Friday, January 21, 2011

How Not To Restore Credibility..... "BOE´s Adam Posen Edition"

The fact that he is also an American economist & has co-written a book on inflation targeting with Fed Chairman Ben S. Bernanke might explain at least in part his quote...... ;-)

Man muss zu seiner "Verteidigung" erwähnen das er laut Wikipedia ebenfalls ein amerikanischer Ökonom ist. Da verwundert es wenig das er zusammen mit Bernanke Co-Autor eines Werkes zum Thema Inflation ist.... Dies relativiert zumindest ein wenig den fast satirisch anmutenden Charakter seines Zitates....;-)

"CPI, excluding currency, commodities and VAT impact, is low"

The quote came in response after CPI once more "slightly" missed the 2 percent target....... Sometimes it´s better to stay just silent.....

Diese Aussage kam nachdem im Dezember die Konumentenpreisinflation in UK mal wieder "knapp" das angestrebte Ziel von 2% verfehlt hat........ Ähnlich wie bei etlichen "Offiziellen" scheint das Sprichwort "Reden ist Silber, Schweigen ist Gold" nicht sonderlich viele Anhänger zu haben....

Record-breaking, forecast-busting UK inflation FT Alphaville
Highest yy rate for CPI food and non-alcoholic beverages since May 2009
Highest yy rate for CPI housing, utilities component since Aug 2009
Highest yy rate for CPI goods component since April 2010
Highest yy rate for CPI services component since Aug 2010 -
Highest yy rate for CPI fuels and lubricants component since July 2010

Posen is almost as funny as ECB´s Smaghi with his "joke" "€ More Stable Than Deutsche Mark" ..... But in comparison with Bernanke & Greenspan even they seem "reasonable".... ;-)

Finde trotzdem das im Fach "Realsatire" die EZB dank Bini Smaghi mit der Behauptung das der "€ stabiler als die DM ist" noch immer knapp den zweiten Platz hinter den unangefochtenen Spitzenreitern Bernanke & Greenspan einnimmt.....

Now take a look at real rates ( base rates minus CPI ) in the UK......

Der nachfolgende Chart zeigt den "realen Zinssatz" in UK verglichen mit dem Letzins und ich empfehle jedem drigend den treffenden Kommentar (!) der FT Deutschland zu diesem Thema zu lesen.....

UPDATE: The Real 10-Year Rates Chart confirms the "vigilance" of the the BOE ....

UPDATE: Der Chart der realen 10 Jahresrenditen bestätigt welch "Sonderstellung" die BOE einnimmt....

This in combination with the next chart showing the printing that the BOE has done so far & the remarks from the end of September doesn´t make Posen´s quote less "cynical".......

Das im Zusammenhang mit dem nächsten Chart, der zeigt das selbst die Fed in Relation zur BOE "zurückhaltend" agiert, sowie den Aussagen Ende September lassen das Zitat nicht gerade weniger "zynisch" erscheinen.....

H/ T RBS via FT Alphaville

Posen Makes BOE ‘Prosecution’ Case for More Stimulus September 29, Bloomberg
Bank of England policy maker Adam Posen made the strongest call yet for the bank to restart its asset-purchase program.

“Additional monetary stimulus at this point should begin in the form of additional QE as the Bank of England pursued by purchasing gilts in 2009-2010,” he said. “In case such QE were to prove insufficiently effective,” Posen said he would “still want preparation ahead of a Plan B of large-scale non-gilt asset purchases” in close coordination with the Treasury.

Posen, 43, an American citizen, joined the central bank from the Washington-based Peterson Institute for International Economics. A co-writer of a book on inflation targeting with Fed Chairman Ben S. Bernanke, he also published a study of the Japanese financial crisis and was a researcher at the Bundesbank and European Central Bank.
Wouldn´t surprise me if down the road even politicians will be more popular than members of the BOE & when the term "central banksters" will gain more and more traction....

Ich persönlich wäre nicht überrascht wenn zumindest in UK die Notenbänker in absehbarer Zeit noch unbeliebter als Politiker unterwegs sind.....


