Emerging Markets Fall on Weak Export Output

“Emerging-market stocks declined the most in three weeks and currencies depreciated as the yen’s tumble to a four-year low threatens developing-nation exporters.

Samsung Electronics Co. (005930), South Korea’s biggest exporter of consumer electronics, dropped 2.6 percent in Seoul, while Hyundai Motor Co. (005380) slid the most in three weeks, after the won climbed to its highest level against the yen in more than four years. China Resources Power Holdings Co. sank 11 percent in Hong Kong after saying it will issue shares for a merger. The Philippine peso, Thailand’s baht, the Russian ruble and South Africa’s rand weakened against the dollar.

The MSCI Emerging Market Index fell 0.7 percent to 1,053.53 at 3:25 p.m. in Hong Kong, paring this week’s gain to 1.1 percent. The yen slid beyond 101 per dollar for the first time in four years, helping the nation’s exporters compete at the expense of Asian rivals. Asian currencies dropped on speculation the yen’s slide will prompt some regional policy makers to weaken their exchange rates to protect exports….”

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“Global central bankers are poised to ease monetary policy even further after a wave of interest-rate cuts from India to Poland.

As Group of Seven finance chiefs gather in the U.K. today with monetary policy on their agenda, economists at Morgan Stanley and Credit Suisse Group AG are among those predicting policy makers will keep deploying stimulus amid weak global growth, slowing inflation and the need to thwart currency gains.

“Most central banks in our coverage universe still have a bias to ease,” Morgan Stanley economists led by London-based Joachim Fels said in a report to clients yesterday. “Given this disposition, it doesn’t take much in terms of downside surprises in growth or inflation to tip the balance for more central banks to pull the trigger for more easing.”

South Korea’s rate cut yesterday was the 511th reduction worldwide since June 2007, according to Bank of America Corp.’s tally, done before Vietnam and Sri Lanka today said they’re lowering their policy rates. While the liquidity has sent stock markets surging, it has yet to prove as effective in generating economic growth.

‘Best Friends’

“Central banks are our best friends not because they like markets, but because they can only get to their macro objectives by going through the markets,” Mohamed El-Erian, chief executive officer at Pacific Investment Management Co. in Newport Beach, California, said in a May 8 telephone interview. “The hope is that improving fundamentals will validate what central banks have done.” …”

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“The Reserve Bank of Australia cut its inflation outlook and reiterated its forecast for “below trend” growth this year, driven by an elevated currency, a crest in resource investment and fiscal tightening.

“The outlook for non-mining business investment remains relatively weak over the next few months,” the RBA said in its monetary policy statement in Sydney today. “The approaching peak in resource investment, the high level of the Australian dollar and ongoing fiscal consolidation are all likely to weigh on growth over the next year or so, while at the same time the low level of interest rates is helping to support demand.” …”

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“India’s industrial output in March expanded at the fastest pace in five months after the central bank eased interest rates to revive economic growth.

Production (INPIINDY) at factories, utilities and mines climbed 2.5 percent from a year earlier after a revised 0.5 percent gain in February, the Central Statistical Office said in a statement in New Delhi today. The median of 26 estimates in a Bloomberg News survey was for a 2.4 percent gain.

The Reserve Bank of India has cut interest rates three times in 2013 to help revive an economy that expanded at the weakest pace in a decade last year, extending the only reduction in borrowing costs this year in the major emerging nations of the BRIC group that include China, Russia and Brazil. Moderating investment, an extended fight against inflation and a drop in exports have hurt growth in Asia’s No. 3 economy….”

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“The yen weakened beyond 101 per dollar for the first time since April 2009 after a government report showed Japanese investors boosted holdings of overseas bonds, ending the longest streak of sales since January 2010.

Japan’s currency fell against all of 16 major counterparts as the data boosted speculation stimulus measures spearheaded by Bank of Japan Governor Haruhiko Kuroda and Prime Minister Shinzo Abe are driving local investors to seek higher returns overseas. Switzerland’s franc, also seen as a haven, dropped to a three-month low against the euro. The Australian dollar dropped below parity with its U.S. peer after the Reserve Bank this week cut interest ratesto a record….”

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World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Italy, Spain, France,  and Germany …

[youtube://http://www.youtube.com/watch?v=8t29dLgjEJU 450 300]

[youtube://http://www.youtube.com/watch?v=bn35qoCjLYA 450 300]

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“In Santa Ana, real criminals never need fear arrest as police get $ to arrest law-abiding fathers, brothers, sisters, and children who have committed no crime except for failing to have their proof of citizenship. Do you have yours?

In Santa Ana, crime victims are rarely able to obtain assistance from the police when it’s needed. Police routinely ignore bruises, broken windows, and evidence of extreme violence. Policemen laugh as girls report child sexual abuse. Officers watch as elderly victims of torture are carried into ambulances. After the victims are removed, these officers allow violent intruders to occupy their homes. (Orange County case files: 30-2011-00503154-CU-PO-CJC)

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“Degrowth embraces the ongoing devolution of paid work and wealth that cannot be reversed.

