Notes From Underground: Wikileaks confirms it–the Walrus was Paul; and Chinese data is suspect

Last night, the RBA voted to hold Australian rates steady at 4.75 percent. Governor Stevens showed us his usual, steady hand in the BANK‘s statement as he provided us with a global view that weighed heavily on Aussie monetary policy. The strength of the Aussie dollar kept the RBA from raising rates as the bank had unexpectedly raised rates in November and was content to see if the U.S. and European economies can overcome their current malaise. The Chinese and Indian demand were responsible for the best terms of trade for OZ since the 1950s and growth in other Asian nations was brightening the jobs and capex picture even more. In a few paragraphs, Governor Stevens and his comrades are very clear that Australia is the epicenter of the Asian growth story and the RBA will be watching for indicators that Australian employment is getting too tight for the BANK to move rates higher.

This morning, the Bank Of Canada announces its rate decision as Governor Carney–another central banker we hold in high regard–gives us insight into the global growth story through Canadian data. The consensus is for no change from the present 1 percent overnight rate. The strength of the LOONIE may stay the hand of the RBC but a 25 basis point rise would not surprise me. Although last week’s Canadian unemployment number was deemed TEPID and the U.S. economy operating at well below capacity, the booming global raw materials trade may move the BANK to act.

Again, the RBC‘s statement will be worth reading for its information on the world’s economic picture. If the BANK holds rates steady and the CANADIAN DOLLAR falls, it may be an opportune time to buy Canadian dollars if support levels are tested. Again, be prepared for just that opportunity.

The WIKILEAKS story is not something I have written about for its impact on the present, real-time world that I try to stay in step with has not been so readily affected. NOTES FROM UNDERGROUND has been very consistent in its views about Chinese economic data as being very suspect on a good day. In a 2007 cable from the U.S. ambassador in Beijing, he reports that Li Keqiang,a high-ranking Politburo member, termed China’s GDP as “man-made and unreliable.” It seems that Mr. Li uses electricity consumption, rail car loadings and bank loans to judge the robustness of the Chinese economy. If that is what one of China’s ranking political powers uses, then that is what NOTES will be watching, but with a weary eye.

It seems we get a better picture from places like Australia and Canada, countries that are central to providing the needed materials for growth across the developing world and also Brazil and most probably Russia. As China begins to structurally move from an exporter to consumer, this mix will change. At this juncture the raw material providers will be the mainstay of my focus. Goo goo g’joob.

 

Tags: , , , , , , , , , ,

4 Responses to “Notes From Underground: Wikileaks confirms it–the Walrus was Paul; and Chinese data is suspect”

  1. Ray McKenzie Says:

    If you go carrying pictures of Chairman Mao, you ain’t gonna make it with anyone anyhow.

  2. yra Says:

    at notes we always believe it is better to free your mind instead

  3. Danny Says:

    Yra,

    Since I am a huge fan AND I really look up to you with aspiration, I thought you should be the first to know…I am starting to think that QEII is actually working – just not the way it was intended to. The whole goal of QEII is to shift capital out on the risk curve (which just for the sake of argument assume it is a sound theory for a method to positively impact the real economy)…BUT the globalization of capital/finance seems to be circumventing this monetary policy from working the way it was intended to, as capital can go where ever it wants to with relative ease – which appears to be, as steve schwartzman purportedly put it, any where but the US.

    If you can look at fund flows data…you can observe that funds are actually flowing out of EM bond funds and flowing into EM equity funds. This is precisely what the Fed wanted…they just hoped it would happen in the U.S. vs. the rest of the world. So at this point it is almost as though the Federal Reserve is incentivizing employment everywhere else in the world besides the US. Also, it is definitely worth considering from a monetary policy standpoint that as investors shift out on the risk curve they will have to allocate less and less capital (the further out they go) assuming they are mandated to remain within already specified volatility constaints…thus the further out they shift the less monetary “fire power” there is to heal the real economy. Just some of my ramblings of things that seem to cross my mind.

    Danny

  4. yra Says:

    Danny–same thing has been on my mind and a blog will be out in about 10 minutes about this

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: