Monday, December 20, 2010

Guest Post: For How Much Longer Can China Resist Raising Rates?

For How Much Longer Can China Resist Raising Rates?

The main focus of QE2 is not domestic but international, exporting inflation and forcing BIC's hands. This is highlighted by Brazil's immediate and very public, very undiplomatic response as well as Bernanke's very undiplomatic jab at China shortly after QE2 announcement. In this it's been very successful. BIC have been trying very hard to resist. Although India has given in and raised rates, Brazil and China (along with other export economies such as Japan and South Korea) have been resorting to other means. But for how much longer can they resist?

China's inflation is particularly worrisome to its policy makers. As a saver's society (and because of the fact that a large portion of the populace still has little disposable income), Chinese people are very sensitive to inflation. And it is because of the same reason that Japan has chosen, wisely so far, the path of lost decades rather than risking over-stimulus and hyperinflation. But Beijing erred badly in their over-reaction to the 08 crisis in late 08 and early 09, going all out trying to stimulate domestic demand and flooding everybody with cash. That was the direct trigger of today's rapidly rising inflation, on top of the chronicle inflation pressure due to exchange rates. But Chinese history is littered with lessons of inflation causing revolutions and social turmoil. Beijing knows this all too well. Although there're potent domestic political forces and economic interests against revaluing the Yuan, when inflation threatens the power, Beijing will have to quickly choose between two evils, and the anti-revaluation camp will quickly recognize it's better to lose some money than losing power all together. (more)

Winter solstice to coincide with lunar eclipse for first time in 456 years

This year's winter solstice will coincide with a full lunar eclipse in a union that has not been seen in 456 years.
The reappearance of the celestial eccentricity -- an event that will occur on Tuesday -- holds special significance for spiritualities that tap into the energy of the winter solstice, the shortest day of the year and a time that is associated with the rebirth of the sun.
"It's a ritual of transformation from darkness into light," says Nicole Cooper, a high priestess at Toronto's Wiccan Church of Canada.
Ms. Cooper said Wiccans also would see great significance in the unique coupling of the masculine energy of the sun and the feminine energy of the moon.
The last time the two happened at the same time was in 1554, according to NASA.
The eclipse will start just after midnight EST Tuesday, with the main event starting at 1:30 a.m. and lasting until 5:30 a.m.

The last time the two celestial events happened at the same time was in AD 1554, according to NASA.

An otherwise seemingly unexceptionable year in recorded history, the darkened moon happened during a bleak year for Tudor England.

Lady Jane Grey was beheaded for treason that year, while Princess Elizabeth was imprisoned in the Tower of London. Mary of Guise - the mother of Mary, Queen of Scots - became regent of Scotland.

"Top-down engineered financial crash designed to take over Europe"

Canadian Real Estate Bubble Is Making The Country's Banks Look Anything But Sound

Theory has it that Canadian banks are in far better shape than their US counterparts. If so, it's primarily because the Canadian Central Bank (Bank of Canada) has assumed nearly all the default risk on Canada's massive property bubble.

Is that supposed to make everyone stand up and salute the Loonie?

One key point that has recently come into the spotlight is Canadian citizens are not in better shape than their US counterparts. All those going "rah rah" over the Loonie, might be advised to consider some of the following articles.

Canadians warned to rein in borrowing on cheap money before it's too late

Bank of Canada governor Mark Carney issued a staunch warning to Canadians about the perils of cheap borrowing Monday, just as fresh data suggested household debt-to-income ratios have jumped to record highs. (more)

Apple Inc (AAPL) Stock Technical Analysis

The following is technical analysis on Apple Inc (AAPL) stock for December 20, 2010

Apple Inc AAPL Resistance, pivot & Support Levels - 12/20/2010

Resistance levels: $323.35, $322.43, $321.52

Pivot point: $320.87

Support levels:$319.96, $319.31, $318.31

Apple Inc. (AAPL) will have minor resistance located at $325-$330 Apple Inc. (AAPL) found short term support area $300.I think stock is for long term buy $280.Apple share will not next leg as long as break over $321.Next support area 50 day moving average at $256.Apple should hang around the $291-$300 zone for a little while before the next major move.I think stock is for long term buy $280.I will keep waiting for in this area again long term next 6 months apple could see $330-$350 target.

