Daily: More cuts to global growth expectations
The IMF is out with its predictions for global growth in 2012 and 2013 and across the board the numbers are being reduced. In particular, the IMF sees growth slowing globally to 3.6% next year, which is a reduction from its July estimate of 3.9% And even these numbers are upside cases in that they assume positive outcomes to the fiscal cliff scenario in the US and the European debt crisis in the euro zone. Likely, one or both of these situations will trigger another growth forecast downgrade at some point in the future.
I also saw some of the numbers for Latin America via Argentina’s Clarin and the clear point here was that all of Latin America’s growth estimates for this year are being cut except Chile. Separately, HSBS reported a slight uptick in the Chinese services sector. Housing markets there have stopped falling, at least in some first-tier cities. And so that is one piece of positive growth news. In Europe, the euro zone fell at an annualized rate of 0.7% in the second quarter. Moody’s sees problems in Portugal that used as a jumping off piece for my comprehensive European analysis in this week’s piece for Gold subscribers. The link is here.
Overall, the global growth slowdown continues apace and I expect forecasts to be cut further. My view is still that the US is the real question mark because of the size of its economy. A positive or adverse fiscal cliff scenario will be the big mover regarding global growth in 2013.
IMF cuts global growth forecasts – FT.com
“The IMF now believes economic output will expand by 3.6 per cent next year, down from its July estimate of 3.9 per cent. But this assumes the US Congress will take action to avoid the “fiscal cliff” – the automatic expiry of tax cuts and introduction of spending reductions next year – and that eurozone governments will follow the European Central Bank’s plan to buy sovereign debt by committing to economic reform and closer integration.”
El FMI redujo sus previsiones de crecimiento para la Argentina: 2,6%
The IMF has reduced its growth expectations for Argentina. It now expects 2.% for 2012 instead of 4.2% as it said in April. Only Chile has received an upgrade of growth expectations within Latin America, showing the extent of the slowdown in global growth.
Euro Zone Economy Shrinks, Darkening Outlook – WSJ.com
“The euro zone’s $13 trillion economy is shrinking, data published Tuesday showed, a development that threatens to worsen a global slowdown and intensify the debate about Europe’s attempts to restore confidence in the currency union.
Economic activity in the 17-country currency bloc fell at an annualized rate of 0.7% in the second quarter after stagnating in the first three months of 2012, according to the European Union’s statistics arm. German growth slowed to an annualized 1.1% rate—not enough to lift the troubled region, whose southern members, including Italy and Spain, are caught in increasingly severe recessions.
The euro zone’s return to contraction, after escaping the latest recession only in late 2009, comes as the region absorbs fewer imports from the U.S., China and other economies.”
German industrial production falls – The Irish Times – Mon, Oct 08, 2012
“Production fell 0.5 per cent from July, when it gained 1.2 per cent, the Economy Ministry in Berlin said today. Economists had forecast a drop of 0.6 per cent, according to the median of 39 estimates in a Bloomberg News survey. From a year earlier, production fell 1.4 per cent when adjusted for working days.”
Moody’s warns on Portugal’s bailout plan – FT.com
“Portugal may need to extend its bailout programme beyond the scheduled three years as a weak economy and a public backlash against austerity threaten to delay Lisbon’s plans to regain access to government bond markets, two rating agencies have warned.
Moody’s said on Friday that a “recent emergence of social upheaval” suggested regaining market access would be slow, “perhaps requiring an extension of financial support” beyond September 2013, when Portugal is currently scheduled to resume issuing long-term debt.”
HSBC China services PMI recovers to 54.3 after one-year low | Reuters
“The HSBC services sector Purchasing Managers’ Index rose to 54.3 in September from 52.0 in August, rebounding to its highest level since May thanks to an uptick in the new business sub-index to 54.0 – also the highest level in four months.
The sunny results are in marked contrast to an official non-manufacturing PMI released on October 3, which showed activity in September slowing to the weakest level since November 2010. The official survey, published by the National Bureau of Statistics, tends to reflect larger state-owned firms, and the two do not necessarily move in tandem.”
United States
Housing Fever Can Work Both Ways – NYTimes.com
“those who filled out our questionnaires were generally well informed about recent home price trends, and that their expectations for the next year’s home price appreciation were actually on the sober side. There were no signs of bubble thinking in these short-run expectations.
