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Saturday, August 18, 2012

Will China's Consumers Save It From a Hard Landing ?

Not likely, argues Cam Hui in his SEEKING ALPHA piece,'Could China Be Rebalancing Growth To The Wrong Consumer?' , excerpted below.

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China's official policy is to rebalance its engine of growth away from infrastructure-led investment to the Chinese consumer (for examples, see "Crouching Tiger, Hidden Profit" and "China Beyond The Hard/Soft Landing Debate"). Having hit a recent slow patch, it appears as if the Chinese authorities have decided to pull out all the stops to stimulate growth using the same old policy tools of infrastructure spending again ahead of the leadership changeover this year...

Already, the strains are starting to show. The Chinese competitive advantage of a seemingly inexhaustable supply of cheap labor is starting to erode. Wage pressures are rising as fewer and fewer workers are migrating from the countryside to search for work in the cities. In reaction, the decision of multinational companies to offshore production to low-wage countries like China is not the no-brainer it once was. Indeed, a recent poll by Boston Consulting Group (full study here) indicates that more than one-third of American manufacturers are considering reversing the offshoring trend and bringing the jobs back to American shores...

This development must be particularly worrisome to Chinese policymakers and makes the objective to rebalance growth away from infrastructure spending to the Chinese consumer far more urgent. In this way, the Chinese economy would be able to grow more sustainably by creating a new source of demand from their own domestic economy. Alas, it does not appear likely to happen as refocusing growth away from infrastructure spending would seriously hurt Party insiders who have gotten obscenely rich in this boom...

Ironically, the latest Chinese move to engage in the more-of-the-same infrastructure-based stimulus will have the effect of rebalancing growth away from infrastructure spending to the consumer. But instead of the Chinese consumer, it will be the American consumer as the reverse offshoring trend starts to take hold and accelerate.

Why Did Romney Opt for Ryan as his VP ?


In their CRYSTAL BALL piece 'Mitt Hops on the Ryan Express', Larry J. Sabato, Kyle Kondik and Geoffrey Skelley venture this analysis :

In picking Ryan, Romney is, in a way, emulating the vice presidential decision made by the man who beat him for the 2008 GOP nomination: John McCain.

Ryan, like Sarah Palin, is a pick designed not necessarily to appeal to independents or Democrats, but rather to excite the party’s base. Palin’s selection did that for McCain, at least for a time, but her candidacy fizzled after a number of slip-ups, including her now-infamous interview with Katie Couric. Presumably, Ryan won’t make the same sorts of mistakes that Palin made, and it’s helpful to him that he’s much more familiar with the national press, which regards him as an intellectual. (They certainly didn’t feel that way about Palin.) Also, McCain’s base strategy couldn’t succeed in a year when the Republican Party was so damaged, when the economy was collapsing and when Barack Obama was running a historic, exciting candidacy. But a base strategy might work this year because a motivated GOP base, despite its weaknesses with minority voters, might be able to outnumber the Democratic base in this election, much like it did in 2004.

It does not appear that Romney has his base fully behind him. His poll numbers, especially lately, have not been strong. At the moment, Romney is slightly underperforming John McCain’s performance from four years ago. McCain received 45.6% of the national vote and 45.4% in seven key swing states (Colorado, Florida, Iowa, New Hampshire, Nevada, Ohio and Virginia) — whereas Romney is scoring just 43.4% nationally and 44.5% in the swing states, according to Saturday’s RealClearPolitics average of polls. There are Republican-leaning voters who still must be brought into the fold, and Romney has two big chances to win them over — through the vice presidential selection, and through his upcoming convention in Tampa at the end of the month.

The Washington Examiner’s Byron York recently reported, “Romney aides believe strongly that this race will play out like the 1980 campaign, in which President Jimmy Carter led Ronald Reagan for much of the race until Reagan broke through just before the election.” If that is indeed the campaign’s thinking — and that strikes us as more than a little overoptimistic even given the gloomy economic numbers — then it would make sense to pick Ryan with an eye to post-January policymaking as opposed to pre-November politicking.

It’s also possible that after weeks of lousy headlines and mediocre poll numbers, Romney simply decided he needed to make a bigger splash, particularly with the conservative base, than a Pawlenty or Portman would have given him.

Legal gambling a fix for state finance woes ?



Not so, reports Steven Malanga in his CITY JOURNAL article,'The State Gambling Addiction' :

"At least 12 states, facing downturn-depleted coffers, have already expanded gambling efforts over the last three years—including Massachusetts, which became the 16th state to sanction casinos. But this approach is utterly misguided, since gambling has often disappointed as a fiscal tool and as an economic-development strategy. As legal gambling has spread, competition for limited dollars has intensified, and the new gambling enterprises seem merely to be siphoning money from elsewhere in the economy instead of generating new economic activity. “This is not an industry that creates wealth,” says Les Bernal, head of the Stop Predatory Gambling Foundation. “It’s an industry that transfers wealth.” And that’s before taking into account the documented social costs, including the disturbing fact that a significant part of gambling revenues comes from problem gamblers."

Tonight, Blogger DJ gets literary, kinda sorta

Elvis Costello - Everyday I Write the Book
Missing Persons - Words
Icicle Works - Whisper To A Scream
Bruce Springsteen - Dancing In The Dark

Friday, August 10, 2012

In memory of a great friend, a good man, recently departed.

