Page 3 of 3 CREDIT BUBBLE BULLETIN No conundrum, again
Commentary and weekly watch by Doug Noland
The dollar index declined 0.6% this week to 80.20 (down 1.4% y-t-d). For the
week on the upside, the British pound increased 2.9%, the New Zealand dollar
2.6%, the Australian dollar 2.5%, the Brazilian real 1.7%, the Swedish krona
1.6%, the Norwegian krone 1.2%, the South African rand 0.7%, the Swiss franc
0.5%, the Japanese yen 0.3%, the Euro 0.3%, and the Canadian dollar 0.1%. On
the downside, the South Korean won declined 0.9%, the Mexican peso 0.8%, and
the Taiwanese dollar 0.6%.
Commodities Watch
June 11 - Bloomberg (Grant Smith): "The International Energy Agency raised its
global oil-demand forecast for the first time in 10 months on signs that the
economic slowdown is abating. The adviser to 28 nations increased its global
oil demand estimate for
this year by 120,000 barrels a day to 83.3 million barrels a day, driven by
consumption in US and China. Consumption worldwide will contract by 2.9% from
last year, the biggest drop since 1981…"
June 11 - Bloomberg (Zainab Fattah): "Copper imports by China, the world's
largest consumer of the metal, climbed for a fourth month to a record in May…
China's urban fixed-asset investment surged 32.9%... in the first five months
from a year earlier as the government pumped money into building railways, oil
pipelines and low-cost housing."
Gold ended the week down 1.7% to $939 (up 6.5% y-t-d). Silver fell 3.7% to
$14.83 (up 31.3% y-t-d). July Crude inflated another $3.76 (4-wk gain of
$15.20) to $72.20 (up 62% y-t-d). July Gasoline jumped 5.1% (up 93.4% y-t-d),
and June Natural Gas increased 0.6% (down 1.4% y-t-d). September Copper rose
4.2% (up 70% y-t-d). July Wheat fell 6.1% (down 4.3% y-t-d), and July Corn
dropped 4.2% (up 4.5% y-t-d). The CRB index rose 1.7% (up 14.3% y-t-d). The
Goldman Sachs Commodities Index (GSCI) surged 3.7% (up 35.3% y-t-d).
China Reflation Watch
June 12 - Bloomberg: "China's new lending doubled in May and industrial output
and retail sales climbed more than economists estimated… New loans jumped to
664.5 billion yuan ($97 billion) from 318.5 billion yuan a year earlier…
Industrial-output growth accelerated to 8.9% and sales rose 15.2%..."
June 10 - Bloomberg (Zainab Fattah): "China's property sales and investment
accelerated, adding to signs that growth in the world's third-largest economy
is recovering. Sales rose 45.3% to 1 trillion yuan ($146 billion) in the first
five months of 2009 from a year earlier and real- estate investment growth
quickened to 6.8%... Sales grew 35.4% in the first four months."
June 10 - Bloomberg: "Zhao Hang, who helped devise China's auto-stimulus
package, is facing demand from car buyers battling an unexpected consequence -
two-month waiting lists. 'Eight friends have asked me to make calls or write
notes to contacts to help speed purchases,' Zhao, president of the
government-linked China Automotive Technology & Research Center said…
Beijing drivers, used to leaving showrooms with new cars the same day, now have
to wait about three weeks for a Hyundai Motor Co. Yuedong Elantra, China's
bestselling car, or as long as eight weeks for a Honda Motor Co. CR-V
sport-utility vehicle."
June 11 - Bloomberg: "China's exports fell by a record as the global recession
cut demand for goods produced by the world's third-largest economy. Overseas
sales dropped 26.4% in May from a year earlier… China… has cut taxes, boosted
lending and pledged to keep its currency stable to sustain overseas sales amid
the worst global slump since the Great Depression."
Japan Watch
June 12 - Bloomberg (Toru Fujioka): "Japan's household sentiment rose to a
14-month high in May, adding to signs that the deepest postwar recession may be
easing."
