Jim O'Neill

Jim O'Neill Is Back To Pitching The Great Consumption Potential Of Turkey, Bangladesh And Iran... Next Up - Uranus

There are permabulls, and then there is Jim O'Neill. The Man U fan explains why, after it has been consistently discredited, people do not believe in decoupling: "because they are not prepared to get it." And just because people are really stupid and just don't get it, O'Neill pitches Indonesia, Turkey, Nigeria and Bangladesh, and, oh yes, Iran, as the "Next 11" once again. Because, gasp, 9 of them are up year to date. We wonder if Jim recalls what happened to the Russian market in 2008. Somehow we think his selective memory may have shut that one out. Also, it turns out Jim O'Neill does not appreciate fan mail bourne out of "weird blog site" commentary: "I received quite a few incoming hostile emails in response, and references to some weird blog sites who apparently opine on my views." Oops.

Why The "World Is Down, But Far From Out" Even If It Is Worse Than You May Have Believed Originally

The man who back in May wrote "Why the world is better than you think", only for the world to turn out about as bad as thought, if not much worse, Jim O'Neill, has just released the sequel to his required reading Kool Aid, "The World Is Down, But Far From Out" (is that a tacit apology for the previous title full of sound and fury?) which is currently making the rounds at all pension and mutual funds as well as all other institutions whose existence depends on the perpetuation of the illusion that the market is undervalued and that America is solvent. The latest essay provides absolutely nothing new and original in terms of though, and merely regurgitates the traditional expectation that China will rescue the world, as it continues decoupling from everyone else. We wonder if it has ever dawned on anyone that the only reason why China is so "resilient" in the face of the ongoing depression is because all of its numbers are completely made up? But that is apocryphal so we wont even ask that rhetorically, and accept at face value O'Neill projection that Chinese GDP will increase by over $7 trillion in the next 9 years, or nearly 3 times more than the US, even as both countries issue about $20 trillion in incremental debt (not bad: $2 of debt for $1 in GDP - even economists can probably figure that out). And where will this growth come from if not from the traditional driver of near-zero cost growth: low interest debt? Oh, so Jim is basically saying the world will grow arithmetically, as the credit bubble (now in its global iteration) grows semi-exponentially. Truly wonderful news. Yet even O'Neill, in his permabullish element, finally agrees that his entire forecast is based on one and only variable coming true - the Fed's ongoing debasement of the dollar: "Over the past couple of months, as evidence has accumulated that the US economy is slowing once again, US financial conditions have not tightened. Indeed, as a result of the aggressive policies of the Federal Reserve, conditions have remained very easy. In order for our more positive underlying views of the world to bear fruit, it is important that this situation persists." Basically, the entire global growth story, decoupling included, is based on what side of the bed the chairman of the politically and special interest independent Federa Reserve wakes up on.

Goldman Asks If US Slowdown Is Priced In

Dominic Wilson, Director of Global macro and market research, asks the most critical question relevant for all market participants:i.e., has the market priced in the US economic slowdown. And after meandering without much conviction on both sides of the argument, and of course invoking the Goldman trademark "decoupling" (which at least he notes is "always challenging to trade" to all except to Jim O'Neill) Wilson states: "A simple picture of the 10-year yield and the SPX would suggest that bond investors are more negative and we have some sympathy with that notion." Of course, applying the traditional dodecatuple reverse squid psychology slant to this exercise, provides little help to those seeking the answer of what to do with their meager and declining savings (or even Other People's Money).

Presenting The Findings Of The Working Group On Extreme American Inequality

America has long had a working group on financial markets (whose sole purpose some suggest is to keep stocks from plunging in times of turbulence), so why not have a working group on that other much more critical phenomenon of US society: a trend of unprecedented unequal wealth distribution, which can be summarized as simply as pointing out that 1% of US society holds more wealth (or 33.8% of total), than 90% of the remaining portion of America (26.0%), and also is in possession of more than half of all stocks, bonds and mutual fund holdings in the US. Well, there is, even if is not formally recognized, and made up of the same distinguished professionals as the PPT (Geithner, Bernanke, Gensler and Schapiro). Hereby we present some of the key findings of the Working Group on Extreme Inequality.

