from Sebastian Tong:
Stop pushing and we’ll do it
The growing acrimony in the international debate over China's currency policy has led some to warn that Beijing could dig in its heels if pushed to hard to let its yuan rise.
But Barclays Capital says Beijing could let its currency strengthen as early as next month, notwithstanding its public resolve against Washington's threat to label it as a currency manipulator.
"They do have a 'If you stop pushing, we'll do it' attitude, which is kind of childish, really. But it will happen because they are the only country in the world, besides India, where there is a whiff of inflation," says Barclays' asset allocation head Tim Bond.
"It's in their own interest. It's the right thing to do."
Barclays expects the relaxation of China's de facto dollar peg to result in the equivalent of a five percent annual appreciation over the next year.
Investors should also keep the heightened rhetoric among U.S. lawmakers in perspective, Bond says.
"The anti-China lobbyists in the U.S. are a lot noisier than the pro-China lobbyists."
Act now or forever hold your (b)-piece, Obama
It appears the penny has finally dropped in Washington.
Bank bailout watchdog Elizabeth Warren, chair of the Congressional Oversight Panel, has unveiled a report that outlines the perilous state of the U.S. commercial mortgage sector, which left unaided could spark “economic damage that could touch the lives of nearly every American”.
The Havard Law School Professor and her panel colleagues are talking the kind of apocalyptic language that may just shock the White House and its star policy advisers into facing problems banks have now rather simply obsess about those they may or may not encounter in the future.
The global banking system may well need some kind of Volcker-esque guidelines to curb the next generation of excessive risk-takers but critics say Obama is putting the cart before the horse in his efforts to haul the economy back on track.
Certainly, the U.S. government has toiled long and hard to stabilise the U.S. housing market, like propping up Fannie and Freddie and their dysfunctional offspring, but the subprime mess has distracted attentions from the toxic commercial market, where the clean-up task is no less important.
Warren reckons there is about $1.4 trillion worth of outstanding commercial real estate loans in the U.S that will need to be refinanced before 2014, and about half of them are already “underwater,” an industry term that refers to loans larger than the property’s current value.
But some believe bank brains are wasting too much time figuring out how the so-called “Volcker rule” might affect their operations and future profitability, instead of getting their arms around the real estate loans that could snap their institutions in two long before the anti-risk measures even take hold.
has it ever occured to people that the Obama administration is not there to fix anything ? just asking
from Russell Boyce:
The politics of bowing in Japan – How low do you go?
By Michael Caronna, Chief Photographer Japan
In Japan nothing says I'm sorry like a nice, deep bow, and lately there's been a whole lot to be sorry for. Ideally the depth of the bow should match the level of regret, allowing observers to make judgements about how sincere the apology really is. Facing massive recalls Toyota President Akio Toyoda and Toyota Motor Corp's managing director Yuji Yokoyama faced journalists at separate news conferences.
Toyota Motor Corp's managing director Yuji Yokoyama (R) bows after submitting a document of a recall to an official of the Transport Ministry Ryuji Masuno (2nd R) at the Transport Ministry in Tokyo February 9, 2010. Toyota Motor Corp is recalling nearly half a million of its flagship Prius and other hybrid cars for braking problems, a third major recall since September and a further blow to the reputation of the world's largest automaker. REUTERS/Toru Hanai
Toyota Motor Corp President Akio Toyoda bows at the start of a news conference in Nagoya, central Japan February 5, 2010. Toyota Motor Corp President Toyoda apologised on Friday for a massive global recall that has tarnished the reputation of the world's largest car maker. REUTERS/Kim Kyung-Hoon
More than a nice-to-have, buy-side considers its actions
More than a “nice to have,” investor sentiment is running heavily on the side of environment, social and governance (ESG) factors, according to the latest Thomson Reuters Perception Snapshot.
Feedback from 25 global buy-side investors found that 84 percent evaluate ESG criteria to some degree when making an investment decision.
The remaining 16 percent say ESG issues are not considered until a company’s ability to generate high returns is hindered by these factors.
Some of the selected comments:
“ESG only plays a role to the extent that it is an overhang on the stock. There is no moral component to investing. We are value neutral when it comes to our investment decisions, but we are not value neutral in our lives. We have a fiduciary duty to our clients, to the people who give us money to manage to maximize returns, which means that we can not be limited by our own personal morality. If I see a cigarette company that looks interesting I may invest in it even though I might not like it personally.” – U.S. Hedge Fund Investor
“I am convinced that companies that follow the philosophy of social and economic responsibility are performing better in the long-term than those that do not.” – European Core Growth Investor
The report dovetails with Tuesday’s push by U.S. President Barack Obama to push for tougher industrial standards aimed at lowering greenhouse gas emissions.
