Frontrunning: August 10
- Buffett Shortens Bond-Holding Duration After Inflation Warning (Bloomberg) - Twenty-one percent of holdings including Treasuries, municipal debt, foreign-government securities and corporate bonds were due in one year or less as of June 30, Omaha, Nebraska-based Berkshire said in a filing Aug. 6. That compares with 18 percent on March 31, and 16 percent at the end of last year’s second quarter.
- No Need for New Fed Stimulus (WSJ) - When Federal Reserve Bank of St. Louis President James Bullard suggested 11 days ago that the Fed beef up its "quantitative easing" to avoid a Japan-like deflation trap, he said he merely hoped to provoke debate. Well, he got that and more. Since then, incessant chatter that the Fed's Open Market Committee could announce new stimulus measures at its meeting on Tuesday has breathed life into both the stock and bond markets.
- UK RICS House Price Balance for July -8% - lower than expected: UK Economic Fears Rise As House Prices Dip (FT) - House prices began to fall for the first time in a year in July as sellers rushed to put their properties on the market and buyers became harder to find and more cautious. After a year when the recovery in house prices surprised almost everyone and brought relief to Britain’s stretched banks, the return of a buyers’ market threatens to increase jitters in a fragile economy.
- Fed Efforts to Spur Growth May Move Markets More Than Economy (Bloomberg) - “If they’re small scale, the direct effects are relatively small,” said Marvin Goodfriend, a former research director at the Richmond Fed. “But to the extent that they signal the Fed’s concerns and what direction they are, and the Fed’s willingness to take actions given the signal of their concerns, they could have big effects.”
- Unemployment: What Would Reagan Do? (WSJ) - Friday's grim labor report is the latest confirmation that our economy
is not recovering. A loss of 131,000 jobs and a stagnant 9.5%
unemployment rate are bad enough. But a deeper look—at the little-known
civilian employment-population ratio—shows how hard it's going to be to
pull out of our crisis, and why the Obama administration's policies are
unlikely to do the job.
- China July Trade Surplus Surges as Imports Soften (BusinessWeek) - China’s trade surplus unexpectedly climbed to an 18-month high and exports grew to a record in July, adding pressure on Premier Wen Jiabao to allow faster appreciation of the yuan. The gap surged 170 percent from a year earlier to $28.7 billion, the customs bureau said, exceeding the forecasts of all 29 economists in a Bloomberg News survey. Exports rose 38.1 percent to $145.5 billion and imports climbed 22.7 percent to $116.8 billion, the bureau said on its website today.
- China Tells Banks to Take Back Trust Firms Loans, People Say (Bloomberg) - China’s banking regulator ordered banks to transfer off-balance sheet loans onto their books and make provisions for those that may default, three people with knowledge of the situation said.
- Incomes Fall in Most Metro Areas (WSJ) - Personal incomes fell across the U.S. last year except in areas with a high concentration of federal government and military jobs, the Commerce Department said Monday. They declined most in places with a lot of housing and finance jobs. Among the 52 metro areas with populations of more than one million, in only three did both net earnings and the broader measure of personal income both rise. All three had strong ties to the federal government: the Washington, D.C., area and two areas with a large military presence, San Antonio and Virginia Beach, Va. In all three, the biggest gains were among workers in the federal government and the military; private sector compensation fell.
- Shirakawa Signals Japan Recovery Withstanding Yen’s Advance (BusinessWeek) - Bank of Japan Governor Masaaki Shirakawaindicated the nation’s recovery has been resilient to the yen’s advance, supporting his board’s decision to keep policy unchanged today. “We are well aware that the yen’s strength is a downside risk for corporate sentiment,” Shirakawa told reporters after the bank kept the benchmark rateat 0.1 percent and maintained the current size of its credit programs for lenders at a meeting in Tokyo today. “On the other hand, we have to assess the currency’s effect on the economy in a well-balanced manner.”
- Australia Business Confidence Down 2 Points In July Vs June (WSJ) - Australian business confidence fell broadly in July as weakness in the manufacturing, retail and construction sectors grew and more than offset strength for the mining sector, according to a monthly survey by National Australia Bank issued Tuesday. The business confidence index fell 2 points to 2 points in July, while its business conditions index lost 3 points to 5 points through the same period. Broadly, the data painted a picture of a disparate economy, with the mining sector enjoying buoyant conditions due to strong prices and Asian demand, while other sectors struggle amid higher interest rates and weakening consumer confidence.
- China To Close Factories In Energy Drive (FT) - China plans to close outdated factories owned by more than 2,000 companies in heavy industries in the clearest sign yet of Beijing’s determination to meet its low energy targets even at the expense of economic growth.
- Housing Gauge Signals First Price Drop in a Year (BusinessWeek) - A U.K. housing-market gauge signaled the first decline in prices for a year in July as demand for homes fell, a sign the economic recovery may be losing steam. The number of real-estate agentsand surveyors saying prices fell exceeded those reporting gains by 8 percentage points, compared with a positive reading of 8 in June, the London-based Royal Institution of Chartered Surveyors said in an e-mailed report today. A third more real-estate agents reported an increase rather than a drop in properties for sale.
- German Exports Rise Again (WSJ) - German exports surged in June, confirming a revival in Europe's largest economy after a severe recession and, until recently, a sluggish recovery. Germany posted strong growth last quarter but the extent of the rebound wasn't clear until the release of the latest trade data, which showed a 3.8% rise in exports from May and a €14.1 billion ($18.78 billion) trade surplus.
- Tavakoli: JPMorgan's Losses From Indecent Overexposure (HuffPo) - JPMorgan Chase's fixed-income revenue fell almost 28% to $3.6 billion in
the second quarter, down from $5.5 billion in the first quarter, and
down from $4.9 billion for the same period last year. JPMorgan blamed
an interest rate squeeze and bad results in the credit markets and the
- Pentagon Plans Steps to Reduce Budget and Jobs (NYT) - Defense Secretary Robert M. Gates said Monday that he would close a military command, restrict the use of outside contractors and reduce the number of generals and admirals across the armed forces as part of a broad effort to rein in Pentagon spending. Mr. Gates did not place a dollar figure on the total savings from the cutbacks, some of which are likely to be challenged by members of Congress intent on retaining jobs in their states and districts. But they appear to be Mr. Gates’s most concrete proposals to cut current spending as he tries to fend off calls from many Democrats for even deeper budget reductions, and they reflect his strategy of first trying to squeeze money out of the vast Pentagon bureaucracy.
- Economy Lost Momentum While I Was Pulling Weeds (Bloomberg) - The post-mortems on the July
employment report made me realize I’d missed the recovery.
- We Do Not Have Liftoff (AEI) - Nearly two years of zero percent interest rates, a $1.2 trillion
expansion of the Federal Reserve's balance sheet, and a nearly $800
billion fiscal stimulus package in February 2009 have failed to produce
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