European December Car Sales Fall 16% on U.S. Producers

“European car sales in December plunged the most in more than two years as recessions in the southern part of the region cut demand at Ford Motor Co. (F), General Motors Co. (GM) andRenault SA. (RNO)

Registrations fell 16 percent to 838,428 vehicles from 997,842 a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. Full-year sales declined 7.8 percent to 12.5 million cars, with the slump in the European Union the worst in 19 years.

Carmakers have announced 30,000 job cuts….”

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“Alcatel-Lucent SA (ALU), the French phone- equipment maker revamping its business to end losses, won a $1 billion services contract over eight years with Reliance Communications Ltd. (RCOM) to improve service quality on the Indian carrier’s fixed and wireless networks.

The contract, the Paris-based company’s first publicly announced deal in India in seven months, is a sign that the Indian market is picking up, Rajeev Singh-Molares, president of the Asia Pacific region at Alcatel-Lucent, said during a press conference in Mumbai. He forecast the market will grow in 2013.

“While the Indian market and the industry have had some challenges over the last two years, I think we’re turning the corner,” Singh-Molares said. “I think 2013 will be a year of more stability and back to growth. Back to expanding the kinds of services consumers will be getting.”

Alcatel-Lucent shares jumped as much as 2.9 percent in Paris, and were up 1 percent at 1.27 euros as of 10:13 a.m., taking the advance to 26 percent this year. On Dec. 24, Alcatel ended a 25-year presence on the CAC 40 by leaving France’s leading stock index….”

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“The Bundesbank will repatriate 674 metric tons of gold from vaults in Paris and New York by 2020 to restore public confidence in the safety of Germany’s reserves.

The phased relocation of the gold, currently worth about 27 billion euros ($36 billion), will begin this year and result in half of Germany’s reserves being stored in Frankfurt by the end of the decade, the Bundesbank said in a statement today. It will bring home all 374 tons of its gold held at the Banque de France and a further 300 tons from the New York Federal Reserve, it said. Holdings at the Bank of England will remain unchanged.

“With this new storage plan, the Bundesbank is focusing on the two primary functions of the gold reserves: to build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold trading centers abroad within a short space of time,” the Bundesbank said. It said the complete withdrawal of reserves from Paris reflects the fact that Germany no longer depends on France as a financial center to exchange gold because both nations use the euro.

Germany’s Audit Court sparked a debate about the country’s gold reserves last year when it called on the Bundesbank to take stock of its holdings abroad, saying their existence had never been verified. German gold reserves, the second-largest in the world after the U.S., amounted to 3,391 tons as of Dec. 31 and were valued at 137.5 billion euros.

‘A Lot of Emotion’ …”

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“The euro’s 8 percent gain against the U.S. dollar in the past six months is posing a fresh threat to the European economy just as it shows signs of escaping the debt crisis, said Jean-Claude Juncker, who leads the group of euro-area finance ministers.

Echoing policy makers from Switzerland to Japan in bemoaning strong exchange rates, Juncker late yesterday called the euro’s value “dangerously high” after the 17-nation currency this week traded above $1.34 against the dollar for the first time since February last year.

The euro has rallied amid growing signs in financial markets that the three-year debt turmoil is fading and after European Central Bank President Mario Draghi last week signaled no immediate plan to ease monetary policy further.

“It was said last year that the euro zone was at risk of breaking and I said last year that this won’t happen,” Juncker, who steps down this month as head of the so-called eurogroup, told an annual gathering of business leaders in Luxembourg. “The euro zone has become more stable after lots of efforts, some from me,” Juncker said, adding that now “the euro foreign-exchange rate is dangerously high.”

The European currency dropped as much as 0.9 percent after Juncker’s comments and reached an intraday low of $1.3262. It reversed declines after ECB Governing Council member Ewald Nowotny said the euro-dollar rate is not a concern and traded at $1.3322 at 11:13 a.m. London time, up 0.1 percent on the day….”

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“The Australian dollar fell for a second day against the yen after data showed consumer confidence was little changed from a two-month low, underscoring concern the South Pacific nation’s economy is weakening.

