Central Perk

miercuri, 18 martie 2015

Mish's Global Economic Trend Analysis

China's Deflationary Bust and Beyond: Anne Stevenson-Yang Presentation
Fed Drops Word "Patient"; Door Open, But For What?
Experimental CPI Index; BLS Disclaimer vs. Mish Recommended Disclaimer

China's Deflationary Bust and Beyond: Anne Stevenson-Yang Presentation

Posted: 18 Mar 2015 01:59 PM PDT

Anne Stevenson-Yang graciously made her presentation on China 2015 Risks - Deflationary Bust and Beyond publicly available.

I wanted to embed the document but it got distorted a bit, so please click on the above link to download the document.

I reviewed her presentation about a week ago in Reality Check: How Fast is China Growing? Global Recession at Hand. The following snip is a recap of what her presentation is about.

How Fast is China Growing?

Analyst estimates of Chinese growth keep getting lower and lower. Yet, those declining estimates have all been from a lofty level: From 10% to 9%, to 8% to 7.5%.

China's growth target for 2015 is 7.0%.

Many question those growth estimates. I certainly do. Chinese growth is not consistent with energy demand, raw materials, or personal consumption. Worse yet, growth does not factor in pollution or malinvestments in vacant housing, vacant malls, vacant airports, etc.

Malinvestments, pollution, and State-Owned-Enterprise (SOE) boondoggles (fraud is actually a better word) should all subtract from current GDP. Instead, fraud, pollution, and malinvestments have been buried and will remain buried until it's impossible to hide them.

I assumed China was growing slowly. After all, 7% is one hell of a lie. However, I now wonder if China is growing at all.

What caused my double take was a fascinating presentation by Anne Stevenson-Yang, Co-Founder of JCap and author of China Alone: The Emergence from, and Potential Return to Isolation.

Video Download

You can download or play her video presentation here: Is China Already in a Hard Landing?

Lacy Hunt on Anne Stevenson-Yang

Lacy Hunt at Hoisington Investment Management had this comment.

Mish,

Congratulations on this piece. When Anne Stevenson-Yang speaks, I listen. She may be the best source on what is actually happening in the Chinese economy. Your comments were excellent. I hope this article gets the recognition it deserves.

Lacy

Liquidity vs. Injections

I did catch one error in the presentation. If you have ever made presentations, it's quite easy to do.

On one slide, Stevenson-Yang spoke of "daily injections" of 1.5 trillion yuan.

Instead, 1.5 trillion is the average daily interbank turnover including interbank lending and repos. It is a proxy for short-term liquidity needs for Chinese financial institutions.

Here are a couple of corrected slides showing updated numbers:

Daily Liquidity

Monthly Injections

Thanks again to Anne Stevenson-Yang for making her presentation available. The link at the top will let you download all 44 slides of her presentation.

China bulls who think China will grow 6-7% a year are in for a rude awakening.

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

Fed Drops Word "Patient"; Door Open, But For What?

Posted: 18 Mar 2015 11:42 AM PDT

As expected, the Fed Drops 'Patient' Stance. Bloomberg says this "Opens Door to June Rate Increase".

The Federal Reserve dropped an assurance it will be "patient" in raising interest rates, ending an era in its communications policy and opening the door for higher borrowing costs as early as June.

"An increase in the target range for the federal funds rate remains unlikely at the April" meeting, the Federal Open Market Committee said in a statement Wednesday in Washington. The panel said it will be appropriate to tighten "when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term."

Inflation in Eyes of Beholder

Inflation as measured by asset prices is rampant. Inflation as measured by the Fed is actually negative.

The experimental CPI, for those over 62 is in positive territory at 0.51%. See Experimental CPI Index; BLS Disclaimer vs. Mish Recommended Disclaimer

That leaves us wondering about the nebulous definition of "medium term". Others may be scratching their heads over "further improvement in the labor market".

How much more improvement does the Fed want? Or does the Fed not believe all these glowing labor reports either?

Door Open, But For What?

Given all the above mush, the door is open for the Fed to do whatever it wants. That's precisely as it has always been actually.

If you think anything meaningful really changed in the Fed's statement, you are mistaken. The Fed always does whatever it wants, making up excuses over time, to do just that.

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

Experimental CPI Index; BLS Disclaimer vs. Mish Recommended Disclaimer

Posted: 18 Mar 2015 01:03 AM PDT

Were you aware that in addition to the regular monthly CPI updates, the BLS also calculates an "Experimental CPI Index" for those age 62 and older?

Experimental CPI Index

The BLS overweights medical care and underweights other categories along with this disclaimer: "These analyses should be treated as tentative."

Mish Recommended Disclaimer

"Serious cases of nausea and shock have been reported by those reading CPI reports. Pregnant or nursing mothers, those over the age of 55, those with high blood pressure, and those prone to laughing attacks are advised to not read CPI reports of any kind, regular or experimental."

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

Damn Cool Pics

How to Say Hello around the World
Rich People's 'First World Problems' Will Bring a Tears to Your Eyes
The Funniest Jokes From The Roast Of Justin Bieber

How to Say Hello around the World

Posted: 18 Mar 2015 01:33 PM PDT

These 15 different cultures all have their own way of greeting one another and it is advisable to know the right way to say hello if you are ever travelling.

Rich People's 'First World Problems' Will Bring a Tears to Your Eyes

Posted: 18 Mar 2015 12:13 PM PDT

The Funniest Jokes From The Roast Of Justin Bieber

Posted: 18 Mar 2015 11:14 AM PDT

Comedy Central's Justin Bieber roast doesn't premiere until March 30 but a lot of the jokes have already hit the Internet. Some of them are pretty brutal as the roasters held nothing back when they ripped on Justin Bieber.