We recognize that China has 2,300 operational combat aircraft, while our democratic partner Taiwan has only 490.

Rob Nabors - White House Director of Legislative Affairs

Macro Overview

Focus On China

• I’m going to Asia for about 2 and a half weeks so you’ll have to bear with me there may not be much commentary from me during this period. I’ll be sure to report back on my own layman’s view of the how I feel the economic sentiment is shifting there.
• In the mean time, let’s take a little look at China and, in particularAmerica’s relationship with the World’s largest contributor to economic growth.
• This week Stephen Roach, now of Yale University, once again wrote an article about America’s Renminbi Fixation. Again, Roachie highlights many points about America’s unhealthy political fixation with China’s currency “manipulation”, but I have written tons about this – click here, for example. Firstly, that Bernanke himself supports currency “manipulation” as a form of monetary management. Any person who thinks that our own Federal Reserve does not manipulate the value of the USD cannot deny that they manipulate the largest securities market in the World.
• But also about how utterly useless it would be in US job creation if China were indeed to de-peg the Renminbi. As Roachie says, the US has a multilateral trade imbalance, not a bilateral imbalance. Something tells me The West is not about to build an economy on the ability to manufacture sneakers to sell to Indonesians or back to the Chinese themselves or whoever, for that matter.
• Protectionism of all sorts is a blunt and dirty tool the effects can be resounding and persistent. If The Western political movement “succeeds” in crippling Chinese imports, we’ll soon the consequences, as Western business loses its fastest growing export market on Chinese protectionist retaliation… and to add insult to injury, the manufacturing that was in China will not come back to The West – it’ll simply accelerate the migration of assembly (that is already occurring) to Indonesia, Malaysia, Vietnam, Philippines etc…
• Here is an excerpt from Roachie’s article:

Finally, China has evolved from the world’s factory to its assembly line. Research shows that no more than 20 percent to 30 percent of Chinese exports to the US reflect value added inside China. Roughly 60 percent of Chinese exports represent shipments of “foreign invested enterprises” –- in effect, Chinese subsidiaries of global multinationals. Think Apple. Globalized production platforms distort bilateral trade data between the US and China, and have little to do with the exchange rate.

Rather than vilifying China as the principal economic threat toAmerica, the relationship should be recast as an opportunity. The largest component of US aggregate demand –- the consumer – is on ice. With households focused on repairing severely damaged balance sheets, inflation-adjusted private consumption has expanded at an anemic 0.5 percent average annual rate over the past four years. Consumer deleveraging is likely to persist for years to come, leaving the US increasingly desperate for new sources of growth.

Exports top the list of possibilities. China is now America’s third largest and most rapidly growing export market. There can be no mistaking its potential to fill some of the void left by US consumers.

Strategic Games: The Key To The Pacific May Lie In The Indian Ocean

• Just to add a little nugget I thought I’d send this article: China – USA: Struggle for Control of the Pacific. An interesting read.
• And also this one at Stratfor: The India-China Rivalry.
• What I find interesting is how both articles mention Myanmar’s strategic position; a country undergoing massive political reform, nestled snugly between China and India with a huge coastline perfect for shipping ports… both industrially strategic and militarily strategic. Just some food for thought, dear reader.

Market Overview

Markets Fighting The Two Usual Forces… Still

• I’m not going to comment much on the markets except to say: nothing has changed in 3 years. Massive injections of monetary easing have done little to stimulate jobs, yet it has succeeded largely in stimulating asset prices – particularly those of large multinational companies. That is those companies that will truly benefit from the lower borrowing costs, not those, smaller companies that actually hire people and move the domestic economy forward.
• So equities are caught between liquidity, great balance sheets, good earning and easy money on one hand… and a fundamentally sick domestic economy on the other. My money’s on the former winning the battle … … for a while.
• As we were on the subject in the Macro Section. My chart of the day is a 5 year chart of Chinese equities (Shanghai Composite).

Chart of the Day

Click here to view my profile, contact information and other recent articles

It is mind-boggling that we could do this well

Tim Cook – Apple CEO

Macro Overview

Blankfein Comes Out Of His Shell

• Today Blankfein stepped out into the lime-light and gave his first TV interviews (at Bloomberg and CNCB) in two years. He seemed talkative and perky and keen to show the world how “client-friendly” Goldman Sachs are stating that (in response to the inevitable questions about Greg Smith) Goldman “couldn’t have the clients we have if we were anti-client.”
• Is this the new face of Goldman? Who knows… but with the stock down nearly 30% over the last 24 months its been a rocky road by their standards.

