NEW$ & VIEW$ (20 SEPTEMBER 2012)

Central Banks Flex Muscles

Massive injections of stimulus into financial markets by the world’s largest central banks are creating a domino effect around the globe.

(…) As with past episodes of aggressive easing by the world’s major, developed-market central banks, many investors are homing in on emerging markets offering higher yields and generally healthier economies. The Brazilian real initially jumped 0.7% after the Fed’s move, but finished Wednesday’s session up 0.3% from a week earlier. The Mexican peso, meanwhile, has gained 2.7% over the past week, the Polish zloty is up 4.3% and the Korean won is up 1.6%. (…)

Brazil took steps Monday to prevent potential waves from the Fed’s easing from lifting the value of its currency, conducting so-called “reverse dollar swaps” to prevent its currency, the real, from appreciating. Also Monday, Peru adjusted its intervention strategy toward weakening the Peruvian sol, and on Tuesday Turkey cut interest rates by more than expected. (…)

Officials in South Korea, Thailand, Singapore and the Philippines took a cautious view of the uptick in their currencies following the Fed’s announcement, though they all asserted a readiness to smooth out market movement if capital inflows become excessive. (…)

In the previous round of Fed quantitative easing, the dollar weakened significantly against most currencies. The Wall Street Journal Dollar Index, a measure of the dollar’s value against a basket of major currencies, fell 18% in the 13 months from June 2010, when expectations of more Fed stimulus first began to rise, until the $600 billion bond-buying program ended the following summer. The index dropped 20% against the Brazilian real over the same period and 18% versus the Korean won. (…)

Yuan Hits Fresh High Against Dollar

Since late last year, the yuan has weakened modestly against the dollar, falling as much as 1.6% against the U.S. currency in late July. But the Chinese currency has reversed course recently and hit a seven-month intraday high during Thursday’s trading, at 6.2945 against the dollar. The yuan is now down just 0.2% against the dollar this year.

China’s central bank, which has been guiding the currency on a stronger path in recent weeks, Thursday guided the yuan a bit stronger. Traders said the recent yuan guidance reflected the broad weakness in the dollar against other currencies following massive stimulus plans by the European Central Bank and the U.S. Federal Reserve.

Japan suffers steep fall in exports
Surprised smile  August shipments to western Europe drop 28%

Thursday’s government data showed that shipments slipped almost 6 per cent from a year earlier to Y5tn ($64bn), the third monthly fall in a row, while imports were 5.4 per cent lower at Y5.8tn. (…)

The provisional data from the ministry of finance showed that August shipments to western Europe fell by 28 per cent from a year earlier, thanks to big falls in exports to Germany (18 per cent) and the UK (42 per cent). Exports to China posted their third successive decline. August’s 10 per cent fall was only slightly better than a 12 per cent slump in July.

Swedish budget emphasises stimulus
Government downgrades growth forecast for next year

Anders Borg, the centre-right finance minister, on Thursday unveiled SKr23bn of initiatives to boost the economy, including a big cut in corporate tax, investment in infrastructure and measures to tackle youth unemployment. (…)

Among the measures unveiled, many of which have been trailed by the government in recent weeks, was a cut in corporate tax from 26.3 to 22 per cent, putting Sweden just under the EU average. It also unveiled plans to spend SKr100bn on infrastructure from 2014 to 2025 including a new underground line in Stockholm.



Smile  Housing Recovery Gains Traction

Home sales and construction jumped to their highest levels in more than two years, offering the strongest signal to date that the U.S. housing sector has turned the corner after a six-year rout.

imageSingle-family housing starts in August rose by 5.5% from July to their highest level in 28 months, the Commerce Department said Wednesday. In August, builders started construction on 535,000 homes at a seasonally adjusted annual rate, up 26.8% from one year ago. Overall housing starts were up by 2.3%, amid a small drop in the more volatile multifamily sector.

Meanwhile, sales of previously owned homes in August rose by 7.8% from July to their highest level in 27 months, the National Association of Realtors said. Sales climbed 9.3% from a year ago, marking the 14th straight year-over-year sales increase, even as the number of homes listed for sale was down sharply.

As I have been saying since January:

The lack of attractive inventory is having “the single biggest impact on new-home sales right now,” Mr. Wehrli said.

Existing house prices are +10% in the last 7 months. Now that prices are rising YoY in most cities, the recovery could accelerate if it motivates fence-sitters. Even more so if QE3 lowers mortgage rates even further.


Storm cloud  Bank of America Ramps Up Job Cuts

Bank of America is planning to cut 16,000 jobs by the end of the year. If the cuts are made, the lender will likely lose its title as the U.S banking industry’s largest employer.

