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Some bold and not so bold macro predictions for 2010
1. The China bubble will not burst in 2010.
The "Chinese bubble" has been a pretty popular topic-du-jour over the last month or so. However, the reality is that this bubble has been building steadily since we last covered it in early April. All evidence points to it from various fundamental indicators (Chinese real estate metrics) to anecdotal (Chinese pig farmers speculating in copper). A fundamental (some would argue THE fundamental) law of markets/physics is in play but we won't see that bubble popping in 2010. We could fill a few dozen pages covering the reasons why but the two biggest drivers are the unique Chinese economic/political system and the big pile of dollars that every new highrise is being built against.
Simply put, a burst of the Chinese bubble is the most likely cause of the fall of the most patriarchal economy since Lee Kuan-Yew. The government, in a self-serving demonstration to make Dick Cheney blush, will see this thing to the edge to prevent that from happening. The framework we are accustomed to viewing modern capital flows through simply do not apply in China - QE and other ham-handed fiscal approaches are comparatively delicate when we evaluate some of the direct and indirect Chinese state-mandated fire hydrants in 2009. If we combine that with the current dynamic of US-China debt flows, this zombie can run for a while.
2. AUD/USD will spend a significant amount of time above par
The decoupling of Australia continues to garner surprise as commentators hastily swap out their rose-colored glasses when looking at the macro data. Every weak rationalization ("only 17,000 jobs lost!") in other areas becomes increasingly transparent when you put it up against the boys from Down Under. The bottom line is the RBA could blow through 5% in 2010 no matter how much we like our ZIRP. Especially as vol premiums continue to shrink, this will be an interesting story to follow.
3. The Euro will weaken and no one will care
The cries of vague "currency instability/fairness" coming out of various European channels (cough, Sarkozy, cough) are to be expected from the land of the 35-hour work week. The reality is a significant currency weakening could be both expensive (economically and politically) and ineffectual. Simplified "good vs. evil" narratives don't convert well into global macroeconomics and aggregate demand has the potential to just not catch up. The Japanese case study may not hold for a number of reasons including nature of exports, consumer credit and ongoing current account concerns. Additionally, JCT could throw a wrench in the works when that pesky M3 rears its nasty head.
4. Monthly unemployment will not be net positive in 2010
Initially, we wanted to work towards a target unemployment floor but our accounting mental gymnastics are simply no match for the BLS. There is a sneaking suspicion net jobs won't be positive for at least Q1, maybe even H1, and there is a minimal chance that we will hit the magical 150,000 mark to keep up with the population. Looking back, this will make many economics professors tear their hair out while trying to teach the great business cycle of the credit crisis. The rough guesstimate 6 month lag has long been blown out the window - the funny part is some are still not sure on which side we are.
5. The party in Rio won't be quite as wild this year
Brazil was a trendy pick in many circles (including this one) in early 2009 with some investors reporting triple-digit gains but 2010 is poised to be quite a bit tougher. An underdone bottom in the real, potential weakness in correlated agricultural and a change in the complexion of current account data point to some potentially tough times ahead. Admittedly, this is far from a home run. Brazil still has several solid macro factors in play including an indulgent BCB and some strong single-names but there's a possibility for a nasty downstream surprise in 2010.
More to come...
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So where does the Olympics fall under that equation, we're poor so give us more money?
Well the corporate sponsors don't want to cough up more funds, they want to let the public pay to watch people excel in useless skills.
What a waste all around.
Right now with temeratures in the mid 11s or 50s for you backward types there will be no winter olympics. They are covering what they have with rapidly melting artificial snow amd hoping.
Fail ... it will make me happy.
No sweat on this show - buckets of snow forecast, millions of square meters stockpiled. Get your facts right. This will be one beautiful show in a fantastic part of the world. Watch it all, warts and all, 24/7 on your HD widescreen. Perhaps we can change the channel to see the real meltdown. The Wall St. kind.
Cantwait in Whistler.
Hey Baby !!!! I dunno if you read my msg or not, so ill just say it here, happy new year to you too and to your family ....
Yes I did and good luck on your new thingy....keep us posted!
Eh, -100.
twenty more pundits will make predictions ,
most wrong ,, yet with nothing important to say we just yabber
from the WallStOnion.blogspot.com
More importantly, the Black Swan arguement is BULLSHIT. Maybe if you looked at it as a flock of Black Swans, that I could buy, but not just one measley sBlack Swan in the subprime market and here is why. When you have, concurrent epic failures across many sectors, such as rating agencies, (Moody's , S&P) regulatory agencies, (CFTC, SEC) mortgage standards, Freddie Mac & Fannie Mae, (the current scape goat) and AIG, not to mention the Black Swan in Subprime ; all at the same time?
