Export Models and CPI Manipulation
Zero Sum Game...
Microsoft beating with a blowout quarter and upbeat forward guidance. Countrywide Financial, the largest US mortgage lender reported a $1.2 Billion loss.
The company reported a $1 billion writedown on the value of loans and securities, and boosted provision for loan losses to $934 million...
more than triple the level of June 30, citing more overdue payments by customers with home equity and ``pay-option'' adjustable-rate mortgages.
Loan production recorded a pretax loss of $1.32 billion vs a profit of $281 million a year earlier. The company is in the middle of cutting 10,000 to 12,000 jobs
That could never happen here...
About 40% of Argentina's $136 billion debt is inflation based securities, whose principal rises and falls with the consumer price index.
Argentina's benchmark inflation linked bonds have tumbled 24% this year, making the country's debt market the worst performer in the world. Why??
The widespread suspicion that the government has manipulated inflation data has transformed the Argentine bond market into a financial bloodbath.
Government statisticians claim that the current administration forced them to tamper with consumer price data to hide the extent of inflation.
According to Goldman Sachs: Inflation is about double the official 8.6% rate, the result of a 35% jump in government spending this year.
Merrill Lynch & Co., the world's biggest brokerage, estimates prices may be rising at a 17% annual pace, double the official rate.
Bondholders have lost out on $250 million in interest payments this year, and by reducing the official rate...
the government will save $5 billion in principal payments at maturity.
The Nattering One muses... with bloated trade and budget deficits, a bankrupt social security and underfunded pension system...
the US government would never do anything like manipulate CPI in their favor, or to "manage" inflation expectations, would they?
Exporting inflation and stagflation...
Our #1 export is inflation, vis a vis through statistical manipulation to understate inflation and ...
the effect of systematic debauchery of the dollar on foreign dollar reserves and global dollar demoninated assets.
Rising... German inflation accelerated to 2.7% in September, the fastest pace in more than six years, driven by oil and food-price increases.
For now, the euro's 8.8% gain against the dollar this year is helping mitigate the impact of rising energy costs by making imports more affordable.
The impact to Germany's export driven economy from a stronger Euro is just starting to be felt.
Slowing... German consumer confidence fell to a 7 month low as higher energy and food prices left households with less money to spend in Europes largest economy.
European manufacturing growth slowed for a fourth straight month in October.
Rising... Money-supply growth in the euro region remained near a 28-year high in September, adding to signs inflation may accelerate further.
M3 money supply rose 11.3% from a year earlier, after gaining 11.6% in August. The rate reached 11.7% in July, the highest since August 1979.
Still deflating... Japan's consumer prices fell for an eighth month in September. Meanwhile, industrial production slid 1.4% last month. The BOJ meets Oct 31st.
Carry trade... The Australian dollar rose 16% this year, to the strongest in 23 years.
The spread in yield between Australian and U.S. benchmark 2 year government bonds (paying 7.5%) reached 2.9% points this week.
Borrow in Yen at 0.5% and buy Australian 2 year bonds at 7.5%, not a bad prop...
The central bank raised rates in August to an 11 year high at 6.5% and there is speculation of further increases.
The Australian Reserve Bank's inflation index climbed 3.1% in Q3 from a year earlier. The rising Australian dollar is already starting to hurt exporters.
Yesterday, rising inflation caused Mexico to lift their benchmark rate 25 bps to 7.50%
They can't fill our shoes, let alone put mortar on their BRIC...
Brazil, Russia, India and China (BRIC) are projected to account for about 75% of global growth in 2007.
Collectively their GDP amounted to $5.6 trillion at the end of 2006. That's 43% of U.S. GDP, 56% of the 13- nation euro area's and 130% of Japan's.
The aggregate free-float value of the BRIC stock markets is 4.9% of world market value.
The four BRICs are 12 % of the U.S. market value, 16% of Europe's and 56% of Japan's.
China's stock market represents 1.9% of total world market value compared with U.S. equities' global share of 42%.
Chinese household consumption was almost 80% of GDP in the first half of the 1980s; falling to 46% of by 2000 and shrinking further to 36% in 2006.
The Nattering One muses... The export driven models in Germany and Japan are already getting a chill from declining US consumption.
The export driven models in China and India cannot be sustained on internal demand and are dependent on the US Consumer.
With the #1 US, #2 German and #3 Japanese economies slowing, these emerging economies are in for some rough times.
The International Monetary Fund in its April 2007 edition of the World Economic Outlook:
"The saying: 'If the U.S. sneezes, the rest of the world catches a cold,' remains relevant." Hattip to Bloomberg.
