The data pointing to the synchronised global slowdown continues. This time we have a string of data from the United States, the United Kingdom, India and China telling us that the economy is not doing well. Here I am leaving Europe aside. But the data are clear in Europe as well – and they point to slowing.
The one data point that is positive here is the renewed stimulus in China. Now I don’t think the stimulus in China is going to lead to anything sustained but it will goose the numbers in the second half of the year. Michael Pettis has recently made similar predictions, also saying he expects 2013 to resume the downward trajectory. But outside of China, the largest economies are slowing without any discernible policy response that can attenuate the downside.
ECONOMY
US Baseline – Tim Duy’s Fed Watch
Tim Duy gives an overarching US economic baseline forecast. The numbers are mediocre but not dire.
India industry contracts in June | beyondbrics
This is bad news for Indian GDP figures.
UK trade deficit hits new record | Business | guardian.co.uk
The lower imports are the cause of UK trade deficit numbers and that means the UK is getting hit by the recession in Euroland. It also means that we should subtract more from anticipated UK GDP numbers because of the negative trade balance impact.
Suddenly, quantitative easing for the people seems possible | Anatole Kaletsky
"The radical alternative discussed here last week – QE for the People (or QEP, for short) – would bypass banks completely by distributing newly created money straight to the public. It is not yet on anyone’s agenda, but neither is it any longer dismissed as a joke."
Hard landing for China as factory prices fall and deflation looms – Telegraph
"Factory gate prices in China fell at an accelerating rate of 2.9pc in July as the economy flirted with industrial recession, prompting calls for further stimulus to head off Japanese-style deflation."
Chinese data point to sluggish economy – FT.com
Inflation is at a 30-month low, which should give policy makers room to cut rates. But industrial production growth dipped to 9.2% from 9.5%. Expectations were for a rebound. Retail sales growth also fell. And remember, all of these are official (and hence unreliably optimistic) numbers. The real numbers are probably worse. Bottom line: China has continued to slow. Some are predicting a turnaround in the second half of the year due to government stimulus. This may happen but it will not be sustained. Note that Andy Lees says that power output has grown just 2.1% y-o-y. And Caterpillar recently announced that it has started to export Chinese-made machinery to the Middle East to offset the Chinese slowdown (although it expects this to be a temporary measure). That gives one the sense that the GDP numbers are exaggeratedly high.
EUROLAND
German Opposition Calls for Wealth Tax – SPIEGEL ONLINE
"In Germany, the opposition center-left Social Democrats and environmentalist Greens want to copy France and apply new taxes to the wealthy to help reduce the national deficit. So far, Chancellor Angela Merkel’s government says it isn’t interested. But proponents say it could bring an additional 11.5 billion euros into the public coffers each year."
Jobs in Euro-Krise: Immer mehr Zuwanderer aus Griechenland und Spanien – SPIEGEL ONLINE
Here is an even better view of the immigration wave hitting Germany. The increase from the periphery is huge. See graphic in this post.
ekathimerini.com | Unemployment rate rose to 23.1 percent in May
Unemployment is still rising in Greece. It is over 50% for the youngest cohort of Greeks.
Greece braced for ‘hottest autumn yet’ over round of new spending cuts | World news | guardian.co.uk
"Athens’ fragile coalition could be heading for a showdown with unions and anti-bailout forces over prospect of more job losses"
El número de trabajadores españoles en Alemania aumenta un 11,5% en un año | Economía | EL PAÍS
The recession in the periphery has meant workers leaving the periphery for Germany in search of work. The Spanish are leaving Spain for Germany in droves. The number of Spanish working there increased by 11.5% in the last year alone. The same is true for Greece in particular, but also for Italy and Portugal.
Bankia mantiene las subidas en Bolsa y ya triplica su valor en menos de un mes | Economía | EL PAÍS
Now bailed out Bankia has tripled its price in a month as shareholders reap the reward of the Spanish sovereign bailout. Again, this is yet another case where shareholders of banks get bailed out as taxpayers take losses. The stock is still below half of the IPO price. But shares should be taking all the losses before a rescue.
Banco CAM pierde 1.215 millones entre enero y junio | Comunidad Valenciana | EL PAÍS
Another one of the larger and sick Spanish cajas has just reported a massive loss of over 1 billion euros for the first half of 2012. Expect more in the 2nd half.
La venta de casas retrocede un 11,4% en junio y encadena 16 meses a la baja | Economía | EL PAÍS
This is the sixteenth consecutive month of falling Spanish house sales. They fell another 11.4% in June. In Spain, local revenue depends not just on sales/property tax but also on transaction tax just as it does in Britain via the stamp duty. That means a slowing of transaction volume hurts local government revenue.
