The Wall Street Examiner http://wallstreetexaminer.com Get the facts. Tue, 04 Aug 2015 01:58:06 +0000 en-US hourly 1 Cycle Screening Measures Should Be Stronger Than They Are http://wallstreetexaminer.com/2015/08/cycle-screening-measures-should-be-stronger-than-they-are/ http://wallstreetexaminer.com/2015/08/cycle-screening-measures-should-be-stronger-than-they-are/#comments Tue, 04 Aug 2015 01:03:11 +0000 http://wallstreetexaminer.com/?p=258536 Cycle screening measures were mixed on Monday. The aggregate indicator downticked for the first time in a week. If there’s follow through from here, the downturn would come from an unusually low level, which would be another sign of momentum loss when it should be strengthening. Market Update Pro subscribers (Professional Edition), click here to download…

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Cycle screening measures were mixed on Monday. The aggregate indicator downticked for the first time in a week. If there’s follow through from here, the downturn would come from an unusually low level, which would be another sign of momentum loss when it should be strengthening.

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Home, Home On The Range http://wallstreetexaminer.com/2015/08/home-home-on-the-range/ http://wallstreetexaminer.com/2015/08/home-home-on-the-range/#comments Mon, 03 Aug 2015 21:33:48 +0000 http://wallstreetexaminer.com/?p=258509 The market pulled back slightly again on Monday, validating the new short term downtrend channels on the S&P and Dow, but not doing much more than that. Market Update Pro subscribers (Professional Edition), click here to download complete report in pdf format. Enter your email address in the form to receive email notification when Professional Edition…

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The market pulled back slightly again on Monday, validating the new short term downtrend channels on the S&P and Dow, but not doing much more than that.

Market Update Pro subscribers (Professional Edition), click here to download complete report in pdf format.

Enter your email address in the form to receive email notification when Professional Edition reports are posted.


 

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Are you an active trader?

If your answer is yes, click here.  Because you already know that timing is everything!

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Urban Carmel: Insiders Are Bullish While Outsiders Are Bearish http://wallstreetexaminer.com/2015/08/urban-carmel-insiders-bullish-outsiders-bearish/ http://wallstreetexaminer.com/2015/08/urban-carmel-insiders-bullish-outsiders-bearish/#comments Mon, 03 Aug 2015 21:16:00 +0000 http://wallstreetexaminer.com/?guid=30da3feadf2ca4a5f73fb362f6b26b8f Corporate insiders are bullish equities at precisely the same moment that outside investors have become bearish. Other factors may intervene to drive the price of equities lower. But sentiment, at least short-term, is quite clearly biased in favor of higher prices.

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This is a syndicated repost courtesy of The Fat Pitch. To view original, click here.

Summary: Corporate insiders are bullish equities at precisely the same moment that outside investors have become bearish. Other factors may intervene to drive the price of equities lower. But sentiment, at least short-term, is quite clearly biased in favor of higher prices.

* * *

There’s a marked divergence of opinions in the US stock markets at the moment.

On bearish side are equity investors. The ISE equity-only call/put ratio has closed below 100 in each of the last 3 days. This means equity investors are buying protection against falling share prices to an extreme degree. In other words, they are bearish and this is normally a positive for equity prices.

This ratio has only twice before closed below 100 three days in a row: mid-March and mid-November 2008. In both cases, the S&P was near a short-term low and rose over 10% in the weeks ahead. Both of those rallies later failed.


We can add one other instance where the ISE equity-only call/put ratio closed below 100 in 3 of 4 days: mid-October 2014. The S&P bottomed the next day and then rose over 10% in the next few weeks.

To be sure, this a small sample, but there is some comfort in knowing this reading of short-term investor sentiment is consistent with others (post).

On the bullish side are corporate insiders. They are currently bullish (i.e., buyers of) equities to the largest degree in the past year. This is most often associated with higher equity prices in the weeks ahead (insider transaction information from Barron’s).

That corporate insiders are bullish at precisely the same moment that investors are bearish is not unique. In the charts above you should note that this same set up existed at the mid-October low in the S&P.

Other factors may intervene to drive the price of equities lower. But sentiment, at least short-term, is quite clearly biased in favor of higher prices.

(Note: ISE measures use only opening long customer transactions. This excludes market maker and firm trades in order to form a clean measure of investor sentiment. More on this here).

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Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

This is a syndicated repost courtesy of The Fat Pitch. To view original, click here.

