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     holycow
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Username: holycow
Post Number: 722
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| | Monday, January 24, 2005 - 07:00 pm: |  
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Here is an interesting news... and below is the summary:
FDI
1) Note the top 10
2) Note US's position
3) Note India's rise!
4) that is the money trail...
HC
"... if you've got a chart, I have an opinion!"
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holycow
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Username: holycow
Post Number: 723
Registered: 08-2004Rating: N/A
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| | Monday, January 24, 2005 - 07:08 pm: |
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... and as a matter of interest...
Far from becoming more important to Australia in recent years, the US has gone backwards, as an import supplier and an export market. Despite the import boom, last year Australia imported 11 per cent less from the US than in 2002 - while as an export market, the US has shrunk to the size of South Korea or New Zealand.
The European Union has maintained its share of Australian imports, and as a group, remains our biggest supplier with $33.4 billion of goods imported last year. The DFAT analysis shows that pharmaceuticals are now Europe's biggest export here, costing us $3.5 billion in 2003-04 - four to five times more than we bought from the US firms that lobbied so hard to shape the free trade agreement.
Here is the full report.
INCREDIBLE OFFER - only $12 USD per month
30 day FREE trial -
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HC
"... if you've got a chart, I have an opinion!"
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holycow
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Username: holycow
Post Number: 724
Registered: 08-2004Rating: N/A
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| | Monday, January 24, 2005 - 07:20 pm: |
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EU's Gray Future
Friday January 21, 7:00 pm ET
Ibd
Global Growth: A new report from the CIA warns that the European Union could be on the verge of breaking up -- a victim of its own economic mismanagement. Is anybody listening? Someone should.
Granted, the CIA's record when it comes to predictions is less than stellar. Still, the report contains enough serious criticism of the euro zone's faltering economy to be sobering -- and not just for the EU.
The main culprit: a European welfare state that promises jobless benefits so lavish that many healthy, well-educated people simply choose not to work. This is compounded by a fast-graying population and plunging fertility.
In 45 years, the population of Western Europe will actually be shrinking. But long before then, the region will no longer have enough workers to take care of postwar baby boomers reaching retirement age. Without major reforms, taxes will soar.
"The current EU welfare state is unsustainable," the CIA says, "and the lack of any economic revitalization could lead to the splintering or, at worst, disintegration of the EU, undermining its ambitions to play a heavyweight international role."
The CIA's warning was underscored by another report, this one from the U.S.-based Conference Board, that deals a serious blow to Europe's hopes of catching up with U.S. productivity by 2010.
At current rates of productivity growth (see chart), it'll take the U.S. 25 years to double its per capita GDP of $38,324, the data show. In the EU, where per-capita GDP stands at $27,546, it'll take 55 years. In other words, the wealth gap is widening -- and fast.
To catch up, the EU must do two things: boost its workforce and increase productivity. Neither will be easy in an economy as heavily taxed and over-regulated as the EU's.
Here again the CIA: "Either European countries adapt their work forces, reform their social welfare, education and tax systems, and accommodate growing immigrant populations (chiefly from Muslim countries), or they face a period of economic stasis."
If this sounds familiar, it's because the U.S. is heading down the same road -- albeit at a slower rate. Our population is also aging, and our public pension and health care systems are also broken. Unless reforms are made, we too face higher taxes.
By the CIA's grim reckoning, the EU could fall apart in 15 years if it doesn't act now. Things aren't so bad here. But if we continue to ignore exploding liabilities under Social Security and Medicare, we could be the ones who'll be playing catch-up.
HC
"... if you've got a chart, I have an opinion!"
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holycow
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Username: holycow
Post Number: 747
Registered: 08-2004Rating: N/A
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| | Thursday, January 27, 2005 - 07:18 pm: |
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Here is a different report but somehow seems to point at the same direction - Euroland is in trouble!
... which brought this up: back in 2000, someone who has the foresight was making a comment on the new millenium - it belongs to Asia. Now bit by bit, the veils are slowly peeling off...
