Friday, November 20, 2009

The dark side of the BRICs

Emerging market stocks have been the stars of the global market rally, and the BRICs (Brazil, Russia, India, and China) have set the pace.

Since their lows in late October 2008 -- they bottomed a few months before the U.S. market did -- the MSCI Emerging Markets index has soared 116%, while the MSCI BRIC index has skyrocketed 150% (all measured in dollars).

That makes the Standard & Poor's 500's 65% gains from its March lows look like chump change.

In the past year, Brazil has been on fire, surging 139.5%. Russia and India are close behind, with advances of around 115%, and China is the "laggard," with a mere 94.5% gain. (more)

SocGen On Gold Mania, And Why Gold Is Very, Very Cheap

With David Rosenberg discussing gold undervaluation virtually every day in his Gluskin-Sheff missives, it was only a matter of time before the other key currency contrarian, Dylan Grice, chimed in as well. Sure enough, Grice's latest letter will make Mr. Paulson want to launch his gold fund tomorrow if possible, as by January 1 the precious metal may very well have taken off to new stratespheric heights. Bob Janjuah - we are waiting for the trifecta.

Some preliminary observations from Grice: (more)

1 million jobless face benefits loss in January

One million people could lose unemployment benefits in January if Congress doesn't extend federal aid, according to a report released Wednesday.

The report is likely to turn up pressure on lawmakers and the president, who earlier this month enacted a record-long extension of federally paid benefits. But the law only helps those who exhaust their lifelines by year's end.

As it stands now, the deadline to apply for federally paid benefits is Dec. 31. So while unemployment benefits now run as long as 99 weeks, depending on the state, not everyone will receive checks for that long a stretch. (more)

Mortgage delinquencies hit record high

A rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure, adding to concerns about the strength of the economic recovery.

Driven by rising unemployment, such loans accounted for nearly 33 percent of new foreclosures last quarter. That compares with just 21 percent a year ago, when high-risk subprime loans made during the housing boom were the main reason for default.

At the same time, the proportion of homeowners with a mortgage who were either behind on their payments or in foreclosure hit a record-high for the ninth straight quarter. (more)

Banks face major commercial real estate storm

Sooner or later, office buildings and other commercial real estate financed during the credit bubble will generate hurricane-scale losses for banks.

Banks in recent years have been hammered by losses on home mortgages, buyouts and corporate defaults. Now, lenders face big losses from loans backed by commercial real estate, where a stagnant economy will eventually take its toll, financial services executives told the Reuters Global Finance Summit.

"The commercial real estate business still has not been marked down. It's not been marked to market," Cantor Fitzgerald LP Chief Executive Howard Lutnick said. "The economy can't, in my opinion, grow fast enough that the tenants are going to go out and start hiring and growing and building and take up all these rents at $60 a foot. It's nonsense." (more)

Behind the Gold Market

The rise in gold pre-sages a currency collapse, led by the USDollar. Gold vaults at commodity exchanges in New York and especially London are being drained by delivery demands. Gold demand is skyrocketing, as distrust for the USDollar is broadening and revolt against the US$ is deepening. The quintessential finance war is between the United States and China, with the battlefield being the US$ and Gold. The race over the $1000 price level came in the face of mammoth shorting by the same Usual Suspects on Wall Street, which do so with paper, but without the required collateral. The gold market is poised for a surprise upward move from a basic broken condition, as the Powerz are losing control. It would be a joy to watch except for the extreme hardship due to come to the betrayed American people. (more)

Fed Downplaying Weak Dollar

Bernanke 2005-2007 a video compilation - "I Have Confidence in Bank Regulators and There’s No Bubble in Housing"

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Chinese Mogul Sees Huge Property Bubble

Many outside experts have speculated that a bubble is brewing in China’s property market. Now a major insider is expressing the same thought.

Zhang Xin, chief executive of Soho China, one of the country’s most successful privately-owned real estate developers, says the government’s stimulus program is creating a bubble.

“Real estate prices should only go up because people want to actually use the space, but at the moment we can see more and more empty buildings across the whole country and in every real estate segment,” Zhang told the Financial Times.

Property prices in 70 of China’s biggest cities gained 3.9 percent in October from a year earlier, accelerating from September’s 2.8 per cent increase, according to official data. (more)