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Here’s How The Top Panderers Attending The Koch Brothers’ Conference Fared http://wallstreetexaminer.com/2015/08/heres-top-panderers-attending-koch-brothers-conference-fared/ http://wallstreetexaminer.com/2015/08/heres-top-panderers-attending-koch-brothers-conference-fared/#comments Mon, 03 Aug 2015 19:50:49 +0000 http://moneymorning.com/?p=190177 The annual Koch brothers' conference went down this past weekend. The nation's affluent elite made their way to California's sunny shores to be pandered to.

The post Here’s How The Top Panderers Attending The Koch Brothers’ Conference Fared appeared first on The Wall Street Examiner. Follow the money! See and understand the liquidity flowing from the Fed, Treasury, and other major central banks and primary dealers as they impact markets in the Wall Street Examiner Professional Edition.

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This is a syndicated repost courtesy of Money Morning - We Make Investing Profitable. To view original, click here.

This past weekend, five Republican candidates attended the Koch brothers’ conference to vie for the kind of funding that could alter the outcome of the 2016 presidential election.

You see, not only did the hopefuls attempt to impress the oil-billionaire brothers – they also gained exposure to the Kochs’ mega-donor friends. The “summer summit” kicked off Saturday, Aug. 1, and finished Monday, Aug. 3. It was held at the St. Regis Monarch Beach luxury hotel in Dana Point, Calif., and was attended by 450 of the biggest financiers in the country. Also present were three House members, six incumbent senators, and seven sitting governors.

Five GOP presidential rivals fought for support at the Koch brothers’ conference:

  • Wisconsin Gov. Scott Walker
  • Former Florida Gov. Jeb Bush
  • S. Sen. Ted Cruz, R-TX
  • S. Sen. Marco Rubio, R-FL
  • Former Hewlett-Packard CEO Carly Fiorina

Here’s a look at how the candidates fared…

Notable Highlights of Koch Brothers’ Conference 2015

Of the five, Cruz and Bush came out on top – at least, according to Bloomberg. The outlet noted Bush and Cruz were already leading the crowded Republican race – at least financially – before the gathering took place. Bush had raised about $115 million for his campaign as of July 9, the most of any candidate so far. Cruz reported $52 million – less than half of Bush’s loot, but still more than the rest of his opponents.

Bloomberg‘s assessment of candidate performance was based solely on applause and crowd reaction. However, other media outlets came away with different impressions…

According to The Washington Times, Rubio was the best crowd pleaser. He got points when he spoke matter-of-factly about ending U.S. subsidies to foreign governments for the production of goods.

And USA Today reported Walker, once the Kochs’ favored candidate, earned a round of applause when he spoke about stricter immigration policy.

Young Supporters Present Walker With Check at Koch Brothers conference.

Young Supporters Present Walker With Check at Koch Brothers conference.

Now that the Koch brothers’ conference is over, the mega-donors and their “billionaire’s club” network will convene amongst themselves to ritualistically announce, one by one, to whom it is they will be donating their millions, how much, and why.

 

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The post Koch Brothers’ Conference 2015: Highlights appeared first on Money Morning. Reposted with permission.

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

This is a syndicated repost courtesy of Money Morning - We Make Investing Profitable. To view original, click here.

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This Chart Shows How The Fed Fiddles On Inflation While The Middle Class Burns http://wallstreetexaminer.com/2015/08/how-fed-fiddles-on-inflation-chart/ http://wallstreetexaminer.com/2015/08/how-fed-fiddles-on-inflation-chart/#comments Mon, 03 Aug 2015 18:11:04 +0000 http://wallstreetexaminer.com/?p=258465 There are a lot of ways to define “inflation.” There are a lot of ways to measure “inflation.” Economists, the Fed, and Wall Street define “inflation” to apply only to consumption goods, things we actually use and consume. Hence the name “Consumer Price Index.” The purpose of the CPI was never really to measure “inflation” however.…

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There are a lot of ways to define “inflation.” There are a lot of ways to measure “inflation.”

Economists, the Fed, and Wall Street define “inflation” to apply only to consumption goods, things we actually use and consume. Hence the name “Consumer Price Index.” The purpose of the CPI was never really to measure “inflation” however. Its purpose was to index government benefits and contracts. In the good old days, when people got cost of living increases in their paychecks, businesses also used it also to index wages. Younger workers today don’t know what that means. It’s ancient history.

