Friday, September 9, 2011
Yield Curves -- Germany going to recession (or just bailout business?)
From Wall Street Transcript, via yahoo (my bolding):
Edward M. Dempsey: The German yield curve is beginning to invert. Yield curves should be positively sloped if all is well since it reflects healthy demand for money. When you get an inverted yield curve, it is a very reliable harbinger of a coming recession. It reflects concerns of an economic slowdown and deflationary period. So now you can have a scenario where if Germany enters recession, and given that Germany is the strongest link in the euro chain, what happens to Greece, Italy, Spain and Portugal? In that kind of a scenario, German public support for the euro can very, very quickly evaporate. Everyone is worried about Greece being kicked out of the euro, but what if you wake up and Germany says, "We are out of the euro"? I don't believe that is outside the realm of possibility.
Image from mish:
Interactive Chart from financial times:
Edward M. Dempsey: The German yield curve is beginning to invert. Yield curves should be positively sloped if all is well since it reflects healthy demand for money. When you get an inverted yield curve, it is a very reliable harbinger of a coming recession. It reflects concerns of an economic slowdown and deflationary period. So now you can have a scenario where if Germany enters recession, and given that Germany is the strongest link in the euro chain, what happens to Greece, Italy, Spain and Portugal? In that kind of a scenario, German public support for the euro can very, very quickly evaporate. Everyone is worried about Greece being kicked out of the euro, but what if you wake up and Germany says, "We are out of the euro"? I don't believe that is outside the realm of possibility.
Image from mish:
Interactive Chart from financial times:
Wednesday, September 7, 2011
Economist looks at Suez traffic vs. world GDP
Running aground
Sep 2nd 2011, 13:56 by The Economist online
An alternative indicator points to a slowing world economy
FURTHER economic strife may be ahead as a swathe of recently released data points to a slowdown in the world economy. This is confirmed by one alternative measure: the amount of cargo passing through the Suez Canal in Egypt. Approximately 8% of the world's international trade is estimated to flow through the canal, so it acts as a good early indicator of the prevailing economic conditions. The average increase in the total weight of cargo passing through the canal was 5.7% in the three months to July, down from 9.5% in December. Making a simple forecast based on the past few months' data suggests that world GDP will fall from 3.8% in the first quarter to 3.3% in the second quarter.
Zack's forecast
http://www.zackswmg.com/pdf/econreport.pdf
selections:
...
Accordingly, we have marked down our forecast of growth signifi cantly, and we now do not expect a return to abovetrend growth until the second half of 2012. That is, the U.S. effectively remains in a “growth recession” for at least another half year while the unemployment rate drifts higher. Even with the boost to growth expected from the reversal of temporary factors that restrained growth over the fi rst half of this year—adverse weather, spiking energy prices, and supply-chain disruptions stemming from the earthquake in Japan—growth over the second half of this year is expected to average only about 2¼%, down from 3.4% in last month’s forecast. Growth is expected to fi rm in 2012, but to a modest 2.8%. This forecast assumes that the persistent forces restraining growth, i.e., the variable headwinds, dissipate sufficiently by 2013 that growth can reach 4% that year.
...
We now expect the U.S. economy will, at best, muddle through until the problems restraining growth get resolved. This implies growth barely at trend through the fi rst half of 2012, i.e. a continuation of the growth recession that began last year. Growth is expected to pick up in the second half of next year to average roughly 3%, but growth for the year as a whole remains only modestly above trend in 2012 at 2.8%. As a result, the unemployment rate is expected to decline only gradually from a peak of 9.3% later this year to 8.7% in the fourth quarter of next year.
...
we expect financial conditions to improve gradually, albeit starting from levels that are not as supportive of aggregate demand as we previously expected. Growth over 2012 is expected to be roughly 2.8%, about ½ percentage point better than over the second half of this year, but nearly ¾ of a percentage point weaker
than we had expected in last month’s forecast. In 2013, we expect GDP growth to accelerate, to 4.1%, as business fixed investment and housing contribute more significantly to the expansion, and as further improvements in labor market conditions and household balance sheets support a modest further acceleration in consumer spending.
...
Firms remain flush with cash and borrowing costs remain near historic lows. Investment in nonresidential structures, which has been particularly hard hit, appears to be turning up and so will swing from being a drag on GDP growth to being a modest contributor. More important to the big picture is the continued strength in equipment and software investment. Business spending on computers and software rose 21.4% at an annual rate in the second quarter, and is expected to continue to rise at low double-digit rates over the next couple of years.
...
recent developments suggest that the European sovereign debt crisis will keep uncertainty high for some time and that this will depress the prices of risky assets relative to our recent forecasts. This is evident in the wider risk spreads and weaker stock prices in this forecast relative to prior projections. Indeed, if the US economy does end up slipping into recession, the most obvious and likely cause is a significant meltdown in Europe.
selections:
...
Accordingly, we have marked down our forecast of growth signifi cantly, and we now do not expect a return to abovetrend growth until the second half of 2012. That is, the U.S. effectively remains in a “growth recession” for at least another half year while the unemployment rate drifts higher. Even with the boost to growth expected from the reversal of temporary factors that restrained growth over the fi rst half of this year—adverse weather, spiking energy prices, and supply-chain disruptions stemming from the earthquake in Japan—growth over the second half of this year is expected to average only about 2¼%, down from 3.4% in last month’s forecast. Growth is expected to fi rm in 2012, but to a modest 2.8%. This forecast assumes that the persistent forces restraining growth, i.e., the variable headwinds, dissipate sufficiently by 2013 that growth can reach 4% that year.
...
We now expect the U.S. economy will, at best, muddle through until the problems restraining growth get resolved. This implies growth barely at trend through the fi rst half of 2012, i.e. a continuation of the growth recession that began last year. Growth is expected to pick up in the second half of next year to average roughly 3%, but growth for the year as a whole remains only modestly above trend in 2012 at 2.8%. As a result, the unemployment rate is expected to decline only gradually from a peak of 9.3% later this year to 8.7% in the fourth quarter of next year.
...
we expect financial conditions to improve gradually, albeit starting from levels that are not as supportive of aggregate demand as we previously expected. Growth over 2012 is expected to be roughly 2.8%, about ½ percentage point better than over the second half of this year, but nearly ¾ of a percentage point weaker
than we had expected in last month’s forecast. In 2013, we expect GDP growth to accelerate, to 4.1%, as business fixed investment and housing contribute more significantly to the expansion, and as further improvements in labor market conditions and household balance sheets support a modest further acceleration in consumer spending.
...
Firms remain flush with cash and borrowing costs remain near historic lows. Investment in nonresidential structures, which has been particularly hard hit, appears to be turning up and so will swing from being a drag on GDP growth to being a modest contributor. More important to the big picture is the continued strength in equipment and software investment. Business spending on computers and software rose 21.4% at an annual rate in the second quarter, and is expected to continue to rise at low double-digit rates over the next couple of years.
...
recent developments suggest that the European sovereign debt crisis will keep uncertainty high for some time and that this will depress the prices of risky assets relative to our recent forecasts. This is evident in the wider risk spreads and weaker stock prices in this forecast relative to prior projections. Indeed, if the US economy does end up slipping into recession, the most obvious and likely cause is a significant meltdown in Europe.
Tuesday, September 6, 2011
Europe -- The Final Countdown
20 Quotes From European Leaders That Prove That They Know That The Financial System In Europe Is Doomed
Mish has a good post about the good times in Europe right now
Not only that, but it's messing up the U.S. markets: From zerohedge:
check out this for euro/us gold play
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