NEW$ TO U(SE)

Economics is a dismal and confusing social science. It claims that there is no free lunch but argues that, at times, one plus one equals more than two. That is why basic theories that monetary and fiscal policies can manage demand in real terms without inflationary
consequences is falsifiable. However, what policies can do is influence total cash spending that is nominal GDP. As to how much of that total spending will be due to real or price changes is pure guesswork. The reason is that there is little data or valid theories that can tell how much any given output gap is cyclical or structural. It explains the heated debate over what path monetary and fiscal policies should take within the Federal Reserve, government and marketplace.

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That would be China’s first trade deficit since May 2004.

China will probably see a "record trade deficit" in March thanks to surging imports, Minister of Commerce Chen Deming said on Sunday (…).

"China’s trade surplus with the US has been turned into a key excuse by American economists to pressurize the Chinese government to revalue the yuan," but, ironically, the calls have been growing stronger even as the "surplus keeps falling", Chen said.

"It’s not rational (for China) to revalue the yuan, as it would hurt both Chinese exporters and American consumers."(…)

Full China Daily article

Related post: CHINESE CONSUMPTION NEAR TAKE-OFF

Deleveraging is happening fast through higher savings, defaults and low interest rates, in spite of the very slow gain in Personal Disposable Income since 2008. PDI should begin to rise faster when employment gets positive again, which could happen pretty soon. Biggest unknown: taxes to repay the economic and banks bailouts.

The Federal Reserve’s financial obligation ratio tracks how much the average American must cough up every month for rent and payments on credits cards and mortgages, as a percentage of disposable income. The ratio fell to 17.51% in the fourth quarter of 2009, down from a peak of 18.87% in early 2008 and the lowest level since the third quarter of 2000.

Full WSJ article

Related post: THE US CONSUMER: SAVINGS? WHAT SAVINGS?

Insurers Get Premium

(…) With the legislation and the expected package of changes, insurers stand to get more than 20 million new customers. New health-insurance “exchanges,” where consumers can shop for policies, will provide an easy way to reach these new customers. And the penalty for people who don’t buy in is somewhat tougher than laid out earlier.

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Source: You Tube

My friend Terry sends me the transcript of his latest doctor appointment:

His practice has no room for new patients! Now, he’s a medical wizard!
I love this Doctor

Q: Doctor, I’ve heard that cardiovascular exercise can prolong life. Is this true?
A: Heart only good for so many beats, and that it… Don’t waste on exercise. Everything wear out eventually.. Speed up heart not make live longer; that like say you can extend life of car by driving faster. Want live longer? Take nap.

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Fourth quarter earnings season is complete and the final results are very positive. Over 70% of index constituents surpassed their quarterly earnings forecasts, and over 50% managed to beat both earnings and revenue estimates.

Importantly, estimate revisions remain positive, providing a strong undercurrent for equity markets. RBC Capital Markets Estimate Revision Index is strongly correlated with equities.

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Stocks That Get a ‘China’ Bounce Dozens of tiny companies have gotten big stock-market boosts simply by adding the word "China" to their names. (WSJ)

Reserve Bank of India Raises Rates The Reserve Bank of India raised its key lending and borrowing rates by 0.25 percentage points each to anchor inflationary expectations, making it one of the first major central banks to raise rates. (WSJ)

Drop the Double Dip

The good news is that the U.S. economy is unlikely to slip back into recession. But the unemployment rate will probably remain as high as 8.5% even into the end of 2011.

Some See a Real Estate Bubble Forming in Canada — Instead of worrying about the recovery of the real estate market, some Canadians are concerned about the prospect of a price bubble. (NYT)

Many sellers in consumer sectors.

Click below for tables.

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The Dow continues to make new rally highs. To provide some perspective to the current Dow rally that began

just over one year ago, all major market rallies of the last 110 years are plotted on today’s chart. Each dot represents a major stock market rally as measured by the Dow. As today’s chart illustrates, the Dow has begun a major rally 27 times over the past 110 years which equates to an average of one rally every four years. Also, most major rallies (73%) resulted in a gain of between 30% and 150% and lasted between 200 and 800 trading days — highlighted in today’s chart with a light blue shaded box. As it stands right now, the current Dow rally (hollow blue dot labeled you are here) has entered the low range of a "typical" rally and would currently be classified as both short in duration and below average in magnitude.

From Chart of the Day