Killer Bunny

If Anyone's Interested

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M Pettis on China and Japan (it's a couple of weeks old)

http://www.economonitor.com/blog/2012/03/the-japan-debt-disaster-and-chinas-nonrebalancing/

Which isn't really what many market commentators are suggesting will happen is it.

Why you would want to be loading up with oil, gold, silver etc ahead of this is quite puzzling to me.

Nadeem was having a pop at Niall Ferguson about China

http://www.marketoracle.co.uk/Article33906.html

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Niall's version and nadeems alternative are both just caricatures I think.

No-one really knows what changes ageing populations will bring as a result of upsets to traditional inter generational relations and economic assumptions.

In terms of economics - returns to capital, wages etc the outcome seems obvious. But of course that may well all play second fiddle to the parallel cultural and technological changes that result.

Both nadeem and niall analyse the future of china in terms of the west's past. Pretty pointless exercise...

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Citigroup Economic Surprise Index seems about to decline into negative territory. Presumably the NFP data will be enough. Doesn't bode well for equities.

http://www.bloomberg.com/quote/CESIUSD:IND/chart

Note of caution - this article notes the poor predictive power of the index (against SPX) before the 2008 crash.

http://articles.businessinsider.com/2012-04-05/markets/31292553_1_stock-market-s-p-business-insider

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Interesting things going on in China.

http://www.ft.com/cm...l#axzz1q52wAs00

I am on the smartphone so will keep this short. Basically the CCP is naturally riven by cliques but occasionally it comes into the open (ie Tiananmen and now the Bo thing). After Tiananmen the Shanghai clique led by Jiang Zemin took control, but Hu and Wen (Wen is the protege of Zhao Ziyang who got ousted for saying the students might have had a point, his book is worth a read) have had the last 8 years in power. However they have needed to operate by getting consensus across the party, the Mao and Deng godlike powers are over. Getting rid of Bo has apparently taking a year of getting the necessary support before moving against him.

This is part of the reason why I am bearish on China. The CCP, contrary to mainstream opinion, is not like the Borg and you don't need much exposure to China to know this. I believe if things get bad, fault lines could appear rapidly (like Tiananmen) and the party paralyzed by indecision.

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An interesting speech by Ben Broadbent (15/3/12) (which I appear to have missed at the time) questioning some commonly held views on 'deleveraging' especially relating to UK housing market, MEW, and 'normalisation' of rates.

http://www.bankofengland.co.uk/publications/Documents/speeches/2012/speech553.pdf

Essentially arguing (evidentially) that it was not easy credit but rather the longer term falls in real rates pushing down on rental yields which caused the rise in house prices. An interesting chart on MEW as 'transfers' as opposed to 'consumption' and on the causal effect of rising house prices driving increased mortgage debts rather than vice-versa.

What must be true is that larger aggregate balance sheets are more exposed to interest-rate risk. If the property-related explanation for the expansion in household balance sheets is correct, then one important corollary is that the debt and the financial assets are held by different people – the debt by the young (roughly speaking), the assets by the old. In time, this intergenerational transfer may get unwound, via bequests. But it may not (the old could yet consume their capital gain) and, in any case, the gross debt has to be serviced in the meantime4. Much of the expansion in balance sheets (I have argued) was due a secular decline in the long-run, risk-free rate of interest, and they are now more vulnerable to a reversal of that trend. I will discuss the risks and implications of a rise in long-term interest rates later on

This won't be a 'popular' view with many on here but nontheless makes sense. In some ways it accords with what I understand to be Scepticus' argument.

Perhaps the 'imbalances' resulting between young and old will not be significantly rebalanced until the old 'die off' or are in some other way fiscally 'nudged' into deleveraging their b/sheets.

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This won't be a 'popular' view with many on here but nontheless makes sense. In some ways it accords with what I understand to be Scepticus' argument.

Yes it does.

However I don't think broadbent actually made any suggestion what might have caused the secular decline in risk-free rates apart from pointing out they were much higher than normal in the 1980s/1990s.

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Yes it does.

However I don't think broadbent actually made any suggestion what might have caused the secular decline in risk-free rates apart from pointing out they were much higher than normal in the 1980s/1990s.

