When will we hit bottom?

Global trade has dropped significantly.

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Now some one may say that this graph is represented in USD and hence due to the strength of the USD and global currency wars is not a ‘real’ indication of the global trade situation.

Okay let’s look at another graph.

 

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If that does not look too good, try combining them.

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Get the picture?

And still going down – my guesstimate is another 6 months.

Which company is safe in this situation – in which industry?

 

 

Negative Japan?

Maybe after negative interest rates Japan should be called the House of the Setting Sun?

 

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Kuroda and the Bank of Japan should look at the net capital outflows and ask themselves whether negative interest rates were such a good idea.

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Australia – the lucky country?

Australia – is being called the lucky country – having avoided a recession and an increase in GDP figures for the 2015 calendar year.

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Everyone celebrating about GDP growth exceeding expectations in the final quarter 2015 – the Australian Bureau of Statistics (ABS) reported that Australia’s economic growth was a higher-than-expected 0.6 per cent for the December quarter and 3 per cent for the year. (1)

Even BIS Shrapnel – is in on the party (2) stating that – to quote ABC – “Despite a volatile start to the year and a drop in commodity prices, Australia has avoided a recession and looks unlikely to have one…”

Wow – I must have missed something.

This is only the beginning – both China and Japan – the two larger trading partners have huge problems – and as outlined in a previous blog – global trade reducing at apace.

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The GDP supported by an increase in consumer spending, construction and mining – funny how all mining companies though – are recording extraordinary losses for the period in question – definitely not sustainable.

Dig deeper – the ‘real’ net national disposable income fell 0.3 per cent during the quarter on this measure, and was down 1.2 per cent for the year, in contrast to a 2.8 per cent trend rise in GDP.

 

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Chart courtesy of the ABS.

Real net national disposable income continued falling, even while GDP headed back towards average growth. 

Per capita, this measure of economic wellbeing has now been flat or falling for 16 consecutive quarters (four years), the longest period it has gone backwards since the ABS started calculating the figure in 1973.

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As I said – the party is over – far too early to say that we missed a recession – let alone be gullible enough to believe the economists.

With China having to have a depression – Japan having the need to hyperinflate through stupidity – I do not think that we have dodged anything.

1. http://www.abc.net.au/news/2016-03-02/gdp-economic-growth-data-december-quarter-2015/7213540

2. http://www.abc.net.au/news/2016-03-01/australia-dodges-recession-unlike-other-commodity-economies/7209662

 

 

China seeks easy option

Moody’s downgrades China’s credit-rating outlook to negative.

Note – this is internal debt situation – I have commented on this Ad Nauseam and more recently here.

https://millermatters.wordpress.com/2016/02/01/unintended-consequences-the-great-chinese-depression-2016-part-ii/

China’s surging debt burden has to be addressed and all Moody’s has done is questioned the government’s ability to implement reforms necessary.

“The government’s financial strength may come under pressure if it takes on liabilities from troubled state-owned companies, while capital outflows have limited policy makers’ scope to stimulate the weakest economy in a quarter century.”

China’s intervention in equity markets – that big stick that does not stem the collapse in the SHCOMP having dropped 23 percent this year.

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Plus the intervention in the foreign-exchange markets has heightened uncertainty about the leadership’s commitment to reforms.

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“The government’s ability to absorb shocks has diminished and we want to signal this in the negative outlook,” Marie Diron, a senior vice president at Moody’s, said in an interview on Bloomberg Television. Authorities “have stepped backward in their reform steps and so that is creating some uncertainty.”

Yes stepped backwards – from the necessary economic reforms – the Government has instead increased the available liquidity into the domestic markets – more debt in a vain attempt to shore up the ailing manufacturing- export industry.

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This is very loose monetary policy – in contrast to what should be undertaken- it is a complete about face from what I had expected from the Government – they have the whereforall in the brains trust to implement the changes – but for some reason digressed into a loose monetary approach which is doomed to fail.
On the currency front – technically they should just float the Yuan – get off the USD peg and allow the foreign exchange markets to dictate the value – instead they intend to fix the price to a ‘basket of currencies’ – this for such a large economy is in itself a very interesting evolution.
A long and windy road – against a backdrop of carpetbaggers and hedge funds – shorting shit out of the currency.

 

Full story can be read at Bloomberg

http://www.bloomberg.com/news/articles/2016-03-02/china-credit-outlook-cut-to-negative-from-stable-by-moody-s