The so-called Aussie slid versus most of its 16 major counterparts after the World Bank cut its global growth forecast for this year, tempering demand for higher-yielding assets. Australia’s bonds advanced for a third day. The New Zealand dollar, known as the kiwi, dropped versus its Japanese peer as Asian stocks declined.

“We’ve seen over the last week that domestic data hasn’t been that good and the Aussie’s taken perhaps a slight hit,” said Derek Mumford, a Sydney-based director at Rochford Capital, a currency risk-management company. “I wouldn’t say today’s data reflects any kind of booming confidence.”

Australia’s dollar fell 1 percent to 92.86 yen as of 4:50 p.m. in Sydney. It lost 0.2 percent to $1.0549. New Zealand’s currency bought 73.87 yen, 0.9 percent below the close in New York. It traded at 83.93 U.S. cents from 83.97 yesterday.

Ten-year yields in Australia dropped to as low as 3.36 percent, the lowest since Jan. 3. The MSCI Asia Pacific Index of shares lost 0.8 percent.

Australia’s sentiment index for January rose 0.6 percent to 100.6, a Westpac Banking Corp. and Melbourne Institute survey taken Jan. 7-13 of 1,200 adults showed today in Sydney. This month’s figure was little changed from the 100.03 level in December that was the least since October. Readings above 100 indicate optimists outnumbered pessimists….”

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“Asian stocks dropped, with the regional benchmark index heading for its biggest loss in two months. The Nikkei 225 (NKY) Stock Average slid the most since May, while Chinese shares fell for the first time in three days.

Honda Motor Co. (7267), an automaker that gets 81 percent of its sales overseas, sank 3 percent in Tokyo as a stronger yen dimmed the outlook for exporters. GS Yuasa Corp., a supplier of lithium batteries to Boeing Co., slumped 4.5 percent after All Nippon Airways Co. grounded its fleet of Boeing Dreamliners. Agricultural Bank of China Ltd., the nation’s No. 3 lender, fell 2 percent in Hong Kong after Premier Wen Jiabao said China should “gradually” establish a property tax system.

The MSCI Asia Pacific Index slid 0.7 percent to 131.74 as of 7:02 p.m. Tokyo time, with more than two stocks falling for each that rose. The gauge rallied 11 percent from Nov. 14 through yesterday as Japanese shares surged on speculation Prime Minister Shinzo Abe will pursue more aggressive stimulus policies and reports showed China’s economy is recovering and .

“We’re seeing shares at an overbought level after such a strong rebound recently,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $126 billion. “The market just needs to consolidate before coming back. The fundamentals are looking better. It’s not going to be a deep correction, just some consolidation. Markets never go up in a straight line.”

Overheating Signs

The MSCI Asia Pacific Index (MXAP)’s 14-day relative strength index, an indicator of market momentum, reached 75 yesterday. A level above 70 is considered by some investors as a sign the shares have risen too far, too fast.

Shares on the Asian gauge traded at 14.2 times estimated earnings, compared with 13.3 for the Standard & Poor’s 500 Index and 12 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg News.

Japan’s Nikkei 225 dropped 2.6 percent, posting its biggest decline since May 18. The gauge retreated after yesterday climbing to its highest level since April 2010…”

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World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Italy, Spain, France,  and Germany …

 

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[youtube://http://www.youtube.com/watch?v=3xOrPQ5m5AU 450 300]

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“Just as employers use temporary workers instead of permanent ones to save money and drive down wages generally, a new report shows that avoidance of worker safety rules is another dubious “benefit” bosses seek when hiring temps, also called contingent workers. Released last week, the report suggests several reforms, including urging the government to target companies that often use contingent workers and to issue new rules to ensure they get proper safety training and protective equipment.

The report from the nonprofit Center for Progressive Reform (CPR) details the increasing use of contingent workers to perform dangerous, undesirable jobs in industries like farming, construction, warehousing and hotel services. Noting that the number of contingent workers has doubled in twenty years to more than 2.5 million, the report underscores Bureau of Labor Statistics data that they suffer higher rates of injury and death than other employees.The economic and political vulnerability of contingent workers, who are often poor and sometimes undocumented, makes them easy to exploit not only with low wages and long hours, but also with unsafe working conditions. According to the study, because contingent employees rarely have health insurance or even workers’ compensation coverage, employers are able to shift the financial burden of workplace injuries onto the public, and often skimp on safety training of temps.