Euroland: Life Without the Pact
Joachim Fels (London)
The Stability Pact is dead…
Let’s face it: Europe’s Stability and Growth Pact (‘the Pact’), which was supposed to ensure fiscal stability and responsibility, died a sudden though not unexpected death in November 2003, and the current attempts in Brussels to revamp it and create a “better” Pact are merely a charade. Ever since Germany and France persuaded their partners to vote down the EU Commission’s proposal to get tough on them for failing to address their excessive fiscal deficits, it has been clear that the Pact lacked teeth (see J. Fels and V. Guzzo, Burying the Pact, 25 November 2003). Put simply, sanctions for the fiscal sinners do not kick in automatically, and governments will shy away from slapping fines upon one another if the going gets tough.
… and the reform proposals are merely a charade
As I see it, the reform proposals tabled by the Commission and the various national governments are largely a thinly veiled attempt to adjust the ‘rules’ to the grim fiscal reality. I will spare you the details, as our expert on euro area fiscal policy, Vincenzo Guzzo, has laid them out elsewhere. The gist of most proposals is to consider additional criteria, some of them soft ones, before deciding whether a country has an excessive deficit, and to give countries that are found to be in excessive deficit more time to address them. In other words: Ladies and Gentlemen, let’s be pragmatic!
The need for fiscal flexibility in a monetary union
Don’t get me wrong: Pragmatism and flexibility are not necessarily bad things. More than ten years ago, when the discussion about creating the Pact started, I argued that it would be wrong to put national fiscal policies in a monetary union in a straitjacket. After all, if one policy instrument -- the power to set interest rates -- is taken away from the member states, fiscal policies must remain free to be able to react to localized shocks that might hit national economies. Also, divergent income levels, infrastructure needs, demographics, and national preferences across countries might imply different optimal mixes of deficit financing versus tax financing of public expenditures. Hardly any reasonable economist would dispute this. But the Pact was created by German officials, whose main goal was to have something in hand that would help convince a skeptical German public that EMU would be a zone of stability.
But fiscal irresponsibility threatens EMU foundations
On the other hand, too much flexibility and pragmatism in fiscal policy can be a bad thing, especially in a monetary union. Extremely profligate fiscal policies in some member countries might harm other less profligate members via higher borrowing costs, especially if markets believed that members would have to stand in for peers that became insolvent. If so, the profligate members could ‘free-ride’ on the backs of the others. It doesn’t take a PhD in political science to understand that such a scenario would create serious political conflicts in the union and would thus threaten its mere foundations.
Safeguards against fiscal irresponsibility
Back then, my confident response to such worries was that there were three safeguards against such fiscal irresponsibility in a monetary union: 1) more enlightened national policies following the bad experiences with runaway fiscal deficits in the 1970s and ’80s; 2) the non-bailout clause in the Maastricht Treaty, which states that no member states can be forced to step in for another state’s liabilities, and 3) the invisible hand of financial markets, which would discriminate between the sinners and the virtuous, punish the former via higher interest rates, and thus lead them back on the road to virtue. With the benefit of hindsight, I was probably overly confident. Blame it on my youth in those days, but only partly so. Governments are also to blame, as is -- and this will come as a surprise to many -- the European Central Bank.
Non-bailout clause not fully credible
First, I was probably naïve to assume that governments had taken the 1970s and 1980s experience fully to heart. True, fiscal deficit reduction was the name of the game during the 1990s, but with hindsight, it owed more to the deadline and the fiscal criteria for EMU entry set by the Maastricht Treaty, as well as the sharp decline in interest rates, than to true fiscal consolidation. Also, governments were creative in finding ways to disguise the true size of their deficits -- the latest but by far not the only example is Greece, which managed to squeeze into EMU on the basis of vastly understated deficit figures. Second, I was probably also naïve to assume that markets would find the non-bailout clause credible. I still believe it is, because I cannot see how national politicians could sell a bailout of a bankrupt member state to their national electorates. But everybody else seems to believe that a bailout would be inevitable for the greater sake of Europe.