The price of the roof over our head doesn’t count as a consumption good. When skyrocketing house prices caused government indexed pay and benefits to rise too fast in the late 1970s, the BLS stopped counting housing prices in 1982, coming up with the excuse that houses were not consumption goods.

Since then the BLS and the Fed considered housing an asset, and replaced house prices in the CPI with the made-up Owner’s Equivalent Rent (OER). That bogus stat is suppressed by a method which ends up with rent increases mimicking CPI in a circular process. So rents in CPI never rise at the actual rate at which they are rising in the marketplace. And the OER never comes close to the rate at which house prices are rising.

Economists don’t think that inflation is applicable to assets. Assets don’t “inflate.” They “appreciate.” So while “inflation” makes us mad when we go to the supermarket, we appreciate “appreciation.” Maybe not so much if we’re on the outside looking in, but if we own a house, hey! It’s all good!

As for the CPI measuring monetary inflation, which in recent years has been expressed ONLY in asset prices, like your house, that was never its intention.

The CPI does not measure the impact of monetary inflation. House prices do. Stock prices do. But not consumer prices. House prices rising 6% per year don’t count in “inflation.” Neither did the skyrocketing prices of stocks in recent years. In this case, too much money did not inflate the prices of consumer goods, because the money wasn’t going into consumers pockets. The “too much money” inflated stock prices. It inflated bond prices. It inflated house prices, because it went into the pockets of the people who had access to the printed money. That didn’t include the bulk of middle class consumers and everybody else with lower incomes. That fact has enabled economists to ignore inflation, or worse, think that it’s too low, and that the Fed just needs to print more money.

The Fed even goes a step further than CPI in its quest to ignore monetary inflation. It loves a measure called the Core PCE Price Index. which was just released today. As the Wall Street Journal put it, “Prices rose 0.2% over May, as measured by the personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge. Prices were up 0.3% from a year earlier. Inflation has now run below the Fed’s 2% target for more than three years.”

That’s because they’re not measuring monetary inflation. They’re measuring a narrowly defined basket of consumption goods which overweights the things that aren’t rising in price, and underweights or completely ignores the things that are. I won’t get into all the arcaninities that the Fed imposes to suppress that number. I’ll just show you.

Here are the Core PCE Price Index (excluding food and energy), Core CPI, Total CPI adjusted for actual rent increases, along with another measure of consumer prices that absolutely no one pays any attention to. That’s the Producer Price Index for Finished Consumer Goods Less Food and Energy. Let’s call it the Core Consumer Goods PPI.

The chart indexes those measures to the year 2009 when the Fed began QE and ZIRP in its effort to boost the markets and suppress long term interest rates. It shows the compound annual growth rates since then. In the past couple of years, the Fed has stated the desire to get “inflation” up to 2%. But the way the Fed measures “inflation,” they’ll never see that goal. In fact, the Core PPI Finished Consumer Goods Index, which isn’t manipulated and suppressed the way CPI and PCE are, has always been above 2%.

CPI, PCE and Reality- Click to enlarge

CPI, PCE and Reality

Below I show how consumer prices have fared over the past year, based on these measures. With the exception of the Fed’s favorite Core PCE, the other three measures have stuck around their 6 year growth rates. The Fed’s favorite measure grew more slowly, however. If the Fed had deliberately decided to follow a measure that would understate inflation, they could not have done better than this. Congratulations Fedheads!

  1. The Fed’s favorite Core PCE has risen by 1.29% (6 year growth rate since 2009- 1.51%).
  2. The Rent Adjusted CPI got hit by falling gas prices last year and is only up 1.36% (growth rate 1.76%).
  3. The Core CPI is up 1.76% (growth rate 1.68%).
  4. The Core Consumer Goods PPI is up 2.57% (growth rate 2.54%).

As a consumer yourself, I’ll let you be the judge of which one is most accurate, based on your experience. Since this is a multiple choice question, I will add a fifth option.

5.  None of the above

If you selected number 4, or number 5 because you think they are all too low, then you must also conclude that the Fed is behind the curve in tightening credit.

We won’t even broach the subject of the charade of pretending to raise interest rates. How does a producer of a good, in this case, cash, raise its price when it has massively oversupplied the market with that good. As far as I know, if the Law of Supply applies, then the only way to do that is to reduce the supply of the good. And the only way for the Fed to do that is to start shedding assets from its balance sheet to extinguish the excess supply of cash on bank balance sheets. The Fed hasn’t started serious trial balloons on that thought yet, so it is not serious about raising rates or tightening credit. That means that the Fed will get even further behind the curve as time goes on.