Searching for BoE credibility on inflation FT Alphaville

From Deutsche Bank, the number of news stories that match three topical words:


A Crisis of Faith in Britain’s Central Banker NYT
A central banker need not be loved, but at the least he should command respect — and in Britain these days Mervyn King cannot count on either.
The pre-emptive UK rate hike FT Akphaville
…over the last 6 years (ie 2005Q1 to 2010 Q4), real GDP growth has undershot the MPC’s forecast made a year earlier in 22 quarters and overshot in just 2 quarters. Conversely, inflation has overshot the MPC’s forecast in 20 quarters and undershot in just 4 quarters.


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Saturday, January 15, 2011

Excellent Interactive Map via The Economist : "US Equivalents: Which Countries Match The GDP And Population Of America´s States"

I think in the context of the ongoing & worsening budget crises the chart provides a good perspective when sooner or later the MUNI topic will dominate headlines... At the latest when they need another reason to justify "QE 3.0".... ;-)

Denke die Übersicht ist besonders hilfreich wenn es wohl eher früher als später um den desaströsen Zustand der öffentlichen Haushalte in den einzelnen Bundesstaaten und Gemeinden geht ( Stichwort MUNIcipal bonds ).... Würde mich nicht überraschen wenn zukünftig die Begriffe "QE 3.0 & MUNIS" in demselben Zusammenhang genannt werden.....

US equivalents......Which countries match the GDP and population of America's states?

IT HAS long been true that California on its own would rank as one of the biggest economies of the world. These days, it would rank eighth, falling between Italy and Brazil on a nominal exchange-rate basis. But how do other American states compare with other countries? Taking the nearest equivalent country from 2009 data reveals some surprises. Who would have thought that, despite years of auto-industry hardship, the economy of Michigan is still the same size as Taiwan's?
The Daily Chart via The Economist has much more to offer... Check it out....

Empfehle jedem regelmäßig dem Daily Chart via The Economist einen Besuch abzustatten... Lohnt sich.....

I think the example of Illinois ( equivalent of Turkey ) & the clip with Meredith Whitney makes it cristal clear that this won´t be a minor issue down the road....

Wer noch Zweifel daran hat das der Begriff "MUNIS" in absehbarer Zeit auch in der deutschen Presse häufiger zu hören sein wird sollte sich das Beispiel Illinois ( lt. interactiver Karte auf "Augenhöhe" mit der Türkei ) vor Augen führen und das Video von Meredith Whitney ansehen... .....

Illinois Governor Wants to Borrow $15 Billion to "Balance" the Budget; Illinois Total Unfunded Liabilities Exceed $200 Billion Already Mish

Illinois Seeks To Issue $8.75 Billion Bond To Pay Overdue Bills As Muni Issuance Market On Verge Of Shutdown

To put Whitney comments into perspective i suggest to read the more balanced rebuttal from Self-Evident & Whitney Municipal-Bond Apocalypse Is Short on Default Specifics via Blommberg.... Personally i think it´s only a matter a time until a "Black Swan" arrives in the MUNI complex..... Like in Europe ( Greece & Ireland ) it will be interesting to see how the politicians will be able or willing to "balance" the pain among voters via austerity, tax hikes, cuts in entitlements etc. & bondholders via haircuts.... Either way this won´t be GDP & market positive.....

Für alle die Whitneys Aussagen für übetrieben halten bietet sich die kritische "Gegenschrift" von Self- Evident & Whitney Municipal-Bond Apocalypse Is Short on Default Specifics via Bloomberg an..... Ich persönlich bin der Meinung das es einzig und alleine eine Frage des Zeitpunkts ist, wann ( und nicht ob ) auch der MUNI Markt Besuch vom "Black Swan" bekommt..... Ähnlich wie in Europa ( Griechenland & Irland ) wird es sehr interessant zu sehen sein inwieweit die Politiker Willens & in der Lage sind die notwendigen Einschnitte zwischen den Wählern ( Kürzungen, Steuererhöhungen, drastische Einschnitte in Pensionsplänen usw )und Anleihebesitzern "auszubalancieren".... Keine der möglichen Lösungen dürfte "marktpositive" Wirkung entfallten.... In Realtime ist dies in Irland & Griechenland zu beobachten....