Obama ordered the U.S. auto industry, where the hand of government is firmly in control (GM and Chrysler, but not Ford) to make more fuel-efficient cars to cut emissions and increase gas mileage.
from MacroScope:
Hey Europe, stop acting so happy
Merrill Lynch economist David Rosenberg's views are well-known for bearing no resemblance to his firm's trademark bull, so when he says European clients seem too upbeat, what he really means is they weren't thoroughly depressed. The New York-based economist just got back from a marketing trip across the Atlantic and didn't find much common ground.
In particular, he said European clients seemed more concerned about inflation than the deflation that he sees coming, and they may have unrealistically high expectations for President Barack Obama.
"Unbelievably ... portfolio managers seem to think they are taking a bigger risk with their careers by missing the rallies than by missing the sell-offs," he wrote in a note to clients. "I can tell you that this is not a condition from a sentiment standpoint that terminates bear markets."
For the record, Rosenberg thinks the Standard & Poor's 500 index may have another 20 percent to fall, and U.S. house prices could drop an additional 15 percent. That would take the cumulative loss in U.S. household net worth to $20 trillion. Yes, trillion.
He said European clients had a "very high degree of confidence" that Obama would be forceful in addressing reflation, credit and the recession, and he heard frequent comparisons to Franklin Roosevelt.
"But the dirty little secret from the New Deal is that even by the end of the 1930s, the unemployment rate was still north of 15 percent compared to 2 percent when the Great Depression began, and the CPI was deflating at a 2 percent annual rate," Rosenberg points out.
And on inflation? He doesn't see that happening when unemployment is high and the manufacturing sector is saddled with 30 percent idle capacity. "Spare capacity in the economy is now so big that it would take six years of 4 percent real GDP growth or alternatively three years of 5 percent real growth just to get the economy back to full employment."
Bears trump bulls on inauguration day
People around the world watched Barack Obama’s inauguration on Tuesday with anticipation and hope, but the stock market took a bleaker view, with the major U.S. indices down more than four percent, the biggest-ever inauguration day stock market decline.
The stock market has historically fallen during inaugurations. The chart below, with an average 0.55 percent decline, shows the Dow’s performance during planned inaugurations days since 1897; it does not include unplanned inaugurations after a president’s death. Republican inaugurations are in red, Democrats in blue.
Do you have an explanation for the market’s behavior? Leave your answer in the comments section.
I have an article on my blog about this very subject. I believe the problem is the banking sector. It has gone beyond bad sentiment regarding banking stocks. It is a global lack of confidence in the banking industry in general. Unstable banks equals unstable markets. The bears move in on that. Stop by and read the rest of the article.
Trading Obama and McCain contracts
Politicians are busy blaming betting in financial markets for the recent market turmoil, with Jean-Claude Juncker, chairman of euro zone finance ministers, urging investors to stop playing a “casino game” with their shares this week.
But dare-devil operators in financial markets have shown no sign of halting their innovation in financial instruments, which are enabling investors to bet on everything from Academy Award winners to space travelling.
One of the most traded contracts on trading platform Intrade is the outcome of the U.S. Presidential election, due in just over a month.
The Barack Obama contract, based on the U.S. dollar, rose 1.5 points to 62.5, with 5,857 contracts traded on Tuesday. The level is just below a record high set in mid-July.
The John McCain contract fell half a point to 37.6, having hit an all-time high only a few weeks ago.
Die-hard Hillary Clinton fans are still betting on the New York senator to win the presidential election, with the Clinton contract rising 0.4 point to 3.2.
Judging by the \”REPLACE DO-NOTHING DEMS IN CONGRESS\” comments the Republican party has it\’s own share of the mentally debilitated on its rolls. It is much more interesting to read about the probability of the polls or the calculations bettors are using to predict the outcome of the election, on this web site at least, than to have to read such sophmoric, or should I say moronic, drivel.
What about the Whigs?
As Democrats and Republicans kick off the final countdown to the Nov. 4 election, strategists at U.S. investment bank Lehman Brothers have done some interesting data mining.
Figures looking back economic conditions in 1948-2007 show the economy under Democrats enjoyed a higher GDP growth rate (4.2 percent vs 2.8 percent for Republican adminsitrations) and a lower average unemployment rate (5.1 percent vs 5.9 percent).
Looking at a longer timeframe since 1828, however, Lehman strategists found that government and corporate bonds fared better when a Republican occupied the White House (it excluded Whigs).
On average, Treasury bonds returned 4.82 percent preceding an election year with a Republican incumbent (3.38 percent for a Democratic one).
Equities fared less well with a Democratic incumbent during an election year (9.13 percent) while averaging 13.76 percent with a Republican incumbent during an election.
But Lehman ends the research with a disclaimer: “Trading rules based on such long-term averages suffer from potential data-mining distortions… Before embarking upon any portfolio course based mainly on ‘election-cycle averages’, let’s wait for the outcome of the election.”
(Photo: Mike Segar/Reuters)
