Knowing What Needs To Be Done

Another day, another Saturday and another week.

Dow is down again for week. Surprised anyone? And for those keeping score, that's stocks down for 4th straight week!

That's how the SPX is faring so far. Note the declining volume. Note where the new trend line could be developing.

The Warning Signs From The Dry Bulk Sector Again? Baltic Dry Index closed down another 1% yesterday at 2985. Yes the BDI is below 3k again. How fast it had broken back down, yes?

Remember the issue of the potential shipping glut mentioned in the above posting?

• 1000 new ships are hitting the market this year and again next year, compared to 300 in normal years. There is obviously a horrendous shipping glut!

ps. wouldn't this distort future bdi readings? And wouldn't this distort one's reliance on the bdi as a leading indicator? ( See The Fool's Game In The Baltic Dry Index )

Everyone is now well aware of China recent stimulus program or rather how China had chosen to allow a loan bubble to be created.

Yes, this is The China Accident Waiting To Happen To Every One Of Us!

And if you need to know the size of the new loan package China had announced, do see RMB 1.5 trillion in new Chinese lending — can we turn this thing off?.

Solving a bubble with a bubble?

Need one to be a genius to figure out where this is heading? Jesse had a piece on this also. The China Bubble and the Convergence of Oligarchies

• Conclusion: It is difficult to see what Chinese leaders expect to happen once the bubble busts. Maybe they are gambling that they can control the unrest that will come in its wake. Maybe they assume the bubble will not bust for many years. (And this is different from the US now in what way? - Jesse)
  
  But articles like the one excerpted above show us that sooner or later China's overheated and pseudo-Western economy will implode, and likely even more violently than Western economies ever have. And here's a thought: The Chinese in the meantime are said to be big buyers of gold on a government level and also personally. Perhaps what is going to eventually happen is better known in China than the West.

Oh yeah, so the Chinese banks are lending out money like crazy to the Chinese people.

What are the stuff we are seeing? We see the incredible run in commodity inventory. We have seen exploding vehicle sales. Money for nothing, what!

And my, look at how China's stock market has been doing the past 6 months.

LOL! What? A bear market? They have been on a tear! Yes sir me! It's the market that could fly up, up and away!

And what about crude oil?



See where it is at. Wanna guess where it most likely to head in the near future?

And what about Malaysia's FCPO. How are they doing?



Looking good? Wanna guess where it most likely to head in the near future?

And the Malaysian Ringgit. See how the USD is gaining strength against our ringgit? Yeah, our ringgit has been doing rather poor lately.


Some comments from Business Times's on Ringgit's performance.

• MALAYSIA'S ringgit fell yesterday, capping its biggest weekly loss since February, as reports suggesting the nation slipped into a recession in the second quarter deterred investment in local stocks.
  
  The currency weakened after reports this week showed exports and factory production extended a slump into May.
  
  The Kuala Lumpur Composite Index of local stocks slipped for a second week as Bank Negara Malaysia said the second-quarter economic performance was “the same as what we saw in the first quarter,” when gross domestic product contracted 6.2 per cent. The GDP report isn’t due until late August.
  
  “The summer is typically a volatile season and the ringgit is going to be affected by thinning fund flows,” said Suresh Kumar Ramanathan, a strategist at CIMB Investment Bank Bhd. in Kuala Lumpur.
  
  “There’s bound to be risk aversion as data aren’t pointing to an imminent recovery yet.”
  
  The ringgit dropped 1.5 per cent to 3.5785 per dollar as of 4.35 pm in Kuala Lumpur from a week ago, according to data compiled by Bloomberg. It fell 0.4 per cent yesterday, after touching 3.5855 Thursday, the lowest level since April 29.
  
  Factory output fell for a ninth month in May, shrinking 11 per cent from a year earlier, the statistics department reported Thursaay. Exports tumbled 30 per cent as electronics shipments slowed, the trade ministry said on July 3.
  
  Global investors withdrew US$365 million from Asia ex-Japan equity funds in the week ended July 8 amid “doubts about US appetite for exports,” said Cambridge, Massachusetts-based EPFR, which tracks US$10 trillion globally.

How?

Know which flow to go with?

:D

The Fudged US Unemployment Claim Numbers!

Here's an article not to be missed, it's written by Mike 'Mish' Shedlock and published on Financialsense.com: Unemployment Claims: How Bad are the "Real" Numbers?

