Market Expansion is Aging; Central Banks Learning a Dangerous Lesson; Modeling Contagion in China

March 20, 2012


Q. What have central bankers and politicians learned in the last six months, when stock and some bond markets fell then rebounded amid an aggressive policy response? A. Printing is the elixir that will solve all problems. – HS

“Once politics becomes a tug-of-war for shares in the income pie, decent government is impossible.” Friedrich Hayek

‘US has already socialized the housing market; nationalizing pensions will be next step.’ – Ben Davies 

cornucopian: a futurist who believes continued progress and provision of material items for mankind can be met by advances in technology. 


Using #Google Insights to Watch the Spanish and UK debt Crises HistorySquared


Expansion is getting old; since 1854, 64% of rallies have lasted less than 36 months, 76% have lasted less than 45 months. The stock market recovery is now 33 months old $SPY – Illusion of Prosperity

Nomura: finds it instructive the Treasury #Bond selloff started during European hours

Table of Contents for Schwager’s New Hedge Market Wizards Book w/ Dalio, Thorp, Woodriff -  World Beta

#Central Banking:

“Former Fed Vice Chairman Warns of US Fiscal 2013 Cliff” – @BarbarianCap: Benanke has mentioned this as well, an excuse for more QE perhaps. #MBS

“IMF Chief Praises China on Economy” – WSJ: Paving the way for Lagarde to ask China for money

In low income countries, anti-government protests double when global food prices rise 10% #IMF. HistorySquared


“Pew says $TWIT, $FB are not big news sources for most Americans. PC World – then they are late 

ISP Defies FBI’s Gag Order, Agent’s Warrantless Surveillance Demands #freedom Daily Tech

Daily Volatility Falls Most Since 1934, $SPY PE down to 14.5 from 24.2, mirrors the 1995 plunge before boom Bloomberg

Since 1965 $GLD has underperformed the $SPY by 27%, but has outperformed 6 mo T Bills by 233%






Ben Davies: Financial Repression and Technocratic Governments – 50 min audio Die MetallWoche

Population growth, energy consumption, cumulative inflation and money supply – ‘the forest of exponentials – Tullet

#Australia: Hidden debt down under, understanding the Australian economy by Delusional Economics continues his expose into why economists don’t understand the economy … Naked Capitalism


What real interest rates are telling us – Martin Wolf of the  Financial Times $TLT $EEM 


Deterioration in fiscal balances puts Latin American Nations in Worse Shape in case of another Crisis, IDB Bloomberg


The Model Thinking used a simulation on the interconnectedness of the US banking system to forecast contagion. Certainly, the US banks were highly connected; however, when you think of china: all major actors – local governments, banks, SOEs, and the central government linking them all – are interconnected. Thus, the economy is highly vulnerable to contagion.  #HS


#China is planning to construct 250 airports over the next 5 years, including the the world’s largest airport. The new #China airports are amazing, but they are also empty, useless, and likely put together with Elmers glue

Bank takes money from depositors; party forces state banks to lend to SOEs; SOE’s do not have repay the loans; raise capital from foreigners –HS

Residential sales volume sinks #China - Socgen

#China to increase fuel prices 6-7 percent ReutersThe natives grow restless 

Ministry of Commerce head Chen calls on US to loosen restrictions on technology and foreign investment China Daily

BHP Billiton (BHP) says it’s reevaluating its massive spending plans as slowing Chinese growth flattens – Reuters

China: “IP is something which is best protected through continuous innovation.” $GE

“Tofu” projects in China Google

Chinese Companies Forced to Falsify Data, Government Says Bloomberg

Only a matter of time before one of these corrupt SOEs defaults, trigger a panic, much like Asian Flu, LEH/BSC. 

Make steel, lose money – Caixin Online

The State-Owned Enterprises of #China – Prof Thayer Watkins

#Research: State Owned Enterprises deliver half the output per employee of equivalent private co’s #obamacare #china[14]



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