The anti-consumerism Degrowth movement is gaining visibility and adherents in Europe. Degrowth (French: décroissance, Spanish: decrecimiento, Italian: decrescita) recognizes that the mindless expansion of mindless consumption fueled by credit and financialization is qualitatively and quantitatively different from positive growth.

Degrowth is based on a number of principles:

1. Consumerism is psychological/spiritual junk food (French: malbouffe) that actively reduces well-being (bien-etre) rather than increases it.

2. Better rather than more: well-being is increased by everything that cannot be commoditized by a market economy or financialized by a cartel-state financial machine– friendship, family, community, self-cultivation–rather than by acquiring more. The goal of economic and social growth should be better, not more. On a national scale, the cancerous-growth measured by gross domestic product (GDP) should be replaced with gross domestic happiness/ gross nation happiness (GNH).

3. A recognition that resources are not infinite, despite claims to the contrary. Even if fossil fuels were infinite and low-cost (cheerleaders never mention costs of extraction and refining or the external costs), fisheries, soil and fresh water are not. For one example of many: China Is Plundering the Planet’s Seas (The Atlantic). Indeed, all the evidence suggests that access to cheap energy only speeds up the depletion and despoliation of every other resource.

4. The unsustainability of consumerist consumption dependent on resource depletion and financialization (i.e. the endless expansion of credit and phantom collateral).

5. The diminishing returns on consumption. Investing in clean air and water, public transit, universally accessible knowledge/information–these forms of consumption yield high returns in public health, affordable mobility, etc. Buying clothing to wear once or twice and then throw away does not.

The investment in the rule of law, public infrastructure and universal access to clean air, water and education moves nations from developing to developed and greatly improves the material lives of the residents. Beyond this, consumption of resources offers diminishing returns up to a point of social/spiritual/ psychological derangement. Consumption beyond this point actively reduces well-being.

6. The failure of neoliberal capitalism and communism alike in their pursuit of growth at any cost.

7. We have reached Peak Consumption (video 27:30 minutes).

The Degrowth movement explicitly questions what John Michael Greer calls the religion of progress (i.e. growth). The civil religion that growth equals progress is akin to the Cargo Cult of Keynesianism, the notion that growth is so essential that expanding debt exponentially to drive diminishing returns of growth is necessary….”

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“Investors often hear about analyst upgrades and new “Buy” ratings. What they do not hear from most Wall Street analysts is the prediction that a stock price could double or come close to doubling. Most analysts do not want to get that bold by predicting ”the next Apple” because a call like that can wreck a career. These all come with high risk, but some investors might be inclined to consider these as being extreme value stocks based on the projected upside.

Most stocks simply do not double over the course of a year, and identifying the next double, or ten-bagger, generally has a lot of risk that companies like 3M and GE just do not have. Such calls generally come from boutique research firms, but that is not always the case.

Ocean Power Technologies, Inc. (NASDAQ: OPTT) and XOMA Corporation (NASDAQ: XOMA) were highlighted as stocks which could more than double by analyst calls On Thursday. Deckers Outdoor Corporation (NASDAQ: DECK) is a runner-up as the call was close enough to a double that it caught our attention from the same day, and a call from Monday on Pure Cycle Corp. (NASDAQ: PCYO) will catch the eyes of small-cap and speculative investors with the risk appetite for such a small stock….”

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“Charles Plosser, President and Chief Executive Officer of Federal Reserve Bank of Philadelphia, gave a speech on Thursday afternoon discussing how to end the “Too Big To Fail” conundrum of the big banks at the fourth Annual Simon New York City Conference. We are not interested in regurgitating Plosser’s speech today. What we want to show you is how and why the “too big to fail” conundrum cannot easily be solved and why it is so difficult to just unbundle the concentration of risk here.

This is an interesting take because it has yet another call to increase the capitalization of the so-called too big to fail banks. It sound great and 24/7 Wall St. is all in favor of big banks being on solid ground. The ultimate problem is that the big banks are so big that increase their capitalization requirements effectively withdraws too much capital from the economy.  It is without any doubt that you have heard of the calls to break apart the big banks before. You will here those same calls tomorrow and beyond as well.

When you consider that a mere handful of banks have about half of the country’s personal and commercial bank deposits you have a right to be scared. Increasing the capital requirements above the 10% hurdles set by Basel banking standards. Imagine how strong and able these banks would be able to hold up in another recession if their bank capital requirements went from 10% to say 15%.   Now for the bad news if you look at the tally of assets as of the end of 2012. J.P. Morgan Chase & Co. (NYSE: JPM) was about $2.36 trillion in assets and Bank of America Corporation (NYSE: BAC) has $2.2 trillion in assets, with Citigroup Inc. (NYSE: C) behind it at $1.86 trillon and then followed by $1.42 trillion for Wells Fargo & Co. (NYSE: WFC).