That my friends is conspiracy. Yes, everyone's hand might of been in the toxic cookie jar at the end, but there definitely was an overhead, overreaching organized voice , that told people to put their hand in that cookie jar. Encouraged them, bribed them, and even told them "Don't worry about it-- AIG's gottcha covered. That organized force was Goldman Sachs with it's 30 independent slimy business units not reporting to each other, other than to talk Trade Ideas.
But the first one out of that cookie jar, was Goldman Sachs, and apparently with the biggest bag of cookies. So many cookies in fact that the bags split and left cookie trail crumbs all leading back to the Cayman Islands, where it is rumored that mountains of cookies all belonging to Goldman Sachs and clients and partners, many of which are washing away with the tide.
I predict a renewed interest in Vietnamese currency trading, with many taking a position of going LONG DONG.
Echoes of Clarence Thomas's infamous Long Dong Silver trade back in the '80s.
Dong?
http://www.youtube.com/watch?v=tktNZpUTMoQ
Curious, what are your thoughts on CAD/USD? Canada can't 'decouple' as much as Australia, but do you think the loonie can reach parity and stay above there for a while or head back down to the mid or low 80 cents U.S.? My feeling is that commodity currencies are going to get whacked in the second half of the year and possibly even sooner.
Totally agree with you on your China and euro calls. A buddy of mine who trades currencies thinks the greenback will rally in the first half of the year and the euro will make up some of the losses in the second half (but not all the losses).
On the jobs front, I think there is still scope for optimism, and the big surprise will be the strength of job creation in the first half of the year and the subsequent market reaction, forcing the Fed to raise rates sooner than anticipated.
The question is how soon after the Olympics Harper's government will fall and how bad will that aftect the CAN dollar. With commodities prices collapsing I say we are going back to 80 to 85 cents by mid-summer.
Sawyer
I'm predicting that Colbert will continue to attack and be victorious over the cheating speek skating Canadian Ice-Holes.
Canada is sitting fat and pretty going forward!
They have abundant natural resources. Canada has the second largest oil reserves on the planet in their tar sands, second only to Saudi Arabia. Where oil goes, so goes the Canadian dollar!
In an inflationary (hyperinflationary) commodity cycle, what do you think oil will fetch 2 years from now? In 5 years?
Canadian banks are among the most financially sound on the planet. The average citizen does not carry excessive mortgage debt, because the tax code does not allow home mortgage interest deductions. As a consequence, because there is no tax incentive to maximize mortgage debt, Canada has NO local exposure to the US foreclosure debacle. The goofy Subprime, ARM, and Alt-A mortgages have no market in Canada.
Canada is among the safest places to put your money going forward!
OilSands can only be produced if "cheap" natural gas remains abundant. When North American NG prices rise again, OilSands is history.
Remove OilSands from the picture, Canda has only a modest amount of Oil, perhaps just enough not to be a net-importer.
I concur on Canada. Things like housing bubble, travel and lesure expenditure expectations and personal debt are not as great. No war to support and govenment expenditures into the minor but significant social support activities are in place.
Reminds me of the US 20/30 years ago.
They have issues, of course. Big native population, occasional Quebec issues and fragile ecosystems require attention. But they are stable.
The last thing the Aussies need is a stronger dollar. Being a commodity based economy, exports will be hit due to shrinking demand and higher prices.
Mortgages are through the roof (10x salary) with the average house in Melbourne over $500,000...and that's an equivalent US salary. If the NAB follows the RBA's raising of interest rates (always responds swiftly on the upside), it may just pop the overextended, overheated, overexpanded housing bubble.
I think you nailed it Ozzi. I've been about 60/40 AUD to USD assets all year, just scaled back to about 50/50. If the AUD goes down to the high 70's / low 80's, this won't surprise me. Actually, I'll push some more cash into AUD to get the 4.5% bank interest rate.
Let's see!