Britain’s Economy Has Been Firing Blanks

• UK GDP came out and… it was rubbish. -0.2% QoQ vs an expected +0.1% plunges the UK economy back into recession. The first double-dip recession since the 1970’s.
• As I alluded to yesterday, Cameron is going to feel the heat from a number of sides now as his austerity drive seems to have driven the economy into the ground.
• The concern that most are too afraid to voice is whether this number is a harbinger of growth data to come out of the Eurozone… we wait and see…
• Meanwhile, across the pond, the Fed says that growth will continue but will only pick up gradually. Hey, at least it’s growth!

Market Overview

Apple Slays The Pessimists With China Growth

• I was concerned about the Chinese economic machine. In particular, I’ve been watching the infrastructure plays. Companies like ABB (largest electricity transformer manufacturer) and Caterpillar – both guiding to the downside on poorer than expected growth out of China– how often do you hear that? It seems the Chinese have stopped spending!? Komatsu earnings out tomorrow…
• Well, not on everything… just check out Apple’s investor call for a contrast… and what a difference a day makes! Apple seems to have sold a shed load of iPhones in Asia, specifically China. It seems the Chinese still have a healthy appetite for some things!
• Two thirds of Apple’s iPhones are now sold outside the US – man that is an export machine!
• Still not up to its highs, but 10% sure is a big move for a $600 billion market cap company!
• Chart of the Day – had to be… Apple.

Chart of the Day

Events

Macro Events:

Update:

• UK GDP very poor -0.2% QoQ –Britain back in recession.

Alerts:

• Germany CPI
• Singapore Industrial Production
• South Korea GDP

Corporate Events:

Results:

• ABB [ABBN VX], Amazon [AMZN], Bank of China [3988 HK], Barclays [BARC LN], Bayer [BAYN GR], Bristol-Myers Squibb [BMY], China Petroleum [386 HK], Colgate-Palmolive [CL], Deutsche Bank [DBK GR], Dow Chemical [DOW], Exxon Mobil [XOM], Hyundai Motor [005380 KS], Komatsu [6301 JT], Lockheed Martin [LMT], Nintendo [7974 JO], Petrochina [857 HK], Royal Dutch Shell [RDSA LN], Hynix [000660 KS], Unilever [ULVR LN], UPS [UPS], Volkswagen [VOW GR], Volvo [VOLVB SS],

Dividends:

• Morgan Stanley [MS], Pepsico [PEP],

Reading, Links:

Nothing Significant

Click here to view my profile, contact information and other recent articles

We’re not saying that saving solves all problems…

…[but], you can’t spend more than you take in. You can’t live your whole life this way. Everybody knows this…

Angela Merkel

Macro Overview

Europe Rotting At The Core?

• Only yesterday, in my article; Is Europe Rotting At The Core?,  I wrote:

• • France’s elections have thrown open the entire Eurozone debate with Far Right, Le Pen winning an astonishing 20% of the vote and whose views on Europe are blatantly anti-EU. It’ll be interesting to see how Sarkozy and Hollande dissect this popularity and implement the amendments into their campaign? Was their support entirely anti-immigration or was a large portion of it a middle finger at Merkel?

• Well it appears, already that this is being played out, without either candidate wasting much time over it.
• Sarkozy’s interpretation of Le Pen’s popularity is directed firmly at the Far Right’s attitude to immigration calling for a Europe which seeks to “defend its borders” and voicing respect for the Nationalist voters who are concerned over immigration – which seems to be directed largely at the Muslim community in the press, from what I can tell.
• By contrast, Hollande appears to be directing his rhetoric firmly at Le Pen’s stance on the European Union (i.e. against it). By reiterating his stance to re-jig (re-neg?) the “Merkozy” fiscal compact and making stronger noises about a “French Flake” on the austerity measures. This has not been missed by Europe’s Iron Lady, who has, begun her defense (of her European policy and perhaps of Sarkozy too?), ironically, before Hollande has even come close to getting his feet under the desk. One thing for sure, Hollande is already feeling the cold calculated strength of Merkel’s iron fist around his neck – hey, at least he knows what he’s letting himself in for, should he ever have to sit across the table from her. But, this is a pivotal point in gauging real French opinion on the cozy Merkozy relationship – opening up a new battle front against the mighty German could either work for Hollande or against him in a big way.
• I think this was in many ways an inevitable route for the candidates to take. Sarkozy daren’t even hint at betraying the German titan and it is hard to see a French socialist embracing anti-immigration issues. Needless to say, this divergence in the dissection of the Far Right vote will prove to be the decisive factor in the French elections of 2012.

Market Overview

Is Bank Of England The First To Get Truly Trapped?

• I’m not going to wait for Apple’s results to hit the tape before sending them out, but it may be the event of the day. As I write this AAPL stock is down over 2%.
• Moving on… YesterdayI wrote:

• Also, I find the trend of the British Pound interesting as it appears to be bucking its normal characteristic. Normally, Cable gets sold off as global economic conditions deteriorate. This time it appears to be trending up into the bad news. One British Pound now buys you 1.61 US Dollars and we are in danger of breaking a new high for the Pound.

• Currency traders are aware that there is nowhere for the BoE to go with even some of the most dovish of Monetary Policy Committee members refraining from voting for more QE “stimulus” as persistent inflation data puts a spanner in the works. Financial News writes in an article today:

The Monetary Policy Committee voted 8-1 this month against increasing purchases of those bonds, known as gilts. Adam Posen, who spent 12 months voting alone for more QE until the MPC swung to his view in October, rowed back from voting for an increase. Even for David Miles, who favoured a £25bn increase, the decision was finely balanced.

• The interest rate differential is a mouth-watering prospect for money traders in a seemingly zero-interest rate world. No noticeable recourse to mortgage rates in the UK… … yet… …
• Tomorrow is a crucial day for the British economy, GDP was down last quarter and is forecast to be a frighteningly low +0.1%. Miss that and confidence will plummet and Cameron will feel the heat of the opposing Labour Party Leader, Ed Miliband … as well as the rating agencies.
• No prizes for guessing Chart of the Day – Cable (Dollar-Sterling) year-to-date.

Chart of the Day

Events

Macro Events:

Update:

• Nothing Significant

Alerts:

• UK GDP

Corporate Events:

Results:

• Boeing [BA], Canon [7751], Caterpillar [CAT], China Life [2628 HK], China Unicom [762 HK], Credit Suisse [CSGN VX], Eli Lilly [LLY], Ericsson [ERICB SS], Fiat [FI IM], GlaxoSmithKline [GSK LN], KDDI [9433 JT], Las Vegas Sands [LVS], Rolls Royce [RR/ LN],SAP [SAP GR], Siemens [SIE GR],

Dividends:

• Hong Kong Exchanges [388 HK], Procter & Gamble [PG], Tesco [TSCO LN], Tyco [TYC],

Reading, Links:

Nothing Significant

Click here to view my profile, contact information and other recent articles

An extremely powerful dynamic that has huge commercial and cultural implications is at play; namely that technology is enabling trust between strangers. We now live in a global village where we can mimmick the ties that used to happen face-to-face but on a scale and in ways that have never been possible before.

Rachel Botsman

Macro Overview

It’s Life Jim – But Not As We Know It

• Yikes! If the raving bull and Euro-nonchalant Jim O’Neill is getting the jitters then may be we all should! Remember this is the guy who told us he couldn’t understand what all the fuss was about with Greece. Who cares? He said, and I quoted in a comment 3 months ago, dismissing talk of Greece’s importance, afterall:

China creates the equivalent of another new Greek economy every 4 months, so you could write off Greece completely and within 4 months China has created another one…

• Anyway, this is what he said recently about Europe, according to Business Insider:

I find myself wavering a little about the US recovery story. While for now, I’m happy to stick with our above consensus 2.5 pct real GDP forecast for 2012, and I buy into the housing sector recovery and shale gas themes, as I have frequently argued, weekly job claims are not to be ignored. While hoping last week’s would decline again, thereby rendering the March payroll disappointment as “susceptible,” in fact, it rose to 380,000, providing support to those who argue the apparent economic strength of the Winter was artificially helped by the weather.

