Mish's Global Economic Trend Analysis

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• Interactive Map of Global Debt
• Portugal Foreign Affairs Minister Threatens "Euro Zone Exit"
• Partied Out: A Recap of Australia's Now Imploding Housing Bubble; Property Bull Offers Jeremy Grantham $100m Housing bet, Party is Not Over
• Sunday Funnies 2010-11-07 Agreement to Agree; Just Say Shazam!

Interactive Map of Global Debt Posted: 14 Nov 2010 04:06 PM PST The Economist has an interesting Global Debt Clock that inquiring minds may be interested in. From The Economist ... The clock is ticking. Every second, it seems, someone in the world takes on more debt. The idea of a debt clock for an individual nation is familiar to anyone who has been to Times Square in New York, where the American public shortfall is revealed. Our clock shows the global figure for all (or almost all) government debts in dollar terms. Does it matter? After all, world governments owe the money to their own citizens, not to the Martians. But the rising total is important for two reasons. First, when debt rises faster than economic output (as it has been doing in recent years), higher government debt implies more state interference in the economy and higher taxes in the future. Second, debt must be rolled over at regular intervals. This creates a recurring popularity test for individual governments, rather as reality TV show contestants face a public phone vote every week. Fail that vote, as the Greek government did in early 2010, and the country can be plunged into imminent crisis. So the higher the global government debt total, the greater the risk of fiscal crisis, and the bigger the economic impact such crises will have. Debt Comparison The map consists of government debt, not all debt. It does not include future liabilities such as Social Security and Medicare. Note that by this comparison Japan is the mother of all basket cases and Australia is better than all of the above. Addendum: Jose writes ... I am confused with the Global Debt Clock, as reflected on your article from The Economist. I have copy of an article from The Washington Post, dated several months ago, reflecting Government debt in percentage of nominal gross domestic product. The table was reproduced from Organization for Economic Cooperation and Development, the comparison is as follows: Country... Economist... OECD Canada .... 82.3% ...... 82.8% UK ............ 76.0% ...... 71.0% Australia.... 22.3% ..... 15.9% Greece .... 129.4% .... 114.9% Japan ...... 196.6% .... 189.3% US............. 62.3% ...... 83.9% The US at 84% is what I remember as well. Note that only the US is far different in that table. If 84%+- is accurate, this Canada and the US are approximately equal in percentage terms. I will see if I can get an answer from the Economist. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Portugal Foreign Affairs Minister Threatens "Euro Zone Exit" Posted: 14 Nov 2010 01:46 PM PST The simmering stew in the Eurozone took another turn for the worse as Portugal discusses a scenario in which it will abandon the Euro. The Wall Street Journal reports Portugal Foreign Minister Warns of Euro Exit A Portuguese government minister openly speculated over the weekend that his country's economic frailties could lead to its expulsion from the euro zone, underscoring the growing fear in Europe that the continent's debt woes may force leaders to restructure the currency bloc. In an interview with the Portuguese weekly Expresso published Saturday, Foreign Affairs Minister Luis Amado said Portugal faces "a scenario of exit from the euro zone" if it fails to tackle its economic challenges. "There has to be an effort by all political groups, by the institutions, to understand the gravity of the situation we're facing," he said. Portugal is now the front line of the sovereign-debt crisis that already has claimed Greece and threatens Ireland, economists say. If economic weakness is sufficient to push an otherwise crisis-free country to the brink of default and rescue, then larger countries, such as Spain and Italy, could be threatened, analysts say. Portuguese Bluff? In spite of the inclusion of Portugal as the "P" in "PIIGS" (Portugal, Ireland, Italy, Greece, Spain), the article makes a case that Portugal is not in any real trouble with property bubbles, excessive Debt-to-GDP, or unemployment. Portugal did have weak growth for a decade, however, it managed to avoid the massive problems that befell Ireland, Greece, and Spain. I suspect this threat is a bluff, but if so, it's a poorly-timed maneuver that is certain to heighten tensions in the Eurozone. Even if higher ranking officials attempt to downplay the Foreign Affairs Minister's statements (something I quickly expect), the uncertainly may cause lasting damage. Deep Denial in Eurozone Note that Greece is still in massive denial about its recovery plans. See International "Extend-and-Pretend" - Greece Needs IMF Extension for renewed concerns about Greece. In the European bond market meltdown, the ECB is Buyer of Only Resort for Greece, Ireland and Portugal. As noted above, that has Portugal fuming. Ireland is in a bigger mess than Greece and Portugal, but Ireland does have an offer of "help" from the IMF. Meanwhile I ask (and answer) the question Can the IMF "Help" Anyone? The answer might be different than you think. Give it a look if you have not yet done so. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Partied Out: A Recap of Australia's Now Imploding Housing Bubble; Property Bull Offers Jeremy Grantham $100m Housing bet, Party is Not Over Posted: 14 Nov 2010 10:47 AM PST Everyone loves a party and Australia threw one of the biggest parties in history. Australia's wholesale liqueur central distributor (widely known as the "RBA") should have taken away the punch long ago, but as in the US (and everywhere else), the central distributor as well as government officials and street vendors, all love a party, and what a long street party it was! After years of partying, party goers got more than a bit tipsy, especially after government officials spiked the punch hoping to keep the street party going perpetually. Out of fear of being blamed for a massive hangover, the central distributor hiked the price of punch repeatedly hoping for a quiet end to the party. However, the central distributor's rate hike message was ignored for over a year, primarily because the punch distributor kept insisting "there is no bubble