Fingers crossed  Architecture Billings Index Inches Back into Positive Territory

    On the heels of a nearly three-point increase, the Architecture Billings Index (ABI) climbed into positive terrain for the first time in five months. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the August ABI score was 50.2, up from the mark of 48.7 in July. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 57.2, up from mark of 56.3 the previous month.

    “Until the economy is on firmer ground, there aren’t likely to be strong increases in demand for design services,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “In the meantime, we can expect to see design activity alternate between modest growth and modest decline.” (Chart from CalculatedRisk)


Fingers crossed  Oil tumbles as Saudis offer more supply  Higher-than-expected US inventories also weigh on prices

Higher-than-expected weekly US inventories data released on Wednesday also weighed on crude. ICE November Brent fell $3.84 a barrel to $108.19. Nymex October West Texas Intermediate, the US benchmark, which briefly rose above $100 late last week, settled down $3.31 at $91.98 a barrel.

The prospect of extra Saudi supplies comes as the market has grown cautious about a possible release of strategic petroleum stocks by the US and other developed nations.


88 companies have already said that results will come in below expectations; 21 that have signaled a positive outlook, said Greg Harrison, corporate earnings research analyst at Thomson Reuters.

“That’s much more pessimistic than normal,” said Mr. Harrison, who added that the third quarter of 2001 was the last time that earnings guidance leaned so heavily to the downside. (NYT)

Pointing up  Since September 4, eight additional companies have issued Q3 guidance, all of them negative.

I remind you that for Q2 2012, 107 companies issued EPS guidance. Of these 107 companies, 72 issued negative EPS guidance and 35 issued positive EPS guidance.

Last night:

Norfolk Southern Profit Drop Echoes FedEx Slowdown Signal  Norfolk Southern Corp.’s quarterly profit will trail analysts’ estimates as dwindling volumes at the second-biggest eastern U.S. railroad add to signs of a slowing domestic economy.

Surprised smile  Third-quarter profit at Norfolk Southern will be $1.18 to $1.25 a share, according to a railroad statement, short of the $1.63-a-share average estimate of 27 analysts surveyed by Bloomberg. The Norfolk, Virginia-based carrier will report earnings Oct. 23.

GOOD QUOTE from George Jonas in Why George Soros is wrong about the European Union:

You can’t have socialism without a printing press.


On Jan. 27, 2012, I posted on 3D printing technology, urging you to take 15 minutes of your time to watch a TED video on 3D printing which will truly revolutionize manufacturing and shipping and …etc., etc., etc. The link to the video is at the end of the post NEW$ & VIEW$ (27 Jan. 2012).

John Mauldin’s Outside the Box letter prints the transcript of a presentation by Alex Daley, editor of Casey Extraordinary Technology which discusses 3D printing, among other topics. You can watch the presentation here:  or, if you prefer, read the full transcript. Some excerpts:

The idea is simple. Take a powder, like  the ink in an inkjet printer. Spray down a thin layer, then use heat or chemicals to bond the powder together into a solid object. Then layer on some more and repeat until you slowly, one layer at a time, build up a 3-dimensional object. Hence the term additive manufacturing. Control the entire process by computer, and you can fuse layers together to build almost anything.

The premise may be simple, but the implications are far-reaching. Unlike traditional subtractive manufacturing, there is little to no waste in the process. And, thanks to the generic nature of the machines, able to control the layers one at a time from a computerized model of the object to be built, one object can be created at a time with customization, much like with a router or lathe – but far more flexible than mold-based processes.

A single copy of a thousand different objects, or a thousand copies of a single one, can be created with no change in the economies of doing so, just as a home printer can print a letter one moment and a photo the next.

(…)systems have now been created to work with a wide variety of practical materials like flexible plastics, or steel and aluminum, all the way  to the emerging ideas of biological materials or even… chocolate. (…)

User cases like BMW’s underscore the importance of the technology. During the design phase of a new or improved vehicle, BMW will go through many iterations of a part to get it exactly right. Previously, they used CNC routers to create prototype fixtures for the car. However, when they moved to using a printer from Stratasys – one of the largest 3D printer manufacturers in the world – BMW was able to reduce the cost of each test part by 58%. Better than that, their wait time for a newly designed part fell 92%. That’s an astounding change to the financials of the process, and a huge leap forward in terms of their ability to bring a design to life quickly. (…)

While this type of work still requires highly precise machines with steep price tags, the prices are dropping rapidly. (…)

3D printing is a remarkable emerging industry, and at approximately $500 million dollars annual revenue in size today, has a great future ahead of it, for both consumers and investors. The technology is just now making the turn up that hockey stick-like growth curve, and over the long run may have as much effect on manufacturing as the PC had on knowledge work – an economic revolution of immense proportions.

Really immense!


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