• Not quite so nonchalant now huh? But, in a sense, he was right. As I alluded to in my Spanish Imposition comment: the economies of Italy and Spain rank 8^th and 12^th in size compared to Greece which ranks in the 30’s (and falling)!
• However, let’s be clear, precedents were set with the Greek workout and conversely, as Mauldin pointed out (see yesterday’s comment) there are consequences to the reactions of authorities (e.g. the ECB’s LTRO) toGreecewhich may infect other Eurozone nations – particularly those already peering into the abyss.
• Spain’s auction went well… (ish)… I mean they sold the bonds they wanted to sell. The market was short going into the auction so it was expected to go quite well and they only had a few bonds to sell. But yields still went up… as did French bonds after the French auction. Which companies are most exposed to this type of action? Well probably the French banks who have exposure to both Spanish and French debts.
• My Chart of the Day is BNP – this is the 25 day price action. It has lost 25% of its value.

Market Overview

EBAY Spike An Insight Into The State Of Consumption?

• It was only a year ago I was writing about “Collaborative Consumption”. If you have not seen Rachel Botsman’s TED speech watch it – it’s a really good one.
• Simplifying things greatly, I believe that the rise of collaborative consumption is born out of two violently converging forces: rise of connectivity and internet renaissance and deterioration of economic conditions for the consumer. Consequently, I think we are about to be amazed at how creative and innovative humans will be at adapting and finding new ways to consume. The World is now one giant garage sale and there are massive efficiencies in consumption to be gained.
• There is also a longer term backdrop to this, in that globalization has meant that consumption economies are practically drowning under a glut of supply.
• Like the first green shoots one a wasteland, Ebay, GroupOn etc are just two examples of many businesses which have arisen from the wastelands of apathetic absolute consumption trends… which begs the question, if Ebay is seeing great benefits from a rise in this sort of internet-based consumption, is this necessarily a good thing for the domestic economy?
• Chart of the Day is Ebay – at a new high and up 200% in 3 years.

Chart of the Day

Events

Macro Events:

Update:

• Nothing Significant – other than to say remember the French Election this weekend!

Alerts:

• Nothing Significant

Corporate Events:

Results:

• General Electric [GE], LVMH [MC FP], Macdonald’s [MCD], Posco [005490 KS],

Dividends:

• Colgate-Palmolive [CL], Volkswagen [VOW GR]

Reading, Links:

Nothing Significant
Click here to view my profile, contact information and other recent articles

The expropriation is nothing more than a way of covering over the social and economic crisis facing Argentina right now.

Antonio Brufau – Repsol Chairman.

Macro Overview

Kicking Spain While She’s Down

• Poor old Spain, when it rains it pours. Just when you could not think anything could get worse, Argentina decide they want to nationalize an oil company YPF. So far so good… only YPF is controlled by the giant Spanish oil company, Repsol! A stake which, representing Spain’s largest private investment abroad, is by no means trivial. To put another twist on it, it was a stake that Repsol was hoping to monetize by selling it to Chinese oil giant Sinopec.
• Here is the FT on the matter:

Politicians and business leaders accuse Ms Fernández of kicking Spain while it is down. She is taking advantage, they say, of a Spanish economic recession and a eurozone sovereign debt crisis so grave that some analysts predict Madrid will follow Athens, Dublin and Lisbon in seeking an international financial bailout.

Worse, almost the only bright patch for the Spanish economy over the past four years of crisis has been the performance of its investments in emerging markets – especially Latin America.

• Today the war of words begins. Reuters quotes Spanish Industry Minister:

With this attitude, this hostility from the Argentine authorities, there will be consequences that we’ll see over the next few days. They will be in the diplomatic field, the industrial field, and on energy.

• Spanish Foreign Minister, Jose Manual, choosing not to mince his words, stating:

Argentina has shot itself in the foot.

• That’s fighting talk, which the popular and charismatic Argentine President, Cristina Fernandez, seems to be dismissing by saying:

This president isn’t going to respond to any threats … because I represent the Argentine people. I’m the head of state, not a thug…

• I’m not sure how long the war of words will last nor am I sure how long it will escalate, but I doubt we’ve heard the last of this.

