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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (1657)	3/10/2004 9:12:23 AM
From: mishedlo	Respond to of 116555

Japan slashes oil from UAE as Iraq supplies resume gulfnews.com Japan slashed its oil imports from the UAE in November because of a decline in domestic seasonal demand and a resumption of Iraqi crude supplies.

To: CalculatedRisk who wrote (1657)	3/10/2004 9:20:11 AM
From: mishedlo	Respond to of 116555

hposehold spending and home prices. Are they out of line? imf.org

To: CalculatedRisk who wrote (1657)	3/10/2004 9:28:27 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

bankingintern on oil prices vs the GDP I've heard two of the authors that wrote this paper speak before, and I've read more than a few of their papers. Overall I think they are pretty straight shooting guys for economists. Their work on natural gas has been VERY interesting. This is a not quite recent fed paper on the link between energy prices and the economy. dallasfed.org My recap: Basically they believe that the link between oil prices and GDP may have weakened over the recent past and this may continue going forward. Their main point is that the GDP/OIL BTU ratio has been falling recently and thus the U.S. uses less oil to produce a $ of GDP. Thus oil prices changes will have LESS of an effect on GDP than in the past. Of course being economists it takes them 19 pages to say this. Some choice quotes P2 "Episodes of sharply rising oil prices (shown as the highlighted portions of oil prices) have preceded nine of the ten post-World-War II recessions in the United States...Research conducted by James Hamilton (University of California, San Diego) strongly suggests that the recessions that followed sharply rising oil prices were not the result of other business cycle variables, such as aggregate demand shocks or contractionary monetary policy." Monetary policfy in response to Oil price shocks were discussed in detail if you want, but I found THIS to be intresting P6 "Similarly, Ben Bernanke, Mark Gertler and Mark Watson (Princeton, New York University, and Princeton, respectively) had an article published in the Brookings Papers on Economic Activity that shows the U.S. economy responds differently to an oil price shock when the federal funds rate is constrained to be constant than in the case in which it is unconstrained. In their unconstrained case, a sharp increase in oil prices leads to a higher federal funds rate and a reduction in real GDP. With the federal funds rate held constant, Bernanke, Gertler and Watson (hereafter BGW) find that an oil price increase leads to an increase in real GDP. Defining neutral monetary policy as holding the federal funds rate constant, BGW find that monetary policy has tightened in response to increased oil prices, and they conclude that this monetary tightening accounts for the fluctuations in aggregate economic activity." The next paragraph shows the increase bit may be wrong... And YES that is the Ben Bernanke on the fed... this sugests that with oil prices moving up there may be at least one vote AGAINST raising rates. P10 "In research published in The Energy Journal, Knut Mork found that when he separated oil price changes into negative and positive oil price changes, oil price increases had more effect on economic activity than oil price decreases." Those are just a few bits, but the paper is a good read if your into the topic.

To: CalculatedRisk who wrote (1657)	3/10/2004 9:30:26 AM
From: mishedlo	Respond to of 116555

Rien on the oil/gdp post of bankingintern One could interpret this as follows: Inflation brought about by an increase in commodities should not be combatted by an increase in the feds rate. This leaves inflation brought about by a tight job market as one of the few reasons to increase the feds rate. This seems to jive well with the view of A.G. From which we could then conclude that rates will stay low as long as jobs are being lost. What about the gov deficit?. I think that A.G. may view this similar as commodities. Inflation due to deficits is not caused by price pressures due to a business cycle, hence it should not be fought by raising rates. Best, Rien.

To: CalculatedRisk who wrote (1657)	3/10/2004 10:10:53 AM
From: mishedlo	Respond to of 116555

Japan Jan mobile phone sales down 22.3 pct yr-on-yr at 2.983 mln units fxstreet.com Wednesday, March 10, 2004 4:38:26 AM TOKYO (AFX-ASIA) - Sales of mobile phones for January fell 22.3 pct from a year earlier to 2.983 mln units, the first decline in 15 months, data released by Japan Electronics and Information Technology Industries Association (JEITA) showed. JEITA attributes the drop to the strong sales in December given the end-of-year sales season and to the transition period from second generation handsets to third generation. Excluding Personal Handyphone Systems (PHS), mobile phone sales decreased 22.2 pct to 2.935 mln units, the first decline in 16 months. PHS sales in January declined 26.7 pct year-on-year to 48,000 units, the third straight fall since November after rising for eight straight months until October.

