Is China faking economic recovery?

Venkatesan Vembu / DNA

Hong Kong: Cynical crunchers of statistical data believe there are three degrees of 'mistruths': lies, damned lies and statistics.

Increasingly, economy watchers are beginning to believe falsehood could go a step beyond: China's GDP numbers. Ever since the official Chinese statistical agency announced earlier this year that the country's GDP grew 6.1% in the first quarter of 2009, there have been murmurs of scepticism about the authenticity of those figures. A few have observed that the GDP data are inconsistent with other data, such as weak power production.

Those murmurs have in recent weeks turned into a high-decibel chorus that is beginning to openly rubbish the validity of the official numbers.

"The Q1 6.1% GDP outturn is simply a lie," notes Albert Edwards, chief global strategist, Societe Generale. "It helps explain why the Chinese data is derided by so many economic commentators

Stratfor unveils another spooky story of Russia's imminent supremacy in Europe

There is no such notion as a former intelligence officer. An intelligence officer always remains an intelligence officer. This notion becomes particularly clear when you read the so-called “analyses” from the US Stratfor (Strategic Forecasting) agency. The agency collects information to look into the future of various regions of the globe. Stratfor’s founding father, George Friedman, is a former professor of geopolitics.

The agency’s products – forecasts and predictions – are especially important for companies involved in global trade. Stratfor does not expose the names of its clients – it only says that it cooperates with both large corporations and private individuals.

Stratfor surprised its clients with an analytical note in 2004, which said that the Bush administration addressed to the Kremlin with a suggestion to dispatch a considerable military contingent to Iraq or Afghanistan. The sources of the agency close to Russia’s Security Council said that then-President Putin accepted the offer from the White House and even ordered the General Headquarters to prepare the plan of the operation by the end of July 2004.

'Green shoots could easily reverse'

The rise in mortgage rates in the US is a worrying trend, as it hinders investment and creates problems for potential home buyers. Noted Robert Shiller, who lends his name to the S&P Case-Shiller Index, feels the increase is affecting home sales.

Professor Shiller, who teaches at Yale University and wrote the classic 'Irrational Exuberance' in 2000, told ET Now that predicting the direction of longer-term rates is very difficult.

How much of an impact does rising mortgage rates have on consumers?

Well, I think, there is a big psychological impact because people see these rising rates as a sign of trouble. That the govt is borrowing heavily and now the borrowing rates are going up. It also has an impact on people’s willingness to buy homes. And the oil price is the most significant down news offsetting this green shoot news

Do you expect rates to keep rising?

‘Dangerous Time’ to Avoid Stocks, CLSA’s Napier Says (Update1)

By Patrick Rial

June 25 (Bloomberg) -- Stock investors can look forward to another few years of gains as central banks engineer a return to inflation, providing a tailwind for global markets, according to CLSA Ltd. strategist Russell Napier.

An acceleration in inflation from zero to 4 percent is historically associated with gains in stocks as the benefits of rising prices accrue to profits instead of labor earnings or debt holders, said Napier, the author of “Anatomy of the Bear,” a study of bear markets.

Thereafter, a bearish cycle that began in 2000 will resume as the Federal Reserve allows inflation to spiral out of control and foreign investors stop buying U.S. sovereign debt, sending the Standard & Poor’s 500 Index to an eventual bottom of about 400, Napier predicts. An index of U.S. consumer prices dropped 1.3 percent in May from the previous year, the Labor Department said on June 17. That was the steepest decline since 1950.

“We’re likely to get strong broad money growth, and I think it’s a very dangerous time be out of the equity markets,” the Edinburgh-based strategist said in a telephone interview yesterday. After a few years of gains “the Fed will launch its final attack on inflation and it will take us into a fairly terrible situation. They’ll let go and we’ll head for inflation.”

Investors eagerly await companies' earnings

By Adam Shell, USA TODAY
NEW YORK — Coming soon to Wall Street: a key quarterly exam on corporate profitability. At stake: the test results could determine if the stock market's recovery rally will fizzle or morph into a sustainable bull run.

On the eve of the second-quarter earnings reporting season, investors are bracing to see if the early bet they made on an economic rebound — and which jumpstarted a 40% stock rally — will actually be reflected in profit reports and companies' commentary about the future.