Microsoft beating with a blowout quarter and upbeat forward guidance. Countrywide Financial, the largest US mortgage lender reported a $1.2 Billion loss.
The company reported a $1 billion writedown on the value of loans and securities, and boosted provision for loan losses to $934 million...
more than triple the level of June 30, citing more overdue payments by customers with home equity and ``pay-option'' adjustable-rate mortgages.
Loan production recorded a pretax loss of $1.32 billion vs a profit of $281 million a year earlier. The company is in the middle of cutting 10,000 to 12,000 jobs
That could never happen here...
About 40% of Argentina's $136 billion debt is inflation based securities, whose principal rises and falls with the consumer price index.
Argentina's benchmark inflation linked bonds have tumbled 24% this year, making the country's debt market the worst performer in the world. Why??
The widespread suspicion that the government has manipulated inflation data has transformed the Argentine bond market into a financial bloodbath.
Government statisticians claim that the current administration forced them to tamper with consumer price data to hide the extent of inflation.
According to Goldman Sachs: Inflation is about double the official 8.6% rate, the result of a 35% jump in government spending this year.
Merrill Lynch & Co., the world's biggest brokerage, estimates prices may be rising at a 17% annual pace, double the official rate.
Bondholders have lost out on $250 million in interest payments this year, and by reducing the official rate...
the government will save $5 billion in principal payments at maturity.
The Nattering One muses... with bloated trade and budget deficits, a bankrupt social security and underfunded pension system...
the US government would never do anything like manipulate CPI in their favor, or to "manage" inflation expectations, would they?
Exporting inflation and stagflation...
Our #1 export is inflation, vis a vis through statistical manipulation to understate inflation and ...
the effect of systematic debauchery of the dollar on foreign dollar reserves and global dollar demoninated assets.
Rising... German inflation accelerated to 2.7% in September, the fastest pace in more than six years, driven by oil and food-price increases.
For now, the euro's 8.8% gain against the dollar this year is helping mitigate the impact of rising energy costs by making imports more affordable.
The impact to Germany's export driven economy from a stronger Euro is just starting to be felt.
Slowing... German consumer confidence fell to a 7 month low as higher energy and food prices left households with less money to spend in Europes largest economy.
European manufacturing growth slowed for a fourth straight month in October.
Rising... Money-supply growth in the euro region remained near a 28-year high in September, adding to signs inflation may accelerate further.
M3 money supply rose 11.3% from a year earlier, after gaining 11.6% in August. The rate reached 11.7% in July, the highest since August 1979.
Still deflating... Japan's consumer prices fell for an eighth month in September. Meanwhile, industrial production slid 1.4% last month. The BOJ meets Oct 31st.
Carry trade... The Australian dollar rose 16% this year, to the strongest in 23 years.
The spread in yield between Australian and U.S. benchmark 2 year government bonds (paying 7.5%) reached 2.9% points this week.
Borrow in Yen at 0.5% and buy Australian 2 year bonds at 7.5%, not a bad prop...
The central bank raised rates in August to an 11 year high at 6.5% and there is speculation of further increases.
The Australian Reserve Bank's inflation index climbed 3.1% in Q3 from a year earlier. The rising Australian dollar is already starting to hurt exporters.
Yesterday, rising inflation caused Mexico to lift their benchmark rate 25 bps to 7.50%
They can't fill our shoes, let alone put mortar on their BRIC...
Brazil, Russia, India and China (BRIC) are projected to account for about 75% of global growth in 2007.
Collectively their GDP amounted to $5.6 trillion at the end of 2006. That's 43% of U.S. GDP, 56% of the 13- nation euro area's and 130% of Japan's.
The aggregate free-float value of the BRIC stock markets is 4.9% of world market value.
The four BRICs are 12 % of the U.S. market value, 16% of Europe's and 56% of Japan's.
China's stock market represents 1.9% of total world market value compared with U.S. equities' global share of 42%.
Chinese household consumption was almost 80% of GDP in the first half of the 1980s; falling to 46% of by 2000 and shrinking further to 36% in 2006.
The Nattering One muses... The export driven models in Germany and Japan are already getting a chill from declining US consumption.
The export driven models in China and India cannot be sustained on internal demand and are dependent on the US Consumer.
With the #1 US, #2 German and #3 Japanese economies slowing, these emerging economies are in for some rough times.
The International Monetary Fund in its April 2007 edition of the World Economic Outlook:
"The saying: 'If the U.S. sneezes, the rest of the world catches a cold,' remains relevant." Hattip to Bloomberg.
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