To: CalculatedRisk who wrote (1657)	3/10/2004 10:21:02 AM
From: mishedlo	Respond to of 116555

The Big Picture financialsense.com

To: CalculatedRisk who wrote (1657)	3/10/2004 10:23:37 AM
From: mishedlo	Respond to of 116555

Mogambo guru dailyreckoning.com "...I say, over and over and over again, clambering up to stand upon the Altar of Truth, in the Tabernacle of Justice, in the Temple of the American Way, and I raise my voice, verily as to that of thunder, to declare that you cannot HAVE an economy based on services! Nobody can. It is impossible. I say this with all the conviction that I can muster, and you can tell by the way my cute little face is all scrunched up, and I am stamping my feet on the ground in my frustration, and I am screaming at the top of my lungs, and jumping up and down like a malfunctioning Jack-in-the-box, that I am the very embodiment of calm, solemn sincerity..."

To: CalculatedRisk who wrote (1657)	3/10/2004 10:29:32 AM
From: mishedlo	Respond to of 116555

Satire on the "housing Economy" dailyreckoning.com Eventually, most of the US labor force will be employed in one of a few types of work: real estate developer, building contractor, appraisers, real estate broker, and real estate agent. Their work will consist of the construction, financing (and re-financing), purchase, and sale of residential real estate. Day traders who now trade NASDAQ issues may be able to day trade residential real estate if sufficiently liquid markets and continuous price quotes are available. Housing will be more than the driver of the Housing Economy: it will be the only form of economic activity. Other types of production, now seen to be unnecessary, will be converted or diverted to residential real estate, as the New York Times has reported ... While some have argued that the fraction of income spent on mortgages must remain under 100%, not all economists agree. A mainstream economist asked to comment on the issue, defended the Housing Economy. "Using the most modern econometric techniques, we can project where the mortgage payments of all home owner reaches 100% of national wage income. Basically what we do is draw a graph of the percentage over time, lay a ruler over it, and draw a straight line. The point where the line crosses 100% is our forecast," he stated.

To: CalculatedRisk who wrote (1657)	3/10/2004 10:32:05 AM
From: mishedlo	Respond to of 116555

Overseas tax rates At issue is a decades-old law passed by Congress that allows companies to defer and often never pay the total U.S. tax rate on some of their overseas profits. moneycentral.msn.com

To: CalculatedRisk who wrote (1657)	3/10/2004 10:34:23 AM
From: mishedlo	Respond to of 116555

Forex - Sterling slump continues after record UK trade deficit Wednesday, March 10, 2004 10:19:06 AM fxstreet.com LONDON (AFX) - The pound fell sharply against the dollar as yesterday's record-breaking trade data continued to weigh on the UK currency. The pound is now worth just over 1.82 dollars, down nearly 3 cents from where it stood just ahead of data showing the UK chalked up its highest ever trade deficit in January. "Yesterday's UK data have raised market awareness that even relatively strong European economies are not immune from the potentially negative effects of currency appreciation," HBOS currency strategist Steve Pearson said. He said the big question now was whether the pound would set a new 2004 low just under 1.78 usd. Official figures showed the UK's trade deficit with the rest of the world widened to 5.6 bln stg from 4.0 bln the previous month. The gap was driven by a drop in exports, particularly to the US, which some analysts attributed to sterling strength. The dollar's rise against the UK currency helped it gain ground against the euro too ahead of US trade numbers due later. The consensus forecast among economists is for the US deficit to have narrowed slightly from 42.5 bln usd in December. Markets will also be keen to see if the euro's strength has weighed on euro zone exports to the US - in a repeat of yesterday's situation in the UK. Elsewhere, the dollar was steady at slightly higher levels against the yen after rising late Tuesday amid rumours the Bank of Japan had once again sold yen for dollars. London 1000 GMT Singapore 0720 GMT Dollar yen 111.25 down from 111.35 sfr 1.2830 down from 1.2840 Euro usd 1.2292 up from 1.2289 stg 0.6741 up from 0.6734 yen 136.788 down from 136.88 sfr 1.5775 down from 1.5785 Sterling usd 1.8205 down from 1.8241 yen 202.74 down from 203.15 sfr 2.3390 down from 2.3443 Australian dollar usd 0.7545 up from 0.7532 stg 0.4139 up from 0.4127 yen 83.93 up from 83.86 ss/rhb For more information and to contact AFX: www.afxnews.com and www.afxpress.com

