Page 3 of 5 CREDIT BUBBLE BULLETIN Dysfunctional pricing backdrop
Commentary and market watch by Doug Noland
according to the survey released today by the Wilshire Trust Universe
Comparison Service. 'Even the larger plans with a greater allocation to
alternatives were not immune from the impact of worldwide market volatility
during the past year,' Hilarie Green, the head of Wilshire Analytics’
Performance Reporting Division, said ... "
August 14 - Bloomberg (Abigail Moses): "General Motors Corp. bondholders may
lose as much as 73% in the event of a default by the world’s biggest automaker,
based on the price of contracts used to fix a recovery value for the
securities. The recovery swap
rate on GM dropped to 26.5%, from 39.5% at the end of June, meaning investors
expect to get only 26.5 cents on the dollar in an insolvency, CMA Datavision
pricing models show."
August 14 - Bloomberg (Bob Van Voris): "Wachovia Corp.’s BluePoint Re Ltd.
unit, which insures structured finance and municipal transactions, filed for
bankruptcy protection, citing defaults on securitized mortgages. BluePoint
filed a petition in Manhattan yesterday ... "
Global Inflation Turmoil Watch
August 12 - Bloomberg (Farhan Sharif): "Pakistan’s inflation accelerated to a
30-year high in July ... Consumer prices in South Asia’s second-largest economy
jumped 24.33% from a year earlier after soaring 21.53% in June ... "
August 11 - Bloomberg (Mahmoud Kassem): "Egyptian inflation rose to an annual
22% in July, the highest since 1992 ... "
Currency Watch
The dollar index gained 1.8% to 77.18. For the week on the upside, the New
Zealand dollar gained 1.0% and the Canadian dollar 0.9%. For the week on the
downside, the British pound declined 2.4%, the Australian dollar 2.0%, the Euro
1.5%, the Danish krone 1.5%, the Swedish krona 1.1%, the Swiss franc 0.9%, and
the Norwegian krone 0.9%.
Commodities Watch
What a rout. Gold sank 8.2% to $786, and Silver collapsed 15.9% to $12.89.
September Crude declined $1.46 to $113.70. September Gasoline dipped 1.1% (up
15.5% y-t-d), while September Natural Gas fell 2.7% (up 7.9% y-t-d). September
Copper was little changed.September Wheat rose 7.7%, and August Corn gained
6.3%. The CRB index declined 1.3% (up 6.6% y-t-d). The Goldman Sachs
Commodities Index (GSCI) dipped 0.7% (up 14.6% y-t-d and 40% y-o-y).
China Watch
August 11 - Bloomberg (Nipa Piboontanasawat): "China’s producer prices climbed
at the fastest pace since 1996 on energy and commodity costs ... Factory-gate
prices rose 10% in July from a year earlier ... after gaining 8.8% in June ...
"
August 13 - Bloomberg (Nipa Piboontanasawat): "China’s money-supply growth
slowed for a second month ... M2 ... rose 16.35% from a year earlier to 44.64
trillion yuan ($6.5 trillion) ... "
August 13 - Bloomberg (Paul Panckhurst and Nipa Piboontanasawat): "China’s
retail sales expanded at the fastest pace in at least nine years in July as
incomes and prices climbed in the world's fastest-growing major economy. Sales
rose 23.3% to 862.9 billion yuan ($126bn) after gaining 23% in June ... "
August 12 - People’s Daily (Robert Tomsho): "China’s total value of foreign
trade reached approximately 1.482 trillion USD by the end of July this year,
growing by 26.4% over the same period of last year ... "
Japan Watch
August 13 - Bloomberg (Jason Clenfield): "Japan’s economy, the world’s second
biggest, contracted last quarter as exports fell and consumers spent less,
bringing the country to the brink of its first recession in six years. Gross
domestic product shrank an annualized 2.4% in the three months ended June 30
after expanding 3.2% in the first quarter ... "
August 11 - Bloomberg (Toru Fujioka): "Japanese consumers became the most
pessimistic they’ve been in at least 26 years ... "
August 12 - Bloomberg (Mayumi Otsuma): "Japan’s wholesale inflation rate
accelerated to a 27-year high in July ... Producer prices climbed 7.1% from a
year earlier, after a revised 5.7% increase in June ... "
August 13 - Financial Times (Michiyo Nakamoto): "Japan has had little to do
with the US subprime mortgage debacle and has avoided a UK-style housing
bubble, but the country’s real estate sector is suffering a painful credit
crunch. In the past few months, an increasing number of real estate companies
have gone under. In July, 43 developers filed for bankruptcy, a year-on-year
increase of 79%... The bankruptcies were largely triggered by a failure to
access funds ... "
August 13 - Bloomberg (Kathleen Chu and Oliver Biggadike): "Urban Corp.,
Japan’s worst-performing real-estate stock in 2008, filed for protection from
creditors with debt of 255.8 billion yen ($2.35bn), making it the largest
bankruptcy among listed companies in the nation this year."