Jim O'Neill Suggests It May Be Time For The US To Give Up On Our Own Middle Class, And Focus On China's

A floundering Jim O'Neill has never seen decoupling as wide as it is now, and the man is now openly hallucinating, seeing every non-developed country as a potential BRIC (see this Friday's FT OpEd: How Africa can become the next Bric). Well, of course, China needs its resources. Soon every open mine will be a "BRIC" to be exploited by Chinese interests, which come, see, and suck the place dry as they build yet more vacant cities, ghost towns, and highways to nowhere, hoping they can sustain the illusion of the world's greatest bubble for a few more months. Which is precisely all those who are betting on a collapse of China are playing it not with China CDS, but those of Australia: for when the worm turns, Bad in Beijing, will be nothing compared to the Massacre in Melbourne. Yet even Jim's nagging conscience is not allowing him to blindly continuine to ignore the other side of the coin, namely that he is once blatantly wrong, and decoupling never did, and never will occur: "What can emerge if Ben Bernanke and the Fed is wrong? What if this
slowdown is sustained, and we actually move into another recession? The
American Dream needs something new. In conventional terms, it needs
booming private investment and booming exports. And they might happen. I
find it hard to see how net exports were such a genuine real negative
contributor to Q2 GDP as reported today, and I strongly suspect this
will be reversed. But what if it isn’t? The scope for more conventional
fiscal stimulus is hardly available. So in this light, the US needs its
own BRIC equivalent. How about something real on the infrastructure
front ? ( a nice mode of transport downtown Manhattan from JFK would be a
sign). How about literally some forced measures to shift the auto user
on masse from conventional fuels ( combined with a major hike in
gasoline taxes)?" Jim's conclusion: now that China is actively moving to developing its own middle class, perhaps it is time for the US to finally roll over and admit its consumer are on longer the world economic dynamo. He asks whether it is time to "borrow a few hundred million BRIC consumers?" Surely China will be ecstatic that the US will now be funding the development of its own middle class. As for ours...Oh well.

Jim O'Neill Is Back

After a brief hiatus, Jim O'Neill is back, and this time is taking it easy on taunting the bears. In his weekly letter he has some rather lucid questions, the first one of them being the observation of the paradox of the surging Chinese trade deficit in light of the weakening renminbi. O'Neill states: "the GS trade weighted CNY has actually weakened by around 1.75pct since
they “ de-pegged”, by “undershooting” the rise of the Euro, Yen et al." Don't anyone tell Schumer that China's whole revaluation bluff was nothing but (and in fact a smokescreen for further devaluation) or there will be more theatrical demands for blood. O'Neill also looks at recent Chinese regulatory developments and notes that the push "to bring any off balance sheet vehicles for disguised lending, back on
the balance sheet, and to be prepared to raise fresh capital" is sensible but hopes that "if this is going to be implemented, if necessary, offsetting stimulatory measures would be introduced." Sure enough, China also has to pay for the Keynesian funeral for a long, long time. Not surprisingly, O'Neill looks at the one-time record pick up in the German economy courtesy of a massive EUR devaluation and extrapolates far into the millennia: "there seems to be a belief that Germany is on the verge of a jobs “ miracle” , and there is more and more talk of a period of stronger domestic demand." Sorry no. It is nothing like that and is purely a function of the ever more volatile seesawing in key FX crosses, on a trendline to global deleveraging contraction. Germany merely borrowed from the future courtesy of a plunge in EURUSD. It is already paying for this now and this quarter's data will be a major disappointment.

China Demands US Stop Meddling In Its Affairs, Wants Acceptance As World Power, Issues Thinly Veiled Threat

It has been a while since political bickering over who can piss the farthest was an issue of global concern. Today, China communist party's mouthpiece People's Daily has released an essay in which the country once again resorts to thinly veiled threats against the US, and demands that not only the country's territorial demands in the South China Sea be uncontested, but that the US accept China as a global power , as the alternative could promptly generate the appearance of rocky relations between the two countries and "no one would like to see the negative effects rocky relations would bring to China, the United States and possibly to the world as a whole." Of course, with China the world's biggest creditor nation, and holder of anywhere between $800 billion and $1.2 trillion (assuming all that London flotsam is really Chinese stealth accumulation), Beijing can rest assured the essay has been duly noted. Of course, with the administration doing one wrong thing after another, it would not be at all surprising if the president's advisory henchmen seek to push the tenous relationship as far as it can go, and truly test the decoupling (this time it IS different, Jim O'Neill said so) hypothesis, however with nothing but downside if decoupling is finally proven true (breathholding not advised).

Frontrunning: July 28

  • Ratings Understate ‘Dangerous’ Chinese Local Government Risks, Dagong Says (Bloomberg)
  • Arcelor Mittal warns on pace of global recovery (FT)
  • Portugal Takes Eurozone Derivatives Set-Aside Decision (FT)
  • Ready for the Next Trillion-Dollar Bailout? (Heritage Foundation)
  • Drip after drip of deflation data (Telegraph)
  • Atlas Didn't Shrug; He's just sitting on his hands while he confronts regulatory and tax uncertainty. (Barrons)
  • Gold bears are wrong, smart money isn't selling (Minyanville)

31st Sequential Decline In Baltic Dry, On The Verge Of Breaching 1,900

And the leading indicators continue collapsing (ECRI later today): the BDIY has posted its 31st sequential decline, and has closed just barely above 1,900, at 1,902, and back to March 2009 lows. One wonders when the BRICmaster, Jim O'Neill, will ever put the appropriate spin on this particular statistic in his weekly permarosy missives.

