FRANKFURT — The president of the German central bank said in an interview published Sunday that he remained staunchly opposed to government bond purchases by the European Central Bank, a position that could make it more difficult to deploy a weapon many economists believe is essential to saving the euro.

Read the rest here.

In the months following the 2008–09 economic crisis, emerging-market economies robustly rebounded. Output in China and India expanded more than 10 percent in 2010, and Brazil’s gross domestic product (GDP) growth of 7.5 percent was its best performance in 25 years. Emerging-market economies retraced their precrisis level of industrial production by 2009, while advanced economies remained below their precrisis levels in 2012 (Chart 1).

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But the strong emerging-market rebound—most significantly in China—hasn’t endured. When China’s average GDP growth remained above 9 percent in 2011, hopes rose that a sustained recovery would prop up the world economy amid the European sovereign debt crisis and subpar growth in the U.S. However, China’s economy deteriorated rapidly in 2012, with GDP growth slowing to 8.1 percent in the first quarter from 8.9 percent at year-end 2011. Second quarter GDP growth slid further, to 7.6 percent, the lowest reading since the height of the global financial crisis in early 2009.

Even with the decline, there is speculation that these figures may still understate economic slowing. Economists have long doubted the credibility of Chinese output data. For example, some studies indicate that GDP growth was overstated during the 1998–99 Asian financial crisis, when official figures reported that China’s GDP grew on average 7.7 percent annually. Alternative estimates using economic activity measures such as energy production, air travel and trade data ranged from 2 percent to 5 percent.[1]

The dubious character of the official figures is no secret in China. Senior government officials, including Vice Premier Li Keqiang, dismiss official GDP data as “man-made” and “for reference only” because of political influence, particularly at the local level, on data reporting.[2]

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Rob Arnott’s Research Affiliates can now boast about $60 billion in assets that use “fundamental” indexes from his Newport Beach, Calif.-based company that screens stocks based on book value, cash flow, sales and dividends. One wonders if the future of indexing will feature Arnott more and more. When IndexUniverse.com Managing Editor Olly Ludwig sat down with Arnott in his office, they talked about his disagreement with indexing legend John Bogle, the state of the ETF industry and the allure of investing in relatively debt-free emerging markets countries.

Read the rest here.

Five things can go wrong in Greece in the next few weeks, in our view. The coalition government could fail to agree on the new austerity package. The Greek Parliament could fail to approve the proposed austerity package. Implementation problems could continue after Parliament approval. Social unrest could get out of control. And some Eurozone members could oppose further commitment to increase funding for Greece. We believe that Greece’s survival in the Eurozone could be at risk if any of these risks lead to a failure of the new program.

Our Chartist Friend from Pittsburg has posted some charts with commentary. Most of the charts look like bottoms to me.

See the charts here.

GENEVA/BUENOS AIRES (Reuters) – The United States and Japan assailed Argentina’s import rules as protectionist at the World Trade Organization on Tuesday, putting more pressure on the country to revamp policies that many trading partners say violate global norms.

The two complaints mirrored litigation brought by the European Union in May and triggered a swift reaction from Argentina’s center-left government, which vowed to challenge U.S. rules on lemon and beef imports.

Argentina is seen by many fellow Group of 20 nations as a chronic rule-breaker since it staged the world’s biggest sovereign debt default in 2002. It remains locked out of global credit markets and relies on export revenue for hard currency.

Read here:

“Goldman Sachs investment strategist Abby Joseph Cohen is out with a massive presentation on the state of the world economy and investment environment.

Cohen’s presentation looks at the state of several key economic and financial market metrics in key countries around the world and discusses her outlook for the rest 2012 and beyond.

• Cohen says investors should “expect quarterly volatility linked to weather, inventories, energy prices and global factors including European activity.”
• However, she also says she “does not expect additional deceleration” in U.S. economic data.
• The presentation concludes with an interesting discussion about the rise of environmental risk in financial markets.”

See presentation here

“Spain is about to receive an emergency disbursement from the 100 billion-euro ($123 billion) bailout of its financial system because of restrictions the European Central Bank imposed on bank borrowing, according to a person familiar with the matter.”

Full article

Many of the 48 Iranian men captured in Syria on August 4 who claimed to be religious pilgrims are in fact active-duty Iranian Revolutionary Guard members, multiple U.S. officials tell Fox News.

Members of the Free Syrian Army captured the group while they traveled on a bus in Damascus.

According to these officials, top members of the Iranian government have reached out to President Bashar Assad to help secure their release. The Iranians say these men were on a Shiite pilgrimage visiting the Sayyida Zeinab shrine, a holy Shiite site in the suburbs of Damascus.

Syria’s state television claimed the men were captured by an “armed terrorist group.”

Read more:

“The euro-area economy shrank in the second quarter after the worsening debt crisis and tougher budget cuts forced at least six nations into recessions.