Market Overview

Spanish Bond Auctions Set The Tone

• Well what a difference a day makes!
• The Spanish bond auctions went much better than most expected and, as a result, the markets were in buoyant mood today. Apple making back pretty much everything it lost yesterday!
• On the Latin theme I couldn’t help noticing the weakening Brazilian Real – that’s my Chart of the Day

Chart of the Day

Events

Macro Events:

Update:

• UK Inflation Numbers in line (and persistently high)
• Eurozone Inflation Numbers in line (and persistently high)

Alerts:

• Nothing Significant

Corporate Events:

Results:

• ASML [ASML NA], Blackrock [BLK], Ebay [EBAY], Marriott [MAR], Qualcom [QCOM],TaiwanMobile[3045 TT], Tesco [TSCO LN], Yum! Brands [YUM]

Dividends:

• BAE Systems [BA/ LN], Tullow Oil [TLW LN]

Reading, Links:

Nothing Significant
Click here to view my profile, contact information and other recent articles

Spain has absolutely no financing problems or urgent needs.

Luis de Guindos – Spanish Economy Minister

Macro Overview

French Elections: Round 1 Looms

• I know there’s a lot going on in America and China but (I’m afraid) Eurozone difficulties remain front-and-center.
• Today Sarkozy’s nemesis (who leads him in the polls), Francois Hollande ups the ante with anger directed at the ECB, for not buying peripheral government bonds quickly enough – rhetoric which will not please the hawkish Germans who thought they’d cemented an agreement of inflationary “vigilance” with Sarkozy.
• We’ve touched on the spat between France’s incumbent President and the main opposition party (Socialist Party) leader before – see here: Merkozy Gets Too Cozy?
• At the current trajectory, Sarkozy may be taken out of the picture altogether… but this is a tight race, and it hasn’t really begun. But let’s remember the “Cozy Merkozy” relationship has been at the heart of EU solidarity over the last few months. There is a chance that “Merkozy” becomes Merk-anyone-else? Given that Merkel seemed to publicly shun Hollande by endorsing Sarkozy I’m not sure “Merkande” will have the same symbiotic ring to it. Hollande could ruffle a few feathers in Europe.
• The date to remember for the Election Round 1 is 22^nd April.

Spanish Austerity’s Latest Sacrificial Lamb: Freedom Of Speech

• With focus still on Spain as it’s Economy Minister declared to all that the economy has probably tipped back into recession… … … this is quite a sorrowful story, dear reader. It would appear that for the last 4 years Spanish QoQ GDP growth has spent more quarters in negative territory than in positive territory. There is talk that the property market still has 20-30% to drop. That is one sick economy.
• Meanwhile, I’m a little astounded to read that there is chatter that Spanish authorities may ban online organizers of protests under the rather pathetic guise of keeping the “public peace”. Many Europeans are already sacrificing their democratic rights… now it would appear that civil liberties as a whole are in the crosshairs. What happened to freedom of speech? Will this blog be next? This is supposed to appease the disgruntled sections of society?
• Come on… please… this article says that:

The proposed amendment has raised fears the government could stifle further protests and has evoked comparisons with Spain’s late fascist dictator, Generalissimo Francisco Franco.

• I rest my case…

Market Overview

Taking A Bite Out Of Apple

• Apple is a wonder stock. It would not surprise me if it was the first company to ready $1Trillion market cap. But I do have a few reservations. Not about the fundamentals of the balance sheet or about the valuations… but about the future of their product line.
• At the back of my mind I have a vision that Steve Jobs left a legacy of massive R&D departments with a huge product capability just waiting to be unleashed to the public. Yet since his death, if we’re honest, we’ve been a little under-whelmed.
• Has Apple got a completely new product in the wings? If they have we have not seen it yet. As this article in International Business Times says:

The iPhone 5 release date has not been officially announced yet, but Apple fans are already predicting that the new phone will be a dud.

The Apple iPhone 5 has been a long time coming, as most tech watchers expected it to come out last year, only to be disappointed when the iPhone 4s was Apple’s next big thing.

Featuring a nicer camera than the previous model sported, Siri voice recognition and a superior processor, the iPhone 4s was an improvement over the iPhone 4, but it was not the game-changing iPhone 5 that everyone had been salivating over for months.

And it seems that many Apple-heads are back in that same mindset — remembering what happened last time, and not getting their hopes up that the iPhone 5 release date will be a revolutionary day for smartphones.

This seems to be a trend of sorts, as the release of the New iPad in March was a major disappointment for many who expected a paradigm-shifting iPad 3 and instead got a tablet that barely matches the stats of its competitors.