If you think the commodity collapse will bring down consumer prices, think again. Even though the raw material cost is a tiny percentage of the cost of production, producers of consumer goods love this. It allows them to enjoy increased margins without engaging in the unseemly acts of raising shelf prices, or reducing the size of the packaging, which has been their sneaky way of increasing margins in recent years. One company, Tropicana Foods, has even come up with a way to water down its product by 50% and raise the price! The call it Lite Orange Juice. It’s light alright. Adding water will do that. This is just one example of the extremes consumer products companies will go to to raise, rather than lower prices, even when raw materials costs have been falling for a couple of years.

So while the BLS finds ways not to measure the rising prices of consumption goods, wages will continue to be sticky on the flat side and consumers will continue to see their purchasing power erode. The Fed is fiddling while the middle class burns. Eventually the financial markets will also begin to suffer from the squeeze on the middle class. “Eventually” was once far beyond the horizon, but we’ve been at this for a long time. It’s getting closer.

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You Won’t Believe the Mind Blowing Demographic Disaster That Europe Will Be http://wallstreetexaminer.com/2015/08/europe-demographic-disaster/ http://wallstreetexaminer.com/2015/08/europe-demographic-disaster/#comments Mon, 03 Aug 2015 16:22:00 +0000 http://wallstreetexaminer.com/?guid=5ae30d26aafb5d7d016946f7c8d8bff5 Europe - posting the most disastrous, by a mile, demographic prospect of all regions.

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This is a syndicated repost courtesy of True Economics. To view original, click here.

Here are the latest UN projections for population growth though 2100 (best viewed by clicking on the image to enlarge):

Source: http://esa.un.org/unpd/wpp/Publications/Files/Key_Findings_WPP_2015.pdf.

Of all major regions around the world: only three are likely to post negative population growth. These are:

  • Europe – posting the most disastrous, by a mile, demographic prospect of all regions;
  • Followed by Asia, where cumulated population decline will be less severe (through 2100) than in Europe; and
  • Finally, by Latin America.
Here is a table calculated by me based on the UN projections showing 30 countries with largest declines in population over 2 periods: 2015-2030 and 2015-2050:
I group these countries by a historical sub-regions as follows:
  • EU
  • Former USSR excluding currently in the EU
Several striking observations emerge:
  • One hears quite frequently media comments about the disastrous situation with Russian demographics. Except: Russian Federation is not in 30 countries with worst population growth performance over 1950-2015 period, while its counterparts in the USSR – Ukraine, Georgia and Belarus are. Russia will be ranked 19th worst performing (demographically) country in 2015-2030 and 2015-2050 period. But compare this to Ukraine (to be ranked 4th in 2015-2030 period and 3rd in 2015-2050 period); Republic of Moldova (expected to rank 11th in 2015-2030 period and 4th in 2015-2050 period); Belarus (forecast to rank 12th in both periods); Georgia (ranked 20th in 2015-2030 period forecasts – better than Russia, but 15th in 2015-2050 forecast – worse than Russia). I have not heard much of ‘disastrous policies’ assessments in the media concerning their demographic collapse predictions.
  • Another interesting aspect of the table is the exceptionally poor forecasted performance in demographics for the Eastern European states members of the EU.
You can see the above point 2 from the table below that selects EU member states:
Just for comparative reminder: Russian population (the benchmark case for media-covered demographic disaster) is forecast to shrink by 10.4% between 2015 and 2050. Which is bad, but better than 10 out of 29 EU member states (not benchmarks, according to the media, of a demographic disaster).

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

This is a syndicated repost courtesy of True Economics. To view original, click here.

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Fed’s Yellen: “We Don’t Need No Stinking Wage Growth!” Despite Not in Labor Force Rate at 37.3 Percent http://wallstreetexaminer.com/2015/08/feds-yellen-dont-need-no-stinking-wage-growth-despite-not-labor-force-rate-37-3-percent/ http://wallstreetexaminer.com/2015/08/feds-yellen-dont-need-no-stinking-wage-growth-despite-not-labor-force-rate-37-3-percent/#comments Mon, 03 Aug 2015 14:19:04 +0000 http://confoundedinterest.wordpress.com/?p=42183 Ms. Yellen said explicitly in that March speech that she is prepared to start moving interest rates up even before she sees sure signs that wages are rising faster.

