Wednesday, March 17, 2010
Energy companies are suffering huge losses from refining because of slumping gasoline use -- a product of the economic downturn and changing consumer habits and preferences. Energy experts say refining cutbacks have begun and will accelerate as corporations strive for profits. (more)
David Rosenberg is, once again, a bear in the wilderness. He actually feels pretty good about it.
"I've been through this before," says the chief economist at Gluskin Sheff + Associates, who once again finds himself where he was a few years ago - the unpopular bearish voice in the midst of a bullish market. Stocks have gone up 60 per cent since hitting a bottom a year ago, yet that has only added to Mr. Rosenberg's conviction that the markets are running on hot air and wishful thinking.
"If you are actually in the wilderness or alone, it says quite a bit about what's probably priced into the market," he says. "I think it's overvalued. I think we're still in the midst of a post-bubble credit collapse in the world's largest economy, at a time when there are ongoing concerns about fiscal finances, particularly in Europe. And I think there are legitimate question marks over an economic recovery that has so far been predicated largely by very aggressive monetary and fiscal stimulus." (more)
Starting in 2012, more than $700 billion in high-yield (junk) corporate debt will come due, and experts are concerned that a lot of that debt could turn sour.
Defaults and bankruptcies reportedly could be the result.
Even Moody’s Investors Service, which like the other major credit ratings agencies blessed almost any deal with a pulse as triple-A in the run-up to the financial crisis, has sounded the alarm. (more)
On February 24, Reuters reported that the Reserve Bank of India was “set to be a buyer” of the 191.3 tonnes (6.74 million ounces) of gold the IMF is selling. Although the bank wouldn’t comment directly on the possibility, they did say, “We are closely looking at the gold market… gold is a safe bet.”
The article then quoted an unidentified official from the China Gold Association as saying, “It is not feasible for China to buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility.”
But the next day, Finmarket news agency in Russia reported that China “confirmed its intention” to buy the IMF gold. “Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market.” (more)
Wen Jiabao, the Chinese Premier, closed the National People’s Congress session today with grim warnings that the global economy risked plunging into double-dip recession and that China itself faced a “complicated” year.
Mr Wen’s note of alarm for the global economy was based on the still high state of unemployment in many of the markets that buy Chinese exports. Sovereign debt problems and exchange rate instability, he said, created the risk that the world economy could tumble back into a second recessionary downturn.
His speech included an aggressive defence of Beijing’s currency policy – the emergency decision made at the height of the financial crisis to re-peg the yuan and stop the steady appreciation against the dollar which began in 2005. (more)