chart for sharper image

Germany 10-Year Bond Yield

Japan is in the lead, but the smart bet is on Germany. The reason is German rates are negative everywhere from 1-month to 5-years.

Germany 5-Year Bond Yield

Blue Ribbon Winner Announced

Germany wins the coveted gold medal in the prestigious 5-year yield category in a stunning come-from-behind victory after trailing by as much as 130 basis points (1.3 percentage points) as recently as 2010.

Yield on the Spanish 10-year bond is 1.64% compared to 1.963% on the 10-year treasury note.

ECB president Mario Draghi believes QE pushing rates even lower will cure Europe.

With yields this low, how can QE possibly do anything other than create even greater risk in sovereign bond speculation?

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

Economists Upbeat Despite 4th Consecutive Decline in Factory Orders; Auto Orders vs. Expectations

Posted: 06 Jan 2015 10:20 AM PST

Economists are among the most optimistic groups on the planet. Year in, year out they project improvements in growth.

So today, despite 4th Consecutive Decline in Factory Orders, it's no surprise that economists remain optimistic.

Orders to U.S. factories fell for a fourth straight month in November, with demand in a key category that signals business investment plans down for a third month.

The Commerce Department said Tuesday factory orders dropped 0.7 percent in November after a similar 0.7 percent fall in October. The November weakness came from decreases in demand for primary metals, industrial machinery and military aircraft.

A closely watched category that serves as a proxy for business investment spending dropped 0.5 percent in November, marking the longest stretch of weakness in this category since 2012.

Economists, however, remain optimistic that the drop in orders is a temporary soft patch and a stronger economy with increased consumer spending will trigger a rebound in demand in 2015.

New Order Details

The US Census Bureau Manufacturers' Shipments, Inventories and Orders Report for November 2014 shows New orders for manufactured goods are down for four consecutive months.

Overall Highlights

November aggregate decline was 0.7%.
Excluding transportation, new orders decreased 0.6%
Excluding defense, new orders down 0.4%
Durable goods new orders down 0.9%
Nondurable goods down 0.5%
Shipments down three of last four months
Durable goods orders down three of last four months
October decline 0.7%.

Transportation Equipment

Transportation equipment (Aggregate) down 1.3%
Automobiles down 2.0%
Heavy duty trucks down 4.4%
Motor vehicle bodies, parts, and trailers up 0.5%
Nondefense aircraft and parts down 4.7%
Defense aircraft and parts down 2.3%
Ships and boats up 0.7%

Auto Orders vs. Expectations

Automobiles orders down 2.0% and heavy duty trucks down 4.4% are standouts. Those numbers suggest the auto party is over or will soon be.

I have a simple question: Who wants a car, needs a car, can afford a car, and does not have a car? Subprime auto loans are a key reason car sales were as robust as they have been.

Nonetheless (from the first link) "Auto sales are expected to reach their highest level in a decade this year, bolstered by strong job gains and cheap gas."

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

Harvard Professors in "Uproar" After Learning Obamacare Applies to Them!

Posted: 06 Jan 2015 12:22 AM PST

In what has to be the funniest as well as most ironic post to date on Obamacare, the New York Times reports Harvard Ideas on Health Care Hit Home, Hard.

For years, Harvard's experts on health economics and policy have advised presidents and Congress on how to provide health benefits to the nation at a reasonable cost. But those remedies will now be applied to the Harvard faculty, and the professors are in an uproar.

Members of the Faculty of Arts and Sciences, the heart of the 378-year-old university, voted overwhelmingly in November to oppose changes that would require them and thousands of other Harvard employees to pay more for health care. The university says the increases are in part a result of the Obama administration's Affordable Care Act, which many Harvard professors championed.

Richard F. Thomas, a Harvard professor of classics and one of the world's leading authorities on Virgil, called the changes "deplorable, deeply regressive, a sign of the corporatization of the university."

Mary D. Lewis, a professor who specializes in the history of modern France and has led opposition to the benefit changes, said they were tantamount to a pay cut. "Moreover," she said, "this pay cut will be timed to come at precisely the moment when you are sick, stressed or facing the challenges of being a new parent."

The university is adopting standard features of most employer-sponsored health plans: Employees will now pay deductibles and a share of the costs, known as coinsurance, for hospitalization, surgery and certain advanced diagnostic tests.

The president of Harvard, Drew Gilpin Faust, acknowledged in a letter to the faculty that the changes in health benefits — though based on recommendations from some of the university's own health policy experts — were "causing distress" and had "generated anxiety" on campus.

In addition, some ideas that looked good to academia in theory are now causing consternation. In 2009, while Congress was considering the health care legislation, Dr. Alan M. Garber — then a Stanford professor and now the provost of Harvard — led a group of economists who sent an open letter to Mr. Obama endorsing cost-control features of the bill. They praised the Cadillac tax as a way to rein in health costs and premiums.

Jerry R. Green, a professor of economics and a former provost who has been on the Harvard faculty for more than four decades, said the new out-of-pocket costs could lead people to defer medical care or diagnostic tests, causing more serious illnesses and costly complications in the future.

"It's equivalent to taxing the sick," Professor Green said. "I don't think there's any government in the world that would tax the sick."

Icing on the Hypocrite's Cake

"None of us who protested was motivated by our own bottom line so much as by the principle," Ms. Lewis said, expressing concern about the impact of the changes on lower-paid employees.

"It seems that Harvard is trying to save money by shifting costs to sick people," said Mary C. Waters, a professor of sociology. "I don't understand why a university with Harvard's incredible resources would do this. What is the crisis?"

Obviously there are principles for Harvard employees and other principles for everyone else.

It's shocking, just shocking, that Obamacare apply to those who are responsible for making it happen.

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