Global Equity Valuations; Bernanke On Unemployment; Scandals in China to Escalate

March 27, 2012

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“It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.” Ben Bernanke (2007)

“For the bureaucrat, the world is a mere object to be manipulated by him.” – Karl Marx

“We judge ourselves by our intentions. Others judge by the results.” – HS

“Naked fiat paper is not money. It’s debt.” – HS

“To a carpenter with a hammer, every problem looks like a nail.” – proverb

Research:

Operation Twist is scheduled to end after Q2: 8%–10% corrections followed Fed policy normalizations of 1983, 1994 2003, QE1 and QE2 – Barclays

“The growth of bank reserves is related inversely to economic and stock market performance,” according to this article in Forbes. #operationnewbubble

Primer on Minsky – EconBrothers

Central Banking:

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Bernanke says 1928-31 policy errors included tightening to stop stock market speculation and to stop a dollar crisis. Thus, we can expect he will stand pat on both a stock market bubble and a dollar crisis. Yesterday, he said a faster than expected drop in unemployment is a reason for more QE, since it may stop, but so is rising unemployment. Whether unemployment goes up or down from here is a reason for more printing.

Mario Draghi: LTRO’s not to support sovereign debt markets or bolster bank profits but to prevent a credit crunch

BOE King: Tradeoffs in Using Only Monetary Policy Undesirable – http://t.co/TchtRgXV

Big Banks Continue to “Suck at the Government” With Never-Ending Stealth Bailouts global research ca

Bill Gates Interview: On the Road to Energy Solutions valuewalk – upshot, nuclear and natural gas real solutions, others have added transport and storage costs, as well as geographic problems. .

US:

People on Social Security today will receive 21 trillion more they paid in, while Medicare recipients will get 3x’s what they paid in, roughly 300k on average versus 100k. – Senator Tom Coburn

The CBO is now saying that the first full decade of Obamacare is going to cost about $1.8 trillion, or double the original estimate

The 10 Terrible Provisions of Obamacare You May Not Have Heard Of – Heritage

Implications and status update on the Volcker Rule – Bloomberg

Daniel Alpert: Consumer Credit Growing at Highest Rate in Past Decade – Unhealthy and Unsustainable – Naked Capitalism #operationnewbubble

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World:

French Presidential Candidate Hollande said to be opposed to transferring Greek sovereignty to the EU wants more aid for Greece. Germany must be thrilled.

Political uncertainty forecasts stock market volatility. With major elections in France and the US and expiration of taxes within the next 9 months, the fall could be tumultuous

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1992 #Sweden banking crisis: “Shareholders were wiped out in exchange for government help.” Good to know, given they have a housing bubble

World equity valuations 10 year range – Barclays, paul kedrosky. #operationnewbubble is just warming up.

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Real S&P 500 price/earnings multiples over time. @paul kedrosky

John Mauldin’s weekly letter – John Mauldin

  • Spain pushing the envelope to see how little they can cut, but Mauldin suspects the ECB is stepping back from purchases to exert more pressure
  • Best case scenario for unemployment rate before the US election is 7% – 8.5%

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China:

‘A new wave of scandals involving Chinese companies listed overseas could hit New York and Hong Kong as embarrassed auditors crack down’ -Financial Times

  • Brian Fox, sees auditor resignations at Hong Kong-listed companies as March 31 deadline for FY11 looms

@BergenCapital : Dramatic devaluation in JPY could be THE catalyst that brings down the undercapitalized & overlevered Chinese banking system.

Hong Kong: China tightens grip, tension escalates Al Jazeera

‘China’s banks can no longer direct cheap capital into wasteful investment projects without suffering deposit withdrawals’ – GMOs Ed Chancellor

“Last year, out of China’s 9.2% real rate of GDP growth, five percentage points came from investment in fixed assets” chovanec

From 2000-2010 #China’s imports (in value terms) of iron ore surged by 42.5 times, thermal coal 248 times and copper 16.2 times, CSFB.

Victor Shih: China’s local government debt is 45% of GDP, expects bailouts to prevent crisis for 2-3 years CSFB

 

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