Solarbird (solarbird) wrote,

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an exciting week, isn't it?

Good morning. It's been an exciting week! This AM, we'll get more excitement as we see the producer price index (PPI) numbers, some initial jobless claims numbers, and the Empire Manufacturing Index. That should be fun. 8118 is December's low on the DJIA, in case you forget. Depending upon these numbers, we could see a retest, um, today. Futures are not looking good overnight, though some of the commentariat are blaming Steve Jobs' medical leave of absence from day-to-day operations at Apple.

All this trade and manufacturing data is showing up strangely in the Baltic Dry Index, though, which I want to point at again for a moment. It's been up sharply several days in a row and is now back over 900. This is still a crash number, but it's a big chunk of recovery. However, it is entirely due to spikes in Cape-class ship utilisation, a very small pool of very high value. All the smaller ships are still in the toilet, price-operations-wise. And I've read that container shipping is still a mess. Is all this stockpiling oil? I don't know. But something's happening.

Have I mentioned commercial property lately? I think I have. Loan distress rates are spiking. (As are risk spreads on commercial real estate loans. Remember, up is bad here.) And the banking situation is a clusterfuck of unintended consequences as bailouts have spurred the need for... more bailouts. Bank of America may be next in the queue, with Citigroup disassembling itself now to try to save the core Citibank. Oh, and, of course, GM's already lining up for more taxpayer money. As expected.

Really, the one bit of good news is that the TED spread has fallen below 1 - but lending volumes are still terrible. Still, if they trust you enough to lend to you, the rates are no longer as bad; it's not entirely pretend good news, unlike the technical recovery of "non-borrowed" bank reserves, the H.3 - nonborrowed reserves are positive, at US$228B! But that's also bullshit, because the Fed changed the rules so most of the borrowing doesn't count as borrowed funds. Transparency loses.

Canada's TSX hasn't been having a good week. Japan is hit hard overnight, the Nikkei 225 down almost 5% in reaction to a terrible, terrible machinery orders report. (The broader 500 was down in line with US markets, at 3.1%) Still, the Yen remains around 円89/US$1. Korean stocks are down significantly as well.

December sales were a worse disaster than surveys indicated. Calculated Risk has an excellent graph; there is no good news in that report. We're starting to see more crazy ideas like taxes on savings, with the intent to "force" people to spend money. Fortunately, so far, these are only crazy ideas, and not policy. We'll see more crazy ideas as the problems in pension plans become unignorable. Did you know that the Pension Benefit Guaranty Corporation - the underfunded, unstable insurer of pension plans - is a Bernard Madoff creditor? Can you see where this goes? I can!

The UK is changing Bank of England rules so they can print currency without reporting it for longer periods of time. It still has to come out eventually, but instead of weekly reports, they'll be monthly, allowing for almost two months of lag. There's a thesis out there that the US is screwed - hard - but that Europe is screwed harder; the even-worse opacity of the European banking system is the prime motivator. We'll see whether that's right - but the key may be whether the Mexican government collapses. (That instability I've talked about previously is recognised by the US military.)

Talking of which, Ben Bernanke's London School of Economics commentary got taken apart (or "translated") by Mish here, and by Karl here. Neither are what you'd call "impressed."

Spain gets worse: S&P has put it on credit-watch negative, indicating that its AAA sovereign rating is in danger. There's kind of a running bet as to whether Spain or Greece will fail first, and whether one or the other will bring down the Euro. However, remember that the death of the Euro has been predicted more often than the death of Usenet (film at 11) so. Greece did get its rating cut by S&P today - to A-/A-2. That's not good for a sovereign country.

There's been another leg of US dollar rally recently as Europe looks worse and worse; the Yen has actually strengthened quite a bit. But the rest of the basket? It's not pleasant. Read this analysis of Chinese reserve growth in the 4th quarter over at Brad's column for the CFR; much of the latest round is illusory. And while monthly estimates are not the most reliable things, he's become much more convinced that China's reserve growth rate has peaked. This has interesting implications for the value of the Yuan.

China is getting louder about blaming the US for the crisis, btw. Karl has very cranky commentary here. Marketwatch has started publishing articles called Seven most horrible things about Bush's presidency. The cost of the 2009 stimulus bill has jumped to US$850 Billion. I sure hope that the Chinese, Korean, Japanese, and Gulf state governments keep buying US treasuries, because if they don't, well. That'd be bad.

correction: Errant commentary about the Can$ removed. That's what I get for trusting Yahoo!'s new reporting system, which handed me bad data. Right then, INO for all currencies from now on. Thanks to gfish for the catch.
Tags: economics
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