State Budgets: Year Ahead Looms As Toughest Yet HuPo

If 2011 is hinting at a national recovery, there is little sign of it in statehouses across the country.

States that already have raided their reserve funds, relied on borrowing or accounting gimmicks,
and imposed deep cuts on schools, parks and public transit systems no longer can protect key services in the face of another round of multibillion dollar deficits.
Are Mom-n-Pop Investors Freaked Out By Munis? Flow Data Says Yes. MarketBeat WSJ

For the week ended Wednesday, investors pulled more than $4 billion from muni funds, extending the outflow streak to ten consecutive weeks. The $4 billion pullout also represents the largest week of outflows during the run
Maybe it´s time to reread the Special Gold Report "In Gold We Trust" from Erste Group..... ;-)

Kann nicht schaden sich demnächst den Special Gold Report "In Gold We Trust" der Ersten Bank mal wieder vorzunehmen..... ;-)


NYT Reports States Looking For Ways To File Bankruptcy, Muni Bondholders To Be GMed NYT via ZH

Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.
American states' pension funds The Economist

Space, time and public pension black holes FT Alphaville

Muni mayhem, charted FT Alphaville

Yes, Investors are Still Dumping Munis. WSJ MarketBeat

The big loser in today’s data is the Municipal fund space which lost -$5.7 bln. This takes total outflows for January 2011 up to -$10.26 bln which is the greatest outflow since our data starts in 2007. Note that even at the height of the Lehman crisis outflows peaked at -$8.36 bln in October 2008.
Moody’s Credit Ratings of States to Factor in Unfunded Pensions NYT

Interaktive Karte US Staaten im Überblick Der Spiegel

US-Bundesstaaten stehen vor der Pleite Der Spiegel

More from the NYT on why QE3.1 - the Muni Edition is just around the corner

The NYT reports that "President Obama is proposing to ride to the rescue of states that have borrowed billions of dollars from the federal government to continue paying unemployment benefits during the economic downturn. His plan would give the states a two-year breather before automatic tax increases would hit employers, and before states would have to start paying interest on the loans."

Michigan, for instance, owes the federal government $3.7 billion it borrowed to pay unemployment benefits. Under current law the state would be forced to pay $117 million in interest to the federal government this fall, and the federal tax on employers would automatically step up each year to repay the debt.


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Wednesday, January 12, 2011

The South China Mall, White Elephants & Beijing University.......

I have blogged about this mall in April 2007 and even i´m surprised that things have indeed deteriorated further....

Ich habe bereits im April 2007 über besagtes Einkaufszentrum gebloggt und es sieht so aus als wenn sich die Lage seit Eröffnung nicht gerade verbessert hat....

Most "comical " aspect is that, according to Paul Allen from Bloomberg News, the new owner of this "white elephant" is now the Beijing University .... ?!?!? Surprising that even the Bloomberg reporter shrugs this probably most interesting circumstance of.....

Die Frage muß erlaubt sein warum ausgerechnet die Universität in Peking jetzt Eigentümer ( lt. Paul Allen von Bloomberg News ) geworden ist..... ?!?!? Mindestens genauso überraschend ist, wie fast selbstverständlich der Bloomberg Reporter die wohl mit Abstand interessanteste Tatsache erwähnt, das Universitäten zumindest zum Teil massiv in Immobilien "machen".......

It seems the spin regarding the housing market ( see China "Bubble" ( Bursting ) Update & Newest Spin "Excluding Tier 1 Cities Everything Is Fine......" ) cannot be asserted when it comes to malls.... ;-)

Es sieht damit ganz so aus als wenn die fast verzweifelt klingende Aussage das Abseits der großen Metropolen der Wohnimmobilienmarkt noch "günstig" ist ( siehe China "Bubble" ( Bursting ) Update & Newest Spin "Excluding Tier 1 Cities Everything Is Fine......" ) für Einkausfzentren nicht behauptet werden kann...;-)

But one has to admit that th South China Mall is somewhat "special" and won´t win any awards for their "superb" market research....