India Bubble Watch
June 12 - Bloomberg (Kartik Goyal): "India's industrial production unexpectedly
rose for the first time in three months, suggesting interest-rate cuts and
government stimulus measures are helping resuscitate demand in Asia's
third-biggest economy. Output at factories, utilities and mines advanced 1.4%
from a year earlier after a revised 0.75% drop in March…"
Latin America Watch
June 12 - Bloomberg (Jens Erik Gould): "Mexico may join Russia, Brazil and
China in increasing financing for the Washington-based International Monetary
Fund, Mexican central bank Governor Guillermo Ortiz said."
June 8 - Bloomberg (Eliana Raszewski): "Argentina's inflation rate is picking
up, even as growth in South America's second-biggest economy comes to a
standstill, putting pressure on policy makers to weaken the currency. The
monthly inflation rate rose to 1.5% in May from 1.2% in April…"
Unbalanced Global Economy Watch
June 12 - Bloomberg (Brian Swint): "European industrial production dropped by
the most on record in April as the worldwide recession ravaged demand for
goods. Production in the euro region plunged 21.6% from a year earlier…"
June 8 - Bloomberg (Helena Bedwell): "Georgia's recession is deepening at an
"alarming" pace as a result of a two-month political protest that has
interrupted trade and spooked investors in the former Soviet state, Finance
Minister Kakha Baindurashvili said. 'I directly blame this on street politics,"
Baindurashvili, 30, said… 'It has influenced our plans and affected investor
confidence.'"
Bursting Bubble Economy Watch
June 8 - Bloomberg (Rich Miller and Matthew Benjamin): "As if General Motors
Corp. didn't have enough to worry about, a 60% jump in gasoline prices this
year may cause inflation to soar as it did in 2008 and throw another roadblock
in the way of recovery… The increases threaten a burst of inflation that could
sap demand just as the US economy is starting to right itself after the biggest
contraction in five decades."
Central Banker Watch
June 8 - Bloomberg (Tracy Withers): "New Zealand central bank Governor Alan
Bollard says tools such as quantitative easing are imperfect and he doesn't
want to use them, he said in an interview published yesterday. 'If we felt we'd
got to the stage where we though monetary policy wasn't having its normal
orthodox impact, we have prepared to do other things," Bollard told news agency
Scoop. 'I should say I'm not expecting to have to use them. Because we see them
as imperfect tools, I'm hoping we never will.'"
Real Estate Bust Watch
June 11 - Bloomberg (Sarah Mulholland): "Investors in bonds that packaged $62
billion of debt for US offices, hotels and shopping malls are bracing for more
loan defaults through 2010 as Bank of America Merrill Lynch says landlords'
monthly payments may jump 20% or more. Principal is coming due on the so-called
partial interest- only loans as an 18-month-old recession saps demand for
commercial real estate. About $179 billion of such loans were written between
2005 and 2007 and bundled into bonds, according to data from Bank of America
Merrill Lynch."
MBS/ABS/CDO/CP/Money Funds and Derivatives Watch
June 11 - Bloomberg (Brian Louis): "Shirley Breitmaier's mortgage payment
started out at $98 when she refinanced her three-bedroom home ... in 2007. The
73-year-old widow may see it jump to $3,500 a month in two years. Breitmaier
took out a payment-option adjustable rate mortgage, a loan popular during the
housing boom for its low minimum payments before resetting at higher costs
later. About 1 million option ARMs are estimated to reset higher in the next
four years, according to … First American CoreLogic ... About three quarters of
those loans will adjust next year and in 2011, with the peak coming in August
2011 when about 54,000 loans recast … "
Speculator Watch
June 12 - Bloomberg (Tomoko Yamazaki): "Hedge funds returned an average 5.2% in
May, the best performance in more than nine years, as they attracted more money
and global markets rallied, Eurekahedge Pte said. The Eurekahedge Hedge Fund
Index, tracking more than 2,000 funds, has advanced 9.2% this year …"
Crude Liquidity Watch
June 11 - Bloomberg (Zainab Fattah): "The vacancy rate in Dubai's residential
property market could double to about a third by the end of 2010 … UBS AG said.
The amount of empty houses and apartments may increase from as much as 15% at
the moment, Saud Masud … analyst at UBS, said ... About 30,000 homes will be
competed by 2011, Masud estimates."
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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