Category: Japan

Economics Update

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As today is a holiday in the United States, it was a fairly slow news day, but over the weekend, we got a report on house prices in the UK, and the asking price rose at the fastest rate in 3 years, of course, the whole problem with the real-estate crisis was the disconnect between ask and offer, so I’d wait for sale prices to rejoice.

In real estate in the US, delinquencies on commercial mortgage backed securities (CMBS) jumped in January.

On the brighter side, Japanese GDP grew strongly, largely on capital spending driven by exports.

In currency and energy, the Euro hit a 9 month low on the mess that is Greece, while crude oil was basically flat, up 6¢/bbl.

Japan Developing Supersonic Anti-Ship Missile

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A translation from the Japanese would be appreciated


French ASMP from Wiki

The missile is supposed to have a 200 km range and supersonic speed.

Looks like the French ASMP, which has a similar range, and a Mach 3 speed at altitude, and Mach 2 down low, so my guess would be similar performance, though it appears to have a solid fuel, rather than a liquid fuel ramjet motor.

I have no clue as to what the blue windows are.

Economics Update

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H/t Calculated Risk

The Federal Reserve has released its “Summary of Commentary on Current Economic Conditions”, better known as the “Beige Book”, and there has been a small improvement.

I’m not sure where the improvement is, since transportation indices continue to disappoint, with the American Association of Railroads’ report on carload traffic showing the lowest level since 1988, and if goods aren’t moving, then people aren’t buying.

Meanwhile the trend in mortgages, with refinancing increasing and mortgages for purchases falling, continued this week.

Overseas, the GDPs of Britain and Germany both suffered the largest drop since before the 2nd World War, -4.8% and -5.0% respectively, while in Japan, machinery orders fell sharply in November.

In the world of US government finance, the US budget deficit doubled year over year in December, which probably had something to do with bond prices being mixed, with the 10-year bond falling slightly, and the 30-year bond rising slightly. (Yields move in the opposite direction of prices)

In energy, oil fell below $80/bbl, on reports of increasing US fuel inventories.

In currency, the dollar was mixed, down slightly versus the Pound and Euro, but up slightly versus the Yen.

Economics Update

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More bad news in real estate, with commercial real estate prices falling to a 7-year low, and the latest figures on home prices showing a year over year decline of 7.8%.

More generally, the Chicago Bank of the Federal Reserve’s economic index rose slightly in November, from -1.02 in October (indicating growth below the historical trend) to -0.32 (indicating growth below, but closer to the historical trend).

We also had good news in Japan, where exports rose sharply.

In treasurys, bond prices fell, as investors moved into US equities.

To move into those equities, foreign investors bought dollars, which drove the dollar, and the rising dollar drove oil down.

Call Me a Traditionalist…..

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But when the helicopter carrying ships in the Japanese grow large enough that they could easily launch fixed wing aircraft, as is the case with the JASDF’s plans for a new “helicopter destroyer,” which, at 248 M (813 ft) and a displacement of 19½ thousand tons, it’s an aircraft carrier.

By comparison, the Invincible Class CVLs that the UK deployed Harriers, normal detachment was 9, from during he Falklands campaign displaces about 17 thousand tons, and was 210m (689 ft) long.

The juxtaposition of the Japanese and aircraft carriers makes me vaguely uneasy.

Economics Update

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The Conference Board’s Index of Leading Economic Indicators rose for 7th straight month in November, as did the Japanese coincident indicator index for the month of October.

On the other side of the coin, the National Federation of Independent Businesses is reporting that small business optimism fell in November, and a recent poll is showing that Americans are becoming more pessimistic about the economy, and the Australian consumer is in a foul mood too.

In real estate, by dint of many government efforts to reinflate the bubble, Freddie Mac is reporting that home prices are up for the 2nd straight quarter.

So, we can expect more tax credits and suchlike in order to put off a final day of reckoning.

We had a major monkey wrench thrown into the the works of international finance today, when Fitch’s downgraded Greece’s credit rating from A- to BBB+, which has spooked the markets generally, most notably this news has pushed the Euro lower, with investors moving to the dollar and Yen, mostly the Yen, the dollar was up vs the € and down vs the ¥, looking for a safe haven.