How much money companies made in the second quarter and how they made it will offer the first true snapshot whether the so-called "green shoots" recovery theory actually translated into better business conditions and bigger-than-expected earnings.

Warren Buffett Says American Economy is a Shambles

By Dan Denning

Yesterday didn't turn out so bad after all on the ASX. Stocks finished slightly up, as did the Aussie dollar and oil. Today might be a different story, though.

For starters, billionaire investor/guru/jovial-grandfatherly-figure Warren Buffett has said the American economy is a "shambles." Buffett told CNBC that the worst of the financial crisis peaked late last year (we're not so sure). But the economic crisis? That's still in full flight.

"I get figures on 70-odd businesses, a lot of them daily," said Buffett. "Everything that I see about the economy is that we've had no bounce. The financial system was really where the crisis was last September and October, and that's been surmounted and that's enormously important. But in terms of the economy coming back, it takes a while."

"A while," is not a precise unit of time. But Buffett is probably right. "There were a lot of excesses to be wrung out and that process is still underway and it looks to me like it will be underway for quite a while. In the (Berkshire Hathaway) annual report I said the economy would be in a shambles this year and probably well beyond. I'm afraid that's true."

Americans saving more and more

By Alison Sider and Deirdre Bolton | Bloomberg News

The U.S. savings rate may more than double to 11 percent in the next year, slowing consumption and inhibiting a recovery in the world's largest economy, said New York University economist Nouriel Roubini.

"If there is an adjustment to 11 percent in the next 12 months, you get thrift consumption, the recession becomes deeper," Roubini said in an interview Wednesday on Bloomberg Television.

U.S. consumers saved 5.7 percent of their disposable income in April, the highest level since 1995, as a recession that began in December 2007 and accompanying financial crisis discourages spending. The country's savings rate averaged 1.7 percent in the past decade.

Roubini, who correctly predicted the damage from a subprime mortgage meltdown, also forecast the U.S. unemployment rate would peak at 11 percent.

Dr. Doom Has Some Good News

by James Fallows

On March 28, 2007, Federal Reserve Chairman Ben Bernanke appeared before the congressional Joint Economic Committee to discuss trends in the U.S. economy. Everyone was concerned about the “substantial correction in the housing market,” he noted in his prepared remarks. Fortunately, “the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.” Better still, “the weakness in housing and in some parts of manufacturing does not appear to have spilled over to any significant extent to other sectors of the economy.” On that day, the Dow Jones industrial average was above 12,000, the S&P 500 was above 1,400, and the U.S. unemployment rate was 4.4 percent.

That assurance looks bad in retrospect, as do many of Bernanke’s claims through the rest of the year: that the real-estate crisis was working itself out and that its problems would likely remain “niche” issues. If experts can be this wrong—within two years, unemployment had nearly doubled, and financial markets had lost roughly half their value—what good is their expertise? And of course it wasn’t just Bernanke, though presumably he had the most authoritative data to draw on. Through the markets’ rise to their peak late in 2007 and for many months into their precipitous fall, the dominant voices from the government, financial journalism, and the business and financial establishment under- rather than overplayed the scope of the current disaster.

Buying Like Buffett Beats Investments in Berkshire (Update1)

By Ari Levy and Erik Holm

June 25 (Bloomberg) -- Warren Buffett followers who invest like the billionaire instead of with him would have earned higher returns since the bear market bottomed more than three months ago.

Berkshire Hathaway Inc.’s 18 percent advance since U.S. equity indexes reached their lows on March 9 lags behind 16 of the company’s top 20 stock holdings. A $1 million investment mimicking Berkshire’s portfolio would have produced a $724,000 profit through today, compared with a $184,600 gain for the same-sized investment in Berkshire shares. Buffett is chairman and head of investing at Omaha, Nebraska-based Berkshire.

Buffett, 78, has seen long-standing equity positions in Wells Fargo & Co. and American Express Co. more than double from their March lows after losing over half their value in the 12 months prior. Companies Berkshire owns outright, meanwhile, had declining sales amid the global recession, and the firm’s losses from derivative positions on corporate and municipal debt may not reverse as quickly as those tied to stock markets.

Hedge, Pension Funds to Lift Commodity Investments, BarCap Says

By Chanyaporn Chanjaroen

une 25 (Bloomberg) -- Commodity investments from hedge and pension funds will probably expand as investors have become more optimistic on a global economic rebound, Barclays Capital said.