TECHNOLOGY
Google agrees to pay largest fine in FTC history for bypassing Safari privacy settings [u]
"Google on Thursday agreed to pay a record $22.5 million fine for ignoring security settings designed to prevent advertisers from tracking users with cookies in Apple’s Safari web browser, bringing an end to a six month investigation aimed at better protecting consumers’ privacy rights online."
RIM Wins Appeal in Mformation Patent Case – WSJ.com
"The ruling by a U.S. District Court in San Francisco vacates an award of $147.2 million in damages RIM was ordered by the jury to pay Mformation Technologies Inc., Waterloo, Ontario-based RIM said in a statement."
Post AT&T tryst, T-Mobile’s decline continues — Mobile Technology News
"It’s now been two full quarters since its merger with AT&T was scuttled, but T-Mobile USA isn’t showing many signs of recovery. In the first quarter, T-Mobile looked like it might have reversed course, posting a modest 187,000 net customer gain, but in the second quarter it lost 205,000 subscribers, T-Mobile revealed Thursday in its earnings report."
Across the planet, broadband is getting faster & faster – Tech News and Analysis
Great data showing very strong broadband penetration in North America, Europe and Asia.
I am in the process of decided whether to defect form T-Mobile right now. I like them better than AT&T but they just do not have a very good network. If you go anywhere but large cities in the US, it’s a crap shoot in whether you get a decent signal.
Amid Lawsuits From Publishers, Boundless Launches A Free, Open Alternative To Textbooks | TechCrunch
"Since it first appeared earlier this year, Boston-based educational startup Boundless has been on a mission to ensure that college students have a free alternative to the pricey and bulky world of physical textbooks."
STANDARD CHARTERED
Standard Chartered: Why the anti-British conspiracy theory doesn’t add up – Telegraph
This rings true: "it should be acknowledged that politics has played a significant role in this week’s drama. Much of it is US regulatory politics. Lawsky is a protege of Andrew Cuomo, the governor of New York state and before that its attorney general. Besides North Carolina (home to Bank of America and for many years the large lender Wachovia) and California, New York is the only state that historically has had any real muscle when it comes to regulating banks. …Much as those in the UK capital might believe this week has all being about Americans hammering London, it hasn’t. This is about a New York regulator sticking it to those in Washington."
Osborne lobbies Geithner on StanChart – FT.com
"One government source said that the coalition had been undertaking “quiet diplomacy” rather than “megaphone diplomacy” but that this did not mean there were not genuine concerns from Mr Osborne and other ministers. “The Treasury thinks that rules should not be broken but we were concerned about the way the allegations came out of the blue,” he said. “It is important that we receive fair treatment for British businesses.”"
StanChart is a reminder of banking’s insatiable greed – FT.com
"Regardless of the outcome of legal process, the Standard Chartered story is symbolic in that the investigators’ findings appear to provide definitive confirmation that global banking is about grabbing a fast buck regardless of the interests of clients, regulators or reputation. The cultural motto of these institutions, in short, is let the devil take the hindmost."
Investors run shy as Standard Chartered’s halo slips | Reuters
"Chief Executive Peter Sands’ defense of StanChart’s cherished image as one of the cleanest names in global finance has so far failed to convince some shareholders, who are taking their time to reappraise their exposure to the latest in a string of British banking scandals."
Yves Smith believes that Reuters took out the juiciest pieces of a story about Standard Chartered which demonstrated how and why big banks are able to escape criminal prosecutions or admission of wrongdoing.
OTHER LINKS
Shiller P/E Ratios for Developed Markets | PRAGMATIC CAPITALISM
"Currently, there is a significant difference between the valuations of US, global and European stock markets. At 16x, the global market is at the third decile (ie. cheap compared with history), whereas Europe at 11.4x is at its cheapest level since the 1980s apart from the immediate post Lehman bankruptcy period.”
BBC News – US Postal Service reports over $5bn in quarterly loss
"The agency said $3.1bn of the loss was from payments for retirement health benefits, but the shrinking volume of first-class mail was also a factor."
Oil May Retreat on Fastest Stockpiling Rate in 14 Years – Bloomberg
"OPEC pumped 2.1 million barrels a day more than projected demand in April through June, the biggest overproduction for any quarter since 1998, the International Energy Agency estimates. "
Bonds for the Long Run | The Big Picture
Good read on the cult of buy and hold and the theoretical underpinnings of it
FT Alphaville » Negative rates as a precursor to the death of banking
Izzzy Kaminska over at the FT shows why negative interest on reserves destroys base money and reduces a CB balance sheet even as it fails to spur new lending. It is a bad idea all around.
FT Alphaville » Chinese banks’ Weapons of Mass Ponzi
There are Madoff-style frauds running amok in Wealth Management ventures in China. This will come to a head soon.