Around the Globe 11.01.2013

US factory activity hits one-year low in Oct: Markit.

Manufacturing in U.S. Expands at Faster Pace Than Forecast – Bloomberg.

Manufacturing sector expands more than expected in October.

U.S. October manufacturing activity growth hits 2-1/2-year high: ISM | Reuters.

U.S. Factories Shrugged Off Shutdown – WSJ.com.

ISM PMI 11.2013

 

There are two widely followed American manufacturing indices issued by Markit Economics and the Institute of Supply Management.  In June, the indices diverged with one continuing to rise while the other began falling.  Even though both organizations released their data today, guess which one the mainstream media is choosing to write about and which one is being ignored?

The optimistic numbers from ISM are winning the news battle 41,000 google news search results to 8,500.  This morning, I saw several articles hyping the ISM’s data but none reporting Markit’s.  None of this criticism should be construed as supporting one index over the other.  In fact, they are both probably right adding to the rest of the decidedly mixed data that defines the New Normal.

 

Markit US Manufacturing PMI 11.2013

Draghi’s Deflation Risk Complicates Recovery: Euro Credit – Bloomberg.

Euro slips to 2-week low as talk of looser ECB policy grows | Reuters.

Euro Fair Value at 1.37

The table above illustrates the relative advantage or disadvantage of the country’s euro membership, and it is all you need to know in order to correctly predict the ECB’s next move.  Germany is essentially running the ECB, so the bank delivers the monetary policy that the Germans want.  As long as inflation remains low and the value of the euro is weak enough for Germany to maintain its export subsidy, then Draghi will hold the course steady.  If the euro begins to rise above $1.45, Germany will allow a rate cut to weaken the euro.

An expensive euro is not as unlikely as you think.  Eurozone banks are busy selling assets to raise their capital levels before the ECB stress tests.  As long as this process continues, their will be steady buying pressure on the euro.  In the meantime, the ECB is not matching the rest of the world’s central bank printing programs.  As such, the euro will continue to strengthen:

Fed-ECB Balance Sheet Ratio versus USDEUR

China property inflation quickens in October: surveys | Reuters.

China 7 Day Repurchase Rate 11.01.2013

 

The Chinese financial system will blow up someday, though it won’t be today.  Whenever the PBOC attempts to stop printing yuan, liquidity dries up and interest rates rise.  In response, the PBOC prints yuan and adds it to the system to ameliorate liquidity problems.  The unintended consequence of this action is a credit bubble, which is particularly evident in the frothy Chinese housing market.  Sooner or later, the Chinese will realize that holding empty apartments in empty cities is not an efficient use of capital but, again, not today.

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8 thoughts on “Around the Globe 11.01.2013

  1. FYI A HUGE issue, INCREDIBLE RULING was reported in Greece yesterday – ignored by most all of the media.

    Background: Greece cannot collect taxes so they started using electric bill to collect taxes and shut off any ones electric that did not pay.

    ekathermini reported yesterday:

    Man cleared for helping households get power back

    http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_31/10/2013_525676

    The man who claims to have led the way in reconnecting people’s electricity after it had been cut off due to unpaid bills was cleared of wrongdoing by a court in Veria, northern Greece, on Thursday.

    Nikos Aslanoglou led a group of citizens in the Macedonian city who reconnected homes to the power grid after they had been cut off by the Public Power Corporation.

    Groups in other parts of Greece followed suit.

    Aslanoglou appeared in court over a September 2011 connection, which he claimed was the first in Greece.

    The misdemeanors court found him not guilty over reconnecting the home of an unemployed man as it deemed that access to electricity is a fundamental social right.

    Aslanoglou said he would continue his activism.

    —– The misdemeanors court found him not guilty … as it deemed that access to electricity is a fundamental social right —–

    —– access to electricity is a fundamental social right —– well of course it is, what isn’t ?

    So we will see how they next try to collect taxes.

    The Cyprus grab mechanism is all but guaranteed.

    .

    Combine that with report from today:

    . http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_31/10/2013_525721

    Reported just today from ekathermini

    By Yiannis Papadoyiannis

    Nonperforming loans (NPLs) have grown this year to more than twice the size of local banks’ capital, as, according to a report by PricewaterhouseCoopers (PwC), they now amount to 65 billion euros, while the capital base of domestic lenders stands at 30 billion euros.

    PwC added that the share of bad loans has exceeded 30 percent of all loans issued, up from 25 percent at end-2012 and 18 percent at end-2011.