With respect ..
costs of commodities are the cost of commodities, the AUD has been yoyo'ing around and any seller can lock in a position. Those that do not may have problems.... but since when has demand been shrinking?
from what I see the demand is reflected in the increase in commodity prices... no one has a crystal ball as to what china, japan and india need over the next 12 months but contracts are contracts and we supply and deliver...
further your 10 x salaries for wages is way off the beam for mortgages. Then look at the $500K average house price... now the latter I know full well that you have read the mainstream media and have no idea as to the real medium price houses in Melbourne (or Australia for that matter) ... pity the reporter himself (and the editor) did not look at what the data and what it represented.
and further RBA makes interest rate policy not NAB, Westpac has been the one to break the norm in applying rate increases, not NAB...
so all said and done, the AUD/USD correlation has nothing to do with the medium price of residences in Melbourne or elsewhere and we will keep on going on ..
steven keen is down under too .. and he lost his bet... we had more tools in our warchest to maintain monetary policies and whilst we are now mired in debt that is another story for another day.
Does the BDI give you any indication of demand drop?
http://www.dryships.com/pages/report.asp
Don't get confused with China's stockpiling of copper and steel.
Medium Income (since we are talking about Melbourne, take a Captain Cook at Victoria)
http://en.wikipedia.org/wiki/Median_household_income_in_Australia_and_Ne...
medium home price- Melbourne is quite a large city as a region.
http://www.myrp.com.au/melbourne_house_prices.do
http://www.domain.com.au/public/suburbprofile.aspx?mode=buy&searchterm=3000
in addition to this. Excuse the date but i could not find anything more recent.
http://www.theage.com.au/articles/2008/01/24/1201157560368.html
Unaffordable is a relative term.
Finally, I know the RBA sets policy but the major banks follow suit swiftly on the upside. I did not say the AUD/USD had anything to do with medium home prices but the AUD's strength greatly rides on the prime interest rate from the RBA and THAT effects home prices.
My point is that the pots a bubbling down under and I personally expect some popping sounds soon.
I know a girl that's an accountant in Australia, and she makes 60k a year there. She can't really afford a small condo on her salary. The housing market there is way overvalued, and even much higher when compared to the U.S. when using the deviation from the prices a decade ago. Our bubble got up to 150% of the prices or so ten years ago, but theirs are up like 300%.
They're definitely in a bubble.
with respect, if you sprout numbers be prepared to back them up and get out of the mainstream media when you are quoting misguided reports!
When RP Data-Rismark accounts for both these facts, we find that Australia’s median dwelling price is just $370,000, which is substantially less than the $500,000 figure often quoted in the media.[1]
http://www.businessspectator.com.au/bs.nsf/Article/Is-Australian-housing...
Whats the definition of 'dwelling'; a one bed room apartment, 3 bedroom house? Where I live it's approx. $480-500k for a 3 bedroom house and about $420 for a 2 bedroom unit. With the average wage at approx. $55-60k, this makes housing very unaffordable. Not in a month of Sundays will you get a house in Darwin for $370k. This figure is more than likely skewed by the relatively cheap housing available in rural and regional Australia; capital cities are another matter.
rofl .. yes I will pick Darwin NT too ... why not, the greatest influx of personnel to work on various infrastructure projects and NO BLOODY HOUSING!
Cute now try Port Hedland, Karratha ...
better still do what my clients do and expend $750K odd to build a property on a rewly released subdivision and then tie down a 5+5 lease agreement with the big australian adjusted to CPI. That doesnt take balls ,,,, there is minimal risk! Better still why not buy a RAAF, Army rental property at around $560,000 and lock in a rental with the Australian Government over 5+5+5 ...
As regards other major capital cities stop being myopic and look around. No you cant have a waterfront property, no you cant live on the beach at those prices. Forget St Ives, Kirribilli ,,, just stop being a drama queen.
Go out to the western suburbs (m.i.p. and auction heaven) and do what the plebs do! Worst house on the best street in the best available suburb, do it up. When you have repaid enough principle do what I did and sell up...
Tell you what as an example Canberra! ... at least the government has released affordable blocks. But and here is the nut cruncher .. you most probably have to work for the Government!
Proof is in the construction numbers and the financing.
You can't escape the Australian property chicken hawks anywhere. One day Australians will wake up to the disgrace that is their property bubble. People like you will be viewed as lower than child molesters.
No respect this time ..
Anon 192139 .. if you are going to quote 'facts' ensure that what you are quoting is correct. Instead of mainstream media hyberbole, understand the situation before you propose to become an expert on Oz. Further those that have written have written nonsense.
As regards the balance of the statement it is as lame as what you are!
Wondering how you calculated the equation .. must have fluked it!
No respect this time ..
Anon 192139 .. if you are going to quote 'facts' ensure that what you are quoting is correct. Instead of mainstream media hyberbole, understand the situation before you propose to become an expert on Oz. Further those that have written have written nonsense.
As regards the balance of the statement it is as lame as what you are!
