Page 2 of 2 CREDIT BUBBLE BULLETIN Just the facts
Commentary and weekly watch by Doug Noland
April 7 - Financial Times (Deborah Brewster): "Art prices plunged during the
first quarter of the year as cash-strapped collectors looked to unload works by
postwar masters that had earlier boomed in price along with the stock market.
The Mei Moses index ... shows art prices fell 35% in the first quarter, having
held up during earlier months of the financial crisis."
Currency Watch
The dollar index rallied 1.9% this week to 85.79 (up 5.5% y-t-d). For the week
on the upside, the Mexican peso increased 3.3%, the Brazilian real 1.8%, the
South Korean won 0.6%, the Australian dollar 0.5%, and the Canadian dollar
0.2%. On the downside, the Swedish krona declined 3.9%, the Danish krone
2.5%, the Euro 2.5%, the Swiss franc 2.3%, the Norwegian krone 2.2%, the
Taiwanese dollar 1.6% and the British pound 1.4%. In the emerging currencies,
the Iceland krona declined 6.3%.
Commodities Watch
April 9 - Bloomberg (Gavin Evans): "Wool prices in New Zealand, the world's
second-largest exporter, fell to the lowest in 30 years as the slump in global
construction sapped flooring demand for new buildings and home renovations."
Gold declined 1.6% this week to $879 (down 0.4% y-t-d), and silver fell 3.1% to
$12.34 (up 9% y-t-d). May Crude slipped 35 cents to $52.15 (up 17% y-t-d). May
Gasoline dipped 0.7% (up 40% y-t-d), and May Natural Gas sank 5.0% (down 36%
y-t-d). Copper jumped 3.7% (up 47% y-t-d). July Wheat dropped 7.3% (down 13%
y-t-d), and July declined 3.6% (down 2% y-t-d). The CRB index dipped 0.5% (down
0.7% y-t-d). The Goldman Sachs Commodities Index (GSCI) gained 1.0% (up 8.6%
y-t-d).
China Reflation Watch
April 7 - Bloomberg (Shamim Adam and Kevin Hamlin): "China's stimulus plan may
fuel the nation's economic recovery this year, helping counter a global
recession that is likely to drag growth in Asia's developing countries to the
weakest in 11 years, the World Bank said. Developing East Asia, which excludes
Japan, Hong Kong, Taiwan, South Korea and Singapore, will expand 5.3% this
year, less than a December estimate of 6.7%..."
April 8 - Bloomberg (Li Yanping): "China's exports fell by at least 10% in
March from a year earlier, the International Business Daily reported ... The
'double-digit' decline was smaller than February's drop…"
Japan Watch
April 10 - Bloomberg (Keiko Ujikane and Toru Fujioka): "Japan's record 15.4
trillion ($153billion) stimulus package may give a short-term boost to the
nation's economy, while leaving it saddled with a debt burden that will smother
future growth, economists said. The plan unveiled yesterday by Prime Minister
Taro Aso, who faces elections this year, is aimed at creating jobs in an
economy heading for the worst recession since 1945. Equal to 3 percent of gross
domestic product, the measures will add to debt that the OECD already forecasts
will rise to 197% of gross domestic product next year."
April 7 - Bloomberg (Mayumi Otsuma): "The Bank of Japan will provide more funds
to commercial banks by broadening the range of collateral it accepts in an
effort to encourage lending to companies. Governor Masaaki Shirakawa and his
policy board today decided to accept municipal and central government bonds
that are sold directly to investors to ease credit…"
April 8 - Bloomberg (Toru Fujioka): "Japan's corporate bankruptcies rose to a
six-year high in March as companies struggled to obtain funds to close books in
the final month of the fiscal year. Bankruptcies climbed 14.1% from a year
earlier to 1,537 cases…"
India Watch
April 9 - Bloomberg (Kartik Goyal): "India's industrial production fell the
most in more than 14 years ... Output at factories, utilities and mines
declined 1.2% in February from a year earlier…"
April 8 - Bloomberg (Kartik Goyal and Rakteem Katakey): "India's passenger car
sales grew at the slowest pace in at least seven years as the economy cooled
and a credit crunch damped demand. Car sales gained 1.3% to 1.22 million in the
fiscal year ended March 31…"
Asia Reflation Watch
April 7 - Bloomberg (Bomi Lim): "South Korea will extend a $100 billion state
guarantee on banks' overseas debts until the end of this year to help lenders
through the credit squeeze."
April 6 - Bloomberg (Shamim Adam): "Asian economies are poised to 'spring back'
from the biggest slowdown in more than a decade as lower interest rates,
government stimulus plans and tumbling commodity prices spur domestic demand,
HSBC Holdings Plc said ... Asian governments have unveiled more than $700
billion in increased spending, tax cuts and cash handouts…"
Latin America Watch
April 7 - Bloomberg (Renato Andrade): "The risk associated with corporate
funding in Latin America has increased over the last six months, Moody's ...
said ... More than half of the companies in the region have 'high exposure' to
funding risk, Moody's added."
April 6 - Bloomberg (Sebastian Boyd): "Chilean economy shrank the most in
almost a decade in February from the same month a year earlier ... The economy
contracted 3.9% in February from the same month a year earlier…"
Central Banker Watch
April 7 - Bloomberg (Jacob Greber): "Australia's central bank cut its benchmark
interest rate to a 49-year low after policy makers signaled the economy faces
its first recession since 1991. Glenn Stevens lowered the overnight cash rate
target by a quarter-point to 3%..."