in partying". New party goers heard the message and came rushing in chanting the slogan "better party before it's too late". Various media outlets and party sponsors mocked one "keen" non-party goer who was too busy mountain climbing to party. Everyone else was cheering the party that had "too many fundamentals to ever end" Meanwhile, the group of bar owners and bartenders known as the "Big Four" were forced to pass along the central distributor's price hikes. Nonetheless, the masses kept drinking and partying. It was quite the spike government officials threw into the punch! In an act of desperation, the "Big Four" bar owners finally raised prices even more than the wholesale liqueur distributor. They did this after becoming worried about the consequences of drunks passing out on the floor, in the street, and in the outback, unable to pay their "bar tabs". Note that bar tab paying is the only real concern of the bar owners, not the mess in the streets or the outback. Unfortunately, the actions of the distributor and the bar owners came far too late for a quiet end to the party. After singing the wildly popular hit tune "It's Different Here" at the top of their lungs more times than there are kangaroos in the outback, the party goers finally passed out in the streets and the outback in drunken stupor. "It's Different Here" was written by the vocal group R.E. Agents. Historians will note that exhaustion from drinking, singing, and spending money they did not have ultimately did the party goers in, not excessive price hikes as currently reported in the media and by the government sponsors of the street party, all hoping to place the blame elsewhere. In the wake of a massive hangover, a group of party goers aptly named the Green Party, as well as various government officials and local businesses are hoping to revive the street party, as is the vocal rock band R.E. Agents, hoping to capitalize on another party tune. Unfortunately, the "Pool of Greater Partyers" has simply dried up. Everyone is passed out on the floor, deep in debt, voices shot, and in general too pooped and too broke to party. Australia is in effect "partied out". A Recap of Australia's Now Imploding Housing Bubble It certainly took longer than I expected but signs suggest the Australia housing boom is finally over. The bubble will take years to unwind. Housing busts always begin with a surge in inventory and a dearth of buyers. Then comes falling prices, denial, and government efforts to re-blow the bubble. Let's start with a look at inventory. SmartCompany reports Property market hit by flood of new listings Residential property listings increased in all cities during October with the market now flooded with more properties than during 2008, one expert has warned. SQM Research managing director Louis Christopher says the increase in listings is clear evidence the market is softening, and says the sheer amount of properties means buyers can now take their pick of the litter. "It means the housing market is slowing down and we are expecting more listings to come into the market in November, in Brisbane there's been a 50% increase in stock levels year on year, and that's a huge increase." "Melbourne is also a fairly rapid increase, and that recorded more stock in the market than in 2008. Sydney doesn't look too bad, but not as bad Brisbane. The market is weakening in terms of prices, and this will continue as more listings come onto the market." Christopher also warns that with price growth remaining flat over the next 12 months, buyers will be able to snap up some bargains. He warns sellers to remain vigilant and watch the market for any further movements. Bargains?! Christopher has the current direction correct but he is is sadly mistaken about bargains. It will take many years before prices get back to normal and far longer for there to be any bargains. Luxury Home Auctions Hit By Prices Bloomberg reports Sydney Opera House Luxury-Home Auction Hit by Rates A luxury home auction at the Sydney Opera House yesterday managed to sell only two of the 11 Australian homes on offer as the most aggressive round of interest rate increases by a Group of 20 member saps demand. The Reserve Bank of Australia raised its benchmark interest rate by a quarter of a percentage point to 4.75 percent on Nov. 2 and said it welcomed a cooling of house prices, even as home- price growth slowed for a third straight quarter from July to September. Auction clearance rates averaged 54.7 percent across Australia's eight capital cities during the Nov. 5 weekend, compared with an average of 63.8 percent the weekend of May 29, according to data from real estate research group RP Data. Last week, "the Reserve Bank seemed to give the indication that they were keen to keep the lid on prices, and that's not what buyers want to hear," Brian White, chairman of the Ray White Group, which organized the event, said in an interview after the auction. "That's a very bearish sentiment." Some properties -- including a six-bedroom rural lakefront home with a tennis court, billiards room, pool and sauna in Tuncurry, about 300 kilometers north of Sydney, and a three- level home with under-floor heating and a 12-person lift in Blakehurst, a south Sydney suburb -- failed to receive any bids. Westpac, NAB complete rate rise quartet Bloomberg reports Westpac, NAB complete rate rise quartet Westpac has joined the other three major banks in raising mortgage rates more than the Reserve Bank with a 35-basis-point increase. The move came just over an hour after National Australia Bank raised its standard variable mortgage rate by 43 basis points. While Westpac's increase is the smallest of the big four, it still has the highest standard variable mortgage rate. The standard variable mortgage rates for the big four banks are: * NAB - 7.67 per cent * ANZ - 7.80 per cent * Commonwealth - 7.81 per cent * Westpac - 7.86 per cent All the rate rises are above the Reserve Bank's 25-basis-point official hike last week, but Westpac's latest move is below ANZ's 39-basis-point increase and CBA's 45-basis-point rise. Australia Building Industry Flounders The CourrierMail reports Housing loan interest rate rises dash any hope of a housing recovery in Queensland. A BOUNCE-BACK in the Queensland housing industry is unlikely any time soon with the latest figures showing another drop in housing finance figures. Australian Bureau of Statistics figures released this week show a 0.5 per cent fall in