Wondering how you calculated the equation .. must have fluked it!
Interesting take. I've been thinking of putting some money into EWA on the basis of
- Aussie banking system more stable
- Commodity based economy (so better handle inflation)
- Proximity to, and trading relationship with, China and SE Asia (though concerned if China bubble pops)
- Already out of recession and raising CB rate
- Thinking if nothing else, OZ will suck less than rest of world
Am I wrong in your opinion, or just too late?
Save your money and take a trip down to see it for yourself. It's a damn expensive place to live and I don't believe it's sustainable which is why I left to live in the US. IMO Australia is the US of the 80's.
For example;
$1 USD Mc Double=$2.50 AUD SINGLE Cheeseburger. Remember that salaries closely match those in the US (apart from minimum wage of course).
Good points by all parties. However, the underlying fact remains: if Chinese demand for ore dries up, Aussie house prices are TOAST. Chinese stimulus along with Rudd/Howard stimulus and low interest rates are keeping Aussie house prices up. Rudd/Howard stimulus nowhere near enough to keep prices at 6-8x (yes, these are real figures, I just sold an apartment in Perth one month ago) salaries for more than a minute.
A bubble is a bubble is a bubble, they are the same anywhere in the world.
If China stops buying, or even slows, look out below. $100k/annum bogans and blue collar, illiterates, will be looking for like work. Pushing trolleys only gets you about $20k/annum last time I checked. Let's hope the luck holds out.
Quick look at the last current account figures show exports declining, imports of capital equipment declining while imports of consumer items increasing. The stuff that makes money is in decline while those items that cost money is increasing - very scary position.
The problem with a commodities based export economy is the tendency to create a lopsided economy. The traditional manufacturing based states are in decay and sensitive to interest rate rises while those commodity based states are not. The other issue is that the commodity sector only employs about 2% of the total work force while the massive profits generated by the mining companies is generally repatriated overseas.
To Anon 191799, my wife and I earn approx. AU$100k a year and we can't afford a house in Darwin - atleast $500k for a rundown 3 bedroom house, anything decent costs around $550k+. With interest rates on the rise coupled with increased household debts, it's going to be a very interesting 12 months ahead.
Australian housing is in one of the biggest bubbles in the world, surpassed only by Dubai and China. I earn 300k+ and can't afford a house worth living in.
At the low end, 300k buys a 1-bedroom 10yr old apartment, 500k buys a basic 2-bedroom house on small block of land at least 30min from central-city. You need at least $1M to buy a 3br with a backyard with 30min of city.
At the top-end, very nice large houses (and I am not talking Palace of Versailles here) in the better suburbs can go for over $15M, and in many areas you need $5M just to crack in.
$5M!!!! I checked up some housing in the US and Europe- for way less than $5M you can get incredible places that are impossible in Australia.
But..... for the majority living in $500k - 1M houses, Australia has:
1. Relatively strict credit standards - no sub-prime, Ninja or 100yr loans here. By relative I mean vs the extremes of bubbles in USA, Britain, Japan etc. It is possible to induce another cycle of credit loosening (say, govt creating "competition" by setting up a Fannie/Freddie look-alike) to stock the bubble further, unlike in those other god-cursed places.
2. Relatively high interest rates, including 95%+ of mortgages on variable rate. I.e plenty of capacity to cut rates and immediately take pressure of household budgets.
3. Probably the strictest bankruptcy standards in the world. Plenty of room to loosen these...
4. Plenty of savings via compulsory retirement savings (known as "superannuation") These are supposed to be ring-fenced for retirement, but if push comes to shove, the govt will allow people to dip into the avoid missing mortgage payments.
5. A 4 bank cartel control 90% of mortgages. Under game theory, in a distress scenario, the more players you have the more likely one will "crack" and start liquidating or call ing in mortgages. But the Big 4 will work together to avoid starting anything - evidence of this is the Centro case study in commercial real estate.
So, i am bearish long term Australian property due mainly to extreme values, but i think the Govt and Big Banks have enough capacity to stop 1 more downturn, so the major correction is probably 7-10yrs away.
Disclosure: I am currently short property (i.e a renter).
Right... The optimist in me was thinking that AU's stricter lending standards would mean any crisis wouldn't be so bad. Unfortunately I think you're right though, the strict standards just give them room to relax them, to stoke it even further.
You missed a prime and most important reason and that is the tax deductions are available on investment properties. Negative gearing on income producing real estate means that the majority of taxpayers can reduce taxable income by having a loss making investment in real estate. If smart investors would have bought in the lower socio economic suburbs then the rents can be covered by social security payments, if those that are renting are unemployed.