But expectations about long-term price appreciation — for what home prices would do over the next 10 years — were less sober. The data showed some odd patterns, not easily tied to any objective data. How does anyone know where home prices will go over 10 years? Somehow, people form opinions about the vague and distant future — just as they form opinions about baby names — and these opinions are crucial in their home-buying decisions.”
Slowdown set to take toll on US earnings – FT.com
“The slowdown in the global economy and anaemic US recovery is expected to result in one of the worst US quarterly earnings seasons since late 2009.
Analysts expect earnings for the period ended September to decline, the first negative result after 11 consecutive quarters of gains.”
The Index of Missing Economic Indicators; The Unemployment Myth – New York Times
“The reality is that we didn’t have a mild recession. Jobs-wise, we had a deep one.
The government reported that annual unemployment during this recession peaked at only around 6 percent, compared with more than 7 percent in 1992 and more than 9 percent in 1982. But the unemployment rate has been low only because government programs, especially Social Security disability, have effectively been buying people off the unemployment rolls and reclassifying them as ”not in the labor force.”
In other words, the government has cooked the books. It has been a more subtle manipulation than the one during the Reagan administration, when people serving in the military were reclassified from ”not in the labor force” to ”employed” in order to reduce the unemployment rate. Nonetheless, the impact has been the same.”
Jack Welch and anti-business sentiment : CJR
“One of the big reasons why Americans don’t trust corporate America like they used to is Jack Welch himself.
Some call the kind of cut-throat, winner-take-all capitalism that has taken hold over the last 35 years or so “Jack Welch capitalism.” The Economist, no lefty rag, for one, is one of them.
Welch wasn’t called “Neutron Jack” for nothing. He got that nickname firing tens of thousands of workers, often outsourcing the work overseas. Jack Welch capitalism discarded other stakeholders like workers and the community to focus almost exclusively on delivering short-term value to shareholders. He was the face of the downsized economy and the end of the social compact between businesses and their workers. He fought to keep GE from cleaning up the Hudson River after it dumped more than a million pounds of carcinogenic PCBs over thirty years ending in 1977, and because his company was responsible for 52 Superfund sites, challenged the law’s constitutionality.
Unfortunately for Welch’s legacy and for the rest of the country, while shareholder capitalism has made the wealthy wealthier, it has largely failed the economy as a whole.”
Investors Back Away From ‘Junk’ Bonds – WSJ.com
“The massive “junk”-bond boom is raising alarm bells among some large money managers, who warn the market is showing signs of overheating.
So much money has flooded into the junk-bond market from yield-hungry investors that weaker and weaker companies are able to sell bonds, they say. Credit ratings of many borrowers are lower and debt levels are higher, making defaults more likely. And with yields near record lows, they add, investors aren’t being compensated for that risk.
Many investors also are wary of calling a top to the rally. Some did so last year, only to watch demand increase after the Federal Reserve pumped money into financial markets and pushed interest rates lower. And the Fed’s recent commitment to pump more money into the system for as long as needed is likely to keep pushing investors into higher-yielding assets.”
tax.com: Election is a Referendum on Tax Hikes
“Emboldened House Republicans will keep tax increases out of Romney first budget.”
“There’s little discernible support on Capitol Hill for allowing the fiscal cliff to happen. But the main alternative to that, indeed, the only option that would be the right fiscal policy and ultimately the easiest solution — a 2013 budget deficit that will be much higher than it otherwise will be — is at least as politically toxic as the fiscal cliff itself. As a result, no one dares talk about it, and the discussions about how to avoid the cliff have been limited.”
Q3 earnings won’t be good, but might not matter much | FT Alphaville
“The big margin compression on new revenue growth in the third quarter is expected to be followed by a big recovery both in the fourth quarter and, especially, for all of next year.
This seems too optimistic, though from a macroeconomic perspective it’s not clear that such a margin rebound would be a good thing anyways. The story of the last few years has been that cost-containment (translation: companies that laid off workers in the downturn were slow hiring again) has allowed earnings to outpace revenues. To the extent that “the fat has already been cut” means that companies have to hire new people to do extra needed work rather than squeezing short-term productivity gains out of existing workers, well, that would be welcome.”