September. This came on the back of a 1.2 per cent fall in August and was a "grim predictor" for the already struggling Queensland building industry, according to Master Builders director of housing policy Paul Bidwell. Mr Bidwell said the fall could largely be attributed to the rapid hikes in interest rates earlier this year. He said finance approvals were the lead indicator of building activity and the current figures showed a bounce-back for the industry was nowhere in sight. The dim prospects for the home building industry comes as the number of existing properties flooding on to the market continues to rise. Broker group Mortgage Choice reports a doubling in borrower requests to talk with a mortgage broker, many from potential refinancers. The main motivation to refinance was to switch to a "cheaper loan" Bouncebacks? Cheaper Loans? Talk of bouncebacks 3 months into a housing implosion 3 years long overdue is complete silliness. Trapped buyers are going to be astounded at how fast prices drop one the implosion picks up steam. That buyers are flooding the banks already hoping to refinance is a sign that many are in serious trouble. Nonetheless, the story gets even sillier. Green Party Wants Laws to Limit Rate Hikes Most mortgages in Australia are adjustable. A series a rate hikes has the green party howling. Bloomberg reports Australia's Greens Plan Laws to Control Bank Rates Westpac Banking Corp. and its closest competitors in Australia would face restraints on increasing mortgage interest rates under legislation planned by the Greens Party. The Greens aim to put a 24-month freeze on the so-called "Big Four" domestic banks, banning them from raising their interest charges by more than the Reserve Bank of Australia's increases, according to an e-mailed statement from the party today. The legislation, to be introduced to the lower house tomorrow, also seeks to scrap some small fees and ensure banks pass on decreases to official central bank rates, it said. Westpac and National Australia Bank Ltd. on Nov. 12 announced increases to their standard variable home-loan rates, following moves by Australia & New Zealand Banking Group Ltd. and Commonwealth Bank of Australia. After reporting higher profits, all four raised charges by more than the Nov. 2 quarter-percentage point move by the Reserve Bank, triggering a backlash by homeowners and verbal attacks from the government and opposition. The rate increases "confirmed the culture of arrogance and contempt for the community we are seeing among the big banks," Treasurer Wayne Swan said in an e-mailed statement today. Mortgage rates are a topic of public debate in Australia, where more than 90 percent of homeowners have variable-rate home loans. Australian Prime Minister Julia Gillard said Nov. 12 the government was working on changes to the banking industry that would allow consumers to more easily leave their bank and find a better deal with smaller lenders. The Australian government will "soon" announce "a carefully considered, effective plan to promote more competition and give people a fair go," Swan said. "There is absolutely no justification" for the scale of the rate increases, Gillard said Nov. 12. "People who bank with those banks will judge them very harshly for it." Justification? Of Course There's Justification Banks are obviously scared s*less about the impending implosion. That is the justification. Of course everyone involved should have thought about this a year ago, two years ago, and three years ago. There was ample warning from the US. Now The Consequences The Sydney Morning Herald reports Business conditions drop as retail flounders Business conditions dropped to their lowest level in more than a year in October, suggesting Australia's economic activity is faltering. The National Australia Bank business conditions index dropped to 2 in October from 7 in September, well below the long-term average of 6. It was the lowest monthly level since July 2009, when business activity was still recovering from the impact of the global financial crisis. "The nascent recovery evident in the September survey has been put on hold for the moment," said NAB chief economist Alan Oster. The profitability index dropped to -4 from 6, going into negative territory for the first time in more than two years as prices weakened. The trading index dropped from 13 to 4 over the same period, NAB said, while retail conditions trended down for the first time since September 1997. Nascent Recovery Over The nascent recovery is over. The implosion has begun. But some still have not gotten the message. Australia Property Bull Offers Jeremy Grantham $100m Housing bet The Australian reports Joye offers US guru $100m housing bet HRISTOPHER Joye, an Australian property market bull, yesterday offered US guru Jeremy Grantham a $100 million bet on house prices. .Mr Joye, managing director of property research group Rismark International, challenged his equally vocal sparring partner, GMO Capital founder and chief investment strategist Mr Grantham, to put his "money where your mouth is" on the issue of whether Australia really is in a property bubble. Mr Grantham's downbeat views on Australia's home prices were "sensationalist and spurious", Mr Joye said. He challenged Mr Grantham to bet the $100m over a three-year term, basing the outcome of the bet on movements in the RP Data-Rismark Australian Capital Cities Dwelling Price Index. For every 1 per cent rise in the index, Mr Grantham would pay $1m, Mr Joye said. But for every 1 per cent decline in the index, Mr Grantham would receive $1m. The trade would be settled at the end of three years with monthly margining to manage credit risk. I hope Grantham takes the bet. Not that Grantham needs the money, but clearly Joye has too much and is offering to give $100 million of it away. Punch-Free Party Addendum: Steve Keen just pinged me with this real-time comment "Loved the outback imagery mate! I did laugh out loud a couple of times. And actually this keen hiker had his own punch-free party on the walk to Kosciuszko. Much more fun than the property bulls shindig." Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Sunday Funnies 2010-11-07 Agreement to Agree; Just Say Shazam! Posted: 14 Nov 2010 01:57 AM PST In tribute to the G20 "Agreement to Postpone Agreement" ... When All Else Fails Just Say Shazam! Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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Seth's Blog : Crunchy