I have several clients with a large property rental base. They are not concerned with the income as it is basically guaranteed, they were more concerned with the capital appreciation, that would allow them to gear up and acquire more rental properties.
Whilst land tax increased, the reduction in interest rates actually blew the negative gearing out the window, so they turned to the next tax minimiser superannuation for tax relief.
Now superannuation can acquire real estate (with borrowings) and this is being done with 'loan' warrants and proving very popular, particularly with businesses as the sale and leaseback of properties releases much needed capital that is utilised to repay debt.
So from where I sit, whilst there was no huge increase in rents from late 2008 (and I suspect ongoing through to 2011) but the increased income (through lower interest rates) just meant moving the cash to other tax effective areas. In 10 years a bust? Who knows? However speculating is a fools game when you have a very rigid social security net that pays the rent for unemployed, single mums and the like.
As regards income -v- acquisition. Banks lend 3 x salary. Remember that Paddington was a renters delight until people realised how cheap the properties where and acquired, refurbished rebuilt. Turned quickly into a trendy with increased value. Those areas are still around.
Consider the ferry, nice bargains ... but a commitment is something that most pople avoid.
supply -v- demand on real estate.
prices of $1m in places in the pilbara yet a 12% return.
why? cheaper than fly in / fly out.
i cannot see any state (or territory) government releasing enough land to force the prices down ... they (governments) are myopic and workforce needs accom so until there is sufficient housing to carry the numbers the demand will be there! The only thing that will change this is if all infrastructure spending by all of the corporates ceases. now that i doubt, but possible if china crumbles.... yet everyone still bleeting for the downfall of china and they have held it up!
btw our major trading partner is Japan .. not china ...
>> btw our major trading partner is Japan .. not china ...
And you are boasting about that? ROFL!
Nope, just stating facts.
Something that previous commentators tend to ignore!
I doubt we'll see the same real estate crisis in AU as in the US. I definitely think (and hope) housing prices will cool off significantly in the not too distant future, but I don't think it will be quite so catastrophic.
Unless it's changed significantly in the last 5 years or so, lending standards and deposit requirements are much tighter in Australia than the US. If that's the case still, it will take a pretty major price drop to end up with any reasonable % of people underwater/unable to pay on their mortgages, without that you wont have the 'foreclosure crisis' (jingle mail).
All pure conjecture, but I can't tell you how many times I've seen things like "sign up for a credit card and get a free t-shirt!" (at a football game) in the US. Not so much post crisis as pre crisis, but it was completely ludicrous how easy it was to get credit here in the leadup to this blowup.
Anyway... I'm hoping for a pretty severe price correction (30%'ish) along with a decline in the $AUD (back to around the low 70's). I'm entertaining the idea of moving back to AU in about 4-5 years, so that would make a nice property on a river (with a water right!) somewhere much more pleasantly priced :)
Oops... forgot to log in.
BanksterGate
I confess - I listened to Alex Jones yesterday and he was interviewing another character named Webster Tarpley - This is conspiracy central but just like HuffPo shares the same outrage as its right wing counterparts the following is palpable in its rage against what Jones is calling BanksterGate - Apart from the antics, this is compelling to listen to / watch.
Webster and Alex Part 1
Webster and Alex Part 2
Webster and Alex Part 3
Webster and Alex Part 4
I would be careful about who bears the 'message'
re Tarpley....
"He was a frequent host of "The LaRouche Connection", which its producer, LaRouche's Executive Intelligence Review News Service, describes as "a news and information cable television program".'
I have no idea who Tarpley is but the raw emotion of the discussion was something that I have not experienced in the past.
Ughhh, I hate gettin sucked into Alex Jones. But i haven NOTHING to do right now so here we go.
I bet not a single person predicted Google leaving China. Kudos to Google for protecting privacy, especially considering the extent of their ability to push past it.
phaesed - what are you talking about??? google is evil they track and store all (America and Eurozone included) searches, your IP etc... and in most cases it is stored in perpetuity.
The following link is to their heavily censored Chinese site (censored that is if you are searching from a Chinese IP address).
http://www.google.cn/
And so they pull out once security is threatened? Again, you take a bit of information and panic, you definitely belong on Zero Hedge.
Consider this -
Why is Google still paying $14,500/day to have certain books online in France. What about the US? What about the EXTENSIVE library project undertaken to allow free access to information? What about free GPS? What about... I could go on but that's just a waste of all of our time.