Fiscal Watch
April 10 - Bloomberg (Courtney Schlisserman): "The U.S. budget deficit surged
in March as tax payments by companies and individuals dropped and the
government spent more to rescue banks and revive the economy. The excess of
spending over revenue climbed to $192.3 billion, compared with a gap of $48.2
billion in the same month a year earlier. Spending increased to $321.2 billion,
and revenue fell 28% to $129 billion. The deficit six months into the 2009
fiscal year already exceeds the record set in the entire previous year."
Real Estate Bubble Watch
April 6 - Bloomberg (Ari Levy and Dan Levy): "Laura Hecox was baffled when an
officer from the San Diego County sheriff's department came to her home in
February and said she was being evicted. She hadn't missed a rent payment on
her four-bedroom house since moving there a year-and-a-half earlier. 'They told
me to leave, to get a few things together,' said Hecox ... 'I got booted out
just like that.' Hecox didn't know the home she was renting in Chula Vista,
California ... was in foreclosure because her landlord was a year behind on
mortgage payments. The new owner was a group of investors led by JPMorgan
Chase…"
April 8 - Bloomberg (Hui-yong Yu): "Vacancies at U.S. malls and shopping
centers rose to their highest in more than 10 years ... according to ... Reis
Inc. More empty stores and lower rents are ahead 'unless conditions change
dramatically,' said Victor Calanog, director of research at the…firm."
MBS/ABS/CDO/CP/Money Funds and Derivatives Watch
April 8 - Bloomberg (Scott Lanman): "The Federal Reserve may offer investors
longer-term loans at higher interest rates to buy commercial mortgage-backed
securities, aiming to protect the central bank's balance sheet while acceding
to an industry plea. Lobbyists in the commercial mortgage-backed securities
industry say the Fed needs to provide loans of at least five years, rather than
the current three-year limit, to avert a meltdown in the market. Fed officials,
wary of granting the request outright, are considering a compromise in altering
terms of its $1 trillion emergency-lending program."
Unbalanced Global Economy Watch
April 9 - Bloomberg (Theophilos Argitis): "Canada's jobless rate rose to the
highest in seven years in March ... The unemployment rate rose to 8% from 7.7%
in February…"
April 7 - Bloomberg (Brian Swint): "U.K. manufacturing dropped the most in at
least four decades as the global economic slump throttled demand for goods from
cars to ceramics. Production fell 6.5% in the three months through February…"
April 9 - Bloomberg (Jacob Greber): "Australia's jobless rate jumped by the
most since the nation's economy was last in a recession in 1991 ... The
unemployment rate rose in March to 5.7% from 5.2%..."
April 7 - Bloomberg (Gemma Daley): "Australia will take the lead in a A$43
billion ($30.5 billion) project to build a high-speed Internet network after
turning away bidders whose plans the government said were inadequate. The
government will own at least 51% of a company ... The network will provide
Internet access 100 times faster than currently available speeds, it said."
Bursting Bubble Economy Watch
April 6 - Bloomberg (Matthew Benjamin): "Joseph Ramelo gave up searching for
work in January to return to school, two months after he was laid off ...
Antonio Poe is struggling to get by doing part-time landscaping ... after
losing his job as an electrician. While such workers are feeling real pain from
the recession that began in December 2007, they're not represented in the 8.5%
unemployment rate ... They are part of a broader group that includes those who
want a job but have stopped looking ... and those who want full-time ... but
have to settle for part-time ... A measure of underemployment that counts those
people has almost doubled over the past two years, to 15.6%..."
California Watch
April 7 - Los Angeles Times: California, which just completed one of the
largest municipal bond offerings in U.S. history, will go back to investors for
another big chunk of change this month. This time, the state plans to sell
taxable rather than tax-free bonds. A portion of the deal will be subsidized by
U.S. taxpayers under Congress' new Build America Bonds plan, part of the
economic-stimulus program. State Treasurer Bill Lockyer may try to raise as
much as $4 billion via taxable bonds either next week or the week of April 20…"
New York Watch
April 9 - Bloomberg (Oshrat Carmiel): "Home sales in the Hamptons, the New York
oceanside resorts favored by financiers and celebrities, plunged 67% in the
first quarter as Wall Street job cuts and bank failures stifled demand for
second homes."
April 7 - Bloomberg (David M. Levitt): "Manhattan office rents fell 6% in the
first quarter as financial companies cut jobs and relinquished space amid the
U.S. recession. Rents dropped to $65.01 a square foot from $69.44…"
Muni Watch
April 9 - Bloomberg (Jeremy R. Cooke): "U.S. state and local government bonds
posted a second consecutive weekly gain as borrowers led by New York City sold
about $5.4 billion in new issues. New York boosted by 45% its sale of general
obligation bonds to $883 million to feed demand ... Washington state, Illinois
and California's State Public Works Board brought to market deals totaling more
than $1 billion during the holiday-abbreviated week."
Speculator Watch
April 7 - Bloomberg (Bei Hu): "Global hedge fund assets may fall by more than
20% this year as managers ease redemption curbs put in place in 2008, a report
from International Financial Services London said. Assets overseen by the
industry already shrunk 9% in the first two months, largely because of $115
billion of investor withdrawals…"
Crude Liquidity Watch
April 9 - Bloomberg (Arif Sharif): "Dubai has begun disbursing a $10 billion
fund it raised to battle the impact of the global credit crisis and its economy
is past the worst of the danger, the emirate's top finance official said. 'We
are talking about big sums here,' Nasser Bin Hassan al-Shaikh, director general
of Dubai's Department of Finance, said ... 'The bad days are over' for Dubai's
economy, which is stabilizing and will gradually recover, he said."
Doug Noland is a market strategist for the Prudent Bear Funds.
(Republished with permission from PrudentBear.com.
Copyright 2005-2009 David W Tice & Associates. All rights reserved.)
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