World economy talk

[ZENMasterTYL]

God bless the PH

MARC FABER holds a doctorate in economics and has been forecasting and trading the global markets since the 1970s. Beginning in 1973, he has been based in Asia - first Hong Kong and now living in Chiangmai, Thailand, a city well known by foreign expats for an incredible German microbrewery and very numerous “hostess bars.”

In 2008 Faber talked about the US government’s attempt to stimulate its economy.

Faber: “The federal government is sending each of us a $600 rebate. If we spend that money at Wal-Mart, the money goes to China. If we spend it on gasoline, it goes to the Arabs. If we buy a computer, it will go to India. If we purchase fruit and vegetables, it will go to Mexico, Honduras and Guatemala. If we purchase a good car, it will go to Germany. If we purchase useless crap, it will go to Taiwan and none of it will help the American economy. The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US.”

That paragraph summarizes globalization in general and how the major economies, in particular, are totally intertwined and dependent on each other and not necessarily for the good.

In May 2012 Faber predicted that there was a 50-percent chance that the world would go into economic recession, recession generally defined as two consecutive quarters of negative gross domestic product growth.

Last week Faber revised his forecast to a 100-percent chance of a recession. From CNBC and Bloomberg: “Europe is already in recession. The US economy has decelerated and I don’t see much growth in the next six to 12 months. China’s economy will slow considerably.”

Here is the “money” quote as far as PHL is concerned. “When you look at the major economies, Europe, the US, China and the emerging markets that are dependent on China for growth, Faber, only sees weakness.”

The Philippines may be an emerging economy but it is not dependent on China or the others, for that matter.

Major drivers for the Philippine economy are agricultural, overseas remittances and the outsourcing business. Eventually, tourism and mining will join the list. Tourism will come when the tens of billions of pesos worth of committed projects are completed. Mining will come when the government decides that tens of billions of dollars of foreign investment is important to the economy.

Agriculture has always been a “government project,” poorly managed with meager success. But over the last years, the private sector is slowly beginning to enter this industry with money and expertise.

Manila Bulletin: “A 1,000-hectare hybrid-rice plantation will be established by a tie-up of Metro Pacific Investment Corp. and SL Agritech Corp. in a long-term aim to help Philippines achieve self-sufficiency in the rice sector. A preliminary investment of $10 million is eyed by MPIC.”

Even the problems with recent banana exports to China are not stopping local investment. From Business World: “AgriNurture’s subsidiary Best Choice Harvest, has already finalized the acquisition of more than 100 hectares of banana plantations in Davao.”

Projects like this are a first important step. But the critical point is PHL agriculture is not dependent on the global economies growing.

Domestic consumption is strong. BusinessMirror: SM Prime Holdings Inc., the biggest PHL retail developer, plans to build four to five malls a year in the country.” While some of that consumption is remittance fueled, there is no indication that remittances are going to be a problem. From the Daily Inquirer: “Remittances from overseas Filipinos posted a new monthly record high of $1.8 billion in June,” up 5 percent in 2012 over last year.

Outsourcing to PHL like our overseas workers cannot be easily, quickly, or cheaply replaced. Further, PHL workers here or abroad are vital to the Western economies. The largest BPO company here has over 20,000 employees. It would take many months to replace them in another country and in the meantime, the work would still go on.

The global recession is coming soon, but not to these shores.

Global recession is coming

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Faber: “The federal government is sending each of us a $600 rebate. If we spend that money at Wal-Mart, the money goes to China. If we spend it on gasoline, it goes to the Arabs. If we buy a computer, it will go to India. If we purchase fruit and vegetables, it will go to Mexico, Honduras and Guatemala. If we purchase a good car, it will go to Germany. If we purchase useless crap, it will go to Taiwan and none of it will help the American economy. The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US.”

ya dollars go to those countries and become those countries' dollars reserves

then their central banks park those dollars in US treasury securities

all dollars end up back in the US

king dollar

[uls]

the US buys stuff from the rest of the world

(everyone wants to sell stuff to the US coz everyone wants to earn US dollars)

the US gets real goods and the rest of the world gets IOU paper

so who got the better deal?

[Ry_Tower]

Market seems upbeat after a rather positive speech from bernanke.

Bernanke: With unemployment high, Fed can do more | Inquirer Business

Although there are questions left that may cut the momentum.

Meanwhile more bad news pala sa EU. Eurozone unemployment at new high. http://www.bbc.co.uk/news/business-19434612

[uls]

10am (NY time) Bernanke speech

initial reaction was negative as seen in the sharp drop in gold price

then sentiment changed as the market digested the speech --QE3 is coming!

[uls]

China

http://www.fxstreet.com/news/forex-n...0-f8e6409f0aae

FXstreet.com (San Francisco) - China’s HSBC Manufacturing PMI registered a 47.6 in August, down from 49.3 in July according to Markit Economics. This reading signaled a tenth straight month-on-month deterioration in the Chinese manufacturing sector, and is the lowest index reading since March 2009.

From Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC: “The final reading of the HSBC manufacturing PMI (August) confirmed that China's manufacturing sector still faces intensifying downward pressure. New export orders contracted at the fastest pace since March 2009, this, combined with a record high in stocks of finished goods sub-index, and a 41-month low employment index, suggests China's exporters are facing increasing difficulties amid stronger global headwinds.”

[uls]

China

http://www.fxstreet.com/news/forex-n...0-f8e6409f0aae

FXstreet.com (San Francisco) - China’s HSBC Manufacturing PMI registered a 47.6 in August, down from 49.3 in July according to Markit Economics. This reading signaled a tenth straight month-on-month deterioration in the Chinese manufacturing sector, and is the lowest index reading since March 2009.

From Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC: “The final reading of the HSBC manufacturing PMI (August) confirmed that China's manufacturing sector still faces intensifying downward pressure. New export orders contracted at the fastest pace since March 2009, this, combined with a record high in stocks of finished goods sub-index, and a 41-month low employment index, suggests China's exporters are facing increasing difficulties amid stronger global headwinds.”

[uls]

Fortescue Metals Group -- 4th largest iron ore producer in the world



they bet big on sustained steel demand from China. wrong bet

Iron Ore-Shanghai steel hits all-time low, to weigh on ore | Reuters

BEIJING/SHANGHAI, Sept 4 (Reuters) - Steel futures in
Shanghai sank to an all-time low on Tuesday, piling pressure on
a global iron ore market reeling from a slump in demand from
China, the world's dominant consumer.

Losing more than a third of its value since early July, iron
ore prices are near their lowest level in three years, forcing
Australian miner Fortescue Metal Group to slash capital
spending and cut hundreds of jobs.

The most-traded rebar for January delivery on the Shanghai
Futures Exchange hit a session low of 3,276 yuan
($520), its weakest since the bourse launched rebar futures in
2009. It closed down 2.1 percent at 3,282 yuan.

Benchmark iron ore with 62 percent iron content
.IO62-CNI=SI dipped 30 cents to $89.10 a tonne on Monday,
after Friday's bounce, according to data provider Steel Index.

Iron ore fell to $88.70 on Thursday, its lowest since
October 2009.

[Monseratto]

Investor confidence out the window...

Facebook loses more than $50-B in market value
by Agence France-Presse Posted on 09/05/2012 9:30 AM | Updated 09/05/2012 9:30 AM

CALIFORNIA, United States of America - Facebook stock hit a new low on Tuesday, September 5, with the world's leading social network having lost more than US$50 billion dollars in market value since it became a publicly traded company in May.

Facebook shares closed on the Nasdaq at $17.73, up slightly from the record low price of $17.55 seen during the trading day. The California company's shares recovered to $18.05 in after-market trades.

The price was less than half the $38 that shares sold for at the Facebook initial public offering on May 18.

Weeks of finger-pointing in the wake of the disastrous stock market debut has aimed blame at IPO underwriters; the Nasdaq; top Facebook executives, and investors who pounced despite pre-IPO warning signs.

The stock lost further luster on Tuesday when a New York Times Dealbook article reasoned that Facebook chief financial officer David Ebersman bore most of the fault for an IPO offering with too many shares at too high a price.

Solely to blame?

"He signed off on the ever-increasing offer price, which ended up at $38 after the company had originally planned a price range of $28 to $35," the New York Time's Andrew Ross Sorkin wrote.

"He - almost alone - pushed to flood the market with 25 percent more shares than originally planned in the final days before the offering."

Henry Blodget of BusinessInsider.com countered in a column that heaping the blame on Ebersman was tempting but wrong.

Facebook revealed in pre-IPO paperwork that its growth rate was slowing; users were shifting to mobile gadgets providing less revenue to the social network, and that co-founder Mark Zuckerberg's priority was making the Internet more social and not investors wealthy.

The stock structure at Facebook was intentionally set up to keep control in the hands of 28-year-old Zuckerberg.

Facebook's share price was, and remains, way out of line with its projected earnings, according to Blodget.

"In short, those who want to blame Facebook CFO David Ebersman for their Facebook stock losses are doing a masterful job of not accepting responsibility for their decisions," Blodget wrote.

"No one had to buy Facebook, just as no one has to buy any stock." - Agence France-Presse

[Ry_Tower]

^ And investors are not upbeat with Nokia either. Bad mood ata sila.

Investors cast doubt over the Finnish firm's chances sending its shares nearly 14% lower.

BBC News - Nokia unveils two Windows Phone 8 handsets

But after a few positive reviews, I think this can turnaround for Nokia. They have so many workers that their survival can actually help world economy IMO.