Oh, unless you don't use any of those features and believe you should pay for shit that should be available for all. Google changed the world and will continue to, I don't like privacy invasions, but perhaps you should read up on how you can protect yours by opting out of their programs.
Oh I forgot, you might be an American so there is a good probability you only read headlines and never do your own homework.
If you want privacy, I suggest you learn to use Linux and Firefox. (funny side note... both of those are free)
mmmm....digital forgery
The Internet in the US is a public resource.
As such, and until authored otherwise, all "traffic" is subject to search and store by whomever. A "user" beware and bares all risk medium if you will.
You don't like it?
Good comment, that Constitution change. Think about it, the only way to keep track of the human genome is electronic. Better protect it or else!
Dear Google,
I wish that you wouldn't accept premiums for disclosing my personal electronic information to domestic surveillance and law enforcement.
Please quit profiting from crime and recommend that a US Constitutional Amendment be voted on that digital information is an individual right. The individual owns any and all of their electronic information and what is done with that information.
Oh, and part 2, the Constitution is an ENDURING document, not subject to interpretation as there is clearly a means to revise and change it. The End
Wow... you could so re-write that as:
Dear Google, I didn't bother to read the fine print, the big print, the blaring all over the media print, so why are you doing this to me?
In the meantime, I have an option ARM deal for you.
I predict Bing will move into China like gangbusters.
Google is not going to leave China and the market share that they have. Google is in it for the money. Look how they went along with censoring the search engine for the Chinese government.
http://www.ft.com/cms/s/0/f65a4ba6-ffd7-11de-ad8c-00144feabdc0.html
Google has said it will end the controversial censorship of its search service in China and risk being thrown out of the world’s most populous internet market, following what it claimed were Chinese-based attempts to hack into its systems and those of other international companies.
It also said it had found evidence of attempts to break into its Gmail system, with partial success in two cases, and many other attempts to trick “dozens” of human rights activists around the world in order to access to their email.
Ya know? Thanks for posting the link... I guess nobody reads more than one headline at a time. Classic ZH. (like me noticing one of the 3 typos today)
MK thanks for the link - this is from the Google blog
http://googleblog.blogspot.com/2010/01/new-approach-to-china.html
So I guess Google is not evil afterall, nice that they will no longer censor results in China like they have been doing for the past four years and in doing so may have to close down their google.cn operation. Excuse me for being cynical but it would seem their motivations might have more to do with a hostile business environment (e.g. cyber attacks, corporate espionage) than with free speech and human rights.
The "right" thing usually must find a commercial conveyance..... Plus the current powers that be need to rebuild their "Human Rights" creds. Tibet will continue to get flushed for the big bucks, but Google can make the splash over "net neutrality". Looks like the administration is hoping that at least some of the walk n knock army returns....
My Five for year end 2010:
U6 @ 20%
USDX @ 79
GC @ $1600
S&P @ 875
80% of all Harvard MBAs living in mamas basement.
Uh, how do I delete all the porno I have been looking up on Google?
Save yourself the search time and just go directly to:
www.youporn.com
Don't stay up too late!
"Brazil still has several solid macro factors in play"
Wow! As a Brazilian, i have to tell you some things...
Brazil has its own credit bubble.
Wages are very low and unemployment is much higher than that in the official statistics, wich consider as "self-employed" the miserable street vendors of oranges.
All growth in "domestic consumption" in recent years is the result of an enormous expansion of credit in the country.
Credit growth is a bubble, like the credit bubble in the U.S. There is a thing called SERASA, which is a national database of "bad payers", people who failed to pay some debt. People with their names in SERASA can't get new loans, can't get more credit.
Every day that passes increases the proportion of Brazilians with their names in SERASA, and with the continuity of the credit bubble, won't be a long time before the day when 70% of the population will be recorded in SERASA, and no longer will be elegible to get credit anymore. Then, the bubble busts.
Here’s one for Show and Tell and what it means to you when your dollar becomes a Yankee Doodle dropout as the Fed counterfeits its paper bank notes to steal your buying power—at home…and abroad.
David Lambert gave the following scenario of lost dollar value between 1970 and 1996 in Your Right to Buying Power (1997 edited):
In 1970 I was contemplating buying a piece of property in Sundance, Utah, on a blue trout stream for $100,000. So was a Japanese businessman. We both knew Robert Redford was setting up a Film Institute there, and that land values would soon skyrocket, but unfortunately, neither of us could afford it.