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This is a syndicated repost courtesy of Confounded Interest - Online Course Notes For Financial Markets. To view original, click here.

Well, the Federal Reserve Chair Janet Yellen didn’t exactly say the famous line from the Humphrey Bogart/Tim Holt film Treasure of the Sierra Madre, “We don’t need no stinking wage growth.” But according to the Wall Street Journal’s Jon “The Omen” Hilsenrath,

“Ms. Yellen said explicitly in that March speech that she is prepared to start moving interest rates up even before she sees sure signs that wages are rising faster. “That said,” she added, “I would be uncomfortable raising the federal funds rate if readings on wage growth, core consumer prices, and other indicators of underlying inflation pressures were to weaken.”

Given her stance, Friday’s employment cost report doesn’t look like a deal breaker for the Fed in its long-running debate about when to raise short-term interest rates. Wages appear to be stagnant but not clearly weakening, which is what she set out as her threshold for not acting. Still, it creates new doubts for officials and doesn’t help them build the confidence they’re hoping to build that the job market is nearing full employment and inflation rising toward 2%.”

True, the Employment Cost Index is at an all-time low. But the percentage of people NOT in the labor force is now 37.3%.

newdawn

The NOT in labor force rate is the number of those NOT in the labor force divided by the sum of those in the civilian labor force and those NOT in the labor force.

StinkinBadges (1)

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

This is a syndicated repost courtesy of Confounded Interest - Online Course Notes For Financial Markets. To view original, click here.

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IMF on Russian Economy: Private Sector Debt http://wallstreetexaminer.com/2015/08/imf-russian-economy-private-sector-debt/ http://wallstreetexaminer.com/2015/08/imf-russian-economy-private-sector-debt/#comments Mon, 03 Aug 2015 14:06:00 +0000 http://wallstreetexaminer.com/?guid=c6afb164004cf3cbf7424c01d9c7306f economic crisis is weighing pretty heavily on banks' Non-performing Loans.

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This is a syndicated repost courtesy of True Economics. To view original, click here.

Continuing with IMF analysis of the Russian economy, recall that
– The first post here covered GDP growth projections (upgraded)
External Debt and Fiscal positions (a mixed bag with broadly positive supports but weaker longer-term sustainability issues relating to deficits).

This time around, let’s take a look at IMF analysis of Private Sector Debt.

As IMF notes, economic crisis is weighing pretty heavily on banks’ Non-performing Loans:

In part, the above is down to hefty write downs taken by the banks on Ukrainian assets (Russian banks were some of the largest lenders to Ukraine in the past) both in corporate and household sectors.

However, thanks to deleveraging (primarily in the corporate sector, due to sanctions, and some in household sector, due to economic conditions), Loan to Deposits ratio is on the declining trajectory:

Note: Here is a chart on deleveraging of the corporate sector and for Russian banks:

In line with changes in demand for debt redemptions, FX rates, as well as due to some supports from the Federal Government, banks’ exposure to Central Bank funding lines has moderated from the crisis peak, though it remains highly elevated:

Illustrating the severity of sanctions, corporate funding from external lenders and markets has been nil:

And Gross External Debt is falling (deleveraging) on foot of cut-off markets and increased borrowing costs:

So companies are heading into domestic markets to borrow (banks – first chart below, bonds – second chart below):

 

Net:

1) Corporate external debt is falling:

2) Household debt is already low:

3) But the problem is that deleveraging under sanctions is coinciding with economic contraction (primarily driven by lower oil prices), which means that Government reserve funds (while still sufficient) are not being replenished. IMF correctly sees this as a long term problem:

So top of the line conclusion here is that banking sector remains highly pressured by sanctions and falling profitability, as well as rising NPLs. Credit issuance is supported not by new capital formation (investment) but by corporates switching away from foreign debt toward domestic debt. Deleveraging, while long-term positive, is painful for the economy. While the system buffers remain sufficient for now, long term, Russia will require serious changes to fiscal rules to strengthen its reserves buffers over time.

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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IMF on Russian Economy: Debt Sustainability http://wallstreetexaminer.com/2015/08/imf-russian-economy-debt-sustainability/ http://wallstreetexaminer.com/2015/08/imf-russian-economy-debt-sustainability/#comments Mon, 03 Aug 2015 13:54:00 +0000 http://wallstreetexaminer.com/?guid=090a9151055550e7b989e579628c5347 In its latest assessment of the Russian economy, IMF has reduced its forecast for General Government deficit for 2015.

