Page 3 of 3 Dollar illusions
Commentary and weekly watch by Doug Noland
March 23 - Bloomberg (Agnes Lovasz): "Emerging European governments are
bringing forward debt sales and investors are lining up to buy it as the region
benefits from an anti-Greece sentiment that's overshadowing the euro area, said
analysts at RBC Capital, BNP Paribas S.A. and Societe Generale S.A. Governments
from Poland to Romania 'are trying to issue as much as possible in the first
half of the year because the conditions are favorable,' said Bartosz Pawlowski,
a ... emerging-market strategist at BNP Paribas ... 'Central and Eastern Europe
have been the beneficiaries. They are trying to frontload.'"
March 22 - Bloomberg (John Gittelsohn): "Lennar Corp., the third-largest US
homebuilder, is investing in failed bank loans and distressed real estate
assets to boost revenue as demand for new houses shows few signs of revival.
The ... company's purchase
last month of a share of $3.05 billion of delinquent loans seized by the
Federal Deposit Insurance Corp. from failed lenders takes the builder into
territory so far dominated by private equity firms ... "
Currency Watch
March 22 - Bloomberg: "China warned the US against imposing sanctions over the
value of the yuan, arguing that the exchange rate issue has been politicized
and that a rise in protectionism threatens the global economic recovery.
Pressure on China to strengthen the yuan does 'no good to anyone,' China's
Commerce Minister Chen Deming said ... Tensions over China's currency are
mounting ... "
The dollar index jumped 1.1% this week to 81.63. (up 4.8% y-t-d). For the week
on the upside, the Mexican peso increased 0.7% For the week on the downside,
the Japanese yen declined 2.1%, the Norwegian krone 2.1%, the South African
rand 1.3%, the Australian dollar 1.2%, the Swedish krona 1.2%, the Brazilian
real 1.0%, the Danish krone 0.9%, the Canadian dollar 0.9%, and the Euro 0.9%.
Commodities Watch
March 22 - Bloomberg (Whitney McFerron): "Hog futures rose to a 12-year high on
signs that US pork supplies are shrinking after farmers trimmed herds."
The CRB index declined 1.9% (down 5.7% y-t-d). The Goldman Sachs Commodities
Index (GSCI) fell 1.6% (down 2.2% y-t-d). Gold was little changed at $1,108 (up
1% y-t-d). Silver slipped 0.6% to $16.93 (up 0.5% y-t-d). April Crude declined
83 cents to $80.14 (up 1% y-t-d). April Gasoline declined 2.0% (up 7.7% y-t-d),
and April Natural Gas sank 7.2% (down 30.6% y-t-d). May Copper gained 1.3% (up
2% y-t-d). May Wheat sank 3.9% (down 14% y-t-d), and May Corn dropped 4.7%
(down 14% y-t-d).
China Bubble Watch
March 25 - Bloomberg: "China central bank Deputy Governor Zhu Min said interest
rates are a 'heavy-duty weapon' and alternative tools for addressing liquidity
are working well, helping to explain why the bank hasn't raised borrowing
costs. 'We are very careful on the interest rate, because it is a heavy-duty
weapon,' Zhu said ... 'We are very careful managing liquidity' with other
instruments, and it looks like that "works very well," he said ... "
March 24 - Bloomberg: "China's government needs evidence of a "very certain"
recovery before it can roll back stimulus measures adopted during the crisis,
central bank Governor Zhou Xiaochuan said. 'If you can be sure about the
recovery, and then some of the extraordinary stimulus policies can gradually
fade out,' Zhou said ... 'On the other hand, you should know that it's not a
W-shaped recovery,' with a renewed slowdown following the current rebound, he
said. China has yet to raise interest rates or allow its exchange rate to
appreciate, keeping in place some of the extraordinary measures even as
inflation and asset prices accelerate."
March 23 - Bloomberg: "Bank of China Ltd., the nation's third-largest lender by
market value, posted a more than fourfold increase in fourth-quarter profit,
helped by a credit boom and lower impairment losses on assets. Net income
climbed to 18.8 billion yuan ($2.8 billion) from 4.42 billion yuan a year
earlier ... "
Japan Watch
March 24 - Bloomberg (Keiko Ujikane): "Japan's exports climbed at the fastest
pace in 30 years in February as global trade recovered from the worst postwar
recession ... Shipments abroad increased 45.3% from a year earlier, helping the
trade surplus expand the most since 1982 ... "
India Watch
March 22 - Bloomberg (Weiyi Lim): "India is still 'complacent' about inflation
risks and will need to keep boosting interest rates after the nation's first
increase in almost two years, according to Goldman Sachs ... 'The key point
with India is that we looked all around the region; the economy we felt was
most in need of raising rates and where the consensus was, we thought most
complacent, was India,' Timothy Moe, the bank's chief Asian strategist, said
... 'India has the highest inflation of any of the economies currently around
Asia.'"