• Inquiring minds may wish to consider the Emergency Unemployment Compensation (EUC) PDF.EUC is a federal emergency extension that can provide up to 33 additional weeks of unemployment benefits.
  
  The first payable week was the week of July 6-12, 2008.The original extension passed in July 2008 paid up to 13 weeks of additional benefits.
  
  Effective November 23, 2008, we can pay up to 7 additional weeks of benefits.Effective December 7, 2008, we can pay up to another 13 weeks of benefits. Adding 2.519 million from the above chart to 6.883 million from the second chart the current real total (assuming nothing else is missing) number receiving unemployment benefits is 9.4 million.
  
  I am unsure how Federal Employees, Newly discharged Veterans, the Railroad Retirement Board, and especially the 346,559 Extended Benefit numbers fit into the EUC 2008 program, but I suspect all those numbers need to be added in as well, making the true count still higher.......
• On a percentage of population basis the 2001 recession was not quite as bad as the 1982 recession, whereas the current recession is 50% worse than the 1980 recession.
  
  Furthermore, the jobs picture is even worse than it looks. The US consumer was nowhere near as leveraged to real estate in 1980 as now. Also note that boomers are heading into retirement now, undercapitalized and looking for jobs, in effect competing against their kids and grandkids for jobs.
  
  Look at the average age of baggers in grocery stores or greeters at Wal-Mart. These people are not working because they want to; they are working because they have to. Demand for jobs is at an all time high while the number of available jobs and the pay scales of those jobs have both collapsed. The employment situation is not only an unmitigated disaster, things are about to get even worse with pending state cutbacks.

Worst May Be Over For Malaysia...

On the Edge Financial Daily. Worst may be over for Malaysia, May's IPI slowest decline since November

• Worst may be over for Malaysia, May's IPI slowest decline since November
  Written by Joy Lee
  Thursday, 09 July 2009 23:43
  
  KUALA LUMPUR: Another sign has emerged that the worst may be over for the Malaysian economy with May's industrial output declining at the slowest pace since November last year and was gaining month-on-month (m-o-m) for three consecutive months to May.
  
  Although the industrial production index (IPI) in May had fallen 11.1% year-on-year (y-o-y), it had gained 1.6% from April.
  
  "We are quite optimistic about the IPI figures. It is in-line with our expectations and has been gaining for the third consecutive month now. The gain month-on-month shows that recovery is on-track and it has strengthened our assumptions that the worst is over," senior economist at AmResearch Manokaran Mottain told The Edge Financial Daily.
  
  According to the Statistics Department, the cumulative IPI for the period of January-May 2009 had declined 13.2% against the same period in 2008.
  
  The y-o-y drop in May's IPI was due to decreases in broad sectors such as manufacturing (15.2%), mining (3%) and electricity (2.1%).
  
  The Statistics Department said the 15.2% y-o-y decline in manufacturing output contracted due to decreases in the electrical and electronics products segment (down 31.9%); non-metallic mineral products, basic metal and fabricated metal products (down 17.3%); and petroleum, chemical, rubber and plastic products (down 4.2%).
  
  The 3% y-o-y decline in the mining sector was due to a decline in the index of crude oil (down 3.2%) and natural gas index (down 2.5%) while electricity output rose 3.9% from the previous month. Nonetheless, the mining sector had gained 2.4% from the previous month.
  
  Manokaran said the contraction in manufacturing was expected to further narrow moving forward as global chip sales, which mirror the performance of the overall economy, have rebounded for the third consecutive month towards May.
  
  In a recent report, the Semiconductor Industry Association said worldwide sales of semiconductors rose to US$16.5 billion (RM58.74 billion) in May, an increase of 5.4% from April when sales were US$15.6 billion.
  
  "Other than that, labour deterioration worldwide has stabilised and global PMI (purchasing managers index) and consumer confidence have returned. Major economies have rebounded in their PMIs," Manokaran said.
  
  Other countries in the region have also shown a rebound in industrial outputs in recent months.
  
  China's industrial output rose 8.9% y-o-y in May, rebounding from April's lacklustre 7.3% and exceeding March's 8.3%. Japan, the world's second-biggest economy, saw its industrial output rose for the third straight month. It increased 5.9% y-o-y in May, matching a rise in April. As for India, its industrial output in May is likely to increase 1.3% y-o-y, according to estimates.
  
  Closer to home, Singapore's industrial production rose 2% year-on-year in May but fell a seasonally adjusted 1.6% from April.
  
