Blog Archives - Economic Presence

Zerohedge reviews its forecasts of 2012

12/28/2012

I shared some of Zerohedge's views and similarly underestimated the ability of CBs/policy makers to kick the can down the road.
i would say that if the US isn't in a official recession by Mar. 2013 I will admit to being wrong.
EU held up better (politically) than I thought it would -though economic performance was on par with my expectations.
The bottom line is I have been expecting a syncrhonized crisis EU-US-China-Japan and so far the world has managed to muddle through. I still expect this to happen "soon".
As an x-boss used to say about forecasting, give a date or a price - but never both.
I still believe we are headed for soverign debt crisis which will rival or exceed the Great Recession. But........
May all my pessimistic forecasts be found to be tail events which never happen.
Its been a good year for me personally.
I thank the readers of this blog for their time and attention. Hopefully you have found something of value from my filters.
Happy New Year.

Japanese trade deficit continues to grow

12/26/2012

Japan is on fire. We will see if Abe and the BOJ can put it out.

Signaling and status: Why High Priced Management Consulting Exists

12/25/2012

From Overcomingbias
"The CEO often understands what needs to be done, but does not have the resources to fight this blocking coalition. But if a prestigious outside consulting firm weighs in, that can turn the status tide. Coalitions can often successfully block a CEO initiative, and yet not resist the further support of a prestigious outside consultant.

To serve this function, management consulting firms need to have the strongest prestige money can buy. They also need to be able to quickly walk around a firm, hear the different arguments, and judge where the weight of reason lies. And they need to be relatively immune to accusations of bias – that their advice follows from interests, affiliations, or commitments."

What if it is envy and not greed that drives us?

12/25/2012

"Consider Easterlin's Paradox, the finding that after a minimum level of income has been achieved, measured happiness does not appear to rise much. If people's happiness is a function of wealth, we are much wealthier than our ancestors but not much happier. This has been documented in many countries, such as Japan, where income rose five-fold from 1958-1987, yet people remained about as happy. This puzzle been addressed in such books as Gregg Easterbrook's The Progress Paradox, David Myer's The American Paradox, Barry Schwart's The Paradox of Choice. It is a paradox, because it is contrary to what we think should make people happy. If people are primarily envious, this is no paradox at all. Libertarians are fond of highlighting criticisms of Easterlin’s Paradox, because they can’t stand the thought that people are primarily status seeking. This is because the assumption of simple wealth maximization has the nice property that liberty maximizes people’s wealth and thus happiness; if people are primarily status seeking, letting people alone won’t necessarily increase aggregate welfare, because there will always be an underclass that is relatively poor, and unhappy. "

Happier countries seem to be ones where there is less inequality. Let inequality rise too far, especially as unemployment rises, and you get expropriation as in my mother's country of birth, Argentina. .

The implications for policy analysis are huge. For example, the benefits of Fed policy that produces wealth effects also need to be evaluated if they are increasing inequality.

Merry Christmas.

Jim Chanos on Value Traps, China, Shale Gas

12/25/2012

From Barrons:"Could you talk about a mistake you made and what you learned from it?

At the dawn of the digital age, when we shorted AOL[AOL] back in 1996, it basically went up eightfold on us. Although it didn't put us out of business, it certainly caught our attention. We learned about timing. Interestingly, as Time Warner[TWX] found
out later, the accounting issues were actually very real. Their churn was actually much higher than they were letting on. But we also had a healthy regard for the ability of corporations to be gullible and to fall for the same hot trends as everyone else. You can never get the timing exactly right, even if you are right on the fundamentals, ultimately. But on the other hand, you can be very, very right and still lose lots of money, so you have to construct your portfolio accordingly and never let one position ever be too large. That was a good lesson, and it probably saved us a lot of money."

AC2012 Kyle Bass The Entanglement

12/21/2012

He cranks his rehtoric up on the likelihood of war.

Pettis on the "good" economic news coming out of China

12/15/2012

"Most worrying of all Charlene Chu, perhaps the only analyst who actually understand what is happening in the banking system, released a new report with Fitch Ratings that is described in a Reuters article:

Fitch Ratings says faster growth of broad credit in Q312 was one factor behind the recent improvement in Chinese economic
data. In a comment published today, the agency highlights that, after slowing from Q411 to Q212, broad credit is back on track to surpass CNY17trn (USD2.7trn) in 2012.

Fitch’s measure of broad credit includes shadow and offshore sources omitted from the central bank’s official total societal financing metric.

“This marks the fourth year in a row that net new credit will exceed one-third of GDP,” said Charlene Chu, Head of Chinese
banks’ ratings at Fitch. At current growth rates, by 2013 China’s banking sector assets will have expanded by nearly USD14trn since 2008. This is equivalent to replicating the entire US commercial banking sector in just five years. Such massive balance sheet expansion has limits, according to the agency."

Matt Taibbi gives his perspective on Carney going to BOE

12/10/2012

Matt quotes:UK's Guradian
"Here's the Guardian's prediction with regard to Carney:
He and many others in central bank circles know that most of the Britain's banks are very highly leveraged. That without the support of the Bank of England's quantitative easing programme, and its very low lending rates – all effectively backed by British taxpayers – Britain's banks would effectively be insolvent.
And so Carney will continue with quantitative easing – which has provided British banks with the liquidity needed to indulge in speculative activity both at home and abroad, speculative activity that bears a scary resemblance to that undertaken before the crisis."

Counterprogramming: Tim Duy does not believe the US is in a recession

12/10/2012

I still do, but admitteldy i am running out of runway on my contention. Here is Duy's view.

Trade is not the answer to a lesser Depression

12/10/2012