Baltic Dry Index. 2468 +438 on the week.
LIR Gold Target by 2019: $3,000.
The problem of our age is the proper administration of wealth, so that the ties of brotherhood may still bind together the rich and poor in harmonious relationship.
Andrew Carnegie.
This weekend, the USA, Europe, and China. America slows and stocks there look like they’ve peaked. In Euroland, Germany booms. Unfortunately mostly via exports to the other struggling EU countries, and to the rest of the world helped by the now falling Euro. Euroland has joined Great Britain in a stealth devaluation to stimulate its economy. But while Germany needs the ECB to start raising Euroland’s key interest rate to check what threatens to become an overheating economy, doing so will blow Club Med’s PIIGS out of the water. Raising interest rates now will probably push Greece, Spain and Portugal into restructuring, and collapse the economy of non euro member Hungary. Oh what a tangled web we weave, when first we practise to deceive.
In China, the boom goes on but at a slowing pace. Ominously, China’s pace of exports has picked up but imports are lagging behind. A bruising fight with America and the EU lies directly ahead.
Economics is a subject that does not greatly respect one's wishes.
Nikita Khrushchev.
Growth Prospects Dim in U.S. After Retail Sales, Trade Reports
Aug. 14 (Bloomberg) -- Prospects for U.S. economic growth took a hit this week after reports showed the trade deficit swelled and consumers reined in spending.
Economists at Morgan Stanley reduced their estimate for third-quarter consumer spending following a report showing retail sales rose less than forecast in July. A record jump in the trade gap for June capped figures that indicated the world’s biggest economy grew at least a percentage point less than the 2.4 percent pace the government estimated last month.
The Standard & Poor’s 500 Index slumped 3.8 percent in the five days ended yesterday, the biggest one-week loss in a month, and a surge in Treasuries pushed the yield on the benchmark 10- year note to the lowest level in 16 months on concern the economy will relapse into a recession. Reports this week showing Chinese industrial output cooled and growth in Europe was uneven added to pessimism over the prospects for the global economy, just as the Federal Reserve said the U.S. recovery was weaker than anticipated.
----Purchases at U.S. retailers in July climbed 0.4 percent, figures from the Commerce Department in Washington showed yesterday, compared with a 0.5 percent median increase forecast by economists in a Bloomberg News survey. Excluding auto dealers and gasoline stations, sales dropped 0.1 percent, the second decline in three months.
Consumer Retrenchment
“This is a modest retrenchment on the part of the consumer,” said Julia Coronado, a senior U.S. economist at BNP Paribas in New York. “This suggests another weak reading on consumer spending” in the third quarter, she said.
Consumer spending, which makes up 70 percent of the economy, is being held back by an unemployment rate close to a 26-year high. An Aug. 12 Labor Department report showing more Americans than estimated filed applications for unemployment benefits last week pointed to further weakness in the job market.
http://noir.bloomberg.com/apps/news?pid=20601087&sid=aj9jBSab.4XE&pos=1
Trichet Faces ‘Headache’ as Germany Pulls Ahead of Periphery
Aug. 13 (Bloomberg) -- Germany’s record-breaking performance in the second quarter is making life harder for European Central Bank President Jean-Claude Trichet.
While Europe’s largest economy expanded at the fastest pace since the country’s reunification, the region’s southern periphery is still struggling to recover from a sovereign debt crisis. Greece’s recession deepened, Spain expanded less than economists forecast and investors are turning their attention to their budget deficits again.
“This is going to become a very serious headache for the ECB,” Marco Annunziata, chief economist at UniCredit Group in London, said in a Bloomberg Television interview. “If the ECB were the Bundesbank it would be raising rates very quickly. But Spain, Greece, Italy -- they can’t afford it.”
Trichet is trying to steer a course that will prevent Germany from overheating while also keeping the euro region’s sovereign debt crisis at bay. In a sign that investors are again questioning the ability of the most deficit-laden countries to cut their budgets, the extra yield that investors demand to hold Greek bonds over benchmark German bunds today rose to the highest since May 7.
Stocks, which initially rose on the German growth figures, later dropped and the premium on Greek 10-year bonds rose 10 basis points to 807. In Ireland, where investors are concerned the cost of bank bailouts will exceed estimates, the spread climbed 5 basis points to 293. That’s the most since Jun 29.
-----Today’s reports highlighted the scale of the growth divide in the euro region, which expanded 1 on the quarter. Germany, which grew 2.2 percent, was responsible for almost two thirds of the bloc’s second-quarter expansion even though it only makes up about one quarter of the economy. In Spain, whose government is pushing through the toughest austerity measures in three decades, the economy expanded just 0.2 percent after economists predicted growth of 0.3 percent. Greece contracted 1.5 percent.
http://noir.bloomberg.com/apps/news?pid=20601068&sid=aaXMLT6ZhQiM
China July Power Use Rises 14% as Cutback Goals Loom
Aug. 14 (Bloomberg) -- China’s power consumption rose 14 percent in July from a year earlier, adding to evidence the government may take more steps to meet conservation goals for the country, the world’s biggest greenhouse gas emitter.
The nation used 389.6 billion kilowatt-hours last month, bringing the total this year to 2.4 trillion kilowatt-hours, a 20 percent gain from the year-earlier period, the National Energy Administration said on its website today.
China is suppressing industrial output to help meet its target of reducing energy use per unit of gross domestic product by 20 percent in the five years ending 2010. The government has listed the power-generation industry as among those adding pressure to conservation goals.
Power demand from secondary industries including manufacturing and construction, rose 15 percent to 293.9 billion kilowatt-hours in July from a year earlier, the National Energy Administration said today. Consumption by heavy industries rose 16 percent to 243.8 billion kilowatt-hours, it said.
China’s industrial output rose 13.4 percent in July from a year earlier, the smallest gain in 11 months, the National Bureau of Statistics said on Aug. 11, adding to signs of a slowdown in the economy, the world’s third-biggest.
The government in June said it may be “difficult” to meet its energy intensity target after the gauge rose 3.2 percent in the first quarter. The nation consumed 0.09 percent more energy per unit GDP in the first half compared with a year earlier, the statistics bureau said on Aug. 3.
China reduced its energy intensity by 15.6 percent from 2006 to 2009, according to the official Xinhua News Agency.
http://noir.bloomberg.com/apps/news?pid=20601089&sid=aBo.Ah0uGin0
China, as part of its international commitment to greener energy rather than using coal which produces over 50% of China’s electricity now, recently set a target of generating 100 Gigawatts of electric power from wind power by 2020, up from about 12 GW of electric power now. For comparison, in 2009 Germany generated about 25GW of electric power from wind. It’s a daunting target and a major input into why China has begun curtailing exports of rare earths and metals, of which it is monopoly supplier of about 95% to the world. As a rough rule of thumb, each Megawatt produced by wind power requires about 1,000 kilos of Neodymium. China is proposing to build 100,000 MWs of wind turbines. China is going to need all its own supply for its own economy and is intending to stop all exports by 2015. In the rest of the world, the scramble to find and develop alternative profitable commercial rare metals deposits has just started. I will shortly be posting a new page of companies I think will be of investment interest in the rare metals sector.
An accession of wealth is a dangerous predicament for a man. At first he is stunned, if the accession be sudden; he is very humble and very grateful. Then he begins to speak a little louder; people think him more sensible, and soon he thinks himself so.
Richard Cecil. 1748-1777. A Clapham "Saint".
Have a great weekend everyone. More Great Vampire Squids next week.
GI.
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