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Crunchy

The term 'crunchy granola' has been shortened to crunchy, a term used to describe people who willingly alter their lifestyle to make less of an impact on the environment. It's crunchy to give up your car for a bike, or to use mesh companies or to become vegan.

I wonder what happens if we broaden the term to describe someone who changes their lifestyle for a job or a brand or a passion? "Eric is getting really crunchy about his job at Microsoft... he even gave up his iPad." Or perhaps, "Cheryl is crunchy about Vuitton... it's all she wears."

Does success for you depend on creating crunchiness among your customers and fans?

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Mish's Global Economic Trend Analysis

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• IMF Ready to "Help" Ireland; Can the IMF "Help" Anyone?
• International "Extend-and-Pretend" - Greece Needs IMF Extension
• QE Explained

IMF Ready to "Help" Ireland; Can the IMF "Help" Anyone? Posted: 13 Nov 2010 05:08 PM PST The IMF is ready, willing, and able to "Help" Ireland according Dominique Strauss-Kahn, the IMF Managing Director. Please consider Strauss-Kahn Says IMF Can Help Ireland's 'Difficult' Situation The International Monetary Fund stands ready to help Ireland if needed, its managing director said, as market concern about the country's debt crisis continues. "Everybody knows that the situation with Ireland, it's a difficult situation," IMF Managing Director Dominique Strauss-Kahn told reporters today in Yokohama, Japan. "So far I haven't received any kind of request. I think they can manage well. If at one point in time, tomorrow, in two months or two years, the Irish want support from the IMF, we will be ready." Bailing out Ireland's financial system could cost as much as 50 billion euros under a "stress case" scenario compiled by the Finance Ministry and central bank. The country's gross funding need for 2011 will be 23.5 billion euros, falling to 18.6 billion euros in 2014, the nation's debt agency said yesterday. Can the IMF "Help" Anyone? Inquiring minds are asking "Can the IMF Help Anyone?" That's a good question. Mish readers may be shocked by my answer: "Yes It Can!" The irony is no country in its right mind should ever accept "help" from the IMF. This apparent paradox can be explained by the fact that "help" from the IMF is akin to tossing an anchor to a struggling swimmer. Help does not go to the country accepting the offer of help. Rather "help" goes to the creditor nations who would otherwise bear the risk of a default by the debtors. In this case, the IMF will not help Ireland. Instead, the IMF would screw the citizens of Ireland while bailing out the bondholders. Who are those bondholders? The answer of course is banks in Britain, Germany, the United States and France. Irish banks, bonds hit as EU eyes survival plan Please consider Irish banks, bonds hit as EU eyes survival plan Shares in Ireland's banks hit record lows and national borrowing costs reached new euro-era highs Monday as the government presented its latest plans for financial survival to the European Union's economic commissioner, who has the power to order changes. The interest rates charged on the treasuries of Ireland, as well as fellow indebted euro-zone members Portugal and Spain, have been rising ever since German Chancellor Angela Merkel last month said she expected any future EU bailouts to come with new rules requiring bondholders to absorb some losses. But Ireland is experiencing by far the greatest skepticism from would-be lenders, who look with horror at Ireland's projected deficit of 32 percent of GDP, a modern European record. Bank of Ireland and Allied Irish have received billions in state aid to cover their dud loans to bankrupt construction tycoons, while Irish Life & Permanent has received no bailout help but is most exposed to Ireland's depressed market for residential property. Traders said a widely read article in the Irish Times by University College Dublin economics Professor Morgan Kelly - known in Ireland as "Dr. Doom" because of his accurate forecasts of the death of the Celtic Tiger economy - added to the gloom. Kelly forecast that state support for banks would cost taxpayers an extra euro30 billion beyond the euro45 billion to euro50 billion declared last month by Lenihan. He accused the government of maintaining "a dreary and mendacious charade" on the true scale of property-based losses in the pipeline. Kelly called the current deficit-fighting push "an exercise in futility" and rated Ireland's financial fate alongside that of the Titanic. He said there was no point trying to cut billions from the budget "when the iceberg of bank losses is going to sink us anyway." "We are no longer a sovereign nation in any meaningful sense of that term. From here on, for better or worse, we can only rely on the kindness of strangers," Kelly concluded. As the traditional owners of Irish treasuries - chiefly banks in Britain, Germany, the United States and France - seek to dump them because of their falling value and increased perceived risk, new sellers can be attracted only by offering higher yields. Traders say the main buyer of Irish bonds in recent weeks has been the European Central Bank. Reject Phony Offer of Help Irish voters, if they have a chance, should reject this phony offer of "help" from the IMF, the EU or whoever. Merkel has it ALMOST correct when she said "any future EU bailouts to come with new rules requiring bondholders to absorb some losses." I say "almost" because the future is now. In addition, I say "almost" because "some of the losses" is inadequate. Bondholders should suffer losses down to the last penny. If they are wiped out, so be it. The citizens of Ireland should not be responsible for those losses. In short, they should tell the IMF to "Go to Hell". The simple way to do that is default. To get its economy functioning again, Ireland will still need austerity measures, public sector reforms, bank reforms and other initiatives, but it certainly does not need any anchors from the IMF. Ireland has enough problems already. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