Underfunded pensions dwarf deficit

It's one of the simpler guidelines in politics: Be careful what you promise; someone might ask you to pay up.

As the state of Connecticut prepares to face a gaping deficit in its budget for the next two fiscal years, lawmakers and Gov.-elect Dan Malloy also will be forced to reckon with an equally challenging and even bigger problem: the long-term cost of the pensions and health care the state has promised its retirees.

The challenge is one inherited from past legislators and governors, who despite occasional periods of reform and investment have repeatedly failed to set aside money for pension accounts - accounts that will owe tens of billions of dollars to retired workers over the next 30 years.

The reason isn't just the collapse in stock market investments, said State Treasurer Denise Nappier, whose office manages the investment of pension funds. That collapse only exacerbated an underlying, older problem, she said: The state for years has failed to set aside the funds it will one day be compelled to pay.

"I think the biggest issue is the fact that the state has not exercised discipline in funding its obligations," Nappier said in an interview last week. (more)

U.S. stock watchers optimistic on 2011

(MarketWatch) — The U.S. stock market -- at its loftiest perch since before Lehman Brothers collapsed two years ago -- can rise further in 2011 as long as there are signs the economic recovery is strengthening.

That’s the view of many stock strategists.

“There is still an awful lot of pain out there for sure, but if you get this creeping confidence to accelerate a little bit, it’s surprising how fast things can turn,” said Sandy Lincoln, chief investment strategist at M&I Investment Management.

With stocks at two-year highs, bulls argue the combination of improving economic data, stronger corporate fundamentals and recent clarity on future taxes should propel equities even further.

Conversely, market bears contend the U.S. economy remains dependant on the cheap money supplied by the Federal Reserve, that U.S. debt levels will someday need to be addressed, and that the impact on stock valuations once the scenario changes is uncertain.

“The $64,000 question for stocks is what level of interest rates matter both in terms of impacting valuations due to the rising risk-free rate and in affecting U.S. economic activity,” said Peter Boockvar, equity strategist at Miller Tabak. (more)

Technically Precious with Merv

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PIV: Just One ETF: Getting Back to Quality With Focus on Low Debt, High ROE

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US Economic Calendar for the Week

DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised From
Dec 227:00 AMMBA Mortgage Applications12/17-NANA-2.3%-
Dec 228:30 AMGDP - Third EstimateQ3-2.7%2.7%2.5%-
Dec 228:30 AMGDP Deflator - Third EstimateQ3-2.3%2.3%2.3%-
Dec 2210:00 AMExisting Home SalesNov-4.87M4.65M4.43M-
Dec 2210:00 AMFHFA Home Price IndexOct-NANA-0.7%-
Dec 2210:30 AMCrude Inventories12/18-NANA-9.85M-
Dec 238:30 AMPersonal IncomeNov-0.1%0.2%0.5%-
Dec 238:30 AMPersonal SpendingNov-0.5%0.5%0.4%-
Dec 238:30 AMPCE Prices - CoreNov-0.1%0.1%0.0%-
Dec 238:30 AMDurable OrdersNov--1.8%-1.0%-3.3%-
Dec 238:30 AMDurable Goods Orders - ex TransporationNov-0.7%1.0%-2.7%-
Dec 238:30 AMInitial Claims12/18-415K424K420K-
Dec 238:30 AMContinuing Claims12/11-4050K4075K4135K-
Dec 239:55 AMUniversity of Michigan Sentiment - FinalDec-75.575.074.2-
Dec 2310:00 AMNew Home SalesNov-290K303K283K-