The recent case of Carlos Centeno is illustrative. In November 2011, Centeno was working for a temp agency and was assigned to a Raani Corp. plant near Chicago. The 500-gallon chemical tank he was cleaning doused him with a 185-degree mixture of water and citric acid, burning him over 80% of his body. When the company refused to call 911, a co-worker drove Centeno to get help, although more than 98 minutes passed before Centeno arrived at a hospital emergency room, and he died a painful death three weeks later. The only safety equipment given to Centeno that day was a pair of latex gloves and rubber boots….”

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“Sen. Rand Paul (R-Ky.) gave an interview to the Christian Broadcasting Networkin which he rather strongly denounced President Obama’s threats to impose gun control through executive orders.  ”I’m against having a king,” said the Senator.  ”I think having a monarch is what we fought the American Revolution over, and someone who wants to bypass the Constitution, bypass Congress, that’s someone who wants to act like a king or monarch.”… ”

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“TALBOT COUNTY, Md. (WJZ) — Some parents on the Eastern Shore say school officials there went too far in disciplining a couple of six-year-old boys. Derek Valcourt explains the boys got into trouble for bringing an imaginary weapon to school.

What started as a recess game of cops and robbers at a Talbot County school turned into a controversy after two six-year-old boys were suspended for using their fingers to make an imaginary gun.

Many say a suspension is going too far.

“It’s ridiculous,” said Julia Merchant….”

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[youtube://http://www.youtube.com/watch?v=S3nmLRUvtrg 450 300]

 

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“Authorities responded to a shooting at Stevens Institute of Business and Arts in downtown St. Louis on Tuesday.

The suspect, a currently enrolled student, allegedly shot one administrator before fleeing to a stairwell and turning the gun on himself, according to a police briefing broadcasted by KMOX.

Both the suspect and victim were transported to St. Louis University Hospital, according to KMOV.

St. Louis Police Chief Sam Dotson said that the alleged shooter and wounded administrator did previously know each other.

“He was familiar to faculty and staff,” Dotson said in a press conference. “The victim and the shooter were familiar with each other. They knew each other. This did not appear to be random.”

Dotson added that the weapon — a handgun — was found in the alleged shooter’s possession, the St. Louis Post-Dispatch reports.

Police said that no other students were injured in the incident, which occurred at approximately 2 p.m. SWAT units checked each floor of the school and secured the building after finding no other victims. About 40 students were escorted from the building.///”

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“President Obama’s pick to run the Treasury Department isn’t much of a financial reformer. And it looks like his potential pick for Treasury’s No. 2 spot might not be, either: She actively lobbied for Wall Street.

Obama is reportedly considering tapping Morgan Stanley chief financial officer Ruth Porat to be the “number two” at Treasury under his pick for Treasury Secretary, Jack Lew. Picking Porat would address two problems for Obama: the notable lack of women named so far to his second-term cabinet, and Lew’s professed lack of financial expertise.

But it might create yet another headache: Though Porat is accomplished and apparently knows financial markets, she has also frequently lobbied regulators over the rules in the Dodd-Frank financial-reform law, according to an incomplete tally by the Sunlight Foundation.

Of course, a new job might bring a new attitude about financial reform. It also seems that Porat’s primary role will be as the glue that binds banks and the White House together during the debt-ceiling fight and other fights ahead, according to Bloomberg. No need for a lot of financial-regulatory zeal in such a job.

Still, a strong regulator might have made a good deputy for the budget-focused Lew. It is hard to imagine that Porat, who has spent the past couple of years arguing Wall Street’s case to regulators, will be that regulator….”

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” “There are decades when nothing happens and there are weeks when decades happen.” – Vladimir Ilyich Lenin

“People only accept change when they are faced with necessity, and only recognize necessity when a crisis is upon them.” – Jean Monnet

“If something cannot go on forever, it will stop.” –Herbert Stein

As we begin a new year, we again indulge ourselves in the annual (if somewhat futile) rite of forecasting the year ahead. This year I want to look out a little further than just one year in order to think about the changes that are soon going to be forced on the developed world. We are all going to have to make a very agile adaptation to a new economic environment (and it is one that I will welcome). The transition will offer both crisis and loss for those mired in the current system, which must evolve or perish, and opportunity for those who can see the necessity for change and take advantage of the evolution.

