Around the Globe 04.22.2013

Bernanke to Skip Jackson Hole Due to Scheduling Conflict.


The reason Bernanke is skipping the annual Fedapollooza is because he will not serve a third term after 2014.  It will be interesting to see who leads the Fed at the annual J-Hole conference, because this may telegraph the next Fed head.  My money is on Janet Yellen.

Caterpillar Earnings, Revenue Fall Short; Slashes 2013 Outlook.

CAT 04.22.2013

Caterpillar serves as a bellwether for the mining industry and China.  CAT’s story today is that profits are 45% less than last year’s first quarter results while revenues plunged 17%.  The metals bubble seems to have burst sapping demand for CAT’s mining equipment.  CAT is a China play, and decreaAT.

Barroso Calls for Growth Over Austerity –

Eurozone Economic Performance

The EU is beginning to play a different tune.  The reason for the policy shift is not a deep concern for countries of the periphery but reality.  As the article makes clear, budget cuts are not leading to smaller deficits.  The periphery and even core countries like France and the Netherlands have no hope of attaining a 3% budget deficit anytime in the near future.  Leaving that goal intact would merely serve as a reminder that the eurocrisis continues.

Spain to Pull Back on Austerity –

Spain Budget Deficits

For some reason, the mainstream media continues to report that Spain had a 7% budget deficit for 2012 excluding its bank bailout from the final number.  There is no good reason to omit the cost of the bank bailout.  Spain is in the midst of a bursting property bubble, and as property values decrease non performing loans shall increase.  The banks have received money from the central government for the last three years in a row, and don’t be surprised if more capital is required sometime this year.  The bank bailout is an ongoing cost and should be treated as such.

Hollow Victory for Italy as More Turmoil Looms.

Giorgio Napolitano

Continued ttempts to form a government in Italy will fail despite the reelection of Giorgio Napolitano to the presidency.  The left bungled the election and post-election bargaining so badly that Berlusconi and Grillo must realize that they have a chance to win a second round outright.  Additionally, the Democratic Left’s popular new leader, Matteo Renzi, believes that he could do better than outgoing leader Pier Luigi Bersani.  It seems like we are heading full speed ahead to new Italian elections this summer.

BOJ’s Kuroda Wins Over G-20 –

Japanese Debt to GDP Ratio

Kuroda must have told his fellow central banksters the truth:  that Japan is on the brink of ruin, and this last ditch plan to print astronomical sums of yen is the only chance the country has.  I hope the G-20 leaders have also discussed what to do in case Japan fails.

Greece, Cyprus May Be Forced to Exit Euro: Citi.

Spanish Yield 04.22.2013

Citi is every pessimistic on the continued viability of the Eurozone.  While it forecasts Greek and Cypriot eurozone exits, it goes beyond this headline to Spain and Italy, which it predicts will both require bailouts this year.  I do not agree.  While the fiscal and economic fundamentals point to exits and bailouts, do not underestimate the effect of central bank money printing in maintaining the current status quo.  As the BoJ purchases bonds on the open market, piles of cash will continue to seek yield, and there is plenty to seek in Europe.  Note sinking bond yields in Italy and Spain since the BoJ announced its latest policy.



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