• I still love the snap-shot fundamentals of this company, but the product line is something I think all investors have to keep an eye on
• Chart of the Day – predictably Apple.

Note:

Big Day For Earnings Tomorrow – look at who reports: Coca Cola, Goldman, Intel, IBM, J&J and Yahoo – among others.

Chart of the Day

Events

Macro Events:

Update:

• Nothing Significant

Alerts:

• Japan Industrial Production
• UK CPI
• US Industrial Production

Corporate Events:

Results:

• China Overseas [688 HK], Coca Cola [KO], Goldman Sachs [GS], Intel [INTC], IBM [IBM], Johnson & Johnson [JNJ], State Street [STT], Stryker [SYK], Yahoo [YHOO]

Dividends:

• Nothing Significant

Reading, Links:

Nothing Significant

Click here to view my profile, contact information and other recent articles

They [Arsenal] have a replay against Chelsea and if they win it they would face a semi-final three days before playing us in the league. But then they did say they were going to win the Treble, didn’t they? It’s squeaky bum time and we’ve got the experience now to cope.

Sir Alex Ferguson – Manchester United Manager

Macro Overview

Did Meagan Hit The Bulls-eye (of the storm)?

• You gotta give credit where it is due. Meagan Greene looked a little crazy when she wrote about the Eurozone crisis back in March (I had an excerpt in my Tonsillitis Economy piece) a time when all seemed to be rosy. Stocks were hitting new highs, credit spreads and borrowing costs of European nations were closing in on new lows. Was that really the right time to be saying: “hey don’t be fooled – this is just the eye of the storm”?
• Well, for a while Meagan looked like a rather lonely kill-joy but these days she’s looking pretty smart, huh? The reality is, as Meagan correctly alludes to, nothing has really been “solved” at all in Europe.
• As I wrote about way back in 2011, an all encompassing solution would involve three types of action:
• • Short Term Relief - Extreme action at the ECB
  • Medium Term Security - a direct and heavy participation of tax-payers at the core of Europe (EFSF and ESM)
  • Long Term Structure – Treaty Change at the heart of Eurozone political structure.

• While, under Super Mario, the ECB is has literally exploded onto the scene with Euro-note-firing big monetary bazookas and Treaty Change happened as I anticipated about way back in September 2011, the medium term leg of the stool (a direct and heavy participation from the taxpayers at the core) has largely gone missing.
• Here is Meagan’s excerpt again:

The third way the troika has tried to buy time is with a so-called firewall consisting of EU bailout funds and bilateral loans to the IMF. This is designed to take Italy and Spain out of the markets for a few years should they face unsustainably high borrowing costs. The hope is that these countries would be able to implement structural reforms and see those reforms boost growth by the time a return to the markets is required.

But for the firewall to work both its EU and IMF elements must be large enough. This is far from guaranteed, and failure on this point could trigger a massive escalation of the crisis. On the EU side of the firewall, there are currently two funds in place, the European Financial Stability Facility (EFSF), which has around 250 billion euros in available funding, and the 500 billion euro European Stability Mechanism (ESM). The former is due to replace the ESM in June 2012, but the only way to amass enough funds to cover Italy and Spain’s financing needs for a few years is to run the EFSF and ESM concurrently. However, German Chancellor Angela Merkel remains — for now, at least — vehemently opposed to this idea. Similarly on the IMF side, many countries have indicated their reluctance to contribute to a firewall until the Eurozone devotes more of its own collective resources to solving its crisis.

[Related: CLICK HERE TO REGISTER FOR A DAILY EMAIL NEWSLETTER OF OUR ARTICLES]

Figure 2: Composition of the Firewall vs. Financing Costs for the PIIGS (€, billions)

* Note; the trajectory of the bottom row (Total Cumulative PIIGS Financing Needs) on Meagan’s table.