International "Extend-and-Pretend" - Greece Needs IMF Extension Posted: 13 Nov 2010 04:40 PM PST The highly popular game of extend-and-pretend took another step forward in the international arena today as noted by Greek loan repayment extension on the table Greece's prime minister said in an interview that the possibility of extending repayment of its EU/IMF loan was on the table, but an ECB policymaker said any talk of renegotiation could harm the country's credibility. Greece has cut public wages and pensions and raised taxes to help plug its budget shortfall as part of a 110 billion euro EU/IMF bailout that saved it from bankruptcy in May. But officials say it will miss this year's deficit target because of a revision of 2009 fiscal data and weak revenue growth, and the government has said it is ready to make extra spending cuts if necessary. "The issue of extending the repayment of the support mechanism loan has already been put on the table," Prime Minister George Papandreou said in an interview to be published by the Greek newspaper Proto Thema on Sunday. Analysts have said Greece is likely to need additional help eventually because of a jump in 2014/2015 gross borrowing needs when the 3-year bailout deal expires. The International Monetary Fund has also said extending repayments is an option, but last month Germany strongly opposed it and the European Commission said no talks were taking place. If 2014-2015 is not the target date, pray tell what is? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

QE Explained Posted: 13 Nov 2010 09:19 AM PST Here is an entertaining video that helps explain what Quantitative Easing is, and who in general benefits from it. I especially like the part about Bernanke being so dumb as to want to raise prices in a recession. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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Your Weekly Address: Exports and Earmarks

Your Daily Snapshot for Saturday Nov. 13,  2010   Your Weekly Address: Exports and Earmarks The President explains his push for exporting American goods in Asia, and urges Congress to address earmarks as a signal of fiscal reform. Watch the video. Weekly Wrap Up Quote: “We recall acts of uncommon bravery and selflessness.  But we also remember that honoring those who’ve served is about more than the words we say on Veterans Day or Memorial Day.  It’s about how we treat our Veterans every single day of the year.” – The President on veterans Day at Yongsan Army Garrison in Seoul, South Korea with base personnel, families and Korean vets: http://wh.gov/3Jj Serve: Learn more about how you can support our Veterans, military families and active duty service members: http://bit.ly/94urqK Your West Wing Week: “OCUNUS, Outside the Continental United States”: http://wh.gov/3Sp Asia in Photos: Two slideshows from the President’s trip: India: http://wh.gov/3ef and Indonesia: http://wh.gov/3z5 Inside the White House: Go on an interactive tour of the White House featuring behind-the-scenes photos and videos: http://wh.gov/3ML On the White Board: Video: The newest installment of White Board series featuring Austan Goolsbee on the Administration’s goals to expand the American export market: http://wh.gov/3z6 Our Newest Citizens: 75 members of the US Military who have risked their lives across the globe become citizens: http://wh.gov/3J2 More Women on Wall Street: iVillage, a site dedicated to women’s interests and issues, sits down with Elizabeth Warren about how the new Consumer Financial Protection Bureau will help American families. VIDEO: http://bit.ly/csOOAU   Honoring Our Veterans: A blog post by Tammy Duckworth:http://wh.gov/3ur. A PSA with the First Lady and Dr. Biden: http://wh.gov/3u0. A video from the Department of Veterans Affairs: http://bit.ly/bJ2jtW Ending the Tobacco Epidemic: Secretary Sebelius writes about the new dramatic graphic labels that are being proposed for every pack of cigarettes: http://wh.gov/3u3 Chu on The Onion: Secretary Chu shares some important “news” from The Onion: http://on.fb.me/cnQ4cy Recovery through Retrofit: The Vice President introduces a plan to set standards and spur growth for the energy-efficiency industry: http://wh.gov/3e1 “Example to the World”: The President gives a speech in Jakarta, Indonesia extending a hand of friendship to the Muslim world: http://wh.gov/3tE 2010 Save Award: The Save Award opens the floor to federal employees to come up with ideas to make Government more transparent and efficient. Tune in Monday to find out who won the 2010 Save Award, and in the meantime, check out the four finalists: http://wh.gov/3Fw Every Marine Shares a Birthday: Video: Happy 235th Birthday he Marine Corps’: http://bit.ly/cLmWNA Get Updates Sign Up for the Daily Snapshot  Stay Connected     Facebook Twitter YouTube Flickr iTunes           This email was sent to e0nstar1.blog@gmail.com Manage Subscriptions for e0nstar1.blog@gmail.com Sign Up for Updates from the White House Unsubscribe e0nstar1.blog@gmail.com | Privacy Policy Please do not reply to this email. Contact the White House The White House • 1600 Pennsylvania Ave NW • Washington, DC 20500 • 202-456-1111

