World Trade

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Frontrunning: July 25





  • ECB's Nowotny - ESM banking license could be advantageous (Reuters) - just keep regurgitating headlines until they generate a short squeeze
  • IMF Says China Downside Risks Significant as Growth Slows (Bloomberg)
  • Moody's cuts outlook on EU stability facility to negative (Reuters)
  • Rome places spending controls on Sicily (FT)
  • Big banks' glory days feared to be gone for good (Reuters)
  • China's CNOOC scoped Nexen, partnered, then pounced (Reuters)
  • Germany backs Spanish austerity plans (FT)
  • Are 2012 Games one too many for London? (Reuters)
  • Euro Crisis Spreading East Damps Growth, Development Bank Says (Bloomberg)
  • Japan Flags Yen-Sales Impact as BOJ Eyes More Easing (Bloomberg)
 
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Thunder Road Report On The Death March: Approaching A New Financial System





If you are reading this, you are probably a member of what the sociologists would term middle class (albeit at the upper end). This is precisely the segment of society which is poised to come off worst from what is coming. Here is a very disturbing idea. As this crisis develops, if you are an equity portfolio manager and you want to outperform the market, you are going to have to position your portfolio so that it benefits most from your own wealth destruction and that  of your family, friends and colleagues. Almost everybody is going to lose and there aren’t many places to hide. This is deeply unpleasant but you can blame the central planners. I’ve written about my own investing, e.g. gold and silver, equities in terms of Maslow’s Hierarchy of Needs, etc. In this Thunder Road Report (below) and going forward, I will discuss this middle class theme and highlight positions I have in individual stocks, etc. The only good thing that can  come out of this is a rise in awareness. It’s just awful.

 
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Obama Opens Car Front In Chinese Trade War





In Ohio today, President Obama will announce the latest World Trade Organization suit against China, this time addressing "unfairly" imposed duties on U.S. auto exports.  The Administration will argue that these duties violate international trade rules. Whether or not China will reply that buying US 10 year paper at 1.6% is also unfair remains to be seen. But at least someone is happy. As reported earlier, ADP reported just 4,000 manufacturing jobs were added in the US in the last month: these are the same people who are supposed to be doubling US exports in Obama's latest 5 year plan. Good luck. Anyway, here is the take of the Alliance for American Manufacturing to this simplistic attempt to trade union for long-term stability with America's largest trading partner.

 
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Guest Post: Coal - The Ignored Juggernaut





Given the rather weak near-term and long-term outlook for US coal demand, it’s not surprising that within such a capital-intensive business, a number of smaller coal producers were hit recently with bankruptcy rumors. Indeed, even large cap names like Arch Coal have seen an escalation of concern over debt levels. Accordingly, many have concluded that coal -- in an era of solar, wind, and natural gas -- has finally displaced itself due to its problematic extraction, distant transportation, and overall costs. Is coal finally going away as an energy source?

Not a chance.

Indeed, everything currently unfolding for coal in the United States is precisely what is not unfolding for coal globally. Prices to import natural gas to most countries via LNG remain sky-high, easily protecting coal’s cost advantage. And the demand for coal in the developing world remains gargantuan. Accordingly, just as with oil, lower US demand simply frees up supply to elsewhere in the world. The global coal juggernaut rolls onward.

 
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Step Aside Business Cycle: Presenting The Business Swirl





The business cycle ought to be thought of as a series of discrete phases, each one quite distinct from the other, rather than as a smooth and uninterrupted process through time. This is how Goldman Sachs describes what is a compelling view of the dynamics of macro acceleration-and-deceleration and expansion-and-contraction and how these separate phases of their so-called 'swirlogram' can be mapped into asset class performance. This means that unlike traditional business cycle momentum jockeys and the extrapolating 'rulers' of the world, trade positioning should depend not only on the current state of the cycle but also on the near-term phase transition. As the cycle turns, so do assets; economic acceleration serves as an early indicator of looming shifts. Hence, vigilance in monitoring the business cycle with an eye towards identifying cyclical turning points is instrumental to a disciplined investment process. These lessons are timely too. Back in March, the business cycle peaked. The GLI shifted from the Expansion phase to the Slowdown phase; growth remained positive but acceleration turned negative. More ominously, April GLI growth was quite modest, with downward revisions to the last few months of data too. If the current downbeat data trajectory is extended, current GLI readings may prove to be overly optimistic. And should acceleration remains negative (which today's Philly Fed will drive), there is not much of a growth buffer to prevent the cycle from slipping into the Contraction phase, where the message for asset markets is clear and sobering.

