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Daily Archives: April 20, 2010

Pig production in comparative perspective

Having lived in Denmark for almost 8 months now, I often heard people told me — In Denmark, there are more pigs than people.  Indeed, in Danish stores, you can buy all kinds of products from all parts of pig… much more varieties than in the U.S.  It’s almost like in China, where people tend to eat a lot of pork.

To put things into perspective, I made an interesting Pig Chart, where I compare country’s pig population with their (human) population (see chart below):

China produces world’s most pigs — in fact, China alone produces more bigs than the total of the next 20 countries combined.

(graph courtesy of WSJ)

But Denmark surpasses China in relative term.  When it comes to pig production per capita, Denmark ranks world’s NO. 1.   The interesting fact is in Denmark, the number of pigs is 2.3 times of Danish population.

The next big pig producing countries are Netherlands and Spain — their pig production per capita is 0.72 and 0.65, respectively.

China’s bubble pricking experiment, part 2

More update after my previous post on China’s curbing on real estate bubble:

Can Corporate America carry the spending torch?

This recovery, from now on, will all count on Corporate America.  Government can’t stimulate the economy forever, eventually it will need (or will be forced by market) to cut down budget deficits.  American consumers are straggled too — too much debt accumulated in the past, banks are tightening consumer credit, and unemployment rate remains high at nearly 10%.

With interest rate staying super low (slightly above zero), the financing cost for Corporate America looks dirty cheap.  Flushed with easy money, Corporate America may soon carry on the spending spree.  There are early signs that this recovery will be led by Corporate America instead, especially the tech. sector, not by American consumers.

It’s true that consumer spending accounts for nearly 70% of US GDP, but corporate spending and early hiring may revive consumer confidence (hopefully), and put the economy into an positive feedback-loop (call it virtuous cycle).

Here is a report from the Wall Street Journal on the reviving corporate spending:

The global recovery has reached a key transition stage: can corporations take up the spending baton from governments? They’ve got the cash but do executives have the confidence? Doubts about final demand, the strength of the recovery and mounting sovereign risks have so far caused boards to hold back on investment. But with Western households and governments requiring substantial deleveraging, only a revival in corporate spending will safeguard the recovery as stimulus programs wind down.

Corporate spending fell off a cliff during the recession, forcing governments to take up the slack. U.S. nonresidential investment plunged 17.8% in 2009. But companies are generating cash and balance sheets are strong; credit ratings upgrades are starting to outstrip downgrades. U.S. nonfinancial free cash flow is 2.8% of GDP, a near-40-year high, according to Credit Suisse. Debt funding is also cheap and available: average U.S. long-term corporate-bond yields are close to 40-year lows, Moody’s data shows. European credit spreads are likely to tighten further even after last year’s rally, according to Citigroup.

Crucially, investors may now give executives the thumbs-up for spending: for the first time since December 2007, fund managers rank capital expenditure and dividends as higher priorities than deleveraging, a Bank of America Merrill Lynch survey showed this week. Companies are thinking the same way: a survey of over 50 large European companies by Credit Suisse found 63% are now looking to maintain or boost spending in the next 12 months, compared to 27% in the last six months, with cash flowing to new hiring, advertising and IT.

Whether this spending materializes depends on confidence. There are some promising signs. Both in the U.S. and Europe, manufacturing and trade are picking up. Euro-zone exports hit a 15-month high in February and trade within the currency bloc climbed 8% on last year. But the headwinds remain severe. Final demand is largely reliant on Asian and emerging market consumers. Corporations may be squeezed through higher taxes. And if borrowing rises, companies may have to compete with governments for capital.

The fate of the recovery now lies in the hands of corporations. Fear of a double-dip recession that deters corporate spending may yet prove self-fulfilling.

also read tech sector led hiring drive

What needs to be done now, more urgently, is to find ways to incentivize banks to lend to small businesses.  Banks got scared in this crisis – they still let huge reserves sitting on their books, reluctant to lend.

Cathy Mann of Brandeis University suggested that the Fed raise interest rate so to make banks’ financing cost marginally more expensive, offering them more incentive to lend the money out.  This can be a good option.