Page 3 of 3 CREDIT BUBBLE BULLETIN Only the timing in doubt Commentary and weekly watch by Doug Noland
three years through 2010 ... The losses envisaged are bigger than those
forecast by the biggest Irish securities firms."
June 26 - Bloomberg (Ott Ummelas): "Moody's ... cut its ratings on six Baltic
banks, citing rising corporate defaults that may 'significantly' drain loan
portfolios."
Government Finance Bubble Watch
June 23 - Associated Press: "The Energy Department said ... it would lend $5.9
billion to Ford Motor Co. and provide about $2.1 billion in loans to Nissan
Motor Co. and Tesla Motors Inc., making the three automakers the first
beneficiaries of a $25 billion fund to develop fuel-efficient vehicles ... The
loans to Ford will help the company upgrade factories in five Midwest states to
produce 13 fuel-efficient vehicles ... "
June 22 - Bloomberg (Valerie Rota): "Mexico will probably boost debt sales 46%
in the third quarter to finance a budget deficit that is widening as the US
recession throttles exports and oil
production slumps, according to Metanalisis SA. The Finance Ministry will issue
455 billion pesos ($34 billion) of bills and bonds in the quarter ... "
June 23 - Bloomberg (Dorota Bartyzel and David McQuaid): "Poland's state budget
deficit will widen 48% to 27 billion zloty ($8.3 billion) this year as the
economic slowdown crimps revenue, the Finance Ministry said."
June 23 - Bloomberg (Paul Abelsky): "Belarus expects to receive $2 billion from
the International Monetary Fund before the end of this year to replenish
reserves and stabilize its currency, President Alexander Lukashenko said."
Currency Watch
June 26 - Bloomberg: "China's central bank renewed its call for a new global
currency and said the International Monetary Fund should manage more of
members' foreign-exchange reserves, triggering a decline in the US dollar. 'To
avoid the inherent deficiencies of using sovereign currencies for reserves,
there's a need to create an international reserve currency that's delinked from
sovereign nations,' the People's Bank of China said in its 2008 review ... The
IMF should expand the functions of its unit of account, Special Drawing Rights,
the report said."
The dollar index declined 0.5% this week to 79.84. For the week on the upside,
the South African rand increased 2.7%, the Brazilian real 2.0%, the Swedish
krona 1.5%, the Mexican Peso 1.1%, the Japanese yen 1.1%, the Euro 0.9%, and
the Danish krone 0.9%. On the downside, the Canadian dollar declined 1.6%, the
South Korean won 1.2%, and the Norwegian krone 0.8%.
Commodities Watch
June 23 - Bloomberg (Shruti Date Singh): "Sugar jumped to the highest in almost
three years on rising signs that a production deficit may extend into a second
year and as the dollar weakened, increasing the appeal of commodities traded in
New York."
June 22 - Bloomberg (Yuriy Humber): "Uranium rose to the highest in seven
months as energy commodities gained globally and utilities sought to acquire
stakes in companies mining the metal."
June 25 - Bloomberg (Carolyn Bandel): "The cost of piracy insurance has
increased as much as 20-fold after attacks on shipping off the Horn of Africa
doubled in the first quarter, insurance broker Marsh & McLennan Cos said."
Gold ended the week up 0.6% to $939 (up 6.5% y-t-d). Silver declined 1.0% to
$14.085 (up 24.7% y-t-d). August Crude slipped 68 cents to $69.34 (up 56%
y-t-d). July Gasoline fell 2.4% (up 77% y-t-d), and July Natural Gas declined
1.9% (down 27% y-t-d). September Copper gained 1.6% (up 63% y-t-d). July Wheat
sank 3.8% (down 13% y-t-d), and July Corn dropped 3.8% (down 5.6% y-t-d). The
CRB index dipped 0.6% (up 9.5% y-t-d). The Goldman Sachs Commodities Index
(GSCI) declined 1.4% (up 29.2% y-t-d).
China Reflation Watch
June 25 - Bloomberg: "China's central bank pledged to keep pumping money into
the financial system to support a recovery in the world's third-biggest
economy. The economy is in a 'critical' stage and the central bank will
maintain a 'moderately loose' monetary policy, the People's Bank of China
reiterated ... The central bank triggered an explosion in credit by scrapping
quotas on lending in November to back the government's 4 trillion yuan ($585
billion) stimulus plan."
June 23 - Bloomberg: "Airbus SAS, the world's largest commercial planemaker,
rolled out the first aircraft assembled at its China factory as it seeks to win
more orders in the world's second-largest aviation market. The planemaker aims
to deliver 10 more A320s this year from its factory in Tianjin, near Beijing
... Production at the plant, Airbus's first outside Europe, will be raised to
four aircraft a month by the end of 2011. Airbus is competing with Boeing Co.
to grab orders in China as it seeks sales in emerging markets to help offset
slumping demand in the US and Europe. China will probably need 3,238 passenger
planes valued at $391.2 billion from 2007 to 2026, according to the ...
planemaker."
June 22 - Bloomberg (Tony Barrett): "China may begin a 'crackdown' on
speculation in domestic commodity markets after suggestions that companies are
stockpiling raw materials beyond their needs in the hope of selling them later
at higher prices, UBS AG said."
June 26 - Bloomberg (Wendy Leung): "China Shipping Container Lines Co., the
country's second-biggest box carrier, plans to almost double rates on
Asia-Europe routes next month to help offset possible losses on weakening
demand."