 

 
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Frontrunning: May 10





  • Game Changer: China Starts Drilling It Own Rig Wells (China Daily)
  • Cisco says customers delay tech purchases (FT)
  • Greeks May Hold $510 Billion Trump Card in Renegotiation (Bloomberg)
  • Liquid heroin addicts heart Chairsatan: Bernanke Gets 75% Approval From Investors in Global Poll (Bloomberg)
  • How a Radical Greek Rescue Plan Fell Short (WSJ)
  • Spain takes 45% stake in Bankia (FT)
  • Facebook admits to mobile weakness (WSJ)
  • FDIC Would Seize Parent, Allow Units to Operate While Mess Is Cleaned Up (WSJ) - Good luck
  • AT&T Fast Network a Work in Progress in Race With Verizon (BBG)
  • Pointed Spat Over World Trade Spire (WSJ)
 
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Guest Post: The New World Order: Paranoia Or Reality?





The phrase “New World Order” is so loaded with explosive assumptions and perceptions that its very usage has become a kind of journalistic landmine.  Many analysts (some in the mainstream) have attempted to write about and discuss this very real sociopolitical ideology in a plain and exploratory manner, using a fair hand and supporting data, only to be attacked, ridiculed, or completely ignored before they get a chance to put forward their work.  The reason is quite simple; much of the general public has been mentally inoculated against the very whisper of the terminology.  That is to say, they have been conditioned to exhibit a negative reaction to such discussion instinctively without even knowing why....  The Liberty Movement has always defined the NWO as a concerted effort by elitist organizations using political manipulation, economic subversion, and even war, to centralize global power into the hands of an unelected and unaccountable governing body.  The goal; to one day completely dismantle individual, state, and national sovereignty.  However, what I and many others hold as fact on the New World Order is not enough.  We must examine the original source and how we came to our mutual conclusions.      

 
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Frontrunning: April 30





  • Only the cattle cars are missing: Greece opens detention camp for immigrants as election looms (Reuters)
  • China really wants that Iran oil - China mulls guarantees for ships carrying Iran oil (Reuters)
  • U.S. eyes testy China talks, Chen backer expects Chinese decision (Reuters, FT)
  • Possible arsenic poisoning probed in death of coroner's official (LA Times)
  • Europe’s Anti-Austerity Calls Mount as Elections Near (Bloomberg)
  • Law firm Dewey dumps executive; talks with rival end (Reuters)
  • Greek bank appeals for fresh equity (FT)
  • Banks seek to put pressure on small rivals (FT)
  • Obama falls short of meteoric expectations abroad (Reuters)
 
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Michael Krieger On The Rebirth Of Barter





China is preparing to avoid U.S. sanctions on Iran by paying for oil with gold.  Not only that but, as Forbes contributor Gordon Change also mentions, China has already been bartering with Iran to get a hold of petroleum using among other goods, Chinese washing machines, refrigerators, toys, clothes, cosmetics, and toiletries. The barter trade works, but Iran needs cash too - hence Gold. Thus, the leadership in America in its infinite stupidity has actually accelerated the demise of the U.S. dollar as the world’s reserve currency. In a similar move on a more micro level, the government of Spain in a similar desperation has banned the use of cash transactions above 2,500 euros.  How do you think citizens are going to respond to this?  People are already in the streets. Everything is going to go black market and to a barter system.  It will happen country by country as governments get increasingly desperate and the authoritarian clamp down continues.  It will happen on an increasing level until all of these house of cards bureaucratic states fail and something new is reborn - just as we noted in a small town in Greece recently.

 
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Is The Real Indicator Of The Global Economy In Africa?





The WTO recently announced it expects global trade to fall again from 5% to only 3.7% growth - significantly lower than the 20-year average growth rate of 5.4%. But ThomsonReuters notes this week that their additional comment that 'severed downside risks' could put a further dent in growth rates could well have foundation in some very real data. Traffic through the Suez Canal - a key cargo transport route - has nosedived in recent weeks and months and is currently only just above the flat-line. While not a perfect indicator, given that 8% of world trade travel this route and the rising tensions occurring geographically, nevertheless the trends in global GDP growth and trade volumes have mirrored one another very closely and this downturn suggests considerably more contraction in global growth than even the most pessimistic of sell-side research shops believes is possible.

 
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