Anirudh Sethi Report

Futures spike immediately as the economy is now losing just around 73k jobs per month instead of the expected 100k, truly a miraculous result. Continuing claims come at 4,456k on expectations of 4,496k, as yet again more unemployed move to the extended ranks: extended rise by 102k and EUC by just under 200k. The US transition to a welfare state continues 300k jobless at a time.

Looking at Bloomberg numbers of equity market caps for countries, China is getting very close to second biggest as well.  As shown below, Japan’s stock market capitalization is currently 7.97% of world market cap.  China ranks second at 6.89%.  Five years ago, Japan accounted for 10.34% of world market cap, while China accounted for just 1.10%.  Back in 2005, China ranked just 17th in terms of market cap, behind countries like Saudi Arabia, Spain, Switzerland, South Korea, Taiwan, India, and the Netherlands.  Now with the world’s second biggest economy and third biggest stock market, it’s hard to classify China as an emerging market, but it is indeed still emerging in terms of growth. 

In the bottom chart we highlight the change in percent of world market cap over the last five years.  As shown, China has had the biggest growth in percentage points, while the US has had the biggest fall.  Hong Kong, India, and Brazil have seen pretty big increases in share, while the UK, France, and Japan have all lost the most ground after the US.  It will be interesting to see how things look in another five years.

Sick and tired of CNBC “interviews” in which the speaker is given 15 seconds inbetween commercials to explain why the economy is in the toilet, before another talking head from the dodecabox appears and starts spouting painfully ridiculous things? So are we. Which is why we refuse to link to David Rosenberg’s earlier presence on CNBC, and instead we present Rosie’s following 26 minute interview with the WSJ which is a must watch for all who want to listen to exiled Merrill Lyncher express a coherent realistic thought before some CNBC associate producer screams “cut to commercial for incontinence pills.” And, true to form, Rosie starts off in style: “If you don’t believe there’s going to be a double dip, it’s because the first recession never ended. If there is going to be a double dip, the odds are certainly higher than 50-50.” For those who follow our daily posts and Rosie’s periodic letters via Gluskin Sheff (which would be all of our readers), the insights won’t be particularly new, but it is always great to hear a rational and sensible person discuss things as he sees them, not as his trading book demands he see them.

Na Bhooto Na Bhavishyathi

Click here and see the Link

On 12^th July’10 very very uniquely we have analysed IIP (Indian Industrial Production) Data Chart and forecasted that at 11.5% Honeymoon is over and it will tumble to 7.85 level.  Readers please switch on Blue channels and see.  IIP has crashed 7.1 as the latest news bulletin is going on.

 Now what you say about the greatness of charts.  Given proper data & intelligent analysis, Technicals can forecast anything.  Ask how many analysts appeariang in Media know what is IIP.  We challenge if any one can collect even its chart, leave alone forecasting about it.

 This forecast is very heartening because it was the unchartered frontier we have anchored onto.

Now -Some Jokes on Economist

On the first day God created the sun – so the Devil countered and created sunburn. On the second day God created sex. In response the Devil created marriage. On the third day God created an economist. This was a tough one for the Devil, but in the end and after a lot of thought he created a second economist!

The First Law of Economists: For every economist, there exists an equal and opposite economist.
The Second Law of Economists: They’re both wrong.

How can you tell when an economist is lying?
His lips are moving.

An economist is a trained professional paid to guess wrong about the economy. An econometrician is a trained professional paid to use computers to guess wrong about the economy.

Updated at 11:44/12th August/Baroda/India

In pursuing an answer to the most elusive question around these days, namely just what is going on in China’s real estate market, Standard Chartered has conducted the first phase of an exhaustive survey analyzing precisely what the real estate trends in Beijing, Shangai, and other Tier 1, 2 and 3 cities. The survey attempts to answer such key questions as: “What is really going on in China’s real-estate sector? Are prices falling – and if not, will they? Are developers’ finances
getting tight, and if so, will they be forced to cut prices? Confronted with the State Council’s stringent cooling policies, are developers postponing project starts and stopping construction? And if they do stop building, will this derail the economy and thus force the State Council to loosen policy?” For all curious to learn more about the truth behind the hype regarding China’s real estate, which has more polarizing opinions than pretty much any other issue, this is the presentation for you.