ECB is to blame, too
However, at least some of the blame for the failure of bond yield spreads to reflect the differences in fiscal sustainability across euro area members has to be laid at the ECB’s door, for two reasons (see also my Euroland’s Fiscal Morass, 27 September 2005). First, the ECB’s expansionary policy stance has contributed to the general compression of yield spreads between more and less risky assets. If markets hardly discriminate among the prices of government bonds, corporate bonds, and emerging debt anymore, why should they discriminate between slightly more and slightly less safe government bonds of the different EMU member states? Second, at its weekly refinancing operations, the ECB does not discriminate between member countries’ debt ratings when accepting bonds as collateral. Therefore, the banking system has no incentive to discriminate between these bonds, either, because banks can always ship bonds of a lesser credit quality to the ECB to obtain liquidity. Thus, through its own actions, the ECB contributes to fiscal profligacy in the euro area as it prevents markets from fulfilling their surveillance and signaling functions.
What should be done?
First, stability-oriented governments in the euro area should be very vocal in stating that they view the non-bailout clause in the Maastricht Treaty as binding. This may help remind investors that the national members of EMU are like municipalities in the US: They have no access to the printing press, and they cannot count on a bailout by others, so they can go bust in principle. Second, the ECB needs to pay more attention to the side-effects of its zero real-interest rate policy. These include not only excessive risk taking in the financial markets and in property markets, but also overly expansionary fiscal policies in response to low absolute and relative borrowing costs. Third, the ECB should start to discriminate among issuers based on credit ratings when accepting collateral at the weekly refinancing operations. Is any of this likely to happen? Even though I’m less youthful now, I’m still optimistic. If I’m wrong, nothing less than the long-term viability of EMU is at stake (see my Euro Wreckage, 28 January 2004).
HC
"... if you've got a chart, I have an opinion!"
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holycow
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Username: holycow
Post Number: 752
Registered: 08-2004Rating: N/A
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| | Friday, January 28, 2005 - 08:45 am: |
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All paper money will depreciate in time in its purchasing power.
The only "currency" that will gain purchasing power relative to paper money will eventually be precious metals and hard assets.
But in the mean time there is a transfer of wealth from the Western World to Asia. (and to Australia? Remember we are a commodity economy - the money trail goes like this: West->China/India/Japan->Australia!  ) The ownership of assets is shifting to Asia and in this environment we have to consider how to invest.
First of all, the Chinese economy is growing very rapidly and is very large. China produces more steel than the US and Japan combined and is still growing very rapidly. They produce five times more cement than the US. Some consumer markets are much larger in China than in the US.
...
But in physical terms, adjusted for the difference in the price level, I would say that the Chinese economy is already 60% of the US economy and still growing.
In the process of industrialization, energy needs go up. China consumes 1.7m barrels of oil a day; India 0.7m barrels.
The whole of Asia has 3.6bn people including Japan and it consumes 20m barrels of oil a day.
The US has 295m people and consumes 22m barrels of oil a day.
For sure oil demand in Asia will double to 40m barrels of oil per day. Whether it takes six years or 15 years, I don’t know, but it will double. In your lifetime you won’t see oil at US$12 a barrel again - ever.
The Chinese used to take 6% of the world’s copper market in 1990, 12% in the year 2000; now they’re the largest copper user, 21%. For Iron ore they consume up 27% of total production in the world.
The incremental demands from industrialisation do not come from China only, but also from India, from rising standards through this wealth transfer from the Western World to Asia, and this will lift commodity prices.
...
The Swiss drink 50 times more coffee per capita than the Chinese, but the Chinese have a population 200 times larger than the Swiss so their market is already larger.
If they go to the per capita consumption level of the South Koreans, Taiwanese, Japanese – non-traditional coffee drinkers – they will take up three times the world’s coffee crop.
