Consumptio to GDP ratios

classic Europe: New attack on private equity and hedge funds & Szarkozy crap… im surprised he hasnt mentioned 12th Imam:-)

Leading Socialist deputies in the European parliament presented a report into the hedge fund and private equity sectors yesterday that advocated measures to curb the influence of activist investors on businesses and workers, or what the report calls the “real economy”. The intervention by parliament’s second-biggest political force is unlikely to lead to tougher rules for the industry by itself.

“I don’t believe that the market will solve it and I don’t want to wait for a major crisis,” Ms van den Burg said.

http://www.ft.com/cms/s/63ac50a0-de5c-11db-afa7-000b5df10621.html

meanwhile at the same day :

Brussels shocked by Sarkozy rhetoric

shock” at the protectionist rhetoric of Nicolas Sarkozy, the leading challenger for the French presidency, saying it was in France’s interests to promote the European single market and cross-border investment

when he said :

“Look at the waste of Arcelor, which we sold off on the cheap because we believed that the steel industry was history. They got it wrong. They lied,” said Mr Sarkozy to a cheering crowd at Lille’s Palais des Congrès. “If I am president, then France will have a real industrial policy.”

he stepped up his attacks on the European Central Bank (ECB) and the euro. “If wages are too low, it is because the euro is too expensive and when the euro is too expensive, companies try to stay competitive by making up for it on wages,” he said.

http://www.ft.com/cms/s/4269a51a-de15-11db-afa7-000b5df10621.html

Commerce Department Applies New Duties Against China

The U.S. Commerce Department, reversing more than two decades of practice, decided today to levy new duties on imports from China to compensate for Chinese subsidies to exporters.

This decision is the most significant step toward a stronger trade policy with China than we have experienced in this decade,” Republican Representative Phil English of Pennsylvania .   

will range from 10.9 percent to 20.3 percent

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVbdOL7MKYj8&refer=home

The Chinese government lost a U.S. court case yesterday aimed at preventing this decision.   and price action and news is today???? or is it me beeing lazy and not reading the news , when the news happanes.    read more on monday

Liquidity , a comment

“Liquidity isn’t about money on the sidelines per se, but rather about the risk appetite of those on the sidelines,” says Paul McCulley of Pimco, the investment group. “When risk appetite turns, no amount of liquidity on the sidelines matters, particularly when a crowd gathers there.”

http://www.ft.com/cms/s/234dc8de-d364-11db-829f-000b5df10621.html

Further on subprime fall-out : classic bubble tale

But in September 2004, an advertisement in the local newspaper for a home buyers’ seminar caught her eye. “It was so appealing,” she recalls. “It said: ‘You can afford your dream home. Let’s make history’.”

At that time, her monthly income was made up of not much more than $1,800 (£930, €1,360) in disability payments, a small amount of child support and a modest rent subsidy. Much to her surprise, Ms Darden was “pre-approved” for a loan worth $894,000. “When they told me, I couldn’t believe it. But they said: ‘We’re different from everyone else, we can help you.’ “Ms Darden faces having to move soon from the home that two years ago she thought was hers for life. “I don’t wish this on my worst enemy,” she says. “I’ve spent many restless nights worrying about this. You work all your life, you save, you dream – and now it’s all gone.”

http://www.ft.com/cms/s/234dc8de-d364-11db-829f-000b5df10621.html

Rapid ageing of developing world surprises UN experts..from FT

i aint Malthus  http://en.wikipedia.org/wiki/Malthus, but this is going to be  a huge macro trend. Think how to play it !

—————————- 

Europe, which boasts the world’s oldest population, is set to age from a median of 39 years in 2005 to 47 years in 2050, according to a mid-range scenario.

But the trend in the developing world is even more dramatic, with the median age in Latin America rising from 26 to 40, and in Asia from 28 to 40. Even Africa, says the study, would see an increase from 19 years today to 28 years in 2050.

http://www.ft.com/cms/s/3880a148-d1d1-11db-b921-000b5df10621.html

Long lag between peak in margins and begining of recession (Surprise,surprise)

from BCAr

A self-fulfilling carry trade obsession

From Mr R. Wise.

Sir, The media’s preoccupation with the famously opaque carry trade (including your numerous recent editorial comments) has speciously institutionalised an explanatory power over inch-by-inch fluctuations in the value of the Japanese yen that belie cyclical and secular capital flows as well as macroeconomic fundamentals.

The reality is that, at any point in time, the yen’s value is a complex, metastable equilibrium of real money investment flows into and out of Japan, the (partial) foreign exchange hedging of those flows, cross-border capital movement, foreign exchange reserve management and speculation. That interest rate differentials (specifically per unit exchange rate volatility) play a part in motivating a component of that speculation is probable. That they play a dominant part remains unsubstantiated. It seems more likely that the obsession with the carry trade is promulgating, in a self-fulfilling way, short-term yen strength as a reaction to recent increases in global risk premiums on a – possibly spurious – expectation that the carry trade will be unwound.