    2 things will occur:

    1. They will do a Cyprus action, and grab all bank accounts. Then take a portion of all just as Cyprus did.

    When they run through that and it is not enough

    2. They will leave the EURO.

    . I find this fascinating to watch, though I sympathize with the Greek people and the terrible position their government has put them in.

    The Good News Is the US will apparently follow Greece’s great example, so if misery loves company, there will be a lot of love going around.

    . Anyway, Now that they know they cannot collect tax via electric bill, things should start unfolding a bit quicker.

    .

    • Good additions here. I missed the first article but read the second. We knew all along that the Greek banks were in much worse shape than reported. Now, the cat’s out of the bag.

  2. I always highly appreciate your posts and charts and read them daily.

    I really do think this a big issue. Call me crazy, but I think this Court holding
    is new and unique and ground breaking material.

    . THIS IS A NEWLY DECLARED FUNDAMENTAL RIGHT

    I think when the ultimate collapse occurs, people will look back and say
    here is the pivotal moment and court decision.

    Did the Court or was it a Jury just say — YES

    1. we know you did not pay your bill
    2. we know you illegally re-connected, it is illegal
    3. But we dismiss the charges, because you have a fundamental right to electric .
    4. and those acting openly against the law and re-connecting, are also to go free.

    5. Those acting openly and against the law re-connecting to ‘steal’ electric
    may continue to do so without fear of prosecution. Because it is now a fundamental right.

    It appears they did, and set a precedent, for many others throughout Greece to follow. Electric now a fundamental right. And no one prosecuted for ‘stealing’ it.

    For the background:

    Greece set to keep property tax via electricity bills for another year
    Friday March 15, 2013

    http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_15/03/2013_488142

    ” An unpopular property tax levied through electricity bills and introduced in 2011 as an emergency measure looks set to remain in place for another year, as the troika has demanded, although government sources insisted on Friday that Prime Minister Antonis Samaras intends to hold a tough line in ongoing negotiations between the two sides.

    Fearing that Greece’s tax revenues could fall short by as much as 1 billion euros this year due to delays in implementing measures, the troika insisted during talks with Greek government officials this week that the emergency property tax should continue being added to customers’ electricity bills. Greece’s lenders see this as the most effective way of collecting the 3 billion euros in revenues it brings in each year. ”

    From yesterday article:

    ” Nikos Aslanoglou led a group of citizens in the Macedonian city who reconnected homes to the power grid after they had been cut off by the Public Power Corporation.

    Groups in other parts of Greece followed suit. ”

    .

    .

    If there were any concern about reconnecting electric, it is now gone.

    A. more and more won’t pay the tax (why would you if your neighbor does not)

    B. more and more people will stop paying the electric bill (why would you if your neighbor does not)

    C. more people will illegally re-connect if service is cut off. (why wouldn’t you if your neighbor does it)

    D. no one can do anything about it, it is ‘approved’ by the court.

    . THIS IS A NEWLY DECLARED FUNDAMENTAL RIGHT

    It is, in short, an amazing step. In my opinion.

    .

    .

    • I do note it was wrong of me to not include the remainder of the article. In hindsight I should have because they speak of a single tax and another way to collect it. But that has not been done to my knowledge. I also tried to keep it short and to the point, but that was a mistake I made when reviewing it.

      So for accuracy I submit the remainder of the article. I apologize for taking up so much space.

      ” However, the government had planned to incorporate this tax into other property levies this year and stop collecting it via electricity bills. However, Samaras indicated in Friday’s news conference following the conclusion of the European Union leaders’ summit in Brussels that the tax may remain in its existing format.

      “We are examining how the tax will be paid this year – if it will be collected via Public Power Corporation bills or another way,” said Samaras. However, he added that the creation of a single property tax would not happen until next year.

      “We had said that the tax burden would be reduced and that all the [property] taxes of the last three years would be scrapped and that a single, uniform tax for property would be adopted,” he said. “This will apply from January 1, 2014.”

      Sources close to the prime minister said that this week’s failure to reach agreement with the troika on a range of structural reforms, such as firing civil servants and allowing firms and individuals who owe the state money to pay in installments, came partly as a result of a tougher stance on the Greek side. They added that since Greece is producing a primary surplus and is in a position to cover its public spending, it has more scope for resisting the troika’s demands on certain points.