Europe
Depositors Turn Up Heat – WSJ.com
“Mr. Nuñez had been coming to the Novagalicia Banco SA branch for eight months with a placard that reads: “I have all my savings trapped in Novagalicia Banco until the year 2999.” The 70-year-old retiree said: “I really should be at home playing with my grandchildren. Instead, I’m here every week, fighting for my savings.”
Mr. Nuñez was one of more than 700,000 Spanish depositors who poured money—in some cases their life savings—into high-yielding preferred shares and subordinated bonds issued by their banks. When the economic crisis erupted in Spain, the securities plunged in value, making it effectively impossible to resell them.”
Ireland Mortgage Bill Aims to Aid Owners and Jump-Start Economy – NYTimes.com
“With its economy still reeling from the housing crash, Ireland is making a bold move to help tens of thousands of struggling homeowners.
The Irish government expects to pass a law this year that could encourage banks to substantially cut the amount that borrowers owe on their mortgages, a step that no major country has been willing to take on a broad scale.
The initiative, which would lower a borrower’s monthly payment, could prevent a tide of foreclosures, an uncertainty that has been hanging over the Irish housing market for years. If it works, the plan could provide a road map for other troubled countries.”
U.K. Posts Record Trade Deficit – WSJ.com
“The U.K.posted its largest overall trade deficit since comparable records began 15 years ago, indicating that weak demand for British goods, in Europe and beyond, is hampering the country’s efforts to trade its way out of recession.
“Hopes that net trade could boost overall economic activity have proved to be horribly misplaced in the first half of 2012, and prospects currently hardly look great for the third quarter,” said Howard Archer, an economist at IHS Global Insight.”
The Greek message for Angela Merkel | Alexis Tsipras | Comment is free | The Guardian
“As Angela Merkel visits Athens on Tuesday, she will find a Greece in its fifth consecutive year of recession. In 2008 and 2009, the recession was a spillover from the global financial crisis. Since then it has been caused and deepened by the austerity policies imposed on Greece by the troika – of the International Monetary Fund, the European Union, the European Central Bank – and the Greek government.
These policies are devastating the Greek people, especially workers, pensioners, small businessmen and women, and of course young people. The Greek economy has contracted by more than 22%, workers and pensioners have lost 32% of their income, and unemployment has reached an unprecedented 24% with youth unemployment at 55%. Austerity policies have led to cuts in benefits, the deregulation of the labour market and the further deterioration of the limited welfare state that had survived a neoliberal onslaught.
The government argues that only the austerity agenda can make the Greek public debt viable again. But the opposite is true.”
The municipal bankruptcies are now beginning in Spain. Here is Parla, a part of Madrid that is prepared to go the wall. It will get worse.
Elsewhere
Argentine bonds fall following “selective default” | beyondbrics
“Cristina Fernández, Argentina’s president, maintains her government has not “clamped” the dollar, despite imposing a rash of restrictions on greenback purchases in recent months.
Try telling that to the northern province of Chaco. It says it was forced to settle a dollar-denominated bond in pesos because it could not get hold of the dollars to meet the $260,000 payment. Argentine bonds fell 1.3 per cent on Tuesday, the first trading day since Chaco’s weekend announcement (Monday was a holiday in Argentina).”
Tras la pesificación en Chaco, los bonos se desplomaron hasta 5%
An Argentine provincial government had to ‘selectively default’ via pesoification of its dollar debenture because of Argentina’s strict currency controls. For those that say Argentina is doing well, this is yet another proof that the country is headed in the wrong direction.
Parallels between apartheid and Argentina – FT.com
“Argentina is heading, and not for the first time, over an economic cliff as the population races to dump pesos for dollars and a zealous government fights back through draconian currency controls, manipulating economic data and import-suppression measures.”
Justin Trudeau: Why Canada bucks the two-party system | Full Comment | National Post
“from the days of the Canadian Pacific Railway to today’s lofty Canadian petro-dollar, Canada’s winners and losers have bunched up by province. The voters of different provinces have often looked to their own distinctive political parties to champion their own distinctive provincial interests.”
