Author Archive

Christopher Thornberg has a chart presentation out and I have picked over some items for observation. One talking point of the bullish story is increasing exports.   However, when one looks under the hood, and asks to whom, the answer is another one trick pony, China (second chart, YoY) .   China, in turn has imported...
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Chart showing commodity rail shipments. So far this year this can’t barely keep pace with last year, and is far below 2006-2008 levels.  Is this all that two years of 10% annual deficits to GDP is worth?Source: Calculated RiskI have posted at length about the factors that will lead to the next rout of...
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Yesterday rumors floated concerning more restrictions on short selling from Gumnut owned securities which in turn led to a further blowoff in cats, dogs and junk stocks in general. This phase reminds me a lot of late 2007- early 2008, when constant rumormongering was in play on how the entire S&P 500 could be...
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There is evidence aplenty that Gumnut is driving forward with a partial exit strategy on its endless bailouts. �A key point man on this seems to be Barney Frank, who last week fired a trial-balloon volley on the implied Gumnut�guarantee of the GSEs. �He starts the new week off by delivering a letter (apparently...
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My attempt now is to put together a navigation survival guide that I will call the Titanic play. Along with the China axiom (that their economy always grows briskly), we have the axiom that Gumnuts, and especially big ones, are unsinkable and can borrow indefinitely at marginal cost and thereby €œstimulate€ (in reality...
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Further signs of a blow off in maladjustments continues to build.  The Baltic Freight Index has risen 20% in six days and has hit 3242.  This leaves little doubt that a big bagunca (mess) will be left in its wake.  At the beginning of 2010, the market was saddled with orders for 1,400 new...
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China has a monetary meeting on March 5th. Are they going to do anything about this?A look at credit default insurance spreads on four large US States, Why would these have actually improved, these deficits and shortfalls are worse:A glance at the Euro shows that the race to the bottom is only slightly being...
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Northwestern professor Victor Shih has zeroed in on China’s local and provisional governments to evaluate debt levels. Once again, the transparency offered is poor, but his study concludes that China’s overall government debt is headed to debt trap levels of 96% over the next year.  The tenor of this and other reports looks alot like what happened in...
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China’s holding of Treasuries goes parabolic. Part of this must be a back door deal to swap agencies for Treasuries with the Fed.  Two elements of this are in question. One, China no longer has a large trade surplus to recycle, and secondly the Fed’s extreme purchases of mortgage securities is winding down.  The...
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PBOC mucky muck Zhu Min chimes in on what he considers a major risk,“To me, the big risk this year is the dollar carry trade,” he said.  â€œIt is a massive issue. Estimates are that the dollar carry trade is $1,500bn – which is much bigger than Japan’s carry trade was.”Arguably the Euro has now...
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Big story: Extend and pretend maladjusted China squeezes its export sector with  Gumnut stimulus. After finding their butts fired last year, now workers have no interest in going back to their old exporter employers even with raises.  What a merry go round, and what way to run an economy. Higher prices and inflation for...
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Don’t look now but California’s stale extend and pretend Ponzi games may be coming to a head: delayed $2 billion GO sale, and delayed payments.The amount of new Treasury demand coming over the next month is simply put,  punishing . With the return of TBAC needs,  the Treasury closing in on $1/2 trillion of...
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New home sales are now scraping at generational lows and are apparently unable to compete with existing home sales in any meaningful way.  Besides weak demand, another reason affecting this is competition with a large supply of near-new houses built in 2003-2008 still on the market.  Why can’t the new home market compete on...
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Today’s blog follows up by focusing on what I think is another Achilles heels for China: water and food.  Before embarking on this, allow me to draw your attention once again to the Bloomberg article on Chinese mal-investment, especially the last paragraph quoting Mark Mobuis:Still, even Mobius says investors have to be wary. He...
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“A country that appears peaceful and stable may encounter unexpected crises.  There are structural problems in China’s economy, which cause unsteady, unbalanced, uncoordinated and unsustainable development.” – Chinese Premier Wen Jiabao, 2007 Today’s post does has extra links that I hope you’ll read, as this is not a post one can just scan and do...