Eternal be your memory.

Desperate to flee fiat currencies and over-priced bonds for hard assets ?

Looking for serious hard-asset diversification in one handy ETP ?

Then check out Richard Bloch's post in SEEKING ALPHA, "Betting With Jim Rogers: Beyond The Agricultural Stocks". Bloch describes in some detail Market Vectors' Hard Asset Producers ETF (HAP), which is based on the Rogers - Van Eck Hard Assets Producers Index :
This is an interesting index because it's designed to track the overall performance of a diverse set of more than 350 hard asset companies. So instead of simply weighting companies by market capitalization, the sectors are first defined into broad categories - allocated based on estimates of global demand and production.
The current sector weightings look like this:  

Is Your ETF at Death's Door, or En Route ?

Then take the sage advice offered by Ron Rowland, author of the ETF Deathwatch, in his SEEKING ALPHA post, "5 Steps To Avoid Disaster When Your ETF Closes".

Among the most important : get out before darned thing gets delisted !  If you don't, you may have to arrange your own over-the-counter sale, at a price "significantly lower than the fund’s net asset value".

Monday, August 6, 2012

More BS from the BLS on Unemployment ?

Apparently, yes, in terms of the BLS' Payroll Report.

To be more polite, Michael Shedlock argues that the latest 'Jobs Report Looks Awful Below the Surface', in FINANCIAL SENSE, emphasizing the gloomy data in the Bureau's Household Survey versus those in the Payroll Survey Establishment Report.  Excerpts from Shedlock post follow.

For a somewhat contrasting view, check out John Cassidy's NEW YORKER post, 'The Jobs Mirage and the Election'.
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On the surface, this was the third consecutive solid jobs report, not as measured by the typical recovery, but the best back-to-back reports we have seen for years. The Payroll Survey Establishment Data showed employment up by 244,000.

At that pace of hiring, the unemployment number would ordinarily drop, but not fast.

Instead, the unemployment rate ticked up. The reason is beneath the surface, employment fell by 190,000 according to the Household Survey.

According to the Household Survey, the number of unemployed rose by 205,000. Another 131,000 dropped out of the labor force or the unemployment rate would have been even higher.

In January alone, a whopping 319,000 people dropped out of the workforce. In February another 87,000 people dropped out of the labor force. In March 11,000 people dropped out of the labor force. In April, 131,000 dropped out of the labor force. The 4-month total for 2011 is 548,000 people dropped out of the labor force.

Many of those millions who dropped out of the workforce would start looking if they thought jobs were available. Indeed, in a 2-year old recovery, the labor force should be rising sharply as those who stopped looking for jobs, once again started looking. Instead, an additional 548,000 people dropped out of the labor force in the first four months of the year.

Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

Thursday, August 2, 2012

Berlin Airport Project on a Par with the Big Dig ?


It's too early to say, since Big Dig defects continue to surface, and Willy Brandt Airport is still being constructed. In any case, as Sven Roebel and Andreas Wassermann report in their DER SPIEGEL article, "Incompetence and Naiveté Behind Berlin Airport Delay":
With the opening of Berlin's new airport delayed at least until next spring, a legal battle has erupted over damages and responsibility. Court documents reveal that the architectural firm behind the project emphasized appearance and gave short shrift to vital operational details.   
...the multi-billion euro project [has been] plagued... by sloppy planning and construction delays. Furthermore, the project faces potential damages claims worth at least €80 million ($98 million). Lawyers around Germany are currently poring over a complaint the airport operator filed against architectural firm gmp in mid-June at the regional court in Potsdam, capital of the state of Brandenburg where the airport is located.
The myriad documents on the case, which together fill a good half dozen binders, read like a recipe for disaster. They suggest that by the spring of 2009, airport officials were aware of significant problems, including the fire safety issues which ultimately ended up forcing the opening date back to next spring. The documents also detail notifications of defects filed by the airport operator. These should have served early on to raise a red flag for the project's supervisory board, which includes Berlin Mayor Klaus Wowereit and Brandenburg Governor Matthias Platzeck -- assuming the board was aware of the notifications at all.
If these documents are to be believed, the planning phase for the airport saw far too much emphasis on architectural design and too little on functionality. Particularly the terminal security and automated systems that are at the heart of this prestigious project are said to have suffered from this reversal of priorities, according to the complaint, which describes an "unnecessarily complex" concept designed according to "purely visual considerations," which proved to be "barely manageable" in its implementation.
All together, the complaint amounts to well over 1,000 pages and helps reconstruct the scandal around the airport whose true opening date it seems no one can predict. The internal documents, which include correspondence between the architects and the airport operator, as well as various records, contracts and expert reports, offer illuminating pieces of a puzzle that add up to a megalomaniac picture. They document the way the public was misled, and they tarnish the image of an icon in the world of architecture, Meinhard von Gerkan, who has contracts around the globe, but whose employees apparently weren't capable of applying the same diligence to technical details as they did to the artistic aspects of their design.

Drought May Spike Natural Gas Prices

The same drought that's spiking corn prices may do the same for natural gas.  As Chrisopher Wallace explains in his SEEKING ALPHA post, Natural Gas Production Could Be Curtailed By Drought, drillers in Pennsylvania and in Texas are already encountering difficulties maintaining sufficient supplies of water to perform hydraulic fracturing or "fracking". The same issue may soon arise in the Montana and North Dakota.