To: CalculatedRisk who wrote (1657)	3/10/2004 10:38:27 AM
From: mishedlo	Respond to of 116555

Germany's DIW cuts GDP expectations for Q1 The Deutsche Institut fuer Wirtschaftsforschung (DIW) has cut its growth forecast for the first quarter to 0.1 pct as the signs of a tangible recovery fail to materialize, above all due to the lack of positive effects from tax cuts. The DIW, one of the six leading institutes for economic research in Germany, forecast last month 0.4 pct GDP growth for the first quarter.

To: CalculatedRisk who wrote (1657)	3/10/2004 10:44:21 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

U.S. Jan. trade deficit sets record high Wednesday, March 10, 2004 1:47:08 PM WASHINGTON (AFX) - The U.S. trade deficit set a new record high in January, the Commerce Department reported Wednesday. The trade gap widened $365 million, or 0.9 percent, in January to $43.1 billion. This is slightly above the previous record of $43 billion set last March. The widening of the deficit was unexpected. A survey of analysts by CBS Marketwatch.com had produced a consensus of $41.9 billion. The December trade gap was revised slightly higher to $42.7 billion from the initial estimate of $42.5 billion. [Is bad news ever expected - even in a string of bad news? - Mish] Both exports and imports fell in January, but exports fell faster than imports. [SLOWING ECONOMY! - Mish] January exports fell $1.06 billion, or 1.2 percent, to $89.0 billion. This was the biggest decline in exports since last August. Imports fell 0.5 percent to $132.1 billion in January, but remained at the second highest level on record. Exports of goods fell 1.7 pct to $61.9 billion for the month. The decline was widespread, with only the "other goods" sector recording an increase. Exports of agricultural products had the largest decline, falling 7.9 percent to $4.6 billion. Exports of civilian aircraft rose 6.1 percent to $1.7 billion. Imports of goods fell 0.5 percent in January to $110.3 billion. The decline was led by auto imports, which fell 5.4 percent to $17.7 billion. The U.S. petroleum deficit widened 9.8 percent to $10.8 billion. This is the largest monthly petroleum deficit in eleven months. The value of U.S. crude imports rose to $8.8 billion in January from $8.6 billion the previous month. The U.S. imported 309.4 million barrels in January, or 10.0 million per day, down from 317.4 million or 10.2 million per day, in December. The average price rose to $28.55 from $27.17 in December. This is the highest monthly average price since last March. The U.S. trade deficit with China totaled $11.5 billion, up from $9.4 billion in the same month one year ago, but well below the monthly record of $13.6 billion set last October. The January trade deficit with the European Union totaled $5.9 billion, the lowest since March 2002. fxstreet.com =========================================================== How anemic Mish

To: CalculatedRisk who wrote (1657)	3/10/2004 10:54:49 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Snow: U.S. doesn't back Fannie Mae Treasury Secretary says government-sponsored firms, like Fannie, Freddie, are not too big to fail. March 9, 2004: 2:21 PM EST WASHINGTON (Reuters) - U.S. Treasury Secretary John Snow took direct aim Tuesday at mortgage finance firms Fannie Mae and Freddie Mac, repeating previous warnings to investors that government-sponsored enterprises are not financially backed by the U.S. government. "We don't believe in a 'too big to fail' doctrine, but the reality is that the market treats the paper as if the government is backing it. We strongly resist that notion," he said in prepared remarks before a bankers group here. money.cnn.com