This is my most-read letter of the year, by the way, and if you’re not yet a subscriber you can join my “one million best friends” and receive bothThoughts from the Frontline and my other weekly letter, Outside the Box, as well as Grant Williams’ rollicking Things That Make You Go Hmmm…, all for free, by simply entering your email address on my site: http://www.mauldineconomics.com/go/bwbsl/MEC

Unsustainability and Transition

Think back to 2001. It was the opening of a new millennium. While that was auspicious enough, several events then ensued that shaped the future for decades to come. China was admitted to the World Trade Organization, leading to a revolution in its production and global trade. The euro was launched with much fanfare – and a minor chorus of criticism.  We are now in a midst of a great trial that will determine whether the euro will be a brief experiment or a durable currency. This has dramatic implications not only for Europe but for the world. And, of course, the tragic events of 9/11 shaped a new global perception of what constitutes threats to democracy and security. …”

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“The share of millionaires planning to investing in stocks this year rose to 55 percent, up 10 percent from 2010, according to a survey of 1,450 millionaires by SpectremGroup.

That’s a nice increase, but it doesn’t mean they’re bullish on the economy.

“Millionaires are taking more risks, but not necessarily because they feel things are better from an economic standpoint,” Spectrem president George Walper told BI. “It’s strictly the challenge of desiring a better return and that’s been available because interest rates are so low. At the same time, they are also holding back money in reserve….”

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“The World Bank just published an update to its latest Global Economic Prospects report.

“Four years after the onset of the global financial crisis, the worst appears to be over,” they write.  “However, the global economy remains fragile, as high-income countries continue to suffer from volatility and slow growth, says the World Bank’s latest Global Economic Prospects, issued today.

“Despite slow growth in high-income countries, prospects for the developing world remain solid (albeit between 1 and 2 percentage points slower than in the pre-crisis period). In order to regain those earlier faster growth rates, developing countries will need to focus on productivity-enhancing domestic policies, to assure robust growth in the long term.”

The report includes updates to the World Bank’s forecasts for growth.  Here are the key estimates and forecasts (June estimates in parenthesis):

• 2.3 percent global GDP growth in 2012 (down from 2.5 percent)
• 2.4 percent global GDP growth in 2013 (down from 3.0 percent)
• 3.1 percent global GDP growth in 2014 (down from 3.3 percent)
• 3.3 percent global GDP growth in 2015 …”

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More bad news for $BA.

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“Japan’s machines orders jumped 3.9 percent in November.

This was much higher than the 0.3 percent increase expected by economists.  This is according to Bloomberg…”

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“We’ve written a lot about the weakness of the Japanese yen, a move that’s associated with the country’s new Prime Minister, and his aggressive agenda of monetary and fiscal easing.

But actually, it’s more than just that.

In a note this evening, SocGen’s Sebastien Galy observes that shifts are underway not just in the yen (JPY) but also in the Swiss Franc (CHF) and the US dollar:

FX implied volatilities have been rising from ultra low levels, as they did pre-Lehman times. It is an important sign not of impending doom, but of a global reallocation of capital. Old regimes are dying and FX is the first sign of this process. We are seeing this in JPY, are starting to see this in CHF and will eventually see it happen in USD, hopefully in H2 or Q4 as the US economy steadily recovers. As capital is reallocated across the world, the allocation between bonds and equities as ultimate “domestic” claims to global growth will eventually also become more unstable. For now, these wobbles will be crushed as monetary policy remains very expansive globally, but the process started. FX is the warning sign.

The 2007-2012 crisis period has been characterized, in part, by extremely predictable correlations among a range of assets. So for example, a “risk on” period might be characterized by higher stocks, a weaker dollar, a higher aussie dollar, and so forth.

But now, for example, we’re seeing dollar strength coincide with a strong market.

And the Swiss Franc, which has been the favored “safe-haven” currency of Europe (everyone rushed into Switzerland) during the crisis is now losing luster, as people feel comfortable repatriating money back into the Eurozone.

In fact, EURCHF (the euro against the Swiss Franc) has been on a crazy tear in just the last few days…”

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