Man muß fairerweise zugestehen das die South China Mall wohl keine Preise für besonders gute Marktforschung und Planung gewinnen wird.....

Over the last few years, hundreds of malls have popped up around China, which now claims seven of the world's 20 largest. Two of those, Oriental Plaza in Foshan and Grandview Mall in Guangzhou, are within 50 miles of South China Mall.
It will be fun to see if the ghost town par excellence ORDOS ( see Central Planning & Ghost Towns In China..... & Ordos, China: A Modern Ghost Town ) will face a similar destiny....

Es wird interessant zu sehen sein wie sich die Geisterstadt schlechthin ORDOS ( siehe Central Planning & Ghost Towns In China..... & Ordos, China: A Modern Ghost Town ) in den nächsten Jahren entwickelt.....

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Wednesday, January 05, 2011

Food Prices Hit Record High......

One can only hope that the very critical price of Rice ( see Chart & Rice Market Monitor ) will stay well below the last "riot" highs from 2008..... UPDATE: Jim Rogers Rotates From Gold To Rice, Sets Foundation For Next Bubble ZH

Man kann nur hoffen das der alles entscheidende Preis für Reis ( siehe Chart & Rice Market Monitor ) weiterhin deutlich unter dem letzten (Unruhe)Hoch aus dem Jahr 2008 bleiben wird....UPDATE: Jim Rogers Rotates From Gold To Rice, Sets Foundation For Next Bubble ZH

The index doesn't measure domestic retail prices, which can be affected by a wide range of factors, including government subsidies. Instead, the index tracks export prices and can still serve as a barometer of what consumers may pay.

Food prices hit a record high last month, surpassing the levels seen during the 2007-08 crisis, the UN’s Food and Agricultural Organisation said on Wednesday.

The Rome-based organisation said the increase did not constitute a crisis. But Abdolreza Abbassian, senior economist at the FAO, acknowledged that the situation was “alarming”. He added: “It will be foolish to assume this is the peak.”

The jump will increase fears about the repetition of the crisis of 2007-2008. However, poor countries have not so far seen the wave of food riots that rocked countries such as Haiti and Bangladesh two years ago, when prices of agricultural commodities jumped.

The increase in food costs will also hit developed economies, with companies from McDonald's to Kraft raising retail prices.

Higher food prices are also boosting overall inflation, which is above the preferred targets of central banks in Europe.

Compare the food CPI problems of the ECB, BOE & FED with the rest of the world.....

Der Rest der Welt kann über die Nahrungsmittelpreisprobleme der EZB, BOE & Fed wohl nur gequält lächeln.....

Please note that the chart above covers only the first 6 Month in 2010....Looking at the monthy price table it should be clear that the real spike happenend since July.....

Der obige Chart wird noch weniger appetitlich wenn man bedenkt das lediglich der Zeitraum bis einschließlich Juni 2010 berücksichtigt ist....Ein Blick auf den Food Price Index zeigt leider das der Löwenanteil des Anstieges im 2. Halbjahr vollzogen worden ist....

H/T FT Alphaville

Probably not an understatement that at least a "small" part of the increase is related to the wisdom of the central banksters around the world..... I´m very sceptical that without "QE" & with "credible" central bankers ( and politicians ) we would face similar headlines.....UPDATE: Speaking of "credible" people Ben Bernanke and the Price of Oil.....Wouldn´t surprise me if way too many on Wall Street & in the numerous "ivory towers" around the world are calling develompents like this "collataral damage"....

