Daily Digest

Daily Digest 1/2 - Gold and Silver Stocks in New Year, Australian Debt, China Manufacturing

Sunday, January 2, 2011, 12:00 PM
  • Bill Gross Tells Bloomberg To "Avoid Dollar Denominated Government Debt"
  • Gold, Silver and Stocks: What does the New Year Hold?
  • Australians Sinking Under Debt Burden
  • China Dec Manufacturing Eases On Tightening Moves
  • Treasuries Gain on Speculation Snow Will Slow Economic Growth
  • Beijing Residents Rush to Register New Cars to Meet China's Quota System
  • Are Oil Prices Are About To Wake Up To Peak-Production Realities?

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Economy

Bill Gross Tells Bloomberg To "Avoid Dollar Denominated Government Debt"  (dejan)



When Nassim Taleb and Marc Faber say that US government debt is a suicide investment, one can be allowed some skepticism. After all, they are likely just talking their book. On the other hand, when the manager of the world's biggest bond fund, whose flagship fund Treasury holdings amount to almost $80 billion goes on Bloomberg and says to "avoid dollar-denominated government debt" better known as US Treasuries, and instead recommends viewers invest in "stable" currencies like the Peso, the BRL or the CAD, then you know the bottom in bonds is in.

Gold, Silver and Stocks: What does the New Year Hold? (doug)



Do precious metal prices reflect economic fundamentals or perceptions of price trend prospects? Silver sells around $30 an ounce and is near a 30-year high. Gold sells for more than $1,400 an ounce. Can gold and silver double from here, with silver already selling for more than five times typical producer costs? (Yes, the prices can double, but not likely.) Just what were J.P. Morgan analysts thinking in June 2010 when, with silver around $18 an ounce, they gave a long-term silver price forecast of $13 an ounce? Were they trying to turn the market? Or did they misunderstand the times?

Australians Sinking Under Debt Burden (michel)



According to the Reserve Bank, Australians have added almost $220 billion to household debt levels since the beginning of 2008, taking our borrowings to a record $1.3 trillion. Despite more cautious spending in recent months, household debt is still up by 5.8 per cent on a year ago and a recent survey by Westpac found only about 20 per cent of people thought paying off debts was the best use of their money. Most households in the US, UK and much of Europe are still busily paying down their borrowings, particularly unsecured debts such as personal loans and credit cards.

China Dec Manufacturing Eases On Tightening Moves



The state-affiliated China Federation of Logistics and Purchasing said Saturday that its purchasing managers index, or PMI, dipped to 53.9 last month from 55.2 in November and 54.7 in October. It was the first decline in five months but the 22nd straight month that the reading has stayed above 50, the benchmark for expansion.

Treasuries Gain on Speculation Snow Will Slow Economic Growth



“Treasuries will rally in January,” said Zeal Yin, who helps oversee the equivalent of $51.4 billion as a bond investor at Shin Kong Life Insurance Co., Taiwan’s second-largest life insurer. “The extremely cold weather will affect the U.S. economy.” U.S. 10-year rates dropped two basis points to 3.35 percent as of 8:10 a.m. in London, according to BGCantor Market Data. The price of the 2.625 percent security maturing in November 2020 climbed 5/32, or $1.56 per $1,000 face amount, to 93 31/32.

Beijing Residents Rush to Register New Cars to Meet China's Quota System



China surpassed the U.S. last year to become the world’s biggest car market as tax cuts and government subsidies aimed at spurring auto sales fueled a surge in traffic. Beijing tied with Mexico as having the world’s worst traffic, according to a survey by International Business Machines Corp. last year. The Beijing Municipal Commission of Transport opened a website yesterday to accept online applications from people wishing to buy a car. Those without Internet connections can register on sites from Jan. 4.

Energy

Are Oil Prices Are About To Wake Up To Peak-Production Realities? (hrunner)



Somehow the government is sticking with an outlook that sees crude prices not hitting triple digits until 2015. It is an estimate that would get smirks on Wall Street and get you laughed out of the room at the peak oil conference in D.C.

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

18 Comments

saxplayer00o1's picture
saxplayer00o1
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Adviser: Debt ceiling must be raised

"Washington (CNN) -- If Congress does not raise the debt ceiling, the result could be "catastrophic" for the American economy, Austan Goolsbee, chairman of the Council for Economic Advisers, said Sunday.

Speaking on ABC's "This Week," Goolsbee said that the debt ceiling was not something to toy with for political ends.

"If we hit the debt ceiling, that's essentially defaulting on our obligations, which is totally unprecedented in American history," he said. "The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw in 2008."

The debt ceiling is one of the biggest budget fights facing the new Congress that convenes this week.

Currently, the debt limit stands at more than $14 trillion. The last time it was raised was in February 2010.

If the ceiling were ever breached, the country would effectively be in default. That would slam bonds, the dollar and creditors' portfolios.

Fiscally conservative lawmakers signaled they would use the opportunity of the upcoming debt ceiling vote to demand spending cuts in exchange for their support."

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Montana Native
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Re: Adviser: Debt ceiling must be raised

In the debt ceiling article Senator Lindsey Graham talks about how the debt must be dealt with immediately. Yet he is talking about a permanent presence in Afghanistan this week. http://www.huffingtonpost.com/2011/01/02/lindsey-graham-afghanistan-permanent-presence_n_803318.html 

There has to be something in the DC water that causes brain damage.

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A. M.
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Re: Daily Digest 1/2 - Gold and Silver Stocks in New Year, ...

How does increasing the debt ceiling preclude financial default?
This article confused me.

It seems as if they're saying "financial meltdown" if we don't raise it, but raising it is just allowing us to accrue more debt, right? Isn't that just allowing pressure to build, so to speak?

Cheers,

Aaron 

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Poet
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National Geographic - 7 Billion

 

Awesome little video intro to National Geographic's year-long focus on the planet's population reaching 7 billion.

Makes me wish I had cable or a subscription.

Poet

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Denny Johnson
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Re: National Geographic - 7 Billion
Poet wrote:

 

Makes me wish I had cable or a subscription.

Hopefully a nearby library is still funded.

Damnthematrix's picture
Damnthematrix
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Re: Daily Digest 1/2 - Gold and Silver Stocks in New Year, ...

Mercedes-Benz SLS AMG E-Cell Electric Car
Power for the E-Cell will be provided by four electric motors  that are capable of revving to  12,000rpm. Power for the setup totals 525 horsepower and 649 lb-ft of torque, good enough for a zero-to-62 time of just 4 seconds.
Mercedes-Benz SLS AMG E-Cell Electric Car Information, Pictures, and Video

http://electricandhybridcars.com/index.php/pages/mercedesecell.html

"This prototype carries a 48-kWh lithium-ion battery ... The current range is about 90 miles ...With a fast-charging station, it took an hour to recharge the batteries to almost 100 percent."

Fuel consumption:

The generation of 48kWh results in 48kg of CO2, so must be around 13kg of coal.

90 miles = 145km, so consumption is 13 x 100/145 = ~9kg/100km

I suspect a car like that would consume ~15L/100km when petrol powered, or ~11kg of petrol/100km

Sort of proves the superior efficiency of electric motors.. but also shows how much more coal will have to be burnt to run these cars..

For my American friends, that coal consumption is ~20lbs of coal per 60 miles

Mike

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Damnthematrix
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Re: Daily Digest 1/2 - Gold and Silver Stocks in New Year, ...
Aaron Moyer wrote:

How does increasing the debt ceiling preclude financial default?

This article confused me.

Just goes to show just how clueless TPTB are.....  all they want to do is fix the symptoms rather than the disease.  How can anyone wonder why we are in so much deep doo doos!

Mike

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Damnthematrix
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Re: Daily Digest 1/2 - Gold and Silver Stocks in New Year, ...

The following are 16 statistics about the coming retirement crisis that will
drop your jaw.....

http://endoftheamericandream.com/archives/in-2011-the-baby-boomers-start-to-turn\
-65-16-statistics-about-the-coming-retirement-crisis-that-will-drop-your-jaw

#1 Beginning January 1st, 2011 every single day more than 10,000 Baby Boomers will reach the age of 65. That is going to keep happening every single day for the next 19 years.

#2 According to one recent survey, 36 percent of Americans say that they don't contribute anything at all to retirement savings.

#3 Most Baby Boomers do not have a traditional pension plan because they have been going out of style over the past 30 years. Just consider the following quote from Time Magazine: The traditional pension plan is disappearing. In 1980,
some 39 percent of private-sector workers had a pension that guaranteed a steady payout during retirement. Today that number stands closer to 15 percent, according to the Employee Benefit Research Institute in Washington, D.C.

#4 Over 30 percent of U.S. investors currently in their sixties have more than 80 percent of their 401k invested in equities. So what happens if the stock market crashes again?

#5 35% of Americans already over the age of 65 rely almost entirely on Social Security payments alone.

#6 According to another recent survey, 24% of U.S. workers admit that they have postponed their planned retirement age at least once during the past year.

#7 Approximately 3 out of 4 Americans start claiming Social Security benefits the moment they are eligible at age 62. Most are doing this out of necessity.  However, by claiming Social Security early they get locked in at a much lower
amount than if they would have waited.

#8 Pension consultant Girard Miller recently told California's Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities. When you break that
down, it comes to $22,000 for every single working adult in California.

#9 According to a recent report from Stanford University, California's three biggest pension funds are as much as $500 billion short of meeting future retiree benefit obligations.

