Archive - Dec 25, 2010 - Story

After a year of endless propaganda surrounding the imaginary jobs boom, which as we have been pointing out for months, is nothing more than the permanent transfer of full time jobs to part time, perhaps the one chart that captures the full effect of said "recovery" is the comparison of number of employees added by China's sweatshop behemoth FoxConn, which at 300,000 in 2010 was just under one third of all non-farm payrolls added by the entire United States in the same year! In other words, this year one company added nearly one third the total number of jobs as the entire world's greatest economy.

BusinessWeek has finally outdone itself: the recent Bloomberg acquisition has come up with what can be described as the definitive visual summary of the key themes and trends of the past year. What we certainly can appreciate is the magazine's attempt to be as focused, concise and cohesive as possible, which is why the punchline is as follows: "Normal, Jobs, Stuck, Currency, Spills and Gaga say all that needs to be said about 2010." From an economic perspective it is the jobs and the currency that are the all important variables. And unfortunately, both are moving in the wrong direction. But before we get into the meat of this series, with part one (jobs) and part two (currencies) here are two appetizer charts of what the biggest movers and shakers in 2010 were, together with a focal node chart that demonstrates the key strange attractors of the past year.

Down on the Exchange the tape inches along

Brokers bargained and traded as they hummed an old song

The Fed struggled and struggled to make payrolls renew

They went back to their playbook and began QE2

The new airport pat downs put some folks in a funk

Prompting one fellow’s warning don’t dare “touch my junk”

A lady named Kagan has joined the Supremes

And Rahm left the White House with mayoral dreams

Following Friday's failed 3 Month Bill auction, things in China are once again getting interesting, just as the rest of the world has decided to sleep right into 2011. The PBoC, in a surprise move, hiked its lending and deposits rates by 0.25%, the second time the bank has done so since October 19, when its then-raise was the first in 3 years. And by all accounts the PBoC is not done: consensus is for three 25 bps moves by the end of 2011: that the PBoC is starting early may be an indication that the country is starting to seriously worry about its soft landing prospects. Yet one thing that is certain is this move cements the CNYUSD peg: despite all the rhetoric, China will keep the currency peg come hell or high water, as it eliminates any monetary trump card Bernanke may have (just as Germany loves being part of the EUR which has such insolvent countries as all PIIGS members backing up the rear). What is unclear is whether the PBoC has now decided to avoid the RRR hike path as the preferred approach to combating inflation. It is assumed that his action will have a soothing impact on the Chinese 7 and 30 Day Repo rates come Monday, as else more failed bond auctions are certain to be in store for Shanghai in 2011.

So often with managing wealth, it is too easy to focus on the really important issues that are making central bankers behave like drunken poker players. While we have (in our opinion) covered the big issues very well during 2010, we would be ashamed if we didn’t finish the year by expressing our unbridled love for the Good in the World – gold, commodities, and the commodity driven theme. In our opinion, the humongous demographic & sociographic wave slowly and surely pushing China and India into the 21st century is creating an enormous end market for commodities. Which commodities? Take your pick – oil, wheat, corn, copper, rare earths, we could go on and on. The fact is, there are millions of people on the verge of permanently entering the middle class - the very economic stage in life that many of us take for granted in the developed World. These new entrants will undoubtedly adopt better diets (read: agriculture), require transportation to work (read: energy) and demand a roof over their head (read: anything housing related). The simple question to ask is “who sells commodity related stuff?”