Denke es ist keine Untertreibung zu sagen das zumindest ein "kleiner" Anteil des Preisanstieges der geballten Weisheit der weltweiten Notenbänker geschuldet ist..... Ich kann mir nur sehr schwer vorstellen das wir ohne "QE" und mit "glaubwürdigen und vertrauenserweckenden" handelnden Personen ähnliche Schlagzeilen zu verkraften hätten...UPDATE: Da wir gerade von Glaubwüdigkeit gesprochen haben Ben Bernanke and the Price of Oil...Würde mich ebenfalls stark wundern wenn an Wall Street & in den leider reichlich vorhandenen "Elfenbeintürmen" eine solche Entwicklung nicht als "Kollataralschaden" bezeichnet wird.....

Just in time comes the follwoing chart via FT Germany showing the correleation from REAL US rates ( rhs inverted ) & the commodity complex...... And the FED is not alone.....

Passender hätte der folgende Chart der FT Deutschland nicht sein können.....Mit Ausnahme des fehlenden "QE" Hinweises hätte ich den dazugehörigen Bericht nicht besser formulieren können .... Zu allem übel muß man leider feststellen das die FED in Ihrer Politik nicht allein auf weiter Flur steht.....

Real rates in the Euro area & UK....

Realzinsen unter Aufsicht der EZB und der BOE.......

H/T FT Deutschland

H/T FT Deutschland

Back with then original Story..... Weiter mit dem Eröffnungslink.....

The FAO said its food price index, a basket tracking the wholesale cost of commodities such as wheat, corn, rice, oilseeds, dairy products, sugar and meats, jumped last month of 214.7 points – up almost 4.2 per cent from November.

The FAO is drawing comfort from relatively stable prices for rice, one of the two most important cereals for global food security, which remains far below its record high. Rice is the staple of 3bn people in Asia and Africa.

The FAO food index is at its highest since the measure was first calculated in 1990. During the 2007-08 food crisis, the index reached a peak of 213.5 in June 2008

However, the cost of the other critical staple, wheat, is now rising fast on the back of poor harvests.

“This is a high prices situation,” said Mr Abbassian, although he pointed to the fact the costs of cereals – and particularly rice – were below the peaks set in 2007-08.

“Rice and wheat are, from a global food security perspective, the critical agricultural commodities, not sugar, oilseeds or meat,” he said.

The increasing costs of sugar, whose price recently hit a 30-year high, oilseeds and meat are the main reason behind the rise in the FAO food index


The rise of commodity prices makes it likely that the global food import bill will hit a record high in 2011,after topping $1,000bn last year for only the second time. In November, the FAO raised its 2010 forecast to $1,026bn, up almost 15 per cent from 2009 and within a whisker of a record high of $1,031bn set in 2008 during the food crisis.

At least the "food import bill" will provide incentives to withstand or slow down the "competitive devaluation trend".....UPDATE: Asia Fights Inflation With Stronger Currencies
Wenn man überhaupt etwas positives an der Situation erkennen will dann vielleicht das die bedrohlich steigenden Nahrungsmittelpreise den bisher vorherrschenden "Währungskrieg" mit der klaren Tendenz die eigene Währung künstlich niedrig zu halten, wenn auch nicht aufhalten, so doch zumindest verlangsamen könnte.....UPDATE: Asia Fights Inflation With Stronger Currencies
Agricultural commodities prices have surged following a series of crop failures caused by bad weather. The situation was aggravated when top producers such as Russia and Ukraine imposed export restrictions, prompting importers in the Middle East and North Africa to hoard supplies.

I think it´s a safe bet that around the world subsidies & government involvement ( food stamps, price controls, ban on exports etc ) will not "deflate".....

One uselful "involvement" would be to start with the derivatives complex... ;-)

Sicherlich wird weltweit das Thema Subventionen & "Regierungseinmischungen" ( Essensmarken, Preiskontrollen, Exportbeschränkungen usw. ) in den nächsten Jahren häufiger die Schlageilen dominieren....