The point is not to plan to invest the inheritance that you got from your uncle, but if commodity prices go up then usually it creates an unfavourable environment for financial assets, certainly for bonds. Also, usually when commodity prices start to go up international tensions increase.
You may have to wait some time until the next war will lead to gold prices that will be at least as high as the Dow Jones or higher. In the meantime, this wealth transfer will lead to an unusual situation.
At the moment, the Japanese market cap is 9% of the total market cap in the world. The US is 52% and the rest of Asia is 3.5%. So for 12.5% you get the whole of Asia’s 3.6bn people with the fastest growing economies of China, Vietnam and India but for the US you have to pay 52% for a country that is economically doomed.
I think this will change; in the next five to ten years time the US will be anywhere between zero and 20% and Asia should be between say 30 and 50%.
By the way, in 1990 Japan was at more than 50%. The change can happen in many ways. It can happen that both the US and Asia go up, but Asia goes up more than the US. It can happen that both go down, but the US goes down more than Asia. Perhaps Asia goes up and the US goes down. Or it could happen that both stay at the same level through currency realignments.
It is quite possible that the US dollar goes down, it could be that the Dow Jones goes to 100,000 but the dollar drops by 99.9%. It happened in Latin America. ...(the US of A becoming a Banana Republic? How'd you like that?)
By the way the apostles of the new economy are right, the US has a new economy; it resembles Mexico and Brazil.
-- extract from an article "The Simple Truths of Life" in Aireview which is based upon a speech given by Dr Marc Faber at an investment conference in the US in early December 2004.
HC
"... if you've got a chart, I have an opinion!"
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longshanks
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Username: longshanks
Post Number: 4
Registered: 11-2004Rating: N/A
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| | Monday, January 31, 2005 - 01:39 am: |
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This is an extract from The Richland Report
http://www.marketweb.com/commentary/rich0128.htm
a little extreme...
...but kind of interesting
Long-Term Outlook
As we look at the investment and economic “Big Picture”, we see what we consider to be three significant major changes that, with relatively little fanfare, are currently taking place, or have taken place over the past two years. We believe these changes are so important that they will, to a greater or lesser extent, affect the financial well-being of every American, as well as millions of others throughout the world. As such, we want to again call your attention to them, despite some redundancies and repetitions from prior issues which that may entail, and for which we apologise. The three are --
(1) The transition from primary secular bull market to primary secular bear market :
(2) The transition in investor preference from one asset class (paper financial instruments) to tangibles; and
(3) The transition from the Plateau Period of the fourth U.S. Kondratieff Wave, to stock market and economic decline, recession/depression, and war.
Let’s briefly address these three changes by the numbers.
(1) After 16 years of arguably the longest and strongest secular primary bull stock market in U.S. history, which at its peak saw record over-valuation measurements, in 2000 we began a primary secular bear market.
Beginning in 1982, within the context of a secular bull market uptrend channel, we saw every 3-5 years (averaging 4-4 1/2 years) a cyclical bear market correction low (1982, 1987, 1990, 1994, and 1998). Now, the primary secular bear market downtrend channel will see volatile cyclical bear market rallies, each of which will doubtless be proclaimed as the “beginning of a new bull market” by Wall Street and the financial media. However, the longer-term trend is now down. Down is faster. It’s a traders’, as opposed to long-term buy-and-hold investors’, market. A “Buy The Dips” mentality must be replaced by a “Sell the Rallies” mantra. Market timing, once scorned, is now all-important, while stock selection remains more vital than ever.
This primary secular bear market is likely destined to end no earlier than 2006, with a regression to historic fundamental bear market average valuation norms (10P/Es) in popular market indices probably roughly two-thirds lower than present ones -- i.e., 3650 DJIA, 365 S&P 500. Interestingly enough, from a technical standpoint, measured move objectives on the large head & shoulder tops of both the S&P 500 and the DJIA yield very close to the same downside objectives technically, as do the fundamental historic average bear market norm P/E’s.