Japanese car sales plunge in China after islands dispute | Business | guardian.co.uk
“Toyota and Honda sales nosedived in China during September as anti-Japanese sentiment flared over territorial dispute “
Technology
“Industry sources increasingly confident that Apple will move into 7in tablet market, but will also launch revised iPads”
Microsoft co-founder dings Windows 8 as ‘puzzling, confusing’ – Computerworld
“He concluded, however, that even with its out-of-the-box quirks, Windows 8 would be manageable by users and that Microsoft would address them in the next release. “While these changes may prove confusing initially, after a short period of discovery most of these changes should quickly become familiar,” said Allen. And like most other long-time Windows users, he applauded Microsoft for assembling an OS suitable for tablets, the hottest category of computer-like devices.”
parislemon – The Patent Beasts
“By the way, while it may seem like Microsoft has been granted an insane number of patents, they’re not even close to the top of the list. That would be IBM, which has been at the top for 19 straight years. In 2011, they actually set a new record with 6,180 patents awarded. In other words, the total number of patents that Google and Apple were awarded together over the past 12 years was almost matched by IBM last year alone.
It’s probably not a coincidence that IBM dominates here — it sure looks like a trend. Again, companies start out not worrying about patents, get burned, then go into patent beast mode. IBM has just been around longer than the others.”
“The year was 2008 and Zynga had it all figured out. Facebook became a portal to games for those who had never played. Viral growth there was unchecked. Facebook ad rates were low, so buying traffic was cheap. And most games were played on the desktop. But soon everything changed, and Zynga never recovered.
Here’s a look at four big shifts that caused Zynga’s power and share price to plummet.”
Google, LG to unveil Nexus phone at the end of the month | Mobile – CNET News
“CNET has confirmed that the phone will be a modified version of the Optimus G. Other handset manufacturers could also release their own Nexus phones as well.”
“It’s impossible to create a perfect map, but that hasn’t stopped Nokia from trying. Here, we go inside the company’s neverending drive to create a digital copy of the world.”
Exclusive: LEAKED Official Apple iPad Mini Promo Video
This video is hilarious.
HTC Profit Falls 79% Amid Competition – WSJ.com
“third-quarter net profit totaled 3.9 billion New Taiwan dollars ($133 million), off 79% from NT$18.64 billion a year earlier.
The net profit was below the average forecast of NT$5 billion, according to six analysts polled by The Wall Street Journal.
HTC, which as recently as 2010 was the biggest smartphone maker by shipments using Google Inc.’s operating system, has seen its profit drop continuously since the fourth quarter of last year due to stiff competition from Samsung, which overtook HTC to become the biggest vendor of Android devices in the U.S. in 2011.”
Zynga’s weak pivot to mobile, loss of casual gamers turns serious | Reuters
“Zynga Inc’s inexorable decline over the past six months, capped by a sharp reduction in its 2012 outlook on Thursday, has sharpened interest in what Chief Executive Mark Pincus will do next.”
Marisa In For A Royal Treat – Page 2 – New York Daily News
“Boy, did we get an earful two years ago from a woman we referred to as Pete Townshend’s girlfriend, despite the fact that the rocker was and still is very married to a woman in London. We just thought it was odd the woman was pictured showing up on the rocker’s arm at various events and even sat dreamy-eyed in the audience while Townshend dedicated a song to her while performing at the Tony Awards.
“We’re friends,” was one of the printable things Lisa Marsh told us at the time. “I’m consulting him on his wardrobe. Don’t people want to read about anything important anymore?” You see, Lisa was a fashion editor at a small newspaper at the time. She has since graduated to Women’s Wear Daily.
At any rate, we’re just here to tell you Pete and Lisa are still friends. And Saturday night, Pete is tossing his friend a little birthday shindig at Trattoria Del’ Arte. Because, hey, what are friends for?”
Google to co-brand 10-inch Nexus tablet with Samsung | Mobile – CNET News
“The 10.1-inch tablet will boast a pixel density that is higher than Apple’s third-generation iPad, said Richard Shim, an analyst at NPD DisplaySearch.
The 2,560×1,600 display will have a PPI (pixels per inch) of about 299, said Shim. That tops the 264 PPI on the 9.7-inch 2,048×1,536 Retina iPad.
“It’s going to be a high-end device,” Shim said — in contrast with Google’s $199 Nexus 7 and upcoming $99 tablet.”
So it looks like Samsung might not have tried to copy the iPhone | Technically Incorrect – CNET News
“Previously redacted documents presented in the Apple-Samsung case seem not to offer actual evidence that Samsung told its designers to copy the iPhone.”
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