Some of the key findings:

• The Tier 2 and Tier 3 cities have not seen much of a correction in land or apartment prices. Moreover, developers’ sentiment about sales volumes seems pretty good, and they do not appear to be postponing construction. A wave of new supply is planned for September. Developers on the whole seem to think sales volumes will be down 20-30% y/y this year, which is eminently survivable.
• This is important, since if sales and construction activity holds up in most Tier 2 and Tier 3 cities, then the economy will not tank, and the State Council will not be forced to loosen real-estate or monetary policy.
• Developers expect apartment prices to fall more in the Tier 2 and Tier 3 cities, but this is acceptable, and developers are taking advantage of lower land prices to build up their land banks. Credit conditions have tightened, but not to the extent seen in 2008. Moreover, many developers still appear to be pretty cash-rich.
• Problems such as land hoarding and accessing bank lending to fund land purchases still appear common, however. We are also seeing significant foreign investment buying in Tier 2 and Tier 3 cities.

We expect to see a series of rebuttal research promptly.

Full presentation:

China Real Estate Survey

With practically everything coming from China that consumers in the United States and elsewhere buy everyday the Chinese PMI Manufacturing Index is closely watched for signs of where the real economy is.

CHINA -  JULY PMI MANUFACTURING INDEX:   51.2  (17-month low)

• Output: 52.7 v 55.8 prior (multi-month low)

• New Orders: 50.9 v 52.1 prior (multi-month low)

• Input Prices: 50.4 v 51.3 prior (multi-month low)

• New Export Orders: 51.2 v 51.7 prior (5-month low)

• Backlogs of work: 46.8 v 47.4 prior (multi-month low)

• Finished goods stocks: 49.9 v 51.3 prior

• Imports: 49.3 v 50.4 prior (5-month low)

• Inventories: 47.9 v 49.4 prior (multi-month low)

• Employment: 52.2 v 50.6 prior (3-month high)

New orders have dropped once again. This is an important metric because it defines the future manufacturing activity. If new orders are stagnate then so to is the output of goods. The world is entering into the time when orders for everything from toys to clothing begins hitting the Chinese manufacturers for the Christmas holiday season. If over the next three months the new orders metric does not show a substantial improvement then we will know how the major retailers feel about the overall economy and the prospects for consumer spending.

The employment figure shows that Chinese manufacturers are keeping employee levels elevated in anticipation of a rise in new orders. But will a rapid rise in new orders come?

The evidence speaks for itself. In 1990, India’s GDP was, at $ 314b., 80% of China’s GDP of $ 390b. Five years later, it was 49%, another 5 years later, it was 39%, yet another at 35% and now, in 2010, it is only 25%. Our GDP in 2010 is $ 1.3b whilst China’s, at $ 5.3 trillion, has overtaken Japan to be #2 in the world.

Of ten people who hear the same story or speech, each one might understand it differently. Perhaps, only one of them will understand it correctly. Bernanke acknowledged that the US-economy faces an “unusually uncertain time,” but if necessary, he hinted the central bank would resort to “Quantitative Easing,” (QE), or printing vast quantities of US-dollars, in order to prevent a deflationary spiral.

Charles Nenner, who prior to founding the Charles Nenner Research Institute served as a technical analyst for Goldman for about 10 years, has been looking at charts and not seeing much to write home about. In his interview with the TechTicker, Nenner says “I expect the bear market rally to continue for 4 more years, with big upswings like in Japan before coming down again. I don’t expect the market to totally fall out of bed. It is going to be very difficult few years to make some money. We will test the lows of 2009 to be tested over the next couple of years. I don’t expect the economy to pick up until 2020.” How charts can give him macroeconomic perspective with a 10 year bogey, we are not too sure. As to trading, he believes that as long as the S&P does not close below 1,085, the market will continue bouncing, and if 1,085 is taken out “it should be all over.” For longer-term investors, Nenner suggests to wait until the Dow goes below its trendline average, with a Dow target of around 5,000. Of course, whether Brian Sack will allow stocks to drop that low is a different matter altogether.