India Watch
August 14 - Bloomberg (Kartik Goyal): "India’s inflation soared to a 16- year
high and may accelerate further after the government approved wage increases
for civil servants. Wholesale prices rose 12.44% in the week to Aug. 2 ... "
August 13 - Bloomberg (Kartik Goyal and Cherian Thomas): "India’s central bank
will need to keep monetary policy 'tight’ as inflation is likely to accelerate
further from a 13-year high, Prime Minister Manmohan Singh’s economic advisory
panel said ... 'Inflation will remain high in the next few months and could
rise to 13%,' Chakravarthi Rangarajan, the outgoing head of the panel, told
reporters ... "
August 11 - Bloomberg (Vipin V. Nair and Kartik Goyal): "India’s passenger car
sales declined for the first time in more than two and a half years as higher
interest rates and accelerating inflation damped demand ... "
Asia Bubble Watch
August 14 - Bloomberg (Seyoon Kim): "South Korea’s import prices jumped by the
most in more than a decade in July as oil costs climbed. Prices of imported
goods surged 50.6% from a year earlier ... "
August 13 - Financial Times (John Burton): "Economic growth slowed in the
second quarter in Singapore to 2.1% from a year ago, providing fresh evidence
that the US slowdown is beginning to affect Asian economies."
Latin America Watch
August 14 - Bloomberg (Fabiola Moura): "Wal-Mart Stores Inc., the third-
biggest retailer in Brazil, will invest as much as 1.8 billion reais ($1.1
billion) in the country in 2009, a 50% increase from the 1.2 billion reais
planned this year."
August 14 - Bloomberg (Brendan Walsh): "Panama’s consumer prices rose 9.6% in
July from a year earlier, the Controller General reported ... "
Unbalanced Global Economy Watch
August 13 - Bloomberg (Jennifer Ryan): "U.K. unemployment rose the most in
almost 16 years in July and wage growth slowed as the deepening economic
slowdown drove companies to cut jobs and hold down pay. Claims for jobless
benefits climbed 20, 100 from June to 864, 700 ... "
August 12 - Bloomberg (Svenja O’Donnell): "U.K. inflation accelerated to more
than double the central bank’s 2% target in July ... Consumer prices rose 4.4%
from a year earlier ... "
August 11 - Bloomberg (Brian Swint): "U.K. producer prices increased in July at
the fastest pace since records began in 1986, adding to pressure on the Bank of
England to wait before cutting interest rates as the economy edges toward a
recession. Prices charged by factories rose 10.2% from a year earlier ... "
August 14 - Bloomberg (Fergal O’Brien and Christian Vits): "Europe’s economy
contracted in the second quarter for the first time since the launch of the
euro almost a decade ago ... Gross domestic product fell 0.2% from the first
quarter ... Separate figures showed inflation held at 4% in July, less than
initially estimated."
August 14 - Bloomberg (Simone Meier): "The French economy contracted for the
first time in more than five years in the second quarter as exports declined
and companies cut spending."
August 11 - Bloomberg (Tasneem Brogger): "Danish inflation accelerated to 4% in
July, the fastest pace in 18 1/2 years ... "
August 13 - Reuters: "Spain’s July inflation topped forecasts to hit a 15-year
high, making a severe slowdown in the economy more painful. Surging fuel and
food costs pushed year-on-year inflation to 5.3%..."
August 13 - Bloomberg (Ott Ummelas): "Estonia’s economy contracted the most in
almost 14 years in the second quarter, becoming the second European Union
economy to enter a recession since the start of the global credit crunch."
August 13 - Bloomberg (Jacob Greber): "Australian wages growth unexpectedly
accelerated in the second quarter at the fastest pace in 11 years, underlining
the central bank’s concern that rising salaries may stoke inflation ... "
August 12 - Bloomberg (Tracy Withers): "Sales of New Zealand houses fell 33%
from a year earlier in July ... "
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