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Citi Sees Risk Of "Sharp Surprise To Upside" In Today's Trade Deficit Number
Today at 8:30 am the US trade deficit for December will be revealed. The consensus is $40.5 billion. Yet the final number could come well worse of even the bleakest expectations. Citi's Stephen Englander looks at export patterns by key trading partners and concludes "that the risk of a big negative surprise and a number beyond the pessimistic Citi forecast is not out of the question. We already have indications from a number of US trading partners about their exports to the US and these indications point to a sharp surge in US imports." In addition to the logical substantial deterioration to GDP numbers, a surge in the trade deficit would have one other key consequence, namely that "a deterioration in US trade performance, if it persists, would suggest that much of the direct impact of QE2 was spilling abroad." In other words QE worked... Just not for the US. Look for a sharp drop in the dollar if Englander is proven true.
Full note:
US trade deficit -- risk of sharp surprise to upside
The consensus expects a modest deterioration of the US trade deficit from $38.3bn to $40.5bn in the US trade data to be released on Friday. Citi economists expect the trade deficit to come in at $42bn. Some data suggests that the risk of a big negative surprise and a number beyond the pessimistic Citi forecast is not out of the question. We already have indications from a number of US trading partners about their exports to the US and these indications point to a sharp surge in US imports (Figure 1). The countries in our sample of early reporters report export increases in the US of about 4.6%, about 2.5bn. Historically this is associated with an increase of close to $5bn in imports. The countries in our sample are not oil exporters so this suggests that there is risk from the non-oil components beyond about $1bn of deficit deterioration implied by already published import and export price data. We do not have nearly as stung early indication on exports but it is worth noting that loaded outbound containers from west coast ports fell in December for the first time in four months, so there is some indication that export growth may have stagnated a bit.
These data rarely have much of an immediate currency impact these days, and often the impact is indirect through whatever revision occurs in GDP estimates. However, a deterioration in US trade performance, if it persists, would suggest that much of the direct impact of QE2 was spilling abroad. Broadly speaking it also suggests some USD risk down the road, as global investors may come to be reluctant to willingly finance a widening US trade deficit at the rates that are on offer.
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Tyler, "$40.5 million" ... Billion?
Currency revaluation
Who can remember the days when a million dollars was a lot of money? The entire Manhattan Project cost $2 billion or so? Today Manhattan syphons $2 billion from the rest of the country every 15 minutes or so. Thanks a lot to The Fed system.
Why the MSM, western banking cartel, and our government are shitting their pants over the Egyptian Revolution.
Islamic banking
Also known as participant banking Islamic banking refers to a system of banking or banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. Sharia prohibits the payment or acceptance of interest fees for loans of money (Riba, usury), for specific terms, as well as investing in businesses that provide goods or services considered contrary to its principles (Haraam, forbidden). While these principles were used as the basis for a flourishing economy in earlier times, it is only in the late 20th century that a number of Islamic banks were formed to apply these principles to private or semi-private commercial institutions within the Muslim community.
Modern Islamic banking
Interest-free banking seems to be of very recent origin. The earliest references to the reorganisation of banking on the basis of profit sharing rather than interest are found in Anwar Qureshi (1946), Naiem Siddiqi (1948) and Mahmud Ahmad (1952) in the late forties, followed by a more elaborate exposition by Mawdudi in 1950. The writings of Muhammad Hamidullah 1944, 1955, 1957 and 1962 should be included in this category. They have all recognised the need for commercial banks and their perceived "necessary evil," have proposed a banking system based on the concept of Mudarabha - profit and loss sharing.
In the next two decades interest-free banking attracted more attention, partly because of the political interest it created in Pakistan and partly because of the emergence of young Muslim economists. Works specifically devoted to this subject began to appear in this period. The first such work is that of Muhammad Uzair (1955). Another set of works emerged in the late sixties and early seventies. Abdullah al-Araby (1967), Nejatullah Siddiqi (1961, 1969), al-Najjar (1971) and Baqir al-Sadr (1961, 1974) were the main contributors.