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In its latest assessment of the Russian economy, IMF has reduced its forecast for General Government deficit for 2015, from -3.69% of GDP back in April 2015 to -3.3% of GDP in the latest report. However, in line with new Budgetary framework, the IMF revised its forecasts for 2016-2020 deficits to show poorer fiscal performance:

In line with worsening deficits from 2016 on, IMF is also projecting higher government debt (gross debt, inclusive of state guarantees):

Still, the IMF appears to be quite happy with the overall debt and fiscal sustainability over the short run and is taking a view that over the next 2-3 years, fiscal policy must provide some upside supports to investment.

One of the reasons for this is that IMF sees continued strong buffers on fiscal reserves side into 2020, with Gross international reserves of USD362.4 billion and 374.8 billion in 2015-2016 amounting to 13.6 months of imports and providing cover for 496% and 281% of short term debt, respectively.

Furthermore, IMF expects debt levels to remain benign, both in terms of Government debt and Private sector debt as the chart above shows.

Note: I will cover Private Sector Debt developments in a separate post, so stay tuned.

Overall, 

1) External debt situation remains positive and is improving in the sector with weaker performance (corporate sector):

Note: above figures do not net out debt written to Russian banks and corporates by their parent and subsidiary entities located outside Russia, as well as direct investment / equity -linked debt.

2) “…no sector shows maturity risk with short-term assets exceeding short-term debt in aggregate”

3) Fiscal stance appears to be expansionary, but moderate, with deficits below 4% of GDP forecast for the worst performance year of 2016.

4) “Exchange rate and liquidity risks are mitigated by the CBR’s large reserve level”

Stay tuned for more analysis, including debt positions across various sectors.

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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IMF on Russian Economy: GDP Growth Upgrade for 2015-2016 http://wallstreetexaminer.com/2015/08/imf-russian-economy-gdp-growth-upgrade-2015-2016/ http://wallstreetexaminer.com/2015/08/imf-russian-economy-gdp-growth-upgrade-2015-2016/#comments Mon, 03 Aug 2015 13:30:00 +0000 http://wallstreetexaminer.com/?guid=a409ba75f869cf50bf793ac5531a1846 IMF actually upgraded, marginally, Russian forecasts for 2015-2016

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IMF has just released its assessment of the Russian economy. Several interesting aspects of this report are worth highlighting.First up: economic growth projections. IMF actually upgraded, marginally, Russian forecasts for 2015-2016 across the key macroeconomic parameters. Here are three charts comparing GDP growth, Inflation and Current Account balance projections from the Fund across two separate reports: April 2015 WEO and today’s Article IV.

And a summary of latest forecasts

Overall, small upgrade on GDP side compared to April release, for both 2015 and 2016. Expected return to positive growth in 2016 remains extremely weak and subject to huge uncertainty. Worse, when one looks into components of GDP, the picture that emerges is less ‘positive’.

Domestic demand will likely remain a negative drag on growth though 2016, with expected improvement – albeit marginal – on investment side in 2017. Consumption, however, will remain a small contributor to the overall growth in 2018-2019. Investment is also to remain weak.

Structural nature of the slowdown is reflected in exceptionally weak productivity performance. This traces back to post-crisis period in its entirety. Russian economy did not experience a significant recovery on productivity growth rates post-2009 crisis and since 2010 there has ben a pronounced downward trend in productivity growth:

While relatively low unemployment is supported by decline in labour force participation rate (accelerating due to twin demographic problem of rising older and younger population shares, plus poor health performance amongst older adults):

Overall, however, declining labour force trend should have translated into increased productivity of the labour force. In Russian case, this is not happening.

Slight uptick in unemployment recently is likely to continue through 2015, but will not be enough to induce labour productivity growth acceleration:

The IMF forecasts come on foot of ruble posting woefully poor performance, falling to a 5-months low (http://www.bloomberg.com/news/articles/2015-08-03/ruble-drops-most-in-emerging-markets-with-crude-at-six-month-low) and with Manufacturing PMI showing acceleration in economic decline in July (http://trueeconomics.blogspot.ie/2015/08/3815-russia-manufacturing-pmi-july-2015.html).

All of this is hardly a pleasant reading. However, not all is as gloomy as the above headline figures imply. In particular, in several key areas, macroeconomic position is relatively strong. I will blog on these in subsequent posts.

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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