Time passed. In 1996, I went back to look at property in Sundance, and coincidentally, so did a Japanese businessman. A similar parcel was now listed for $300,000. I could now afford it, but no longer felt it was a bargain.
“You see, back in 1970, when the asking price was $100,000, the Japanese businessman would have had to round up 35 million yen to buy it. That was the exchange rate at the time. But 25 years later, things were quite different. Although the price for me was $300,000—triple the former asking price, the Japanese man had to pay only 30 million yen. That’s the new exchange rate. The price hadn’t tripled for him, it had fallen by almost 15%.”
This is just one of the games the central bankers play with your wealth. Isn’t America way past due in shutting down the Fed?
Thank you. A most excellent way to describe relative values.
JR- good example of relative purchasing power Yen/USD. However, if your Japanese businessman was invested in the Nikkei at its peak he would be down 75%. I do not know how far Japanese RE has dropped from the peak, but it is a long way down also.
Money and credit creation is but a mutually agreed illusion, never more so than the present. The property, I assume, has not changed at all.
That’s an excellent point. I used this scenario as one example of wealth destruction by a paper currency that has lost 95% of its value since 1913.
I love America. I don’t like what America has become—potholed streets, moral filth, fraudulent financiers running loose, government and economic control by international bankers bent on driving all peoples into one big global plantation with no individual rights. Money is a moral, economic, and political issue.
As Ron Paul said long ago, “Since the monetary unit measures every economic transaction, from wages to prices, taxes, and interest rates, it is vitally important that its value be honestly established in the marketplace without bankers, government, politicians, or the Federal Reserve manipulating its value to serve special interests.
“All great republics throughout history cherished sound money,” Paul said. “This meant that the monetary unit was a commodity of honest weight and purity. When money was sound, civilizations were found to be more prosperous and freedom thrived. The less free a society becomes, the greater the likelihood its money is being debased and the economic well-being of its citizens diminished.”
Job growth has to be positive, or they will kill equities. The census has to force job adds.
well gold may be some answer to challenge to fiat.
Jim Sinclair’s Commentary
MOPE finds some obscure Chinese fund manager who hates gold and loves the greenback and blasts it all over the place.
The COMEX crowd grabs the bunks and runs the underfinanced longs. What a joke in light of the fundamentals below.
Gold is going to and through $1224.10, $1274 -$1278 and on to $1650 on or before January 14th, 2011. The US dollar is TRASHED by the many administrations of Keynesians.
Hey dumpster
I am not a gold bug, but it certainly is a hedge. But do not discredit John Maynard Keynes. Keynes was a successful investor in his own right and the lone British voice condemning the Treaty of Versaille (which impoverished Germany, giving rise to Hitler).
I believe Keynes would be enraged at the wanton waste of precious public capital being squandered in his name.
Today's brave new world- Rob from the Poor and give to the (filthy) Rich.
how do you force job ads ... are you hiring LOL
Boring... Full fledge US-China trade war with far reaching geopolitical implication. This is my prediction for 2010 and beyond. American companies pulling out from China. Google first Who is second? http://googleblog.blogspot.com/ . FREE TIBET!
anyone know how I can get my hands on the details of the CMHC's mortage portfolio? Years ago the Fed provided an excel spreadsheet that provided all sorts of interesting details on Alt-A and subprime mortgages. Looking to see if I can dig around the Cdn mortgage market as well..
anyone?
thx!
http://www.cmhc-schl.gc.ca/en/hoficlincl/mobase/mobase_006.cfm
also have 182 billion of interest rate swaps on their books. average 4 year maturity
I agree on all except #5. The Chinese will have a great time in Rio.
hmmm. medium home price... medium being about 2,000 SF? ;)
kayman ... its alright if your not a bug lol
but they have not done so bad .. with their gold.
regarding keynes
from gary north
Keynes called for restricted entry into markets. Keep the unwashed speculators out. Make capital markets a club of English gentlemen. What might do this? A transfer tax.
Keynes was an elitist -- the consummate English snob. He resented grubby Americans, who could make fortunes when cultured British gentlemen could not. He therefore resented the American stock exchange. There was altogether too much freedom associated with it in 1936 -- and it had been much worse in the 1920s. He and his disciples have dedicated their careers to this crucial elitist task.
CENTRAL BANK POLICIES, 1920-29
He did not mention the secret meetings between the head of the New York Federal Reserve Bank and the head of the Bank of England in the 1920s. Rothbard told the story about these meetings in his 1963 book, America's Great Depression. Establishment economists have ignored this ever since.