Additionally, an update on Japan’s GDP numbers for the 3rd quarter slashed growth from the initial reading of 4.8% to 1.3%.

The rising dollar, along with reports of strong inventories, drove oil to below $73/bbl.

VIDEO: Japan TV profiles Shinshin stealth fighter – The DEW Line

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The trust vectoring system in the video resembles that of the X-31

Stephen Trijble came across this video of Japans for developing their own stealthy fighter.

It appears to be similar to the F-22 in configuration, and it looks like they are looking for stealth and supercruise, though the slab sides on the side of the fuselage (at about 0:25) look to my very untrained eye to be an issue, and given that it is much smaller than the F-22, to my eye less than 1/2 the weight, I’m not sure how much it would be able to carry internally.

It also looks like they have a 3-D thrust vectoring system on the the video (2:30)is very similar to that of the X-31 Enhanced Fighter Maneuverability test bed (shown in bottom picture).

It’s a wicked neat video, and the translation, while sometimes clumsy, is sufficient.

Economics Update

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I’m not a gold bug, but Rolf Winkler’s graph pr0n is interesting. It could imply that gold has further up to go, or that the stock market is overvalued. Your call.

Slow news day today, with biggest news that the People’s Bank of China has modified the language it uses to describe its position on the Yuan, which implies that the currency will be allowed to appreciate over the near term.

In Australia employment increased by 24,500 in September, s not inconsiderable number for a country with a total population in the 22 million range.

Meanwhile, Japan appears to continue to be in a deflationary mode, with producer prices falling for the 10th month, down 6.7% year over year.

In currency, driven partly by the Bank of China statements, the dollar weakened to more than $1.50:€1.00, though it settled at $1.4961 when trading ended.

In either case, it appears that people are still betting on a recovering economy, as crude oil rose again today.

And for you gold bugs, as well as for the graph pr0n, gold hit a new record in trading today, $1,121.9/oz (troy).

Economics Update

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The Notch is the Bankruptcy law change
H/t Calculated Risk

The FOMC has met, and they are keeping their benchmark rate at essentially 0%, and they have clearly said that they will keep rates low for an extended period of time.

Meanwhile the Bank of Japan has issued a statement that its walk-back on emergency programs to bolster the credit market are not a precursor to a rate hike.

In employment, ADP’s private sector job survey reports that 203K jobs were cut in October, the smallest cut in over a year, and Challenger, Gray, & Christmas is reporting that announced that planned layoffs fell to 55,6799 in October, down 16% from September.

Meanwhile, in New Zealand, where they are supposed to be out of the recession, their jobless rate hit a 9-year high, 6½%.

Meanwhile, the Institute for Supply Management’s Non-Manufacturing survey fell to 50.6, down from September’s 50.9, but any number above 50 indicates expansion., though, as Calculated Risk notes, “the Non-Manufacturing Employment Index for October registered 41.1 percent. This reflects a decrease of 3.2 percentage points when compared to the 44.3 percent registered in September,” so the sector expanded, while employment in the sector shrank.

Still, even after the draconian legislation enacted in 2005, personal bankruptcies rose 9% in October, to a new post law change high (see graph pr0n). (American Bankruptcy Institute report)

One interesting thing on all this is that the the market is pricing in increasing inflation expectations, as indicated by the spread between Treasury Inflation-Protected Securities (TIPS), and generic Treasuries. It’s at 2.08%, the highest level in over a year.

Unsurprisingly, the statement by the Fed regarding rates, juxtaposed with the increased inflation concerns, pushed Treasuries down, and hence their yields up.

The Fed’s statement pushed the dollar down, as investors looked for higher returns, though this was abated somewhat when Fitch cut Ireland’s credit rating to AA- from AA+, which put a downward pressure on the Euro.

As is customary, the falling dollar drove oil prices up, but only by about 1%, to $80.40/bbl.

Full Federal Reserve Open Market Committee statement after break.

Press Release

Release Date: November 4, 2009

For immediate release

Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Economics Update

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Unemployment by State, h/t Calculated Risk


Architectural Billings Index, h/t Calculated Risk

Permanent Layoffs, h/t macroblog, which led Calculated risk to note that that it’s not a jobless recovery, it’s a “job-loss” recovery

The Federal Reserve’s Beige Book, a collection of “anecdotal” data (it’s really more than “anecdotal”, but you know economists) about the economy, was released today, and it shows that the economy is stabilizing, with that data showing either flat, or slight upticks, in economic activity.