Well he doesn't it that speech, no. I don't know if he has elsewhere (?).

Perhaps you ought to drop him a line.............

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Michael Pettis - The ways China can rebalance

http://www.economonitor.com/blog/2012/04/the-ways-china-can-rebalance/

And this is my point. If you believe my assumptions are correct, then you should agree that China has no choice but to follow one or more of these paths. If privatization is not an option, then a collapse in the economy caused by a rapid adjustment in interest rates and the currency (the second option) might be. If that is ruled out, then perhaps the outcome will be a surge in government debt (the fourth option again), and so on.

This what I mean by the economic constraints that limit the choices Beijing can make. It doesn’t matter what anyone thinks or wants Beijing to do, if the plan violates the economic constraints, it cannot be done. To be really complete we should outline the political constraints, the environmental constraints, the demographic constraints, the external trade constraints, and so on, although of course this is way beyond my ability, but each of these exercises allows us to escape from the confusion of stated intentions and to focus on the possible.

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:D

This is weeks overdue.

Unless we get a repeat of the Nov '10 'correction' which was blasted out of the water by Benjamin.

Am waiting to see what happens as we retrace to 5600-5700 (basis FTSE)

#Patienceisavirtue apparently

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She looks so sweet too. (arrested re murder of Heywood according to FT)

Have you ever read 'Wild Swans' by Jung Chang? I read it when I went skiing one year along with 'One Day In the Life of Ivan Denisovic' and 'All Quiet on the Western Front'. Good holiday. B)

If you manage parallel turns whilst reading you're a more accomplished skier than I am!

The princelings have acquired enormous power in China’s ‘state capitalist’ economy, both in private business and as heads of powerful state monopoly enterprises, which are often run as clan fiefdoms. As a Wikileaks report revealed, based on a 2009 cable from the US embassy in Beijing, it was “well known” that former Chinese premier Li Peng and his family controlled China’s electric power interests, while the country’s police chief Zhou Yongkang controlled the state monopoly of the oil sector. The wife of China’s premier Wen Jiabao is said to control China’s precious gems sector, the cable stated.
The recent NPC meeting was “a house of representatives of officials and businesspeople” according to Wang Guixi, a professor at the Central Party School in Beijing. As reported on chinaworker.info last week, the richest 70 NPC members – with an astonishing combined wealth of 565.8 billion yuan (US$85 billion) – are more than ten times wealthier than the 535 members of the US government, Congress, and Supreme Court

In essence China is run like Las Vegas in the 50s/60s. It's not really a functioning 'state', more a real life version of 'Casino'. These are the people Dave is mad keen to hand all our kids jobs over to so his £250k a pop kitchen buddies can keep the money flowing. They're infecting the entire global system.

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Moving averages are a wondrous thing......

Spot gold is going to see a 'Death Cross' shortly unless we see closes above $1725 and then c.$1800 during April.

http://stockcharts.com/h-sc/ui?s=$GOLD&p=D&b=5&g=0&id=p14414478673

It narrowly avoided it in Feb with that last ditch buying into the end of Feb which was rapidly reversed. Perhaps they'll try the same move again? Then it will have to swallow that massive surge in Aug/Sept last year to avoid the 200 turning down too. Which means either we're going to see new highs over the summer or a technical bear market and renewed selling pressure. It's going bi-polar.

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In essence China is run like Las Vegas in the 50s/60s. It's not really a functioning 'state',

Its looked like a functioning state when I have been there!

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Which means either we're going to see new highs over the summer or a technical bear market and renewed selling pressure. It's going bi-polar.

$ in major rally. Thus...

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Been a while but recall epic sadness. Maybe you should have taken the Gulag Archipelago along as well to complete a happy quartet. Quite different but pearl buck novels also made for an interesting read esp the female perspective.

stratfor.com

All seems to rest on that same same but different economic growth vs societal health dynamic encountered here and everywhere, but with wider starting differentials and a more recent painful intra and international history.

Perhaps the Bo Xilai 'purge' will be but one of many. Is it wise to start purging those at the top of China's military industrial complex? Ramefications?

US election beginning to look a bit of a sideshow by comparison

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US election beginning to look a bit of a sideshow by comparison

Well, no-one has been poisoned in the US race yet...

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