Mish's Global Economic Trend Analysis

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• NJ School Superintendent Bitches about Making $175,000 a year, Gov. Christie says “Let Me Help You Pack”
• Sugar Prices Fall Record 12% in London, Most in 22 Years in NY; Soybeans, Corn Lock-Limit Down
• QE II Bet Starts to Unravel
• European Bond Market Meltdown; ECB is Buyer of Only Resort for Greece, Ireland and Portugal

NJ School Superintendent Bitches about Making $175,000 a year, Gov. Christie says “Let Me Help You Pack” Posted: 12 Nov 2010 07:48 PM PST Every time I listen to NJ Chris Christie I want to stand up and salute. Today is no different. Please watch this 4 minute video where Chris Christie blasts LeRoy Seitz, Superintendent of Schools for the Parsippany School District about Seitz's threat to leave the state if his salary is reduced to $175,000. NorthJersey.com has more details in Governor sets sights on Seitz contract Last week the Parsippany-Troy Hills Board of Education voted 6-2 to renew Superintendent LeRoy Seitz's contract, which included a 2 percent per year salary increase. What made the contract noteworthy, aside from the dozens of people that spoke out against it and the tongue lashing the Board and the Superintendent received from Gov. Chris Christie was that the contract Seitz is currently working under doesn't expire until July 1, 2011. The Board began contract negotiations during the summer, at about the same time the Christie administration released information about a plan to cap chief administrator's salaries and tying the numbers to the enrollment in the district. By finalizing the contract now the Board effectively agreed to give Seitz a salary well above the governor's proposed cap for almost five years. At the Board meeting Mark Tabakin, the Board attorney, told the gathering of about 90 people that the cap is still in the proposal form, that the contract was approved by the County Executive Superintendent Kathleen Serafino and that it is a legal action. "People are upset," he acknowledged, "but it's up to the will of the Board." The controversial contract drew township residents and protesters from as far away as Clifton and Hackettstown, who were outraged over the Board's end run around the proposed cap. At times the dissenters were so vocal Board President Anthony Mancuso, who remained calm and in control throughout the proceedings, had to call for a 10-minute recess to let the outbursts subside. The police were also called during one of the breaks though they never had the need to take action. When the public was allowed to speak the floodgates opened. Taking a sarcastic tact the first speaker Roman Hoshovsky said, "How can anyone be expected to live on $200,000?" Then he produced an empty canister and proposed using it as a collection jar in businesses around town to raise money for Seitz. Barbara Hackling pointed out the Board had laid off teachers and refused to negotiate with the paraprofessionals, "but found money for him." Karen Blunt, a 36-year Parsippany resident and a paraprofessional in the district said, "He [Seitz] is looking out for his future. I haven't had a raise in 4 years who is looking out for my future?" The day before the meeting Seitz is quoted in the Daily Record as saying, "Because of the proposed salary caps, I have to look at my future and the financial welfare of my family. I certainly would have options if I didn't feel the compensation in this district, or New Jersey, is appropriate." The governor reacted to Seitz's veiled threats to leave New Jersey and go to a nearby state where there is no state salary. "I will say in response to Mr. Seitz, 'Let me help you pack.' We have real problems in our state that we have to fix and we don't have the time, nor the money, nor the patience any longer for people who put themselves before our citizens," Christie railed. I Applaud LeRoy Seitz A tip of the hat goes to LeRoy Seitz for being such an arrogant SOB that that the meeting to discuss the new contract overflowed with citizens fed up with school board greed. It is not easy standing up to thugs who want nothing more but to raise your taxes. But the voters did. That's how riled up they were. I recommend voters in the Parsippany School District send a message to the ignoramuses who agreed to give LeRoy Seitz a new contract. Vote them off the school board. Fortunately it takes approval from another level to agree to that raise, so the raise is not a done deal yet. New Jersey taxpayers are fed up, and rightfully so. If LeRoy Seitz thinks he can get $212,000 elsewhere, more power to him. The same holds true for every public "servant". If you can get more in the private sector, shut up and do it. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Sugar Prices Fall Record 12% in London, Most in 22 Years in NY; Soybeans, Corn Lock-Limit Down Posted: 12 Nov 2010 05:39 PM PST In yet another sign that the QE II Bet is Unraveling, over a month's worth of gains in the sugar futures market went into the dustbin in two days. Bloomberg reports Sugar Prices Fall Record 12% in London, Most in 22 Years in N.Y. Refined-sugar prices plunged by a record in London, and raw-sugar futures in New York tumbled the most in 22 years as speculation that China will boost borrowing costs roiled commodity markets. China may increase interest rates soon in a bid to cool inflation, according to Bloomberg News survey. Raw materials tumbled on concern that demand for crops will ease in the Asian nation, the biggest consumer of many commodities. Prices also fell after ICE Futures U.S. raised margins on contracts by 65 percent. Europe announced plans to increase sugar exports. Refined-sugar futures for March delivery fell $91.50, or 12 percent, to close at $677.10 a metric ton, marking the biggest drop ever. The price fell 2.8 percent yesterday after the EU said it also plans to lift import duties. Raw-sugar futures plunged 3.45 cents or 12 percent, to settle at 26.21 cents on ICE. The single-day drop and this week's slide of 17 percent were the most since July 1988. The margin requirement, or amount of money traders must keep on deposit, rose to $4,970 per speculative contract from $3,010, ICE said. Raw Sugar Daily Raw Sugar Weekly I see no reason why sugar couldn't or even shouldn't fall back to the 14-18 area, wiping out the entire runup. Soybeans, Corn Lock-Limit Down It's not just sugar that got whacked hard. Please consider Soybeans, Corn Plunge as Commodities Drop on China Rate Concerns Soybeans and corn fell the most allowed by the Chicago Board of Trade on speculation that China will raise interest rates soon, cubing demand for commodities. Equities in China tumbled the most since August 2009 after a report yesterday showed that consumer prices in October rose 4.4 percent from a year earlier, the fastest pace since 2008. China is the world's biggest consumer of soybeans and second- largest user of corn. The Thomson Reuters/Jefferies CRB Index of 19 raw materials fell 3.6 percent, the most since April 2009. "The risk of rising Chinese rates increases the chances for demand to slow," said Dale Durchholz, the senior market analyst at AgriVisor LLC in Bloomington, Illinois. "The message is, China is taking a more aggressive stance to cool inflation and push speculative money out of commodities." Corn futures for March delivery dropped 30 cents, or 5.2 percent, to close at $5.48 a bushel, the biggest drop since Oct. 1. The price has gained 46 percent since the end of June, reaching a 26-month high of $6.175 on Nov. 9, after adverse weather reduced the size of the U.S. crop. Soybeans also fell on speculation that China will reduce imports because the government may sell supplies to damp inflation, said Greg Grow, the director of Agribusiness for Archer Financial Services Inc. in Chicago. The country may begin selling from inventories next week to limit gains in food prices, said Cao Huimin, an analyst at China Cereals & Oils Business Net, a researcher in Beijing. The sales may total as much as 2.6 million tons, she said after discussions with cash traders. "Chinese release of soybean stocks next week cast a negative shadow over the market," Grow of Archer Financial said. "Most of today's weakness in commodities was an exodus of funds and speculators." Soybeans Weekly Soybeans did not hit the speculative peak they did in summer of 2008, but there is virtually nothing to like about this price action technically or fundamentally. Technically I would expect a pullback to the 1000 area. Bear in mind I am a long-term commodity bull. However, this love-fest with QE II has gotten more than a little bit out of hand. To make matters worse, China is clearly overheating, something I have warned about all year. Think twice about buying this dip. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