To: CalculatedRisk who wrote (1657)	3/10/2004 11:12:13 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Plunger on how to solve some of the US's problems. =========================================================== Given my view that there is excess capital around, I believe the government needs to assist people in recycling it into spending. Thus I would impose huge capital taxes, like 50% of one's estate on death and 1% pa on net worth for those still alive. I know the standard theory says this would be bad for incentives, and for investment and so productivity gains, remember just after WWII there was indeed a capital shortage, and that's when the people who wrote economics books in the 70s had their formative years. Not many mainstream economists realise we have surplus capital just now because they don't think to rethink their base theories. And in case anyone thinks this is a loony lefty idea, consider this: However right wing you are (definition: aiming for maximum concentration of wealth) the utmost you can achieve is to have a massive under-class working away and subsisting but with a small group of others enjoying most of the fruits of that. Bu to achieve this you need to give the under class the opportunity to work but also the ability to stay afloat if they do - the incentive. Right now the under class is IMO steadily sinking in the mire by borrowing more and more faster than wages are growing - an unstable paradigm. In other words, Bush has overcooked the squeeze and grab. It will implode in two ways. 1. With people not able to work then there is less to plunder. 2. The whole system is at risk both financially with individuals and businesses going BK but also people getting angry enough to make a big change up top, by ballot box or otherwise. I am not worried about the Federal deficit, there are clearly too many savers so let them gorge themselves on government bonds, but the trade deficit needs to be squared. I'm in Harmy's camp there, close out all subsidies, all tax breaks, all import tariffs but I would put a $2 a gallon tax on gas (car fuel) to pay for roads and pollution. There's plenty to spend these extra taxes on - education and public transport for example. How about a Shinkansen from Boston to Baltimore; that would solve a lot of NYC's traffic problems too. Last part of the invited rant (thanks Splot) - a much underplayed aspect of the stock bubble - going back to the mid 80s - is the loss of decency and integrity when easy gains are available. This is actually the core problem in the business world right now IMO. So, government has to balance the incentives (does this make me Chicago school not Austrian?). 1. Obviously expense stock options, or as Buffet asks, where's the incentive for outside directors to call for restraint. Actually I think one should forbid any entity to issue options on its own securities because the opportunities for deceit are just so huge and deceit is the only real reason they are issued. 2. Integrated with that, companies need to record a loss when they buy back their own stock for more than they issued it for. It may sound a bit harsh but this is key to an accounting system that links internal profits to the capital account. The whole game with Cisco and so on has been the magician - get everyone to concentrate on the products, technology, gross margins etc ... to divert attention from the capital account debasement where all the value is sucked out. You can't see it in a static set of accounts because it is a continuous process. Accounts show what options are in issue ... "fully diluted" only includes options currently issued ... not those we all know will be minted every year going forwards. 3. Accounts need to be "fair and reasonable and representative" in some way. Apparently because the Brits are all gents, their accounting requirement is much more general than the incredibly rules-based system in the US. Which is better? The problem is that if loopholes can be found in the US system the perpetrators get away with it. The trouble in the UK is that a judge has to decide the definition of "reasonable" case by case. Actually sometimes I despair of capitalism. Free markets ar great, each sells his labor and buys what he can after best negotiations. But when the Capital Value of things starts getting involved, it completely outweighs the free market profit that is part of it. Remeber Lernout and Hauspie cashing in a few shares and buying their own products? It was a perpetual motion machine ... for a few years. Plunger.

To: CalculatedRisk who wrote (1657)	3/10/2004 12:30:01 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

RPT-UPDATE - JP Morgan's credit derivatives chief steps down Tuesday March 9, 10:50 am ET LONDON, March 9 (Reuters) - Tim Frost has left JP Morgan (NYSE:JPM - News), where he was head of credit trading for Europe, a spokeswoman for the bank said on Tuesday. Frost was with the U.S. investment bank for 16 years and was key to the development of JP Morgan's credit default swap business, where the bank has built a leading market position globally. Sources close to the situation said they believed one of the reasons for Frost's departure was to pursue his political interests ahead of the next UK election. He stood as Conservative candidate for Mansfield in northern England in the 1997 election. JP Morgan, which declined to comment, has not yet decided on a replacement. ======================================================== I see I was mistaken it was JPM credit derivatives trader that stepped down, not FNM. Unless I missed something and both did. M