Asia Bubble Watch
March 24 - Bloomberg (Stephanie Phang and Ranjeetha Pakiam): "Malaysia's
central bank raised the country's 2010 economic forecast, pledging that its
monetary policy will continue to support growth even as it begins to
'normalize' interest rates amid an 'uneven' global recovery. Southeast Asia's
third-largest economy may expand 4.5% to 5.5% this year ... "
March 24 - Bloomberg (Jason Folkmanis): "Vietnamese inflation accelerated to a
one-year high in March as a devalued dong pushed up import costs and the
government raised power prices ... Consumer prices jumped 9.46% from a year
earlier ... "
Latin America Bubble Watch
March 22 - Bloomberg (Andre Soliani and Katia Cortes): "Brazil's current
account gap will exceed inflows from foreign direct investment in 2010 for the
first time in nine years, according to central bank forecasts ... The current
account deficit, the broadest measure of trade in goods and services, will
widen to a record $49 billion this year, up from an earlier forecast of a $40
billion gap ... "
Unbalanced Global Economy Watch
March 24 - Bloomberg (Maria Levitov): "Russia's economy will grow faster than
previously forecast this year as higher wages and pensions stoke household
spending ... the World Bank said. Gross domestic product may rise between 5%
and 5.5%, the bank said ... "
Fiscal Watch
March 26 - Bloomberg (Rebecca Christie and Kate Andersen Brower): "The Obama
administration plans to announce programs to help homeowners avoid foreclosure,
including subsidies for borrowers who owe more than their home is worth. The
plan ... would expand Treasury Department and Federal Housing Administration
programs and use funds from the $700 billion Troubled Asset Relief Program ...
'It's almost like a triage policy,' said Eric Barden, chief investment officer
of Barden Capital Management in Austin, Texas. "It limits the losses of the
most overvalued properties and it also limits the losses to the borrowers that
are in the most distress.'"
Central Bank Watch
March 23 - Dow Jones (Michael S. Derby): "In a speech that said there's no
urgency to tighten monetary policy any time soon, a key central bank official
also asserted her reputation as an inflation fighter. 'I don't believe this is
yet the time to be tightening monetary policy," Federal Reserve Bank of San
Francisco President Janet Yellen said ... The current policy of essentially
zero-percent interest rates is 'accommodative' and 'is currently appropriate
... because the economy is operating well below its potential and inflation is
subdued.' Yellen said she is expecting at best a gradual recovery and a slow
ebb in high levels of unemployment, all of which argues for supportive monetary
policy. But she warned that 'as recovery takes firm root and economic output
moves toward its potential, a time will come when it is appropriate to boost
short-term interest rates.'"
March 25 - Bloomberg (Scott Lanman and Joshua Zumbrun): "Federal Reserve Vice
Chairman Donald Kohn said he expects the Fed will tighten credit early enough
to prevent unprecedented stimulus, including $1 trillion in excess bank
reserves, from causing an inflationary surge. 'I am confident the Federal
Reserve can and will tighten policy well in advance of any threat to price
stability, and successful execution of this exit will demonstrate that these
emergency steps need not lead to higher inflation,' Kohn said ... "
Real Estate Watch
March 24 - Bloomberg (Hui-yong Yu): "Twelve US cities, including Boulder,
Colorado, and Providence, Rhode Island, are showing extended declines in
housing values, reversing signs of a sustained recovery last year, according to
Zillow.com. The number of markets in a 'double dip' jumped in January from five
in December ... "
March 22 - Bloomberg (Brian Louis): "U.S. commercial property values rose for a
third month in January as the economy grew, according to Moody's ... The
Moody's/REAL Commercial Property Price Index climbed 1% from December ...
Values are 40% lower than the peak in October 2007. The index fell 24% from a
year earlier."
March 24 - Wall Street Journal (Josh Barbanel): "A Manhattan condominium owned
by a financially troubled Italian film producer was sold in a foreclosure
auction for $33.2 million, the highest price paid for Manhattan apartment this
year ... A Chinese businessman who was not identified purchased the
5,500-square-foot apartment with 20-foot ceilings and views of Central Park ...
The price in the current deal underscores signs of recovery in luxury housing
in Manhattan in the last few months ... "
Muni Watch
March 20 - Wall Street Journal (Mark Gongloff and Ianthe Jeanne Dugan): "At a
time of voracious market appetite for traditionally safe municipal bonds, some
market watchers are warning municipal-debt investors to be choosy. A
still-struggling economy is squeezing municipal budgets across the board, but
many larger governments are passing on their pain by choking off the flow of
cash to the local level ... 'I prefer large states and cities, as problems
within those areas are pushed to local governments,' Larry Fink, chief
executive of BlackRock ... 'The assumption that an investment-grade rating is
merited for all municipal debt is less tenable every day,' said Kenneth
Buckfire, CEO ... of Miller Buckfire & Co. 'This is eerily reminiscent of
the early days of the subprime crisis, where everybody was comforted by the
investment-grade ratings but nobody did any analysis.'"
New York Watch
March 25 - Bloomberg (Michael Quint): "New York Assembly Democrats proposed
narrowing the state's more than $9 billion deficit with $2 billion of bonds and
$4.3 billion of spending reductions, a plan that Governor David Paterson said
doesn't cut enough."
Doug Noland is a market strategist for the Prudent Bear Funds.
(Republished with permission from PrudentBear.com.
Copyright 2005-2010 David W Tice & Associates. All rights reserved.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