We also got the state by state unemployment report for September, and it is ugly. (see bottom pic)

In real estate, mortgage applications fell sharply on higher rates, and the Architectural Billings Index rose, but remained below 50, indicating further contraction in nonresidential construction

The news in the Far East was pretty good though, with the decline in Japanese exports slowing to a 10-month best, and China’s GDP growing by 8.9% year over year, though Chinese statistics are always somewhat suspect.

In energy, oil rose to a 1-year high, $81.37/bbl, and the dollar weakened to a 14 month low, hitting $1.5014:€1.0000, so the buck and a half barrier is broken again.

Economics Update

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If This Doesn’t Make You Feel Like a Chump, then You are forgetting the “Ownership Economy” Hype
H/t Calculated Risk

Well, it’s Thursday, and that means that it’s new jobless claims day.

We are actually in a place where we can see the seasonally adjusted statistics have meaning, because we are past the auto plant shutdown in the dog days of Summer that actually happened in the spring.

Initial claims were 545,000, down 12,000 from last week’s upwardly revised 557,000, a drop of 12,000, but remember that if we compare initial numbers to initial numbers, we were at 550,000 last week, so the drop is only 5,000, not 12,000…..Anyone see a pattern?

The 4 week moving average, which is a less noisy metric, fell from 8,750 to 563,000, but note that anything at 400K or above is still bad news territory.

Continuing claims rose by 129K to 6.2 million, and that does not account for people who are exhausting their benefits.

As CR notes (link on graph pr0n) the fed has reported that household net worth has fallen $12.2 trillion, or about $40,000.00 for every man woman and child in the United States.

Of course the financial journalist are reporting that household net worth is up for the first time since Q3 of 2007, but this is almost entirely the recent bump in stock prices, which primarily benefits the top decile.

Still, we are seeing good news, with housing starts and the Philadelphia Fed Manufacturing Index both showing improvement.

Of course, part of this has to do with the fact that mortgage rates are way down, because the Federal Reserve is buying mortgage backed securities like they are going out of style, in order to keep those rates low.

I would also note that there just are not that many consumers out there. The UK again being a case in point. Yesterday, I mentioned that their unemployment had spiked, and today we discover that their retail sales fell 0.2%, as opposed to the forecast increase of o.1%.

People without jobs cannot buy stuff.

That’s why the Bank of Japan decided to keep its benchmark rate at essentially 0%, actually 0.1%, but that’s a f%$#ing rounding error.

In energy, oil fell slightly, to 72.47/bbl.

In currency, the dollar took a hit today, falling against both the Euro and yen, and the Canadian dollar rose to an 11 month high.

Economics Update (a Day Late)

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The University of Michigan survey showed an improvement in consumer sentiment, hitting 70.2, exceeding forecasts of 68.0.

In wholesale, inventories have fallen to a 3 year low, indicating that there is little push to restock, though wholesale sales actually rose.

In retail, the fact that video game sales fell for the 6th straight month is worrying: When consumers, specifically hard core video gamers, do not feel comfortable purchasing video games, they don’t feel comfortable purchasing anything.

Meanwhile across the pond(s), we have

Japan’s growth in Q2 being revised down to 2.3% from a 3.7% annualized rate, though domestic cargo volumes in Russian indicate a recovery is imminent there.

Meanwhile, in the folks with more petro-dollars than brains department, Dubai’s sovereign wealth fund, Istithmar World, has stopped making investments, probably because they are having problems covering their losses.

In real estate, repossessions dropped 12.7% in August, but foreclosure filings fell only 0.5% and the number of people defaulting.

My guess is that this is some of the banks out there are already overwhelmed with REOs and don’t want to acknowledge the bottom line hit, so they are letting things slide right now.

Oil falls below $70 on demand recovery doubts – Sep. 11, 2009:

Meanwhile crude oil finished the week below $70/bbl.

In currency, the dollar index, a basked of currencies against which the USD is measured, fell to a 1-year low, in the longest sting of losses in the index, 6 days, since March.

Finally, gold ended the day above $1000/ox (Troy), which might make for happy gold bugs, but I’m inclined to say that it is time to cash in and get Yen or Euro.