An index of the net long position in 20 raw materials monitored by the U.S. Commodity Trading Commissions rose to its highest since July this month. The Reuters/Jefferies CRB index has advanced 9 percent this year, recovering from the worst slump ever in 2008.

Investing in 'The New Normal'

In this age of diminished expectations, how should you invest?

By Christopher Davis

In May, real estate developers met in Las Vegas to discuss the future of the American shopping mall. Judging by The New York Times' account of the conference, many developers were reluctant (or unwilling) to entertain the idea that the post-financial crisis world could be much different than the environment that preceded it. Not only were they less-than-attentive to environmental and sustainability concerns, they seemed indifferent to the fact that consumer spending had fallen off a cliff and is likely to remain subdued for years to come. Many, though not all, were waiting for things to get back to normal--the way they were before the crash.

Dreadful Stocks to Avoid

Dreadful Stocks to Avoid

By Richard Gibbons

Warren Buffett's first rule of investing is: "Never lose money." To this, he often adds rule No. 2: "Never forget rule No. 1." Of course, following these rules is easier said than done. But Buffett's done pretty well, so it seems unwise to simply dismiss his advice as the semi-coherent ramblings of a man who's read way too many 10-Ks.

I take those rules to heart in my investment strategy. I try to focus my investment dollars on sustainable, undervalued businesses that I can easily understand. Buffett has made more than $40 billion for himself using that strategy, and he's made even more for his partners and shareholders over the years. Do you really need to assume a lot of risk to make more than $40 billion? My answer, and the answer of my colleagues at Motley Fool Inside Value, is "Heck no!" If I make only $40 billion, I'll be perfectly satisfied.

Mexico struggles to make industries competitive

By Noel Randewich

MEXICO CITY, June 22 (Reuters) - Mexico is taking steps against near-monopolies that the government blames for stunting the nation's growth, but it hasn't been easy to wrest control from some big companies.

Dominating Mexico's television industry is tycoon Emilio Azcarraga's Televisa (TLVACPO.MX)(TV.N), which has a 70 percent share of audiences and owns the country's largest cable operators and a satellite operator. Rival TV Azteca (TVAZTCACPO.MX) controls most of the rest of the television market.

And Mexicans joke that it is difficult to go a day without putting money in the pocket of Carlos Slim, who owns the nation's largest telephone operators as well as stores, restaurants, a cigarette maker, an airline, and construction companies that build and manage toll roads.

Last month, President Felipe Calderon announced that Mexico's state power utility would find a private operator to manage a new telecom backbone, piggy-backed on its nationwide fiber optic network.

ANALYSIS-Optimism stalls amid second thoughts on recovery

ANALYSIS-Optimism stalls amid second thoughts on recovery

Reuters News
USA-MARKETS/REVERSAL (ANALYSIS)

By Steven C. Johnson

NEW YORK, June 23 (Reuters) - After months of wishful thinking, investors are nervous again about financial markets and the world economy, and it may take a flurry of much better economic data to make them believe in a sustainable recovery.

Anxiety grew on Monday after the World Bank cut its 2009 global growth forecast, saying the world economy will contract 2.9 percent this year.

That added to a decline that has hit major markets identified with increased risk -- global stock markets, currencies such as the euro, and oil, copper, gold and other commodities.

All three recently hit multi-month highs -- U.S. stocks surged nearly 40 percent from a bear market low hit in March -- as markets bet the worst of the global financial crisis had passed and the world recession was easing.

But these moves stalled this month, leaving the benchmark S&P 500 in the red for the year at Monday's close.

The dollar has also clawed back some of the losses suffered when growing optimism sparked investors to buy the euro and higher-yielding, commodity-linked currencies such as the Australian dollar instead, while U.S. bond yields have retreated from this month's eight-month highs.

For Older Investors, Old Rules May Not Apply

For Older Investors, Old Rules May Not Apply
by Tara Siegel Bernard

provided by
The New York Times

The stock market's damage has already been done. And if you're one of those people near or already in retirement, you already know you're going to have to work longer, save more or spend less.

But what should you do right now with the money you have left? Should you wade back into the stock market, if you bailed out when the market was plunging? Or if you watched your investments drop and then recover a little in the last few months, should you just hold on? What happens if the market doesn't fully recover for a long time? (That happened in Japan in the '90s.)