That the world’s biggest yen carry trader, Japan’s ministry of finance, with its approximately $800bn of foreign exchange reserves, remains unmoved by recent currency gyrations is a significant data point missed by most carry trade commentators.

R. Wise,

Tokyo 106-0047, Japan

Copyright The Financial Times Limited 2007

Mr.G speaks again

Greenspan Sees `One-Third Probability’ of Recession This Year
By Craig Torres

March 6 (Bloomberg) — Former Federal Reserve Chairman Alan Greenspan said there’s a “one-third probability” of a U.S. recession this year and that the current expansion won’t have the staying power of its decade-long predecessor.

“We are in the sixth year of a recovery; imbalances can emerge as a result,” Greenspan, 81, said in an interview yesterday at his office in downtown Washington. “Ten-year recoveries have been part of a much broader global phenomenon. The historically normal business cycle is much shorter” and is likely to be this time, he added.

“It is possible that we can have a recession at the end of this year,” said Greenspan, who ran the central bank for 18 years until January 2006. Bernanke, 53, declined to comment.

`Surprised’

“I was surprised at this recent episode,” he added.

Investors may have taken notice of his comments on Feb. 26 because they considered them prescient. The day after he mentioned the risk of a recession to a Hong Kong audience on Feb. 26, a Commerce Department report showed sales of non-military capital goods excluding aircraft dropped 2.7 percent in January, the biggest decline since September 2001. Orders slumped by the most in three years.

Greenspan said he doesn’t believe that so-called point forecasts, where economists hone their outlook down to decimal points, can be accurately made in the near-term. “We really can’t forecast” the economy over the next two years, he said.

Tracking Inventories

Greenspan worked for what is now the Conference Board, a New York-based business group, as an industrial-metals analyst from 1950 to 1953. Tracking inventories, he was able to come up with a model of final demand. He expanded that model to textiles, aluminum and oil.

He found that large-scale models that used aggregate data averaged out the nuances and changes he could pick up at an industry level. Finally, some of the assumptions of firms’ pricing power simply didn’t hold as the post-war years unfolded.

“I realized I was trying to see how the world works in the context of individual entities,” Greenspan said.

Under his chairmanship, the Fed staff began to collect figures on capital-spending plans, surveying firms directly from the Board of Governors’ building in Washington.

“We certainly devoted some resources to our own gathering of anecdotal information,” said Michael Prell, former head of the Division of Research and Statistics, the central forecasting unit at the Fed. “Every other week, we would contact some subset of a sizeable group of firms.”

Greenspan’s unique discipline both frustrated and amazed Fed colleagues, especially those trained in sophisticated economic modeling.

`Idiosyncratic’

“His great value is that he has an idiosyncratic approach,” said Laurence Meyer, a Fed governor from 1996 to 2002 who often sparred with the chairman over the outlook. “The reason why Greenspan gets and deserves disproportionate weight is that he doesn’t get caught up in all the themes that tie together in a consensus forecast. He is looking at all the different strands of data.”

Once, Meyer said, he was sitting in a meeting with the Fed staff discussing the inflation implications of import prices. Out of nowhere, he recalled, Greenspan asked about steel-ingot prices. Meyer said he wasn’t even sure what an ingot was.

“Why would I ever even ask that?” Meyer, a founder and vice chairman of the model-based forecasting firm Macroeconomic Advisers LLC in St. Louis, said in an interview.

Macroeconomic Advisers isn’t forecasting a recession this year, and Meyer said markets “over-responded” to what the former chairman said.

“Who wouldn’t agree that it is possible we could have a recession?” says Meyer. “I think we are closer to the middle of an expansion than the end of an expansion.”

Great explanation why carry trade continues

From Dr Vineer Bhansali.

Sir, I read your two articles on the yen carry trade (January 31) with interest. Concerns that a shift in the dollar’s exchange rate against the yen could trigger a debacle along the lines of Long Term Capital Management’s near-collapse are not new, and have been expressed in one form or another for the last three years – which, as you point out, have been periods of fat profits for many hedge funds. The arithmetic of the carry trade was also laid out by Thomas Stolper at Goldman Sachs, whom you quote as saying that “an implicit but critical assumption for most carry traders was that the low-yielding currency appreciated significantly less than the interest rate differential”. The threat of verbal intervention by the Group of Seven also looms.

However, these fears ignore the key calculus of risk for the carry positions. At no time in the recent past have option premiums for buying protection on the US dollar-yen, or US dollar-Australian dollar, been so inexpensive relative to the carry returns offered. In other words, while not an arbitrage, the likelihood is high that if you buy the higher-yielding currency financed with the lower-yielding one, and buy protection against the tail risk of an unwind as in the LTCM crisis, you will be safe in most probable outcomes….

Vineer Bhansali,

Portfolio Manager,

Pimco

Copyright The Financial Times Limited 2007