Hey dumpster
I agree that as a human being JMK was a disagreeable elitist snob, however I side with the Keynesians to the extent that without government intervention during the Great Depression, free market capitalism would have been wiped out.
Today is vastly different than the early thirties. Back then the country wasn't mired in direct debt and indirect debt through social programs.
Best regards
Guliani Thinks Wall Street Bonuses are "Wonderful"
http://thinkprogress.org/2010/01/12/giuliani-bonuses-wonderful/
here's a wildcard for 2010 -
*
http://moveyourmoney.info/
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this is picking up steam. watch ordinary people leave the "Too Big to ..." banks in droves and bring their money home to small local banks and credit unions.
*
what sort of impact will that have ?
Watch the full video peoples:
The Money Masters
- http://video.google.com/videoplay?docid=-515319560256183936#
Listen to the bits about colonial script and interest (and then reconsider what ZH might just stand for)
I remember what Bill Still advocated, but who would Masters of Zero Hedge want to control the money system?
The congress or private banking?
Totally disagree about Brazil. Yes, Olympics is overhyped, but the fundamentals are solid. Growth might not be explosive like in the past, but Brazil is going to be the next India. See my take: http://www.frontieroutlook.com/?p=35
-Alex
11 Big Surprises for the Next Decade
China Bluff Exposed, Regime Overthrown- China's communist regime continued to print money, lending it everybody that wanted and didn't want it. The giant housing, infrastructure, and manufacturing came to a violent crash when the debts where not paid and inflation forced the authorities to tighten despite massive unemployment. The combination of high inflation and high unemployment in the urban centers took the people to the streets. The Chinese citizens refused to accept state intervention in the economy and their personal life demanding more personal and economic freedom resulting in prolonged civil unrest which almost reached a full scaled civil war. The collapse of the Chinese regime and economy resulted in a colossal bust for commodity prices, albeit temporarily and caused a severe recession in Australia, Brazil, Russia, Argentina, and the Gulf States.
http://israelfinancialexpert.blogspot.com/search/label/predictions%202010
For what it's worth, I wrote down my 2010 predictions a few days ago...
http://saulsays.blogspot.com/2010/01/2010-economic-predictions.html
It would be nice to own a time machine.
Excellent predictions. I especially found #1 thought provoking and a reinforcement of my sentiments. Thanks!
1. Double dip recession by mid year
Sorry guys, but I don't think we are out of the woods and blue sky's upon us. Instead, all major problems have been deferred rather than being faced head on. This has delayed the day of reckoning, but not for long, and it will be a doosy. I believe new lows in the stock markets, new lows in sentiment, new highs in unemployment figures. I expect this to be in March - June timeframe, but of course it could be sooner or later by a few months. This time Australia will not escape the fallout so readily, and will start to get some serious unemployment strain. The problem with this leg down is that all the tricks they pulled to get us out of the last nose dive won't work this time. Volatility will come back too - big up and down days. More people will get scared this time as the realise that the powers that be have lost control. Comparisons the to the 1930's will be everywhere, and people will be talking "Depression".
"there's a possibility for a nasty downstream surprise in 2010"
that surprise is up to china
I agree with the author 100%. We are starting to see a major change swelling in search demand/supply curves for investment information in 2010. It is turning much more fear based again, no longer looking for yield but capital preservation. Our software at www.TheInternetTImeMachine.com usually sees this stuff 45 to 55 days before the press (talking head at CNBC) pick up such information. We study what people are looking for (search demand) and then compare it to supply (think "results" in Google) to find profitable niches and ideas worldwide.
Curt
Here is a video on what I mean...
http://bit.ly/SupplyDemandCurves
Do not trust the cad dollar the gov does not support a strong dollar. There economy can not decouple off the us economy so it may reach parity but the downside risk outweighs any potential upside move. The housing market is in bubble territory , which the BOC disagrees with so they wont raise rates. 500k for a 30 year old bungalow 2 hours drive to Vancouver, when interest rates rise, you will see the end of Canadian banks not losing money.
I find it amazing how much the housing market swings province to province in Canada. My sister and her husband bought a house in winnipeg, for close to 100k. Now it wasn't the biggest house of course but it was far from a shack, quite comfortable for a family of 3 or 4 complete with a refurbished basement. Being from Manitoba i find it quite shocking to discover just how much other people are paying for houses in other countries.
I expect this to be in March - June time frame as before all the important occasion , but of course it could be sooner or later by a few months. I think this time Australia will not escape the fallout so readily, and will start to get some serious unemployment strain.
Regards replica bags