QE II Bet Starts to Unravel Posted: 12 Nov 2010 10:54 AM PST Signs in the yield curve, municipal bonds, junk bonds, and commodities suggest the one-way "sure thing" QE II bet has started to unravel. Curve Watchers Anonymous is particularly interested in the yield curve. Yield Curve 2010-11-12 click on any chart in this post to see a sharper image A representative of Curve Watchers Anonymous said "I have never seen action like this before. The middle part of the curve is blowing up even as the long bond rallies. The action indicates that everyone who front-ran the Fed purchases is now unloading to the Fed. " The 5-year is off 14 basis points while the 30-year is up 8. This is quite unusual to say the least. Municipal Bond Fund Shellacking A tip of the hat to Barry Ritholtz for noticing the California Muni Bond Fund Shellacking Since so many of you have asked: These funds are getting mangled on expectations of — All Aboard! Munis and California joining Ireland on the default train. Even the general Muni funds have lots of California Exposure PCK PIMCO California Municipal Income Fund II PML PIMCO Municipal Bond Fund II click on chart for sharper image JNK Lehman High Yield Bond Fund Metals Grains It remains to be seen if this is the start of a serious correction or just another dip-buying opportunity (in literally everything), but with sentiment sky-high and nearly everyone believing QE II is a one-way bet, I am more inclined to believe the former. As far as gold goes, I do not expect the shellacking we saw in 2008. In fact there might not be much of a pullback at all. However, I can easily be wrong. As far as equities go, action in junk bonds will be particularly important. If and when the corporate bond market cracks, it will be all over for equities. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

