The New Century Weekly

The New Century Weekly
Double dipping again

Andy Xie
May 30, 2011

Summary

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The double dip scare has begun earlier this year than in 2010. High oil prices, falling property market in the US, sovereign debt crisis in Europe, recession in Japan, and inflation-induced tightening in the emerging economies are exerting downward pressure on the global economy. The growth data will surprise on the downside, inflation data on the upside. Risk assets like stocks and commodities will come under pressure in the summer.

Fortune: How housing could rebound -- in 2025

How housing could rebound -- in 2025
By Colin Barr May 31, 2011: 11:49 AM ET

Ready to be Depressed?

House prices have fallen further in the past five years than they did in the Great Depression – and there's no sign the free fall is about to stop.

CNBC: 'Double-Dip' in Housing Prices Even Worse Than Expected

'Double-Dip' in Housing Prices Even Worse Than Expected
Published: Tuesday, 31 May 2011 | 9:05 AM ET
By: Reuters

U.S. single-family home prices dropped in March, dipping below their 2009 low, as the housing market remained bogged down by inventory and weak demand, a closely watched survey said Tuesday.

Reuters: EU, IMF to judge Greece as protests swell

EU, IMF to judge Greece as protests swell

By Angeliki Koutantou
ATHENS | Sun May 29, 2011 9:33pm EDT

(Reuters) - European Union and IMF officials are expected to deliver their verdict this week on Greece's faltering drive to bring its budget deficit under control, but ordinary Greeks have warned that their patience is running thin.

WSJ: OECD: Most Central Banks Should Raise Rates

EUROPE NEWS|MAY 25, 2011, 1:57 P.M. ET
OECD: Most Central Banks Should Raise Rates

By GABRIELE PARUSSINI And PAUL HANNON

PARIS—Central banks around the world should raise their key interest rates as the economic recovery settles in and inflation rates pick up, the Organization for Economic Cooperation and Development said Wednesday.

WSJ: China's Growth Risks

REVIEW & OUTLOOK|MAY 25, 2011
China's Growth Risks
Rising inflation and an opaque financial system, among others.

The Chinese economy is coming in for some sort of landing, and everyone is speculating whether it will be hard or soft. After HSBC on Monday released a purchasing managers index barely in positive territory, Goldman Sachs yesterday lowered its growth forecast for the year to 9.4% from 10%. But the determining factor in the hard vs. soft debate, and one reason global markets have fallen out of bed this week, is that Chinese inflation continues to accelerate. Goldman predicts an annual rate of 5.6% in June, up from 5.3% in April.

NYT: In Europe, Rifts Widen Over Greece

In Europe, Rifts Widen Over Greece

By LANDON THOMAS Jr.
Published: May 23, 2011

LONDON — Fissures among Europe’s currency partners are becoming even deeper and more widespread than was previously evident, raising new doubts about whether the group can resolve the regional debt crisis that has simmered for more than a year.

USAToday: Questions and answers about Europe's debt crisis

Questions and answers about Europe's debt crisis
By Matthew Craft, Associated Press

NEW YORK — In case you were wondering if Europe still matters, take a look at the latest headlines.

MarketWatch: QE2 was a bust

May 23, 2011, 10:18 a.m. EDT
QE2 was a bust
Economic data is worse than before

By Brett Arends, MarketWatch

BOSTON (MarketWatch) — It‘s cost $600 billion of your money. And it was supposed to rescue the economy. But has Ben Bernanke’s huge financial stimulus package, known as “Quantitative Easing 2,” actually worked as planned?

WSJ: Europe Debt Concerns Grow

EUROPE NEWS|MAY 23, 2011, 2:22 P.M. ET
Europe Debt Concerns Grow
Spanish Vote Results, Greek Woes, Ratings Warnings Add to Fears

By JONATHAN HOUSE And DAVID ROMÁN

MADRID—Concerns mounted about Europe's debt problems following a crushing defeat for Spain's ruling party in weekend elections, compounded by infighting in Europe over whether Greek government bonds should be restructured and new warnings from credit-rating agencies.

Reuters: Euro zone debtors under pressure over new risks

Euro zone debtors under pressure over new risks

(Reuters) - Financial markets piled pressure on heavily indebted euro zone countries on Monday as investors worried about heightened risks in Spain and Greece and ratings agencies stoked new concerns over Italy and Belgium.

Bloomberg: China Manufacturing May Slow on Tightening Steps

Related News: Economy · Asia · China
China Manufacturing May Slow on Tightening Steps
By Bloomberg News - May 23, 2011 1:34 PM GMT+0900

A Chinese manufacturing index fell to its lowest level in 10 months, adding to signs that economic growth is cooling after the government raised interest rates and curbed lending to rein in inflation.

