Wednesday, October 23, 2013

Some morning news

Here's some news to get your head into the game today.

FT beyond brics - foreign holdings of USTs down $68B since May. Avantika, I think the explanation has to do with international trade and foreign reserves. In any case, UST10 is now down to a 2.5% yield, so it seems whatever the EMs are selling, everyone else is happily buying.

NYT Economix - federal employment at 47-year low. Obama seems to be doing a great job of reducing the size of government to the point it can be drowned in the bathtub, no? This is yet another headwind to US economic recovery; but of course the Republicans feel they have to do all they can to ensure no black man presides over an economic recovery.

Michael Shaoul - UK September mortgage approvals. The chart looks about to take off:

Then again, maybe it's all down to the Chinese and French buying London real estate? Well, I doubt rich foreigners need mortgages. In any case, the UK is a large economy, so hopefully it can join the US, Japan and the ECU in returning to growth? You think that's stimulative for the world economy? Hm?

Bloomberg - Spain ends 2-year recession. GDP is back to expansion. So buy Spain.

FT beyond brics - Chinese property: hot or not? This chart is an interesting counterfactual to the idea of a Chinese property bubble:

That's right; relative to wages, property prices are in a long downward trend. What does that mean for the part of Chinese credit dealing with mortgages, btw? And heck, what's wages' share of Chinese GDP growth? I like factoids that raise questions.

Bloomberg - China banks triple debt writeoffs as massive wave of defaults looms. This is the article that has everyone selling everything today. Because they just read the title and didn't bother reading the body of the article:
“The banks and the regulators’ interests are aligned in speeding up write-offs,” said Ma Kunpeng, a Beijing-based analyst at Credit Suisse Founder Securities Ltd. “This prepares them for a rainy day.”

The China Banking Regulatory Commission, led by Shang Fulin, urged banks in April to set aside more funds to cover defaults, write off some bad loans and curb dividend payments while earnings are ample to create a buffer in case of an economic downturn.
So there's policy-driven, sensible intent behind it, not an imminent collapse. Also,
Neighboring India will inject 140 billion rupees ($2.3 billion) into government-run banks including State Bank of India and Central Bank of India (CBOI) to guard against soured loans amid forecasts for the slowest economic growth in a decade, the Finance Ministry said today.
If this is the first time you heard that India's economy sucks, you shouldn't be managing other peoples' money.

Back to China:
Allowing the banks to use their “gigantic” loan-loss reserves to eliminate the worst of the debt indicates that China is beginning to adopt a “more modern approach” to credit management, said Jim Antos, an analyst at Mizuho Securities Asia Ltd. in Hong Kong. Putting the provisions to use -- instead of letting them accumulate -- may also give investors more confidence in the reported bad-loan figures.

“Every other banking sector in the world does write off loans that are totally uncollectible,” Antos said. “Finally, we see evidence that this is happening in China.”
Again, not a "massive repudiation of debt as a dishonest system is com..." - oh wait, that saying doesn't apply, it only ever applies to the USA, which is the only country in the world according to some bloggers.

It's not a disaster, is what I meant to say. It's Chinese policy leaders forcing a cleanup in advance of the November plenum.

But hey, the world markets got really overheated these past few days, so let's see some selling to bring them back down from overbought.

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