The Third Leg Of The Eurozone Solution Stool Is Largely Missing

• The medium term leg of this three-legged stool is essential because it connects the superficial short term remedies (money-printing) to their long term objectives (full political unity). The absence of this essentially adhesive part leave the project with a soft underbelly, prone to attack. Until investors have a comfort level that this Eurozone experiment is succeeding, they will always err towards putting pressure on the peripheral Eurozone economies via the markets.
• Simplistically speaking, German taxpayers, and others at the core, need to put their hands in their pocket if they truly want the Euro-dream to succeed, but, so far, investors feel that this essential part of the plan is falling well short of what is needed.
• The Eurozone politicians (bless them) have tried every trick in the book to polish this turd including: creating new shells under the impression that they are well-capitalized funds, turning the bailout fund into a Giant CDO and begging the Chinese. But we kinda know… you can’t really polish a turd.
• In hoping that massive ECB stimulus (in my opinion, a short term solution) is continually repeated ad nauseum for a period long enough to bridge over the medium term to give time to the long term adjustments of real, integrated fiscal consolidation (Confederative Treaty Change) to gain traction is a real long shot, and, in my opinion a very risky strategy.
• Aside from the political nightmare of Eurozone fiscal and political collaboration (right now this is a goal post moving further away from Europe with time, not getting closer) there are real risks to inflation here and (more poignantly) to the credibility of the ECB as it reaches further and further beyond its rather purist, single mandate.
• Much has happened in the last few months. Let’s not underestimate the progress that has been made to-date. The Treaties have been worked out with alarming efficiency, the ECB is ready to inflate with Mario’s gleefully hovering over the “PRINT” button. Also, despite the fact that the ECB turned the entire Eurozone debt market into a retroactively risky, pseudo CDO-like minefield, Greece has finally defaulted and the process is in the latter stages of workout.
• But rest assured, the future of the Eurozone is still in the balance – this ain’t over yet. In fact, as Meagan Greene implies and as Manchester United manager, Sir Alex Ferguson would say: the “squeaky bum time” in Europe may be ahead of us, not behind us.

Click here to view my profile, contact information and other recent articles

Today there’s speculation the ECB will jump in. You know what? That will be one of the worst possible things to happen to medium term confidence for the markets. As soon as the ECB steps in, resumes the SMP buying program it’s a clear signal that nothing is fixed…

Bill Blain – Newedge Group

Macro Overview

Super Mario To The Rescue

• The Spanish are in a funk. They may have the best soccer team in the world but they can’t even afford to watch them play. Meanwhile unemployment among young people is a cool 50% and they having trouble hitting their already woefully depressing deficit targets.
• This is a pretty large economy in Europe in many senses, but not in terms of market capitalization any more… the Spanish stock market has been pummeled to a humiliating level where Apple’s market cap alone is larger than “the combined market cap of companies in Spain, Portugal and Greece”, says an article in ZeroHedge.
• This is a pretty big deal for a country regarded as one of the major economies in Europewith a population close to 50 million. Now, it emerges that the country may have difficulty borrowing money from rational investors. That does not surprise us does it dear reader? So in steps the World’s most irrational investor group, the Central Bankers. Super Mario is eyeing up Spanish bonds and backing up the truck… or, rather the trash lorry. That does not really surprise us either, does it dear reader? The ECB balance sheet looks like landfill anyway, what difference does a ton of toilet paper make?
• What is a little interesting is just how Super Mario has a taste, a blood lust, even, for non-conventional measures at a time when Super Ben appears to be hesitant. True Mario has more fires to fight, but his mandate is only half that of Ben’s – inflation is not only his priority objective, it’s his only objective!

Market Overview

Nokia Collapses To New Lows

• I almost feel sorry for Nokia stock, even though it’s insanity to have feelings for a chart. But they’ve just missed the boat, they’re product will soon be as defunct as the Xerox electronic type-writer if they don’t take care.
• Today the stock got pummeled and managed to trade up a little into the close but still closed down 15% on the day a calamitous new low.

Chart of the day is Nokia and also Palm Oil futures… hmmm… that chart looks interesting!

Chart of the Day

Events

Macro Events:

Update:

• Japan Machine Orders +4.8% MoM (good number)

Alerts:

• Australia CPI
• France CPI
• India Industrial Production

Corporate Events:

Results:

• Aeon [8267 JT],

Dividends:

• Google [GOOG],

Reading, Links:

Nothing Significant

Click here to view my profile, contact information and other recent articles

Superman where are you now
Everything’s gone wrong somehow
The men of steel, men of power
Are losing control by the hour.

This is the time
This is the place
So we look for the future
But there’s not much love to go round
Tell me why, this is a land of confusion.

