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Monthly Archives: April 2009

Read the tea leaves of the economy

Milken Institute panel on the current state of the economy and where the market is headed. Highly worth watching. Panelists include Meredith Whitney (one of the best banking analysts), Rebecca Patterson (JP Morgan), David Soloman (Goldman Sachs).

Read the tea leaves

China’s jobless migrant workers reaches 30m

According to BoFIT:

As many as 30 million migrant workers now out of work. At the end of January, the official estimate for the number of unemployed migrant workers was about 23 million. Last week, the deputy head of the Chinese State Council’s Development & Research Center said the actual amount is now about 30 % higher. Estimates of the size of the pool of migrant workers also vary. The government recently increased its estimate from 130 million people to about 225 million, of which 13 % are thought to be jobless at the moment. Some 14 million migrant workers who recently lost their jobs have apparently decided to remain in their rural home districts after returning home to cele-brate this year’s Chinese New Year holiday rather than struggle to find new work in the cities.

China’s official unemployment rate, which does not count unemployed country-dwellers, is still a relatively modest 4.3 %. The official unemployment rate, however, has been rising since the fourth quarter of 2008 with the slowdown in economic growth and factory closings. The government still says it wants to keep the official unem-ployment rate below 4.6 % in 2009 and has targeted the creation of 9 million new jobs by the end of the year. In the first three months of this year, an estimated 2.7 million new jobs have been created, about 12 % less than in the same period in 2008. Even so, the current rate of job crea-tion is more than 50 % higher than the rate of job creation 4Q08. China’s official unemployment numbers are gener-ally considered unreliable; some estimates put China’s unemployment rate in recent months at around 10 %.
Labour market disputes (e.g. due to unpaid wages) are on the increase. Almost 100,000 civil claims were filed in the first quarter, a nearly 60 % jump from 1Q08.

Poll: Will Ken Lewis be out?

A new era of thrift

Call it the new frugality. Americans are spending less and saving more. Is this a temporary move and a generational change? It is believed that the great expansion of consumer credit since early 80s will not come back and personal saving rate will have to go back to the pre-boom level, averaged at 10%. To remind you the personal saving rate was negative a few years ago.

Let’s first look at the history of personal saving rate in the US:

Then here is a graph of consumption as percentage of GDP over the years:

Finally, listen to this intelligent discussion on the New Shrift in America from On Points.

These Zombie Banks

“They are dead but they just don’t know it”. In the real situation, it should be: they are dead but they just don’t admit it.

Bear Market Rally: then and now

I am not indicating at all we are going to have another Great Depression, mainly because today’s policy makers learned the past mistakes, especially Fed’s monetary/credit policy is much more expansionary (also innovative) than in Great Depression. Bernanke’s famous comments were “we won’t do it again”. But one and half years into recession, banking sector is still in a huge mess. I am very worried.

The graphs below compare bear market rallies, then (1929-1933) and now (2007- ).

Great Deleveraging:



Great Depression:

great depression rallies

(click to enlarge)

Charlie Rose with Joe Stiglitz and Bill Ackman

Stiglitz is 2001 Nobel prize winner of Economics; Ackman is the hedge fund manager who rocked the wall street with his book on shortselling.

GM outlines restructuring plan

Government’s bankruptcy threat seems quite effective. GM ditched Pontiac brand, keeping Chevy, Cadillac, Buick and GMC. GM will also close 42% of its dealership stores. The plan also includes a debt-to-equity exchange program and bond holders will not be happy about the huge haircut. GM may eventually go to bankruptcy court.