Flow of bad news...
NOVEMBER 23, 2011
Just a quick note...
The flow of bad news out of Europe and Asia this morning is quite troubling. These are the headlines making me nervous this morning....in no particular order:
1) China factory activity signals contraction, slows most in 32 months
The steep fall in the HSBC flash purchasing managers' index (PMI) to 48 in November from 51 in October largely reflected domestic weakness as both output and new orders shrank even as export orders continued to grow.
The flash PMI, the earliest readout of China's industrial activity, was the lowest since March 2009 and suggests the factory sector contracted during the month. A PMI reading of 50 demarcates expansion from contraction.
This is not encouraging. I've continually warned that a slowdown in China is the most unappreciated threat to the Canadian economy and the TSX. Recall that TD ran a simulation in which China growth slowed to 5%. They calculated that under such a scenario, commodities would shed 40%.
Another interesting tidbit that strongly suggests that commodity prices are facing significant headwinds comes from an anecdote courtesy of Mish: Metal warehouses are overloaded with inventory
2) Dexia bailout on the verge of collapse
Belgians want to renegotiate the bailout deal agreed with France and Luxembourg in October, and get the French to take on a bigger chunk of financing it. But with France's AAA credit rating already in question, media reports said such renegotiations could put that rating at risk further.
Financial crises precede sovereign debt crises. Case in point...
3) German bond sales disappoint
Risk trades are off...big time. In its latest bund offering, Germany was unable to find buyers for 35% of the debt it was looking to sell. This has the potential to be a huge development. If investors lose faith in German debt, it's hard to see how the Eurozone experiment won't blow apart at the seams, and in short order.
It's not all bad news as latest Canadian retail sales jumped (albeit on the backs of car sales, which are currently being financed to the tune of 92 cents on the dollar) and the Conference Board reported that Canadian consumer confidence rebounded, reversing a multi-month slide. However, the Conference Board also noted that the Help Wanted index, which gives a preliminary look at employment trends in large Canadian cities, fell again indicating that the massive job losses Canada experienced in October are unlikely to be recovered any time soon.
And on that note, have a great day!
Ben
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- recession europe
13 Comments
Thanks for keeping us posted, much appreciated!
Where does the data on car financing come from? I just ask because judging by the number of zero-down, no payments for 6 months and even cash-back financing offers that are being heavily promoted here in BC I wouldn't be surprised if the real financing rate was over 100%.
The U.S. Bureau of Economic Analysis (BEA) has issued the following news release today:
Personal income increased $48.1 billion, or 0.4 percent, and disposable personal income (DPI) increased $30.2 billion, or 0.3 percent, in October, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $8.2 billion, or 0.1 percent.
The full text of the release on BEA's Web site can be found at:
www.bea.gov/newsreleases/national/pi/pinewsrelease.htm
I would like to see 'animated graphs and charts and percentages', a 3D animated object that moves over a time span in order to see 100 integral factors of an economy interacting at the same time, to monitor its health.
Thanks Ben.
I'll get right on it...
I got this idea from working with 3 axis spinning LED arrays and the number of voltage inputs that can be put into them. 100 times more definition than HDTV.
Is it wise for a stay at home mom to take the canadian securities course? We have some money from the sale of our home that has been sitting in a savings account since may 2011. After watching our rrsp's take such a hit over the last couple of years I am inclined to manage our family savings myself. Am I insane?
Do it! I did it. It's well worth taking. A dumbed down version of the CSC and the financial planning courses should be a mandatory high school curriculum.
Thank-you for the quick reply! I just needed that reassurance to get me started.
Sit back and observe the future: Super-slow growth, ultra-low interest rates, and a real estate market that refuses to say 'uncle'.
Prudents savers and those who vigorously attack their debts, will be financially victorous in the current market.
Companies that need to invest capital into their operations, can do so cheaply now and thet are. It will be business investment, not government stimulus, that will give birth to a true economic recovery.
Patience is required.
There are no more good 'ole days.
Anemic growth and frequent, though less dramatic recessions, may be the future template of our economy for some time.
Economic efficiencies and pent-up demand will eventually arise; and the economy will adjust. But it will take time.
On a personal finacial level, one can always take advantage of that which is presented in life, in order to not only survive, but perhaps even shine.
As they say in baseball, if you want to win you have to, "hit 'em where their pitched."
Strangely you are making more and more sense these days. Kenny Rogers sucks BTW.
I agree, that makes more sense.
However, please explain how and a real estate market that refuses to say 'uncle'. can co-exist along with Prudents savers and those who vigorously attack their debts...
As well been well demonstrated here and elsewhere, a massive expansion in reckless borrowing is the ONLY factor that correlates well with the run-up in housing prices. Remove the reckless behavior, vigorously attack the debt load and exactly how will housing remain inflated?
"Remove the reckless behavior, vigorously attack the debt load and exactly how will housing remain inflated? "
A thousand thumbs up to that. House prices at these multiples of incomes simply cannot be maintained without 1) a stable supply of new buyers who 2) have access to cheap and readily available credit and 3) are willing to pay these prices rather than rent.