WSJ: Euro-Zone Growth Slows to 7-Month Low

EUROPE BUSINESS NEWS|MAY 23, 2011, 4:36 A.M. ET
Euro-Zone Growth Slows to 7-Month Low

By NICHOLAS WINNING

LONDON—Growth in the euro zone's private sector eased more than expected to its weakest pace in seven months in May, led by a sharp slowdown in manufacturing, the preliminary results of a survey by financial-information firm Markit showed Monday.

Bloomberg: Risk Rally Ending for Currencies Turns Focus to New Least Ugly-Alternative

Related News: Economy · Asia · Europe · Japan · U.K. & Ireland · U.S. · Currencies · Funds · Insurance · Middle East · France · Canada
Risk Rally Ending for Currencies Turns Focus to New Least Ugly-Alternative
By Catarina Saraiva and Allison Bennett - May 23, 2011 1:08 PM GMT+0900

The best-performing currencies of 2011 are falling out of favor as the Federal Reserve plans its exit from record monetary stimulus just as the global economy shows signs of slowing, buffeting commodities and stocks.

Bloomberg: Fed Focusing on Inflation Expectations

Related News: U.S. · Bonds · Currencies
Fed Focusing on Inflation Expectations
By Caroline Salas and Scott Lanman - May 23, 2011 8:00 AM GMT+0900

The cue for the Federal Reserve to start withdrawing its record monetary stimulus may be a measure of its own credibility: inflation expectations.

Fortune: Sizing up a sweeping mortgage settlement

Sizing up a sweeping mortgage settlement

Mortgage lenders like Bank of America and Wells Fargo are fighting the fight on all fronts, with the latest being False Claims Act violations. Here's what to look for in any settlements.
By Abigail Field, contributor

FORTUNE -- The trouble for America's largest mortgage lenders just keeps mounting. How much will it cost them to make it all go away?

Bloomberg: Home Sales in U.S. Drop, Manufacturing Stalls in Sign Recovery Is Flagging

Related News: U.S. · Economy · Real Estate
Home Sales in U.S. Drop, Manufacturing Stalls in Sign Recovery Is Flagging
By Bob Willis and Shobhana Chandra - May 20, 2011 5:13 AM GMT+0900

Sales of existing U.S. homes unexpectedly declined, manufacturing in the Philadelphia region slowed and consumer confidence dropped, pointing to an economy that is struggling to regain momentum following the surge in energy costs.

Bloomberg: Fed’s Bullard Sees Europe Debt Crisis as Top Risk to U.S. Economic Outlook

Related News: Economy · U.S.
Fed’s Bullard Sees Europe Debt Crisis as Top Risk to U.S. Economic Outlook
By Joshua Zumbrun - May 19, 2011 1:43 AM GMT+0900

Federal Reserve Bank of St. Louis President James Bullard said the European sovereign-debt crisis has surpassed rising oil prices to become the biggest risk to the economic outlook in the U.S.

Bloomberg: Banks Say Simpler Mortgage Form Could ‘Stifle’ New Products

Related News: Finance · Real Estate · U.S. · Personal Finance
Banks Say Simpler Mortgage Form Could ‘Stifle’ New Products
By Carter Dougherty - May 18, 2011 1:00 PM GMT+0900

For Elizabeth Warren, the Obama administration adviser setting up the Consumer Financial Protection Bureau, simpler mortgage paperwork is a “regulatory sweet spot” that will cut lender costs and borrower confusion.

CNBC: China Economic 'Facade' Starts to Show Cracks: Chanos

China Economic 'Facade' Starts to Show Cracks: Chanos
Published: Wednesday, 18 May 2011 | 8:16 AM ET
By: Jeff Cox

China's economy is showing real signs of weakening, particularly in real estate, and even could tip into a recession, hedge fund manager Jim Chanos told CNBC.

WSJ: Moody's Cuts Rating of Four Major Australian Banks

BUSINESS|MAY 18, 2011, 5:20 A.M. ET
Moody's Cuts Rating of Four Major Australian Banks

By GEOFFREY ROGOW And CYNTHIA KOONS

SYDNEY—In a blow to the Australian banking industry, Moody's Investors Service downgraded the debt ratings of the country's four largest banks, citing their dependence on global lending markets.

Bloomberg: Geithner: No ‘Magical Thinking’ to Fix Deficit

Related News: Economy · U.S.
Geithner: No ‘Magical Thinking’ to Fix Deficit
By Ian Katz and Rebecca Christie - May 18, 2011 10:49 AM GMT+0900

U.S. Treasury Secretary Timothy F. Geithner said budget deficits threaten to erode the nation’s economy and security and can’t be reduced with “magical thinking.”

Bloomberg: U.S. Industrial Production Stalls on Auto Disruption; Housing Starts Drop

Related News: Economy · U.S.
U.S. Industrial Production Stalls on Auto Disruption; Housing Starts Drop
By Shobhana Chandra and Bob Willis - May 18, 2011 1:05 AM GMT+0900

Industrial production in the U.S. unexpectedly stalled in April and housing starts dropped, posing hurdles to a rebound from the first quarter’s economic slowdown.