These four banks alone have $7.84 trillion in assets. The CIA World Factbook tracks just about all global economies and its final estimate for 2012 GDP was put at $15.66 trillion for 2012. Different regulators have many different means of calculating what they think the capitalization are best and keeping up with the flavor of the day or week is for government accountants and regulators. Still, this asset base for just the four biggest banks is right at half (actually 50.06%) of 2012 GDP on the purchasing power parity calculation preferred by economists.

It is very easy to merely say in a vacuum that the too big to fail banks should just increase their capital to hedge against future bailouts. Various regulators have various means of evaluating capitalization metrics and requirements. The unfortunate outcome is that by forcing banks to hold even more capital will tighten credit even further than it has been. With much of the world back in recession, that puts the U.S. back in recession.

Here is what Mr. Plosser said….”

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At 1370 i wrote a post that said if your short you arer fucking dead. I never expected to see a rise above 1550-1575 S&P.

Now the NY fed expects stocks to rise for another 5 years…..so you might just be fucking dead forever; believe me 5 years is forever in the stock market.

DOW 20k?

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A rumor is floating around that QE off is coming sooner than you think. A fed member is allegedly going to release a paper shortly on the matter…

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“The nation’s biggest banks are going on the offensive to fend off growing efforts in Washington to rein them in.

The banks have hired longtime, influential Washington hands to deflect regulatory and political pressure to strengthen their finances and to sell assets. Regulators and some lawmakers have raised concern that large banks remain “too big to fail” and could require another government bailout in the event of a new financial meltdown.

The effort by banks marks a lobbying turning point for the industry, which adopted a mostly low-profile stance to new regulations in the wake of the financial crisis. It also comes as banks such as Morgan Stanley, MS -0.82%Bank of America Corp. BAC -0.84% andGoldman Sachs Group Inc. GS -1.12%are shedding lucrative assets that would have required them to hold more capital to compensate for their risk.

While the banks are joining forces, much of the work is being coordinated through trade groups.

Several banks and the Financial Services Forum, a top trade association, have hired Tony Fratto, a former Bush administration official, to provide what they call a “rapid response” to criticism that banks remain too large. The too big to fail notion implies that the government would have to step in and provide funding to institutions whose failure could disrupt the financial system, as it did during the 2008 financial crisis….”

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“U.S. wholesale inventories rose in March, fueled by increased stocks of cars and machinery which have provided support for economic growth early in the year, but wholesale sales posted the biggest fall in four years.

The Commerce Department said on Thursday wholesale inventories rose 0.4 percent, just above the median forecast in a Reuters poll for a 0.3 percent gain….”

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“Last Friday’s surprisingly strong April jobs report and today’s unexpected drop in initial unemployment claims were welcome developments in the beleaguered U.S. labor market.

However, the underlying details of the labor market continue to be troubling.

Last week, veteran economist David Rosenberg gave a lengthy 59-slide  presentation on the Federal Reserve’s failed efforts to get the economy on track.

Much of the presentation focused on the dynamics of the U.S. workforce.

Rosenberg argued that despite the high unemployment rates, there’s actually a shortage of qualified labor, which is resulting in labor hoarding….”

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“This extraordinary stock market is driven by characteristics that defy conventional valuation techniques. I receive emails from people who tell me that the market is overextended, overvalued, and trading way above its 50- or 200-day moving average. If you look at the metrics, the market is all of those things.

I receive other emails that talk about the valuation of the market. Is it reasonably “fair?” If you look at earnings expectations and the price of stocks this year and compare them to a metric, you would say the market is reasonably priced.

The math goes something like this. The S&P 500 Index will earn an estimated $105-$110 for 2013. That puts it at a multiple of about 15 times earnings. Those earnings are being reported by companies that have minimal distortions due to inflation or accounting mechanisms. Thus the earnings are of a higher quality in terms of reporting than they have been in the past. They do not reflect the bubble of the 2006 and 2007 financials. And they are more representative of the diversity of American companies. Our metric would say the market is reasonably priced. Not a great market, but certainly not excessive.

The next metric ties the relationship between stocks and interest rates. We use a number of vehicles to make this comparison. I like the calculation of the equity risk premium that says how much you get paid for owning stocks versus riskless debt instruments. If you compute an equity risk premium against an interest rate next to zero, the valuation of stocks could be infinite. Anything compared to near-zero has a huge bulge in its multiplier.

If you compare stock valuations against the 10-year riskless Treasury note, the equity risk premium is still very high by any historical measure. Why? Because the Treasury interest rate is so low.

If you try to compare the equity risk premium against what you believe to be the normalized 10-year Treasury interest rate, you still get a fairly reasonable equity risk premium.

The math is straight forward….”

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“The U.S. dollar just hit the key ¥100 psychological level against the Japanese yen!

The currency pair hasn’t traded north of ¥100 since April 14, 2009.

The chart below shows the big downward move the yen has made…”

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