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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (5521)	1/20/2004 12:04:17 AM
From: ild	Read Replies (1) \| Respond to of 110194

To me it looks like the whole world has been overstimulated. China has switched to overdrive. Thanks to low interest rates there is a massive building boom in many countries, not just US. All this creates too much load for world's existing infrastructure. China's GDP Growth Accelerated to 9.9% in 4th Quarter (Update2) Jan. 20 (Bloomberg) -- China's economic growth accelerated to 9.9 percent in the fourth quarter as factories produced more cars, computers and clothing to meet rising consumer demand and surging overseas orders. The economy grew a revised 9.6 percent from a year earlier in the third quarter, the National Bureau of Statistics said in a statement in Beijing. For the full year, gross domestic product rose 9.1 percent -- its biggest percentage gain in six years -- to 11.7 trillion yuan ($1.41 trillion), it said. China's economic growth gathered pace last year even as the region's severe acute respiratory syndrome outbreak cooled consumer spending, tourism and trade in the second and third quarters. Electricity blackouts too failed to curb expansion in the world's sixth-largest economy. ``We had a successful 2003 and sold a record 597,000 cars after overcoming SARS, heat and capacity and power shortages,'' said Xiao Guopu, vice president at Shanghai Automotive Industry Corp., China's No. 2 vehicle maker. The company makes cars in partnership with General Motors Corp. and Volkswagen AG. China used a new system of measuring economic activity that takes greater account of the construction industry, black market and other areas after economists cast doubt on the accuracy of the previous method. The economy was previously reported to have expanded 9.1 percent in the third quarter and 8 percent in 2002. Fixed-asset investment, which accounts for about a third of China's economy, grew 35 percent last year, Xie Xuren, commissioner of the State Administration of Taxation, said last week. Retail sales rose about a 10th for a fifth straight month in November and overseas sales in December grew 51 percent -- their fastest pace in more than eight years -- to a record $48 billion.

To: russwinter who wrote (5521)	1/20/2004 10:14:29 AM
From: mishedlo	Read Replies (1) \| Respond to of 110194

J.P. Morgan's Debt Swapping Passes Lending as Top Money-Maker quote.bloomberg.com J.P. Morgan Chase & Co., for more than 200 years, has made most of its money by arranging loans to governments, companies and individuals. So far in the 21st century, the bank is getting more revenue by rearranging borrowers' debt payments in the so-called swap market. The second-biggest U.S. bank gets as much as $10 billion a year helping customers from Fannie Mae, with the highest credit rating, to Humana Inc., whose debt is at the lowest investment grade, get cheaper financing by exchanging one borrower's fixed debt payments for another's floating rate obligation. These interest-rate and currency swaps are now New York-based J.P. Morgan's biggest money-maker. ``This is a leviathan business for us,'' said Michael Davie, 41, London-based managing director and co-head of European interest rates at J.P. Morgan, which last week agreed to buy Bank One Corp. of Chicago to boost its assets to more than $1 trillion. The market for interest-rate and currency swaps, invented in 1981 by Salomon Brothers banker Jon Rotenstreich for International Business Machines Corp., grew 20 percent in the first half of last year to $100 trillion, according to the Basel, Switzerland-based Bank for International Settlements. ``Derivatives and interest-rate swaps help spread risk in our economy and are one of the leading reasons that our capital markets are the best in the world,'' said Gary Gensler, a former U.S. undersecretary of the Treasury under President Bill Clinton. Gensler was called in to assess the damage to world financial markets posed by the possible collapse of hedge fund Long-Term Capital Management's derivatives positions in 1998. Borrowed Money U.S. Federal Reserve Chairman Alan Greenspan has said swaps and other derivatives -- financial obligations whose value is derived from debt or equity securities, commodities or currencies -- make markets and economies more flexible and resistant to shocks by spreading risk. J.P. Morgan, which reports earnings tomorrow, has about $22.4 trillion in swaps contracts outstanding, the most in the U.S., according to the Office of the Comptroller of the Currency in Washington. Bank of America Corp., based in Charlotte, North Carolina, is second with about $8.6 trillion. Banks' secrecy about disclosing revenue or profit from swaps makes it difficult for investors to know how much risk a bank is carrying on its books and whether the revenue can be counted on in the future, investors said. And Greenspan has said that risk may be concentrated among too few banks. ```Derivatives' has almost become a bad word in the investment community, and so firms like to hide behind trading revenue,'' said Wayne Bopp, who owns J.P. Morgan shares along with the $31 billion he helps manage at Fifth Third Bancorp in Cincinnati. ``As an investor you know it's there and you know it's not steady or regular or dependable. If somebody like J.P. Morgan would step up and disclose more, others might follow.'' Buffett Warren Buffett, chairman of Berkshire Hathaway Inc., began liquidating General Re Securities, the derivatives business of one of Berkshire's insurance companies, after failing to sell it in January 2002. The difficulties he encountered in unwinding more than 14,000 derivatives led him to conclude that the range of the contracts ``is limited only by the imagination of man or sometimes, so it seems, madmen.'' It took the banks that bailed out Long-Term Capital 18 months to unwind all its derivatives contracts, Gensler said. A failure by one of the biggest banks in the swaps market would force companies to revert to their original payment obligations in hundreds of thousands of cases, he said.

To: russwinter who wrote (5521)	1/20/2004 10:19:21 AM
From: mishedlo	Read Replies (1) \| Respond to of 110194

China Says `No Chance' Yuan Will Revalue This Year (Update3) Jan. 20 (Bloomberg) -- China's currency won't be revalued this year, and investors who bet the government will let the yuan's value rise against the dollar risk losses, officials said. ``There's no chance of the yuan being revalued this year,'' Yao Jingyuan, chief economist at the National Bureau of Statistics, told reporters at a Beijing briefing. ``Anyone who tries to speculate on yuan appreciation will be burnt,'' added Li Deshui, a director of the bureau. The comments came a day after China warned exporters against padding the amount of money they bring back to the country as some companies anticipate a revaluation. China is resisting international pressure to allow more flexibility in the currency, and has said improvement in the banking sector is needed before it can relax its 8.3 yuan peg to the dollar. quote.bloomberg.com