(2) Recently, approximately every twenty years has seen a gradual but tectonic shift in asset class preference by investors, from the class they perceive as overvalued, to the one they consider undervalued.
In the early 1940’s, with the DJIA at 100, stocks were seen as being on the bargain table. There was a shift out of tangible assets and cash into paper financial assets. But in the early 1960’s with the Dow at 1000, the shift was back out of paper and into tangibles -- commodities, real estate and collectibles - old autos, coins and stamps, rare books, jewelry, objects d’art, paintings, sculpture - BARRON’S contained a section each week on antiques.
But by 1982, real estate and many collectibles were viewed as overpriced by investors, whereas stocks were considered cheap -- we recall seeing the S&P 500 price/earnings ratio briefly at 7 that year. (Incidental-ly, colleague Peter Eliades [Stockmarket Cycles, (800) 888-4351] reminds us that there appears to be a 20-year cycle in stock lows which, logically enough, coincides with those years, with one theoretically due this year, 2002.)
Today, however, with the S&P 500 P/E still well above 30, and despite a 76% decline in the Nasdaq Index and Wall Street analyst’s propaganda to the contrary, stocks are not perceived as “cheap”, nor are bonds with their miniscule yields. And while certain types of real estate -- housing, for example -- are looked upon as overpriced in many parts of the country, several commodities during the past few years were selling at price levels last seen during the Great Depression.
These, plus the activities at Sotheby’s, Tiffany’s, and the recent popularity of “Antiques Road Show” on television, indicate to us that another shift in investor preference is now under way, out of overvalued paper financial instruments, the symbols of “things”, and into the tangible “things” themselves, probably including gold and silver in their various forms. These are likely to become future “investments of choice”.
(3) Kondratieff is alive and well. The obscure Russian agricultural economist, who authored “Long Wave” theory during the Stalinist era, was sent to the Gulag because his theory of a long (54-70 year) economic cycle in the United States conflicted with Communist dogma, which held that the capitalistic system was inherently self-destructive. But his theory, despite detractors, has proved remarkable prescient.
We are now in the fourth Kondratieff Wave cycle in the United States. Just as occurred in the third cycle in 1929, we have seen the simultaneous collapse (albeit largely unrecognized and unacknowledged as yet) of both the stock market and the economy in the year 2000.
That involved a consequent “falling off the back edge” of the “Plateau Period”, when everything seemed on the surface to be doing well, but beneath the surface things were rotten and deteriorating. What an apt description of recent conditions, and remarkably, those of each of the three prior Plateau Periods, in this country!
If events follow the three previous Kondratieff Waves, a deflationary recession, which we feel we are currently headed into, will be followed by an inflationary depression. Politicians, pressed during a recession with no jobs to be had, and people out of work clamoring the government to “do something”, know nothing else to do but urge the Fed to open the money spigots and flood the banks with money. Fruitless, because there are no credit-worthy borrowers! But all that currency, money and credit finds its way inexorably and inevitably into the system, and you have the classic definition of inflation -- too much money chasing too few goods and services. The dollar becomes toilet paper, and gold and silver, and mining stocks, rise in price.
It’s happened before -- remember “wheelbarrow inflation” in Weimar Germany ? Students of our own history will acknowledge the American Revolution and the Continental Dollar, which was eventually redeemed in gold at two cents on the dollar, leading to the expression, “Not worth a Continental”, still heard today (the post-Plateau Period of the first Long Wave in this country.) Those of us from the South recall stories of our aunts, uncles and grandparents of the bitter days of Reconstruction (the second Long Wave in the U.S.) I still have framed on my office wall Confederate dollars and bonds, once valuable as are our own today, then worthless as a result of the Lost Cause. Southern women.who lost their sons and husbands during that war survived by selling their heirlooms of gold and silver - rings, jewelry, etc. Think similar adversity can’t strike again ? It may be different, but if it has happened before, it could happen again. Pray not.