Bloomberg: U.S. Wheat Harvest May Be Worse Than Forecast

Related News: U.S. · Commodities · Canada · Latin America
U.S. Wheat Harvest May Be Worse Than Forecast
By Whitney McFerron - May 18, 2011 5:37 AM GMT+0900

Wheat crops in the U.S. Great Plains are showing signs that production may plunge more than the government forecast last week as hot weather and a lack of rain erode plant quality and force farmers to harvest early.

Bloomberg: Geithner Says Default Damage May Be ‘Irrevocable’

Related News: Bonds · Economy · Currencies · U.S.
Geithner Says Default Damage May Be ‘Irrevocable’
By Ian Katz and Daniel Enoch - May 15, 2011 2:44 AM GMT+0900

Timothy
Geithner,
U.S. treasury
secretary

U.S. Treasury Secretary Timothy F. Geithner said a default arising from failing to raise the debt limit could cause “irrevocable damage” to the economy, risk a “double-dip” recession and increase unemployment.

MarketWatch: Home prices won’t bottom until next year: Zillow

REAL ESTATE WEEKLY
May 13, 2011, 4:28 p.m. EDT
Home prices won’t bottom until next year: Zillow

By MarketWatch

The first quarter proved rough on home prices, as U.S. home values fell 3% from the fourth quarter — the biggest quarterly decline since 2008, Zillow.com reported this week.

Reuters: Jim Rogers says may short U.S. Treasuries, later today

Jim Rogers says may short U.S. Treasuries, later today

By Edward McAllister
NEW YORK | Tue May 10, 2011 7:18pm EDT

(Reuters) - Influential investment veteran Jim Rogers said on Tuesday he plans to short U.S. Treasuries, maybe as soon as later in the day, as he expects the end of the Federal Reserve's quantitative easing program to pressure government bonds.

Bloomberg: Commodities Trading Is Banking’s New Battleground: Commentary Matthew Lynn

Related News: Bloomberg, Economy, Africa, Australia, Europe, Latin America, Middle East, Opinion, Emerging Markets, Energy Markets, Finance, Commodities
Commodities Trading Is Banking’s New Battleground: Commentary Matthew Lynn
By Matthew Lynn - May 10, 2011 8:00 AM GMT+0900
Bloomberg Opinion

Forget bonuses. Don’t worry about bailouts. That’s all history. The battleground that matters most for the banking and finance industry right now is the profits it is making from commodities trading.

Bloomberg: Hedge Funds Rose 1.4% in April to Highest in Almost Three Years

Related News: Funds
Hedge Funds Rose 1.4% in April to Highest in Almost Three Years
By Kelly Bit - May 6, 2011 2:05 AM GMT+0900

Hedge funds climbed 1.4 percent in April to the highest level in almost three years as stock markets rallied amid rising earnings and the Federal Reserve renewed its pledge to stimulate growth with low interest rates.

Bloomberg: Europe Producer-Price Inflation Unexpectedly Accelerates on Jump in Energy

Related News: Europe · Economy · Retail
Europe Producer-Price Inflation Unexpectedly Accelerates on Jump in Energy
By Jones Hayden - May 3, 2011 6:20 PM GMT+0900

European producer-price inflation unexpectedly accelerated to the fastest in 2 1/2 years in March, adding to concerns that surging energy costs will feed through to consumers and prompt the European Central Bank to raise interest rates further.

PIMCO: The Caine Mutiny (Part 2)

The Caine Mutiny (Part 2)

- Low policy rates and the increasing negative real yields that they engender as inflation accelerates represent an immediate threat to investment portfolios.
- Bond prices don’t necessarily have to go down for savers to get skunked during a process of “debt liquidation.”
- PIMCO advocates a renewed vigilance, stressing bond market “safe spread” alternatives available globally, including developing/emerging market debt at higher yields denominated in non-dollar currencies.

Bloomberg: U.S. Manufacturing Grows at Faster Pace Than Estimated, Leading Recovery

Related News: Economy · U.S. · Municipal Bonds
U.S. Manufacturing Grows at Faster Pace Than Estimated, Leading Recovery
By Bob Willis - May 3, 2011 5:24 AM GMT+0900

Manufacturing expanded faster than forecast in April, driven by gains in exports and inventories that are keeping the industry at the forefront of the U.S. economic expansion.

WSJ: Hybrid Securities Feed Yield Hunger

THE VIEW FROM HONG KONG|MAY 2, 2011
Hybrid Securities Feed Yield Hunger

By PETER STEIN and ALISON TUDOR

Asian businesses have found a way to raise money and boost their creditworthiness without ceding control of the boardroom. In the process, they are feeding investors' hunger for high yields.

Reuters: Buffett remains solid on the American economy

Buffett remains solid on the American economy

By Ben Berkowitz
OMAHA, Nebraska | Sun May 1, 2011 4:29pm EDT

(Reuters) - Warren Buffett does not spend his time making stock research recommendations, but he is sure of one thing -- America should have a "strong buy" slapped on it.