Eine der wenigen produktiven "Einmischungen" wäre, wenn man sich dem Thema "Derivate & Terminbörsen" mal etwas genauer widmen würde... ;-)UPDATE:

Food production is down, hunger is up and prices are rising / INFOGRAPHIC The Globe And Mail

U.N. Data Notes Sharp Rise in World Food Prices NYT

Needless to say that the NYT & GAM make no reference when it comes to the relation of prices & "sound money" .... ;-)

Überflüssig festzustellen, das es auch die NYT & GAM versäumen zumindest in einem Nebensatz die nicht unwesentliche Korrelation von Preisen und "verantwortungsvoller Geldpolitik" zu erwähnen.... ;-)

Immerhin wunderschön zu sehen das eine Firma wie Monsanto, die bei diesen Nahrungsmittelpreisen eigentlich durch die Decke gehen müßten, noch immer 50% vom Hoch notiert.....Um meine SCHADENFREUDE zu verstehen, muß man sich zwingend Monsanto - mit Gift und Genen ansehen.... Meiner Meinung nach die beste und wichtigste Doku der letzten Jahre über eine Firma die wahrscheinlich über noch bessere Lobbyisten verfügt(te) als alle Banken der Wall Street zusammen ..... ;-)


Youths riot in Algeria over high food prices Associated Press
Riots over rising food prices and chronic unemployment spiraled out from Algeria's capital on Thursday, with youths torching government buildings and shouting "Bring us Sugar

Wednesday's violence started after evening Muslim prayers. It came after price hikes for milk, sugar and flour in recent days, and amid simmering frustration that Algeria's abundant gas-and-oil resources have not translated into broader prosperity.
Food Riots Commence As The Fed's Loose Money Policy Leads To First Violence Of 2011 Zero Hedge

Mann bei Protest gegen teures Essen erschossen Die Welt

Big Picture Agriculture / Lester Brown via Reformed Broker
In the United States, which harvested 416 million tons of grain in 2009, 119 million tons went to ethanol distilleries to produce fuel for cars. That's enough to feed 350 million people for a year.... The combined effect of these three growing demands is stunning: a doubling in the annual growth in world grain consumption from an average of 21 million tons per year in 1990-2005 to 41 million tons per year in 2005-2010. Most of this huge jump is attributable to the orgy of investment in ethanol distilleries in the United States in 2006-2008.
Bond Vigilanties
The reasons behind the ugly scenes in Tunisia are down to a combination of political and economic factors, but at least part of the discontent stems from rising food and energy prices

The problem these countries face is that food and energy prices are a much bigger percentage of an emerging consumer's shopping basket than for a developed consumer's basket. Food and energy therefore carry a much higher weight in domestic consumer price indices within emerging markets, which is something I discussed last year when going over some of the risks to the emerging market story
To an extent, higher food and energy prices are a result of expansionary economic policy in the US combined with a reluctance of emerging market countries (particularly China) to allow their currencies to appreciate versus the US dollar. Would it not be ironic if the very policies that US authorities have pursued to return the US economy to growth then proceed to be the cause of global economic weakness?
Food Stamp Usage Hits New High Of 43.2 Million ZH

It´s safe to say that without similar programs in the G7 countries we would see similar "riots" like in Algeria etc.....

Man muß kein Prophet sein, um zu erkennen das in den G7 Ländern ohne ähnliche Programme längst "ziviler Ungehorsam" wie momentan in Algerien, und demnächst wohl noch deutlich mehr Ländern, zu sehen sein würden....

The food price vulnerability index Citi via FT Alphaville / Tilt

The index has been created by Citigroup and its based on the idea that a country’s central banks are more likely to have to respond to a food price shock if:

1) the consumer price index is sensitive to changes in good prices.

2) growth is strong — the chances of contagion from food prices to core CPI are strongest when demand pressures are in any case robust.

3) Relatively loose monetary policy– on the grounds
that a country already behind-the-curve might have some nasty catching-up to do if a food price shock leads to a surge in inflationary pressures overall.

And China ticks all those boxes.
Back with a vengeance Economist

Russia Imposes Inflation-Driven Price Controls: Will Use Price Caps On "Socially Important" Commodities
Russia has just announced it would proceed with price caps on a variety of foodstuffs, from buckwheat, to potatoes, assorted fruits and vegetables and all other commodities it deems "socially important" accoding to Russian newspaper
Interactive Map Of Recent Food Riots And Price Hikes ZH

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