Golman Goes Bearish On Dollar; Time To Short Euro Again

Just like Goldman top ticked the EURUSD trade to within a few hours of the multiyear low of the pair when it issued its downgrade from 1.35 to 1.15, so today's notice that Goldman is now bearish on the dollar should be enough reason for everyone to short the living daylight out of the euro. Amusingly even as the GS Global Market team sees a major slowdown in the US, somehow the rest of the world (BRICs) is supposed to pick up the slack, even as Jim O'Neill himself has now said he expects China to decelerate materially. Also, according to Goldman's "GS Bond Sudoku Model" the fair value on the 10 Year is at 3.1%, "with a very grim macro backdrop needed to justify yields at 2.5% or below." Well if the Sudoku says so... Altogether confusion is rampant, but the only thing that matters is that Goldman is now buying dollars and selling euros.

Jim O'Neill's Latest Spin: "The Quicker China Slows, The Better"

It was only a month ago that Jim O'Neill was openly taunting those who refused to suckle on Goldman's Kool Aid teat: "dear grizzlies…….bet your worried about today’s rally?   See u later." (sorry, we won't let this go for a long time). Then again, those who did believe Goldman's and David Kostin's advice that the market would be 30% higher now, are down to 70% of AUM (the very same David Kostin who on September 12, 2008, the weekend before Lehman blew up, predicted a 12% rally by the end of 2008 on the road to "S&P 1,400"). So, yes Jim, the grizzlies are far less worried at this point. Wish we could say the same for the bulls. Which incidentally may explain why Jim O'Neill has been completely gone from the scene for the past month. Luckily, he has now reappeared, and is once again dispensing bullishness to all who care to listen. The quote du jour this time: "While I can understand why some of the China bears will be full of the
joys of Spring right now, this is a “desired slowing” and unlike some
of the many issues in the West, the quicker they slow, the better." And we thought Bob Pisani had trademark to the "a nuclear holocaust is a victory for the bulls" phrase. Needless to say, we disagree with everything Jim has to say, except for his world cup pick. That said, we certainly enjoy his spin for the comedic content.

Jim O'Neill On The CNY Regime Change

What specifically is happening, and will happen to the CNY? Like many others, I went to bed last night thinking that how Beijing allowed the fix to move today would be key. In fact, it was unchanged, and since then spot has moved notably from 6.8275 down to 6.8055 last print. I am reminded, that truly technically, today’s fix reflects the previous days trading, so in this regard, where we close will determine tomorrow’s fix, and in some sense today’s fx was not relevant. Given that the PBOC statement said that the daily trading band will not be widened ( beyond the 0.5pct which it has never experienced), this means the limit for today is 6.7930 I believe. Of course, it also means if this is all true, then we could have in theory a maximum 2.5pct rise of the CNY against the Dollar this week. I guess if that happened, and you times it by 52 even Congress would be happy, a 130pct move….I doubt that Mr. Schumer…… - Jim O'Neill, Goldman Sachs

Jim O'Neill Explains Global Economics Through The One Thing He Knows Well: Football

The Red Knights' attempt to buy ManU may have ended, but that won't curb the Goldman's BRICster's enthusiasm for all thing football. In his most recent Rose-Glassed commentary, Jim O'Neill explains why the world is great in 8 simple world cup parables, for all the ADDed traders who spend about 10 times as much time watching football than actually trading. Yet even the permabull is unable to contain himself in calling out the EU, ECB and the IMF in their Stress test hypocrisy: "The UK, the economy, the FSA, fiscal policy, and (oh dear), the team plays again tomorrow……..With a bit of luck, I wont be able to watch the match against Algeria which, if it is anything like the last one, will be much worse than a Spanish bank stress test…." Jim, you missed the news that according to the regulators in your favorite Europe, Santander is the healthiest bank in Europe. You have nothing to worry about: England should win by the same credible one thousand-nil, as the STD news.

Baltic Dry Index Rolls Over

The Baltic Dry index, which is the closest proxy for China's bubbleliciousness, has dropped to one month lows, and continues accelerating its drop to the downside. The dry bulk shipping sector, which was the bubble of late 2007 and early 2008, does not appear poised to make a repeat appearance just yet. As concerns over commodity overstocking in China, and Australian extraction concerns courtesy of the recent supertax, keep investors awake at night, is CNBC's "favorite" index about to retrace its 2009 lows? Furthermore, if the recent Afghanistan raw material discovery is even close to scale, the next big "thing" in Asia will be the Railroad Dry index, as construction of the world's biggest railway hub in Kabul is likely already underway. Throw in a few nuclear power plants, a couple of smelters, discover some bauxite and soon Afghanistan will eclipse Australia and Brazil as the premier commodity production center in the world. Is it time for Jim O'Neill to rebrand the N-11 index, formerly known as the BRICs, to the A index?