Phil Collins – Land of Confusion

Macro Overview

Impossible To Gauge Economic Sentiment

• I don’t know why, but my timing is off on economic impact on the markets. I seem to be timing things a month or two too early. I expected the EU treaty change / talks to make the markets rally in December… they didn’t … they waited until January and February before rallying.
• In January and February I was cautioning on how bond auctions of nations like Spain and Italy would have huge impact on economic sentiment… but everything went swimmingly … up until now. I should have done all those fancy auction graphs starting March, but how was I to know? What exactly has changed in the Spanish bond market between now and then?
• QE after QE from all the major central banks has muddied the investment waters, it’s hard to know your left from right, your up from down… it’s a land of confusion out there.
• Well my timing is off… what can I say, best to just sit and observe the markets for a while until I get in sync again.

Fed In A Pickle

• Superman where are you now?
• I’m not the only one with timing issues over the economy. You gotta feel for Bernanke. He’s in a real pickle now. He talks a good game but the market is onto his “subliminal QE” tricks. Remember, QE is defined as any non-conventional policy action… so all this not-so-subtle-hinting-at-QE-bazooka’s could also be deemed a form of QE in itself.
• But the market knows that a cool Trillion dollars has less and less impact in each subsequent QE measure so the Fed would have to come up with something humongous just to get asset price action out of bed… and what Federal Reserve would do that with brent crude up at $120 rolling into a Presidential Election and with inflation (as the Fed measures it) above its own specified Fed target rate?

Market Overview

Did You Buy Vol?

• Well, did you? Vol was hammered down a month ago and I muttered some skepticism about the benign environment lasting. My timing wasn’t off on everything, huh?Italy down 5% – yuck! Europe is not such a pretty place in Spring.
• Chart of the Day is the VIX-like index, the CBOE volatility index (VXO) and I’ve chosen Deere stock too.

Chart of the Day

Click here to view my profile, contact information and other recent articles

The greatest wealth is health.

Virgil – A Roman Poet

Macro Overview

The Perils Of Treating The Symptoms

• Sorry I’ve been off writing for a couple of weeks, I’ve been sick. You see, I had just a common cold/flu virus but because I’d had a few consecutively my immune system was vulnerable. This is when tonsillitis strikes, usually on the back of a virus when the body is weak. By the time I’d got to the doctors the tonsils were reducing so it was treated with just painkillers.
• This was my first mistake: while the tonsils were improving a larger, much more aggressive throat infection was building steam constricting my airways to dangerous levels. Before I knew it I was coughing up blood and accompanying the paramedics to my local hospital. I ended up on a drip for 3 days which did give me some time to think about the economy but, if I’m being honest, I was not thinking that deeply, nor was I looking at the markets – just the ceiling, mainly! It is only now, after a serious set-back and a significant amount of pain, that I can say I am truly on a road to recovery.
• There are so many parallels with economic malaise and subsequent recoveries here that I don’t know where to begin. But perhaps the most glaring moral regards the treatment of the cause rather than the symptoms. However, painful or uncomfortable it may be, it is often better to strike at the heart of the problem than to tinker around the periphery… and of course, prevention (I should not have over-run myself over the last few weeks) is the best cure.
• Anyway, I’m good now… so let’s get back into the groove.

Market Overview

Wall Of Wonder

• What’s all this? It appears that as we reach new highs on the S&P the market appears to be doubting itself again. They say the market climbs a wall of worry… not lately. These days the market hurtles down a runway of uncertainty and deleveraging only to takeoff on the aerodynamics of QE.
• Now we are increasing altitude and flying high only one question remains…how much fuel do we have? And will there be an airstrip when we need to land?
• Speaking of which, I notice Brent Crude did not dip below $120 once while I was sick. Bernanke may not have the ammunition we think he does with Oil up here… he can wave the bazooka all he wants, but, ultimately, he may only be able to fire oil-friendly pellets.
• Chart of the Day is Brent Crude… oh, and the Spanish 5 yr CDS over the last 2 months – just to get the grey cells working.

Chart of the Day

Events

Macro Events:

Update:

• Nothing Significant

Alerts:

• Nothing Significant

Corporate Events:

Results:

• Nothing Significant

Dividends:

• Nothing Significant

Reading, Links:

Nothing Significant

Click here to view my profile, contact information and other recent articles