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Irwin Seltzer writes in the WSJ, and echoes clearly the problem with bailout economics and moral hazard. There is an interesting marker provided in this article by Lindsey Group that might be useful in determining what true, sustainable austerity would be for Greece: a 10% cut in the total budget.  Greece is trying to sell a...
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There is a new book called “The Quants” and also a few related articles including this one in the WSJ. I believe the defining ingredient of these Boyz are that they use models that turn out to be faulty, and then herd into crowded trades as an algo-wolf pack hunt. It is also evident that they give...
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The China Bubble roller coaster produced another out of control month in January, as lending checked in at $203 billion. M1 money supply is growing 39%, and M2 at 26%.  The fuel for one heck of a Wil E Coyote  bust is building into a frenzy.  Supposedly new banking restrictions kicked in on Jan....
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There is increasing evidence that the US and China are engaged in brinksmanship over their unsustainable and exhausted symbiosis.   Andy Xie and others believe that the US has lost its options and will turn to trade policy to try and open up export markets.  Xie offers that China would benefit, but that means abandoning...
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By necessity or design, Joe Ultra Light Sixpack is slowly repairing his or her balance sheet.  Whether it’s voluntary or involuntary is really a moot point.  It’s a trend in motion. Case in point is consumer credit, which has declined about $100 billion from $2.56 trillion at its peak in mid 2008 to $2.46...
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It now feels that the pretend world is finally catching up to the real world. For those who seek some glimmer of hope, the message this time from Fitch on CRE delinquencies keeps coming in loud and clear as does the delinquencies on jumbo mortgages. Feb. 8 (Bloomberg) — U.S. prime jumbo mortgages at least...
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Harrisburg, Penn., is looking at bankruptcy and for obvious reasons, debt service is about equal to its entire budget.  Look for a lot more of this. You heard the concept here: Feb. 4 (Bloomberg) – Greece’s biggest union approved the second mass strike this month and tax collectors began a 48-hour walkout, showing that Prime Minister...
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US Treasury is out with a report and illustrative charts on the key issue of times, debt traps. The first charts leads off with the interest paid against GDP. Since I believe GDP is in many respects bogus, I prefer to compare against tax revenues, which in 2009 were $2.1 trillion. What is important about this chart is that...
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China continues tightening its property markets. Mostly likely property prices in China have already rolled over and are heading lower. Shanghai’s property stock index topped out in August, and has already dropped 33%. Now looks like nothing has come out of Dubai on their restructuring talks, except shines. The CDS market is again starting to...
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Don’t look now but carry traders are in the cross hairs in the UK.  This is long overdue. The implication is that carry trades and other forms of speculative trading activity that perform no apparent economic purpose would carry much higher capital requirements than ordinary lending and would therefore be rendered largely unprofitable. State and localities...
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SIGTARP has its quarterly  report out, and it discusses both exposure the Gumnut now has, as well the moral hazard blowback caused. I was especially interested in Section 3 (starting on pg 109), which go into the Gumnut literal “ownership” of the mortgage market both as investor-speculator in the securities and as guarantor of...
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Asset correlation has been extremely high,  as trades are seemingly being unwound in tandem.  If a real jailbreak develops here, it will be important to separate the men from the boys.  The USD carry trade has played a  major role in distorting markets without much consideration for fundamentals, and it was using hot money to boot. That explains...
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Blackstone mucky muck  Steven Schwarzman, "Financial institutions will feel under siege and they will retreat … Their entire world is being shaken and they're being attacked personally. We don't need those financial institutions insecure." Yesterday, Morgan Stanley’s honcho John Mack was quoted as saying, ” the market probably wouldn't crash if Bernanke wasn’t...
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Lots of Sgt. Schlutz defenses about the AIG folly, with Bernanke, Paulson and Geithner claiming they weren’t involved.  If true, that would suggest the transactions went down on auto-pilot with no questions asked, and that’s not good.  The argument about no negotiating power in the situation is as loony as Fed policy in general.  On...
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There is a House investigation into the AIG matter, and Turbo Timmy is expected to testify Wednesday.  Now comes Hammerin Hank Paulson who will be on board too. All these characters seem to be adopting the Sgt. Schultz defense of : “I know nothing.” Meanwhile 250,000 documents have emerged, and some of the juicier...
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