June 26 - Bloomberg: "Chinese industrial-company profits fell at a slower pace
as commodity prices declined from a year earlier and a 4 trillion yuan ($585
billion) stimulus package boosted demand. Net income sank 22.9% in the five
months through May to 850.2 billion yuan ($124.4 billion)…"
Japan Watch
June 24 - Bloomberg (Jason Clenfield): "Japan's export slump deepened in May,
casting doubt on the nation's growth prospects as the economy struggles to
emerge from its worst postwar recession. Shipments abroad dropped 40.9% from a
year earlier, more than April's 39.1% decline…"
India Watch
June 23 - Dow Jones: "India's fiscal deficit widened to 541.58 billion rupees
($11.16 billion) in April, compared with 329.39 billion rupees in the same
period a year earlier ... During April, the first month of the current
financial year, the government's net tax receipts fell 32%..."
Asia Bubble Watch
June 26 - Bloomberg (Shamim Adam): "Singapore's industrial production
unexpectedly increased in May as pharmaceutical companies boosted output.
Manufacturing, which accounts for about a quarter of Singapore's economy, rose
2% from a year earlier…"
Unbalanced Global Economy Watch
June 23 - Bloomberg (Alan Purkiss): "Brazil, Russia, India and China, the
so-called 'BRIC' countries, will account for most of the world's economic
growth, if any, this year and next, said Jim O'Neill, who heads global economic
research at Goldman Sachs...he said consensus forecasts are that India will
grow by almost 6% in both years and China is likely to manage 8% this year and
10% in 2010. Chinese policymakers realized quickly that the period of very
rapid export growth is over and initiated a massive boost to domestic demand,
O'Neill said."
June 24 - Bloomberg (Brian Swint): "Almost half of U.K.-based foreign
professionals are considering leaving as they endure rising living expenses and
the recession, more than in any other country, a survey by HSBC ... showed.
Forty-four percent of expatriates in Britain are contemplating moving…"
June 26– Bloomberg (Kati Pohjanpalo): "Swedish household credit grew at the
slowest pace in more than six years in May ... Household lending grew an annual
7.9%..."
Bursting Bubble Economy Watch
June 25 - California Association of Realtors: "Home sales increased 35.2% in
May in California compared with the same period a year ago, while the median
price of an existing home declined 30.4%... 'With affordability for first-time
buyers at a record high, sales of existing, single-family homes continued to
remain above the 500,000 level for the ninth consecutive month,' said C.A.R.
President James Liptak ... C.A.R.'s Unsold Inventory Index for existing,
single-family detached homes in May 2009 was 4.2 months, compared with 8.7
months for the same period a year ago."
June 23 - Bloomberg (Alexander Nicholson): "Russia's economy shrank 11% in May
from the same month last year, Interfax reported, citing Deputy Economy
Minister Andrei Klepach."
Central Banker Watch
June 24 - New York Times (Stephen Labaton): "During the debate over financial
regulation, the Federal Reserve chairman Ben S. Bernanke has been surprisingly
quiet. But behind the scenes, he has been a forceful proponent of giving the
Fed more power, both defending his management of the economic crisis and
arguing that more authority would help the agency act more decisively to reduce
the chances of a recurrence ... Despite criticism by some lawmakers that the
Fed failed to anticipate the problems that led to the crisis, Mr. Bernanke has
told associates that such critics fail to recognize the extraordinary actions
taken by the central bank over the last year."
June 23 - Bloomberg (Simone Meier and Christian Vits): "European Central Bank
council member Axel Weber said the bank has used up its room to cut interest
rates and there's no need to expand its stimulus measures. 'The ECB Governing
Council has used the room for rate reductions that was created by waning
inflation risks and a dramatic worsening of the economic situation,' Weber, who
heads Germany's Bundesbank, said ... Having loosened policy further with its
provision of unlimited liquidity to banks and a plan to buy covered bonds,
'additional steps are not necessary at the moment,' he said."
June 24 - Bloomberg (Monika Rozlal and Dorota Bartyzel): "Poland's central bank
cut its key interest rate for a sixth time in eight months to a record low ...
The ... Monetary Policy Council trimmed the benchmark seven-day reference rate
a quarter of a percentage point today to 3.5% ... "
Real Estate Bust Watch
June 23 - Florida Association of Realtors: "Florida's existing home sales rose
in May - the ninth month in a row that sales activity increased in the
year-to-year comparison ... Statewide sales showed gains over the previous
month's sales ... Also, for the first time in many months, the statewide median
sales price in May for existing homes and for existing condos rose over the
previous month's figure."
MBS/ABS/CDO/CP/Money Funds and Derivatives Watch
June 26 - Bloomberg (Jody Shenn): "JPMorgan Chase & Co. and Citigroup Inc.
are expanding in 'jumbo' mortgages used to buy the most expensive homes,
helping revive a market that shriveled amid a three-year jump in homeowner
defaults. JPMorgan resumed buying new jumbo loans made by other lenders this
month, after halting purchases in March ... Citigroup is again offering the
loans through independent mortgage brokers ... "
California Watch
June 23 - Bloomberg (Joe Mysak): "Investors are increasingly bearish on
California, the Golden state, which is facing a $24 billion budget deficit. The
... price on 1-year California credit-default swaps widened to 285.10 bps from
200 basis points on May 8 ... Recently, all three rating companies have given
notice that its cash position imperils its credit grades once again. On Friday,
Moody's said 'lack of action could result in a multi-notch downgrade.'"
New York Watch
June 25 - Bloomberg (Chris Dolmetsch): "New York City's 7.6 million daily bus
and subway riders will pay more to commute starting this weekend when fares on
the busiest US public transportation system rise for the second time in two
years. A single ride on New York City Transit buses and subways will increase
25 cents to $2.25 … "
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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