Economics Update

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Unemployment Chart Pr0n Courtesy Calculated Risk

Well, we have the initial unemployment claims out now (government link), and it appears to point to improvement. Initial claims were 550,000, a decrease of 26,000 from the revised figure of 576,000 (but the initial figure was 570,000, so the drop is 20K, not 26K apples to apples), the 4 week moving average was 570,000, down from 572,250, and the continuing claims number(seasonally adjusted) was 6,088,000, down 159,000 from last week’s revised level of 6,247,000 (only continuing claims were revised up from 6.23m, so the apples to apples drop is actually 142K, not 159K).

Anyone else knowing a pattern in revision numbers, or is it just me?

BTW, note that the continuing claims number drops as people lose benefits or move to emergency unemployment claims.

In any case, with foreclosures up 18% year over year, and poverty rate hitting an 11 year high, 13.2%, things really don’t indicate a rapid improvement.

The weekly claims number needs to be below 400K before we will start seeing increases in employment.

Additionally, we have a leading indicator in Japan, machinery (capital) orders are in the toilet, with orders being the lowest since the start of the survey in 1987.

I’d also stay out of the stock market, as insiders selling continuing to go crazy, and when people sell their own stocks it’s because they know something, even if this knowledge is not sufficient to trigger an criminal or civil investigation.

In the world of central banking, the Bank of England is leaving its benchmark unchanged, and continuing with bond purchases (quantitative easing).

Bonds did fairly well today, with the yields on mortgage backed bonds and US treasuries prices rising, which means that the yields are falling………Unless, of course, you are talking about Polish government bonds, which look to be heading into the world of hurt that their Baltic Republic neighbors are feeling.

Meanwhile, a week inventory report has pushed crude oil up, and the US dollar was up marginally, though whether this is a turn, or just a breather, is unclear.

Economics Update

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The Institute for Supply Management’s Chicago Purchasers’ Index beat expectations,
rising to 50, where 50 is the dividing line between contraction and expansion.

It’s the highest number since last September, but it has been goosed a bit for cash for clunkers, which has me wondering what the number will look this September.

I would say that we have a pretty good indicator for the cynics among us (hi there) that the stock market rally will soon be ending, as insiders are now selling their stocks 30.6 times more than they are buying, and when the insiders sell, it generally means that some sort of disappointment is on the way.

We are getting mixed signals from Asia, with both Chinese and Japanese industrial production rising, but South Korean exports falling this month, giving a 20.6% year over year drop.

In energy, closed at $69.96/bbl, as falling stocks led to demand concerns, and in currency, the biggest mover was the Yen, on the election news.

Democratic Party of Japan Defeats Liberal Democratic Party

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This is a major change in government, with the DPJ ending over 50 years of LDP rule, winning 308 of the 480 seats in the Diet.

I’m not sure how much of this is ideology, and how much is just that the voters were sick and tired of the LDP, which has been an increasingly rudderless bastion of cronyism.

From what I understand of the DPJ, their ideology is not particularly clear either.

They seem to be a bit more assertive on the foreign policy front, and a bit more inclined to developing internal consumer markets, but the differences are not much.

I do think that anti-American sentiment provided some of their votes, and we will see this all over the world for the next few decades, as we continue to feel reverberations of the absolute disgust of the population at US diplomacy under Bush and His Evil Minions&trade.

In many of the industrial democracies, we have an age cohort that has come to political awareness over the past 8 years, and their sense of the US is not as a beneficial influence in the world.

As they move into leadership positions in the next 20-30 years, we will see an increasingly confrontational foreign policy from them.

Economics Update

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Consumer confidence is at a 4 month low for August, Reuters/University of Michigan Surveys of Consumers, which compares with the Conference Board’s reading, which was up a few days back.

Both results are consistent in that they beat expectations, but this confuses the hell out of me. I think that future sentiment has a bigger role in the Conference Board’s survey, which may explain the difference.

We saw consumer spending rise by 0.2% in July, though income was flat, but this should be taken with a grain of salt, as the increase was entirely a consequence of the “Cash for Clunkers” program.