The early 1970s saw institutional involvement. The Conference of the Finance Ministers of the Islamic Countries held in Karachi in 1970, the Egyptian study in 1972, the First International Conference on Islamic Economics in Mecca in 1976, and the International Economic Conference in London in 1977 were the result of such involvement. The involvement of institutions and governments led to the application of theory to practice and resulted in the establishment of the first interest-free banks. The Islamic Development Bank, an inter-governmental bank established in 1975, was born of this process.
The first modern experiment with Islamic banking was undertaken in Egypt under cover without projecting an Islamic image—for fear of being seen as a manifestation of Islamic fundamentalism that was anathema to the political regime. The pioneering effort, led by Ahmad Elnaggar, took the form of a savings bank based on profit-sharing in the Egyptian town of Mit Ghamr in 1963. This experiment lasted until 1967 (Ready 1981), by which time there were nine such banks in country.
So if I don't want to be continously screwed by banks, I can either convert to Islam or move to North Dakota. Tough choice.
I'd go with North Dakota.
Think of the bacon. The choice is obvious.
So the results of "participatory banking" are...? And why is this a threat? Religious bankers making business decisions. Sounds like religiofascism.
Actually, this is the way most banking is done in the Islamic States. I really don't have a problem with a fee based system. I would actually like to have a choice of both, to see which one I feel better with. Competition is a good thing.
My question is why interest free banking should be so concerning to western banks,etc. I would think that they would be more concerned with the fact that Islam believes in hard money, a concept that seems to be gaining traction in the west of late as well.
Does the number really matter? I focus on the term "DEFICIT". As in, eternal trade deficit.
I wonder if the words "deficit" and "defecate" come from the same root word. I'm too lazy to check.
Big deal. All we have to do is keep printing. That will make everything good.
We are looking at a possible vacation to Europe in October. The prices today are up about 15% from what they were when we looked two weeks ago. I know the dollar weakened against the Euro but holy cow. I will keep an eye on it.
I still can't believe the Euro is so strong. There doesn't seem to be any shortage of Europeans in this City. I still laugh at the concept that we are called "ugly Americans" and then I watch the behavior of the Europeans. And I won't even mention how much waiters and bartenders hate them. I guess the phrase "when in Rome" is supposed to apply to Americans but "when in New York" does not apply to the Euro-refuse.
It is amazing what kind of behavior some europeans engage in, but it is facilitated by their innate sense of superiority, not that they have anything to feel superior about since the 19 th century
I don't know about the dollar, but look for the treasuries to sell off.
Sell off even more? They have already gotten killed.
I think I'm pretty smart, even for a Village Idiot. But when it comes to guessing the direction of these fixed markets I am clueless, thus the idiot moniker. I actually bought call options on TLT around the time QE2 was starting. I got my clock cleaned before I finally extricated myself. I was lucky to get out with a couple Tootsie Rolls and a can of Spam.
The one time I decided not to fight The Fed and I got crushed. So then I decided to fight The Fed on a couple of equity puts. The truck backed up and ran me over again.
Who can really be buying NFLX, PCLN and LULU right now, thinking they are good long-term investments?
Long term investment? What's that?
look, these zombie markets exists since the beginning of this century. There is no way to fundamentally understand whats going on and why. Though, it is not necessary: daily take the position that would hurt the most 'investors'. Obviously today u have to be long US T-Bond. Check this out tonight.
I hear the ghost of jesse livermore in your comment.
If we blew out deficit expectations treasuries would sell off, but we didn't.
My positions held this morning: FAS and NUGT
Betting on a weaker dollar trend.
This is the same firm that predicted Jan 3 would be the high for the year in equities.
I think we come under $40 billion as oil imports fell big time in Dec.
citigroup is a bunch of losers...
And after that report evidently needs to get its eyes checked. The Dollar is dropping anyway this morning so I guess mission accomplished.
Thanks for the cold water to the face. The kool aid has been tasting awfully good recently. If these countries are willing to continue to impoverish their people by selling us even more stuff at greater subsidy, then this war will last a lot longer than i thought.