If history follows suit, the depression will be followed in turn by a war -- a strongly-felt, very patriotic Trough War, so-called because it ocurs at the trough, or bottom, of the Kondratieff economic cycle.
Books could be, and some have been, written on each of these three changes. These Reports to you afford us neither the time nor space to devote to them the in-depth discussions they deserve. Rather, our purpose is simply to alert you to these major underlying investment and economic trend shifts, so that you will recognize and understand them as you see evidence that they are occurring.
What is some of that evidence that you and I are currently hearing and observing?
Layoffs -- for example, Schwab laying off 10% of its workforce. If that’s happening to one of the largest discount brokers, what does it mean for the brokerage industry? Alcatel announces a mammoth layoff . . .
General Electric announces it is combining its appliance and lighting divisions to reduce costs and over- head. What does that tell you? They have no aggregate pricing power -- their ability to raise prices is non-existent. They have to combine divisions, close facilities, fire people. Same with Boeing and the fuselage facility in Renton, Washington -- will it be mothballed? How many other factory closures have we seen?
Banner front-page right 2-column headline in the “Personal Journal” section in the Tuesday September 10 Wall Street Journal -- “FORECLOSURES HIT RECORD LEVELS”. Subheads read, Trouble on the Home Front” and “More Homeowners Fall Behind On Mortgages, Stoking Concerns About Housing Market”.
Wal-Mart and others issuing earnings warnings, or failing to make their numbers - EDS, IBM, Morgan Stanley, Emerson Electric, Illinois Tool Works, Charlotte Russe - and Enron, Worldcom, Global Crossing.
It is in this environment that we must not only, as the Bible says, “...live, move, and have our being”, but also buy and sell, trade and invest, very, very carefully -- and hopefully, profitably.
Good luck, and may God bless you and yours!
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holycow
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Username: holycow
Post Number: 773
Registered: 08-2004Rating: N/A
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| | Monday, January 31, 2005 - 08:30 am: |
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Hi Longshanks,
Thanks for the interesting read.
I have this to share: I find the report too "USA-centric", although I acknowledge SHE has been the centre of world finance and economy in the last 30-50 years (after the 2nd World War); I think the world has now evolved to a stage that where one by one the "old powers" of the past like Germany, France, even UK to an extent and now the USA had gone into decline (slowly) with the balance of power shifting to the new economies (Brazil), or, rather "old" economies revived like China, Russia and India - WE have to wean ourselves away from thinking and looking from the USA or the "West in general"'s point of view.
In other words, we have to think with a new paradigm with the USA and the Europe NOT in control of world finance of economy in the future. (at least not in toto) We won't know when it will happen, but like Marc Faber has said, if you consider how the oil is consumed today and project into 10 to 15 years time - it kind of giving us a perspective of how it will be.
Recently when Jim Rogers was asked about the possibility of intervention in the US$, his reply was quite revealing (to me anyway) - "Well they might try. It would have to be a foreign government because our Federal Bank doesn't have any money so they couldn't support it. Our cash reserves are something like $70 billion, while $2 trillion gets traded everyday in the currency market. Our $70 billion would be gone in about six to eight minutes. If someone does intervene they know the problem is so fundamentally unsound, there isn't much they can do other than a temporary or short-term basis."
It tells how far down the saving tube the Americans have been in the last few decades. And then you compare that with the Chinese reserve, from memory it is about 269 billions while the Chinese economy is still at its early growth stage. Stretch that out, one can't be too optimistic about the US economy (and US$!), really!
... and of course, the K cycle will continue I presume and if it still holds water, it is saying the USA is on the way down.
Cheers.
HC
"... if you've got a chart, I have an opinion!"
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ken
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Username: ken
Post Number: 97
Registered: 04-2003Rating: N/A
Votes: 0
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| | Monday, January 31, 2005 - 12:05 pm: |
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