European Bond Market Meltdown; ECB is Buyer of Only Resort for Greece, Ireland and Portugal Posted: 12 Nov 2010 08:58 AM PST Thing's don't matter until they do. Ireland finally matters. So does Portugal. The big event happens when Spain and/or Italy matters, and that is just a matter of time. In the meantime, a huge feud is developing between European Central Bank President Jean-Claude Trichet, Bundesbank President Axel Weber (the likely successor to Trichet), and German Chancellor Angela Merkel. Right now, ECB's Trichet Is Buyer of Only Resort as Debt Crisis Worsens. European Central Bank President Jean-Claude Trichet is the buyer of only resort as the euro area's bond market melts down. Just six months after he threw out his rule book to prevent Greece's debt crisis from splintering the euro area, the 67-year old Frenchman may again be the only policy maker able to prevent the collapse in Irish and Portuguese bonds from spreading. That may require him to ignore opposition from Bundesbank President Axel Weber to the ECB's bond-buying program and expand purchases of sovereign assets, according to Citigroup Inc. and Royal Bank of Scotland Group Plc. "The ECB's lack of action is puzzling to say the least and begs the question as to whether it's fulfilling its financial- stability mandate," said Jacques Cailloux, chief European economist at Royal Bank of Scotland in London. "The more the ECB waits, the bigger the purchase program will have to be." With Greece, Ireland and Portugal "now having virtually lost access to capital markets," Cailloux said the ECB must "extend dramatically" its bond purchases. He called on it to buy Spanish assets to limit contagion and spend an additional 100 billion euros by the beginning of next year. So far, the ECB has spent a total of 64 billion euros. One potential obstacle is Weber, a contender to replace Trichet as ECB president next year, who said last month that the central bank should terminate its purchase program. Weber is not the only German publicly disagreeing with Trichet. Chancellor Angela Merkel has quarreled with the central bank chief, whose tenure runs out on Oct. 31, 2011, over the terms of a permanent rescue facility now being debated by the European Union. Trichet says Merkel's demand that bondholders be forced to share the cost of a future bailout risks undermining investor confidence. It was Merkel's push for burden-sharing at a European Union summit last month that triggered this month's sell-off, according to David Mackie, [chief European economist at JPMorgan Chase & Co.] Spain's Economy Stalls Inquiring minds note Spain Stagnates as Austerity Bites Spain's economy stalled in the third quarter, the Bank of Spain estimated, as the deepest austerity measures in three decades undermined the recovery. Gross domestic product was unchanged from the previous three months and expanded 0.2 percent from a year earlier, the central bank in Madrid estimated in its monthly bulletin today. The economy grew 0.2 percent from April to June, as consumers brought forward purchases ahead of a sales-tax increase in July. Industrial production fell the most in seven months in September, a separate report showed today. Output contracted an annual 1.4 percent, compounding an annual decline of 12.7 percent in the same month last year, the National Statistics Institute said. "This was an exceedingly poor outcome given that industrial output had fallen by 12.7 percent year-on-year in September 2009," Raj Badiani, an economist at IHS Global Insight in London, said in a note. It "suggests the sector is struggling to regain its pre-crisis levels." Spain's government, which expects GDP to fall 0.3 percent in 2010 in a second year of contraction, slashed public workers' pay by 5 percent in June and raised value-added tax to 18 percent from 16 percent in July. The measures, passed as contagion from Greece's debt crisis swept through the southern euro region in May, aim to cut the deficit to 6 percent of GDP in 2011 from 11.1 percent last year. Efforts to contain the shortfall and restore growth may come under renewed pressure as the extra yield investors demand to hold Spanish debt rather than German equivalents climbs. As Irish borrowing costs rose to a euro-era high, the Spanish spread widened to a four-month high of 203 basis points from 194 basis points yesterday. It reached a euro-era high of 221 basis points on June 16. Finance Minister Elena Salgado has repeatedly ruled out any contraction in quarterly GDP this year after the economy emerged from a recession in the first quarter. The government forecasts unemployment, at 19.8 percent in the third quarter, will fall to 19.3 percent in 2011. Spain's finance minister can rule out whatever the hell he wants, but that does not make it so. With rising taxes, austerity measures, 20% unemployment, and falling industrial output, it is beyond silly to rule out a GDP contraction. What's even sillier are predictions of a "smooth recovery". Nonetheless, the Bank of Spain said "It is to be expected that the stagnation in the third quarter is transitory. Once the one-off effects linked to the value-added tax increase have passed, the economy will return to the path of smooth recovery." Nonsensical statements like that will send Spanish bonds soaring when the economy slips further. The finance minister and the central bank went out of their way to create unrealistic expectations that cannot possibly be met. Right now Spanish spread widened to a four-month high of 203 basis points while Irish debt spreads hit a record 650 basis points higher than the equivalent German bond. Yields on Iris debt topped 9%. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Addendum: Many people noticed my blog was down this AM. I do not know what happened until I talk with Google. I picked a bad day to sleep in. I suspect someone tried to hack my blog. It happened once before. I believe it happened once to Naked Capitalism as well. Mish Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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