December, 2010
[Wilmot's PMI tour] Postscript
Credit Suisse’s economists publish an excellent Global PMI chartbook, with details of all the different components, that is easy on the eye and highly informative.
It should be out later today. [here it is - ed.] But for me,
[Wilmot's PMI tour] Alexander Hamilton on Shadow Money and the Euro
Our shadow money analysis relies in part on a belief that government debt can substitute for money in order to meet demand for liquidity.
This is a surprisingly old idea.
In his 1790 Report on Public Credit (source courtesy of George Washington University),
[Wilmot's PMI tour] The new proletariat
Here’s a heretical thought to sign off with.
Some day, and perhaps not in the very far future, robots will become the low cost producers in global manufacturing. Displacing and replacing a high percentage of human workers,
[Wilmot's PMI tour] Sovereign risk – beyond the numbers
Last April we attempted to grade sovereign sustainability risks across the major economies.
No surprise the laggards were (starting from worst) Greece, Ireland, Portugal, and Spain.
After those four,
[Wilmot's PMI tour] Lest we forget
Here is the final heat map for November 2008.
And the final heat map for 2010.
Global warming!
Your guide to the Fed’s $3.3 trillion data dump
Cast your minds back to 2007, 2008 and 2009 — and think hard.
You’ll need to. The Federal Reserve has just released the mother-of-all data dumps — showing who received payouts from its circa $3,000bn bailout programmes,
[Wilmot's PMI tour] Shadow money and inflation
Two years on from Lehman’s spectacular demise, global investors’ expectations for future US inflation are – still – all over the map, or at least fabulously fat-tailed.
Some fear runaway inflation;
[Wilmot's PMI tour] That will do nicely
So that’s it: US ISM new orders are out and fell by 2.3 points to 56.6, following last month’s 7.8 point jump.
We were expecting a 1.5 point drop, the most typical outcome after huge jumps. So that’s marginally weaker than we expected.
When bunds (and ECB credibility) are risk assets
The European Central Bank might have hinted that it’ll buy up Irish, Greek, Portuguese and perhaps even Spanish bonds, burning shorts aplenty after Tuesday’s horrific core contagion sell-off.
But there are some bonds the ECB won’t be buying.
Macro Live transcript 1 Dec 2010
Markets Live chat transcript for the chat ending at 17:02 on 1 Dec 2010. Participants in this chat were: Cardiff Garcia Tracy Alloway John McDermott CGGooood morning rabble TAHi there
Over to you Mr President [updated]
Take a bow President Trichet.
That’s quite a short covering rally you’ve triggered. Now comes the difficult bit: ensuring it doesn’t fizzle out.
So what does Mr President need to announce at Thursday’s ECB meeting to make sure the shorts aren’t put on again and the selling of European periphery debt is stopped?
Recent CDS prices from Markit.
Homeowners luckier (this time)
From the latest Nationwide house price index:
More interesting is their illustration – through a comparison with house price falls in the early 1990s – of the pressures on prices which could contribute to future fluctuations.
BRIC by BRIC III
Just another way to underline the fact that the next innovations in growth are not really coming from the BRICs…
[Wilmot's PMI tour] Meanwhile, in Central Europe…
PMI New orders are looking pretty perky:
[Wilmot's PMI tour] BRIC by BRIC II
A slight disappointment from Brazil: PMI New orders were up 0.4 but still below 50. Potentially stabilizing, but no clear sign of rebound.
But then again, the Brazilian real is the most overvalued of all currencies in our real effective exchange rate universe – see chart below:
Macro Live 4: PMI wrap
FT Alphaville’s new feature, Macro Live — our periodic real-time chat about the US economy — returns on Wednesday, December 1.
We’ll be recapping the PMI releases from around the world in the last 24 hours,
[Wilmot's PMI tour] Trading Places: Alemania and Spanien
Economic divergence and intra-euro imbalances are amongst the pessimists’ main arguments why EMU can not survive in the long-run. But divergence – in alternating roles – is also by definition an intrinsic part of monetary union,
Indicator wars
Ignore those slumping Chinese leading indicators at your peril! Or — a dose of bearishness on looking at the OECD’s leading indicators, courtesy of SocGen’s Albert Edwards.
Look away for now from that headline China PMI figure showing a seventh month of manufacturing expansion.
Markets Live transcript 1 Dec 2010
Markets Live chat transcript for the chat ending at 12:43 on 1 Dec 2010. Participants in this chat were: Neil Hume, FT Jonathan Wilmot bryce.elder NHHola NHIt’s 11.03am
[Wilmot's PMI tour] Further reading
And now for something a little more in-depth than our usual further reading offerings. Here’s a list of essential strategy reading compiled by James Sweeney — Jonathan’s right-hand man in New York:
- A History of Interest Rates by Sidney Homer and Richard Sylla
Understanding sovereign debt is in large part about understanding the history of interest rates.
[Wilmot's PMI tour] The strongman of Europe
Yes, we really are talking about the UK.
UK PMI new orders jumped to 59.1, marginally above Germany! Export orders were up 1.6 points to 56.9.
Some good news for the chancellor on Wednesday morning.
[Wilmot's PMI tour] Euro Area – Strong core holds periphery up
The euro area PMI was a bit weaker than the flash estimate from last week, but new orders were still up in November by 0.6 points to 55.6, after rising nearly 2 points in October.
Despite all the current turmoil,
An acrid smell of burnt fingers
Currently wafting in from the eurozone, following ECB President Jean-Claude Trichet’s threat dovishness on buying more government bonds, a rally in periphery debt!
Naughty Mervyn [updated]
Yes, we know Bank of England governor Mervyn King has been shown to have said some rum things about his future Chancellor – according to the latest Guardian release of Wikileaked US diplomatic cables.
Such as (emphasis in original):
[Wilmot's PMI tour] Hola
Spain is out…
… and it’s not great news. New orders down 1.5 points to 49.6 and employment down too.
A big silver-lining though: export orders up nearly 2 points to 55.9, the highest since 2000.
[Wilmot's PMI tour] The trend continues
Same sort of messages from Turkey, Poland and Norway: New orders were up 3.2 and 1.7 points, respectively. Norway was basically flat.
Not going to move the global needle but reassuring consistency.
[Wilmot's PMI tour] Euro periphery
Clearly growth is not the only issue for Europe’s periphery, but, without growth, there is no good way forward. More on that later on Wednesday.
Irish PMI New Orders picked up slightly in November and were just in positive territory,
Snap news
Breaking pre-market news on Wednesday,
- Royal Bank of Scotland completes sale of Global Merchant Services to a consortium of Advent International and Bain Capital – statement.
- Aegis Group announces it is to expand its marketing presence in Russia - statement.