      Speaking to Kathimerini, the head of the International Monetary Fund’s troika representation, Poul Thomsen, said there was “no one looming issue” preventing the two sides reaching an agreement. “We made substantial progress but it is a very ambitious program,” he added.

      On the issue of reducing the number of people employed in the public sector, Samaras said that civil servants who have breached the ethics code would be the first to go. “Those who are proved to have committed offenses or are systematic shirkers or have gained their jobs using forged degrees will be fired,” said the prime minister. It is thought that up to 7,000 civil servants are liable for dismissal because of such offenses. The government is thought to have committed to sacking 5,000 by the end of next year.

      Samaras however insisted that the pause in talks with the troika, whose representatives are due back in Athens at the beginning of April, will not impact on the disbursal of Greece’s next loan tranche of 2.8 billion euros. “We are on the right track for receiving the installment,” he said. It is thought the money is likely to be released at the beginning of next month. ”

      – This may now force an issue or risk receiving further installment.

      It will be interesting to watch.

      .

  3. ” access to electricity is a fundamental social right —– well of course it is, what isn’t ?”
    Fundamental right and measure of civilisation,elementary needs – running water,house and electricity.
    Sitting in a caffe all day,dining at the resturant,own a car or two or boat,buying stupid things…etc is not elementary need for living.

  4. .

    Igor, I am a nice person, I think as nice as you.

    I want you to have a house. Is a house not more important than health care ?
    If you and your family had a free house, with no stress, would they not be healthier ?
    So is a free house a fundamental right ?

    I want you to have a car. Is a car to get to and from employment and social activities, and medical needs, not more important than health care ? You cannot get health care if you cannot drive a car to get there. You cannot have a job without a car to get there.
    If you and your family had a free car, with no stress, would they not be healthier ?
    So is a free car a fundamental right ?

    I want you to have education. Is education not more important than health care ?
    If you and your family had education, knew what to eat, knew how to take care of yourself,
    with no stress, would they not be healthier ? If you and your family had free education they could get a job and be employed.
    So is education a fundamental right ?

    I want you to have employment. Is employment not more important than health care ?
    If you and your family had employment, with no stress, would they not be healthier ?
    Many of our young are educated but with no employment. Should a job not be guaranteed ?
    So is employment a fundamental right ?

    I want you to have utilities, electric yes, Oil yes, natural gas or propane Yes.
    If you had heat and all these things maybe you would not get sick, and would not
    need healthcare ? Are utilities too a fundamental right ?

    I want you to have vacation, I want you to relax, and enjoy life. If you have vacation and all these things maybe you would not get sick, and would not
    need healthcare ? Is vacation too a fundamental right ?

    I want you to have a happy childhood, I want you to have many happy years as a child. And I want everyone to have many children. I want you to have 10 children it will make you happy. If you have a happy childhood and 10 children maybe you would not get sick, and would not need healthcare ? Is a happy childhood and having children too a fundamental right ?

    I want you to have a wonderful retirement, I want you to have many happy years retired, you should retire at age 50. If you retire at age 50 maybe you would not get sick, and would not need healthcare ? Is a happy retirement too a fundamental right ?

    .

    Igor, I want all these things for you. You are nice. I am nice.

    .
    ..

    Igor will you pay these things for me ?


    ..
    .

  5. . .

    Igor – please to you to send me money to pay for my water, house and electricity ?

    Thank you.

    . I will give address, and you to send me the money.

    Thank you.

    . I will pay for other things.

    Thank you.

    .

  6. I think we have different view..i guess you are democrat you want other ppl pay you for specific services (elementary services)…You see elementary “things” what we call civilization could not be process of some democratic standpoint nor republican nor question of investement.At my company political standpoint is “Enlightened Dictatorship” and dictatorship is enlightened as much as dictator is enlightened;if is not than we talk about classic dictatorship.At our company we have in total 13 sallaries (one extra) plus bonuses, but in order to achieve this we must use any means to provide quality and profitable work it also means that if we can not achieve that dictator takes fiscal measures (takes our money) to maintain that standard.This idea happens to work great all this years.One extra sallary and bonuses are measure of our own civilization at company,it goes beyond personal needs of individual.
    What we measure as civilization (home.running water,electricity) it cannot be part of “free market” a part of amateur and diletante investors because that are foundation for free market and i do not see any contradiction in this.
    Overvalued meaning of “investors” lead to this point,since they have only one interest which puts him in a “citizens of a second order”.
    Civilization needs should not be part of free market but free market must add value to maintain this standard.

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