Meanwhile, in banking, the Federal Reserve is reducing the size of its Term Auction Facility (TAF) cash for sh$#pile auctions to banks, largely on the basis of reduced demand for them:

Banks are increasing lending to buyers of high-yield company loans and mortgage bonds at what may be the fastest pace since the credit-market debacle began in 2007.

……

“I am surprised by how quickly the market has become receptive to leverage again,” said Bob Franz, the co-head of syndicated loans in New York at Credit Suisse. The Swiss bank has seen increasing investor demand for financing to buy loans in the past two months, he said.

I’m not surprised. Modern investment banking is about making big bucks by scamming rubes like the one pictured on the right.

Unfortunately, said rube has the power to make every American taxpayer pay for his decisions.

Meanwhile, on the other side of both ponds, we have record unemployment and record deflation, while businesses in the UK cut investment spending at a record rate, so there is not much in the way of green shoots there.

In currency, the dollar fell, and more significantly, the “cost of borrowing dollars for three months slipped below the rate on similar loans in yen for the first time since 1993,” which implies that in the event of a flight to safety, that money will go toward Japan, where returns are now marginally higher.

In energy, oil rose slightly.

Economics Update (Yesterdays)

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Temporary Help Numbers, H/T The Big Picture

I was going to post, but thunder storms came through, and even with a surge protector, I shut down.

It was a big day for central bank news, with reports that the Federal Reserve sending signals that it will stop purchasing Treasuries, which means that while rate hikes are not on the horizon, that quantitative easing (printing money) will be ended over the next few months.

Meanwhile, the granddaddy of zero interest rate central banks, the Bank of Japan, has decided to keep its rate at 0.1% (basically 0%), as the Bank Governor, Masaaki Shirakawa, says that he does not see a strong recovery once stimulus measures fade, “I can’t be confident about the strength of final demand after inventory adjustments and policy measures run their course.”

The Bank of Korea is of the same mind, with it keeping its benchmark rate at 2%, an all time low for the institution.

In employment, the decline in temporary workers seems to be moderating a bit (see graph).

In real estate, it looks like commercial real estate (CRE)is on a path to crash more catastrophically than residential real estate, Fitch Ratings predicting that delinquencies could exceed 5% by year’s end.

Basically, CRE is in a worse place than residential, because they typically take out 5 year mortgages that they have to refinance at the end of the term. If real estate prices go down, they cannot refinance, while in residential real estate, once you have a mortgage, you have one until the loan is paid off.

In China, exports have declined for the 9th straight month, and new loans fell, indicating that they are not out of the woods yet.

Meanwhile, in currency, there has been a flight to safety, driving up the US dollar, and to an even larger degree, the Japanese Yen.

In energy, oil fell, though it is still above $70/bbl, and gasoline prices have spiked, up 15¢ in the past two weeks.

Economics Update

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So much for green shoots. We now know that delinquencies in loans and credit cards have hit an all time high, and records for this have been kept for 35 years.

We’re also machine orders in Japan falling for the 3rd straight month.

So, we are seeing a continuing pullback in both manufacturing and consumers, so perhaps the focus on reviving the banking incumbents was a bit short sighted.

In real estate, we have the pending home sales rising slightly, and mortgage rates falling, though it must be noted on all home sales reports that the percentage of distressed sales, foreclosures and short sales, has been increasing, so any increase in sales reflects this phenomenon.

In any case, fears of a continued recession have pushed up the dollar and the Yen, while depressing the price of crude oil.

Economics Update

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We’re All Red States Now
(Philly Fed Index, Red is Contraction)

The revised numbers for the first quarter GDP are out now, and it’s an upward revision for once, from a fall of 6.1% to a fall of only 5.7%.

Of course, -5.7% is still pretty ugly, and the fact that the ATA Truck Tonnage Index fell 2.2% in April, and that the Philly Fed State index is not showing expansion in any states, seems to indicate to me that we are still talking about a change in the 2nd derivative, i.e. not getting worst faster, than a rebound.

Still, there was still some good news, with the Consumer Sentiment Index reaching an 8 month high, 68.7, and Japan’s factory output unexpectedly rose last month.

Still, with Euro zone inflation hitting 0% this month, the specter of deflation is very real.

Meanwhile, the less concern about the economy has pushed the dollar down, while oil price increases have pushed the Canadian dollar up by 9.6% in May.