Gross domestic product in the 17-nation currency bloc fell 0.2 percent from the first quarter, when it stagnated, the European Union’s statistics office in Luxembourg said today. That’s in line with the median estimate of 35 economists in a Bloomberg survey. The contraction was softened by stronger-than- forecast growth in Germany, the region’s largest economy.”

Full article

France manages to side step contraction 

Unreal. America, bend over. This is your future:

Antonopoulos and his partners spent hours collecting papers from tax offices, the Athens Chamber of Commerce and Industry, the municipal service where the company is based, the health inspector’s office, the fire department and banks. At the health department, they were told that all the shareholders of the company would have to provide chest X-rays, and, in the most surreal demand of all, stool samples.

Read the article here.

Germany will block any new aid to ailing Greece if Athens does not fully comply with the terms of previous rescue packages, even if other countries support unlocking funds, a senior lawmaker said Sunday.

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Since Obama claimed credit for Stuxnet, does this mean he is responsible for spying on your trades?

BOSTON, Aug 9 (Reuters) – A new cyber surveillance virus has been found in the Middle East that can spy on financial transactions, email and social networking activity, according to a leading computer security firm, Kaspersky Lab.

Dubbed Gauss, the virus may also be capable of attacking critical infrastructure and was built in the same laboratories as Stuxnet, the computer worm widely believed to have been used by the United States and Israel to attack Iran’s nuclear program, Kaspersky Lab said on Thursday.

Read the rest here.

via AP

TOKYO (AP) — A new report says the world’s appetite for beer hit a new high last year, with China leading the way.

The report released Wednesday by the research arm of a major Japanese brewery said it was the 27th consecutive year that beer production marked an increase. It attributed the rise to robust demand in Asia and developing countries.

KEEP READING 

New York, August 07, 2012 — Historical evidence shows that the risk of re-default tends to remain high after sovereign distressed exchanges, Moody’s Investors Service says in a new report that analyzes the modern history of sovereign bond defaults and the haircuts imposed on investors.

The new report, entitled “Sovereign Defaults Series: Investor Losses in Modern-Era Sovereign Bond Restructurings,” is available on www.moodys.com. Moody’s subscribers can access this report via the link provided at the end of this press release.

“Thirty-seven percent of the 30 sovereign debt exchanges since 1997 were followed by further default events,” explains Elena Duggar, Moody’s Group Credit Officer for Sovereign Risk and author of the report. “These high rates of re-default after a distressed exchange in the sovereign sector are similar to the experience in the global corporate sector and explain why ratings often remain low, in the Caa-C rating range, following distressed exchanges.”

Since 1997, there have been 30 distressed exchanges on sovereign bonds, by 22 sovereign issuers. Moody’s new report pinpoints four key findings:

Read here:

“Earnings season is heading into the final quarter, as more than 85 percent of S&P 500 companies have already reported results.

Rather than dwell on company-specific performance, we wanted to see what these industry leaders were saying about the global economy.”

Full article

via yahoo.com

Fiona McLaren, 59, had kept an old painting in her Scottish farmhouse for decades. She reportedly didn’t think much of the painting, which had been given to her as a gift by her father. But after she finally decided to have the painting appraised, some experts are speculating that it may in fact be a 500-year-old painting by Leonardo da Vinci and potentially worth more than $150 million.

“I showed it to him [auctioneer Harry Robertson] and he was staggered, speechless save for a sigh of exclamation,” said Ms. McLaren, according to The People.

The Daily Mail says the painting may be of Mary Magdalene holding a young child. The painting is now undergoing further analysis by experts at the Cambridge University and the Hamilton Kerr Institute, who will attempt to uncover its exact age and origins.

KEEP READING

Bolt won his second straight Olympic gold medal in the 100 meters with an Olympic-record time of 9.63 seconds.

Bolt joined American Carl Lewis as the only men to repeat in the 100 meters. Fellow Jamaican Yohan Blake took the silver, while American Justin Gatlin took bronze.

via TMZ.com

Faber reminds us that Europe is trading at levels which can only be described as “depressed” and may therefore be setting up for a great mean reversion play.

The strategy produced an excess return of 4.42% annualized for the period 1976–2011. With Europe trading at depressed valuation ratios, mean reversion suggests that the region is poised for long-run outperformance.

Read the article here.

“China’s manufacturing teetered on the edge of contraction in July and South Korea’s exports and inflation declined, indicating that stimulus efforts have yet to bear fruit.

The Purchasing Managers’ Index in China unexpectedly fell to 50.1 in July, the weakest in eight months, from 50.2 in June, a government report showed today. Fifty marks the dividing line between expansion and contraction. South Korea’s exports slid by more than double the amount forecast by analysts and inflation moderated to a 12-year low.”

Full article