- adjusting for timing differences between order dates, delivery dates, and sales dates,
- Eurozone and U.S. retail sales are more likely than not to be headed downward entering the last one-third of 2012.
If I am right in this, that does not auger well for either the Eurozone or U.S. economies in the near-term.
Topical Reference:
More easing seen as China factory survey disappoints, from
Reuters, Lucy Hornby and Gabriel Wildau, August 23, 2012 – reading time 2 minutes; also see
China concerns mount as ‘awful’ data see manufacturing fall to nine-month low, from
The Telegraph, August 23, 2012 – reading time 2 minutes.
North America >> United States: The Federal Reserve and quantitative easing!
Why read: Because you need to keep updated on what the U.S. Federal Reserve may or may not introduce by way of further significant quantitative easing in the near and longer term. This is something many believe both the equity and
physical gold markets are counting on.
Commentary: On Wednesday the U.S. Federal Reserve offered up its August summary of its current views. On Wednesday the gold price increased significantly to over U.S.$1,660, and increased a few more dollars in price yesterday.
Whether you read the article referenced in this commentary or other articles on the Fed Meeting Minutes then made public, I suggest you focus on what seems to be to be a dependence by the Federal Reserve members on short-term economic statistics.
The U.S. Federal Reserve has to be the ‘most listened to’ Central Bank in the world. It seems to me its members ought to be more proactive, and less reactive, to what they believe is the likely direction of the U.S. economy than they seem to be. Stated differently, I find it difficult to believe the U.S. Federal Reserve members don’t collectively have a strongly held belief in where things are headed. That said, they don’t seem to have a formalized strategic plan other than expressing willingness to possibly throw more quantitative easing (exact methodology yet to be announced) at the wall and see what sticks.
To the outside observer, the Federal Reserve seems to be doing little but taking a ‘wait and see, and then we will respond to whatever prove to be the then existing circumstances’ attitude. To the extent this observation is a fair one, it is a worrisome one.
Following from the foregoing, perhaps the U.S. Federal Reserve simply is keeping its powder as dry as it can for as long as it can because it isn’t able to predict with any comfortable degree of certainty what is likely to happen economically in the Eurozone, China and the United States in the next weeks and months. In fairness, if that is indeed what is going on, the U.S. Federal Reserve’s seeming procrastination makes sense to me – but if this indeed is what is going on I say ‘hang on to your hat’.
Topical Reference:
Top 5 takeaways from the Fed that signal QE3 is ‘coming soon’, from
The Financial Post, Pamela Heaven, August 22, 2012 – reading time 3 minutes.
Brief Commentaries prompted by world headlines
Eurozone >> Greece: Has Germany hit the wall on Greek fiscal support?
Why read: If you read yesterday’s newsletter, you will know I question whether Germany will now give back to Eurozone countries the benefits it has realized from the Eurozone structure in past years, or will Germany simply throw up its hands with respect to the Eurozone as it is now structured and operated. Certainly the spending behavior of Greece, Spain, Italy and other Eurozone countries hardly can said to be conservative and ‘germanic’ – where ‘germanic’ characteristics
are said to include thoroughness and orderliness. It seem to me things are ‘getting ever closer to decision time’ for Germany on that question.
Commentary: German Finance Minister Wolfgang Schaueble is reported Wednesday as having said that Germany “has gone to the limits” to help Greece, and that to give Greece more time (I assume to ‘get its house in order’) would mean giving Greece more money.
This seems to me to be a ‘very strong statement’, and I think a not unexpected one. At some point I think it highly likely Germany will say ‘enough is enough’ with respect to Greece – and Spain – and perhaps other of the Eurozone countries.
The financial markets indices currently continue to get stronger. The only sense I can make of that is that the financial markets are largely trading markets, value investors must be somewhere in the background – and I assume largely not currently participating – and financial market participants must not be looking ‘beyond tomorrow’ as they make their trades.
Topical Reference:
German Finance Minister: Giving Greece More Time Means Giving More Money, from
Business Insider, Sam Ro, August 23, 2012 – reading time 2 minutes.
Oceania >> Australia: Is the resources boom over?
Why read: Because if you invest in resource stocks you ought to be aware of what the Australian Resources Minister is saying.
Commentary: BHP Billiton, one of the world’s largest miners, is reported as having postponed two Aust$20 billion projects:
- one an Australian based copper mine expansion; and,
- the other a new Australian harbor project that would have been aimed at doubling Australia’s iron ore exports.
These announcements, and presumably other factors including ongoing project reviews by other companies, apparently have resulted in the Australian Resources Minister announcing the ‘resources boom’ is ended. This may, of course, be an overreaction to a series of specific events, but does make ‘project deferrals’ something to keep track of going forward.
It seems to me that as a minimum the executives of the mining companies are far more ‘feet on the street’ than are politicians. To me this means some senior resource executives, who presumably have access to the best of economic forecast information, are signaling economic slowdown in the near-term in a rather big way.
I suggest you read the referenced article carefully, and reach you own conclusion as to what these project deferrals mean, if anything, in the overall scheme of things.