  The smaller contraction in IPI spells good news for the Malaysian economy and Manokaran expected better gross domestic product (GDP) figures for the second half (2H) of the year.
  
  "The first quarter GDP declined 6.2%, which was a ten-year low. We are expecting about -4% for 2Q or maybe even better. There would be further improvement in the third quarter and subsequently a positive fourth quarter," he said.
  
  However, Azrul Azwar Ahmad Tajudin, senior economist at Bank Islam Malaysia, said it was not time to celebrate as the IPI has seen a double-digit plunge for six months in a row now.
  
  "It has eased somewhat. But combined with the sharp dip in exports, the magnitude of GDP contraction in 2Q may cast doubt over the timing and strength of the recovery which is widely expected to resume by year-end or the beginning of 2010," Azrul said.
  
  He said the worst may be over but there could be many pitfalls ahead for recovery to take place, adding that optimism over "green shoots" a few months back may have been tampered with recent dismal data.
  
  "What we are seeing now is the impact of the financial crisis on the economy. But the full impact of the mounting job losses on the economy has yet to be seen.
  
  "If job losses remain, we may see another round of negative impact on the economy. We may only see earnest recovery in the middle of next year," he said.
  
  Azrul said other indicators to look out for were the global job indicators and production figures in industrialised economies as these are the key export markets for Malaysia.

Hmmm..... let me borrow Warren Buffett's phrase "We are not in a freefall, but we are not in a recovery either."

That would be rather accurate, no?

But then what about the continued weakneess in the Ringgit?

And what about the weakening commodity prices?

Warren Buffett : US Economy Is Weaker Than Expected

On ABC News Warren Buffett Backs Second Stimulus

• As debate grows about a possible second stimulus package for the flagging American economy, at least one legendary investor is giving the idea his guarded approval.
  
  "I think that a second one may well be called for," Warren Buffett, the CEO of Berkshire Hathaway, told "Good Morning America" today. But, he added, "you hope it doesn't get watered down in many ways."
  
  Buffett cautioned that a second stimulus package, like the first, won't be "a panacea," because stimulus packages take time to work. He criticized lawmakers' work on the first stimulus package, which contained $787 billion in spending.
  
  "Our first stimulus bill ... was sort of like taking half a tablet of Viagra and having also a bunch of candy mixed in ... as if everybody was putting in enough for their own constituents," he said. "It doesn't have really quite the wall that might have been anticipated there."
  
  Buffett also criticized the government's public-private investment plan, through which private investors are supposed to buy so-called toxic assets off the balance sheets of ailing banks that received billions in government aid.
  
  "I do not like the idea of any kind of a plan involving the government where Wall Street makes a lot of money. My plan provided that they would make no money whatsoever, and the American public would make the money. I just think that Wall Street owes the American people one at this point," he said.
  
  Nebraska native Buffett, known as the "Oracle of Omaha" for his long history of prescient stock picks, said that despite the talk of recent economic "green shoots," he couldn't predict when the flagging economy would bounce back.
  
  "We are not in a freefall, but we are not in a recovery either," Buffett said. "We were in a freefall really in the last quarter of last year, starting in the financial markets and spreading to the economy, and we had this huge change in behavior. That change hasn't changed."
  
  The U.S. unemployment rate, which currently stands at 9.5 percent, still "has a ways to go" before it peaks, he said. His own company, he said, had to lay off 500 people.
  
  "We didn't want to do it, and if we saw things coming back we wouldn't do it," he said.
  
  Buffett said he's never seen a recession affect consumers the way the current one has.
  
  "I have never seen it quite happen like this, but what happened was in late September, the American public … saw money market funds break the buck. They saw commercial papers stop, they saw all kinds of things that they hadn't seen before," he said. "It was a shock to the system."
  
  Still, Buffett remains optimistic.
  
  "I want to emphasize, we are going to come out of this better than ever," he said. "I mean the best days of America, by far, lie ahead. But not next week or next month and then, I don't know exactly when we will come out, but we will come out big time."
  
  Second Stimulus Debate Grows
  
  Talk of a second stimulus has grown, as the economy shows limited signs of improvement.
  
  "It looks like the economy is weaker than expected. Why not begin to think about over the next several months whether we need a stimulus package and what it should include," Laura D'Andrea Tyson, Obama's economic adviser said recently.
  
  Some, including Nobel Prize-winning economist Paul Krugman, support the second stimulus idea, but Republicans doubt it will yield any results.