#10 It has been reported that the $33.7 billion Illinois Teachers Retirement System is 61% underfunded and is on the verge of complete collapse.

#11 Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern's Kellogg School of Management recently calculated the combined pension liability for all 50 U.S. states. What they found was that the 50
states are collectively facing $5.17 trillion in pension obligations, but they only have $1.94 trillion set aside in state pension funds. That is a difference of 3.2 trillion dollars. So where in the world is all of that extra money going
to come from? Most of the states are already completely broke and on the verge of bankruptcy.

#12 According to the Congressional Budget Office, the Social Security system will pay out more in benefits than it receives in payroll taxes in 2010. That was not supposed to happen until at least 2016. Sadly, in the years ahead these
"Social Security deficits" are scheduled to become absolutely horrific as hordes of Baby Boomers start to retire.

#13 In 1950, each retiree's Social Security benefit was paid for by 16 U.S. workers. In 2010, each retiree's Social Security benefit is paid for by approximately 3.3 U.S. workers. By 2025, it is projected that there will be approximately two U.S. workers for each retiree. How in the world can the system possibly continue to function properly with numbers like that?

#14 According to a recent U.S. government report, soaring interest costs on the U.S. national debt plus rapidly escalating spending on entitlement programs such as Social Security and Medicare will absorb approximately 92 cents of every single dollar of federal revenue by the year 2019. That is before a single dollar is spent on anything else.

#15 After analyzing Congressional Budget Office data, Boston University economics professor Laurence J. Kotlikoff concluded that the U.S. government is facing a "fiscal gap" of $202 trillion dollars. A big chunk of that is made up of future obligations to Social Security and Medicare recipients.

#16 According to a recent AARP survey of Baby Boomers, 40 percent of them plan
to work "until they drop".

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mrobinson
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Re: Daily Digest 1/2 - Gold and Silver Stocks in New Year, ...

Some interesting articles on China which i think fits in with the current theme.

Andy Xie, Caixin Online - http://english.caing.com/2010-12-23/100210360.html

China know they are in the race

China has an opportunity to gain immunity against the next crisis.

The last crisis started in the U.S. If China hadn't reformed a decade ago, it could have started in China. An economic crisis in China would have prolonged the U.S.'s economic cycle by bringing down oil and other commodity prices, which would have improved the U.S.'s cash flow.

The most likely candidates to trigger the next global crisis are the U.S.'s sovereign debt or China's inflation. When one goes down first, the other can prolong its economic cycle. China may have won the last race. To win the next one, China must tackle its inflation problem, which is ultimately a political and structural issue, in 2011. If China does, the U.S. will again be the cause for the next global crisis. China will suffer from declining exports but benefit from lower oil prices.

On the other hand, if China has a hard landing, the U.S.'s trade deficit can drop dramatically, maybe by 50 percent, due to lower import prices. It would boost the dollar's value and bring down the U.S.'s treasury yield. The U.S. can have lower financing costs and lower expenditures. The combination allows the U.S. to enjoy a period of good growth.

One could describe the global economy as a race between the U.S. and China, to see who goes down first.

This coming year is China's opportunity.

and also understand the competition

I have argued several times before why the U.S.'s stimulus won't bring lasting growth. I'm not sure that the stimulus advocates in the U.S. believe what they say. The real intention for the new Obama tax cut is to get him re-elected in 2012. The mid-term election this year shows that, unless the U.S.'s unemployment rate drops significantly, he will lose his re-election bid then.

Yu Yongding, China Dailey - http://www.chinadaily.com.cn/opinion/2010-12/23/content_11742757.htm

China's progress over the past three decades is a successful variation on the East Asian growth model that stems from the initial conditions created by a planned socialist economy. That growth pattern has now almost exhausted its potential. So China has reached a crucial juncture: without painful structural adjustments, the momentum of its economic growth could suddenly be lost.

 

Michael Pettis - Chinese Growth in 2011 - http://mpettis.com/2010/12/chinese-growth-in-2011/

It is proving very difficult to keep growth up in China except with massive increases in bank-driven investment, even though this year China got a lot of help from the surge in the trade surplus.  Next year I suspect it will be much more difficult to count on a surging trade surplus to generate domestic growth, and consumption is not going to kick in, so we are pretty much left with growing investment if policymakers want to keep growth rates in the 9-10% range, which they almost certainly do.

 

Fitch Ratings - "Stress Test" - Impact of a China Slowdown.

http://asianbondsonline.adb.org/publications/external/2010/The_Impact_of_a_China_Slowdown_on_Global_Credit_Quality_FR_30_Nov2010.pdf

http://www.shanghaidaily.com/article/?id=460278&type=Opinion

Chinese property on verge of bursting.

 

BHP the largest iron ore producer in the world is trying to diversify their business in agriculture and enrgy aligned business. Failed to aquire the Canadian company Potash Corp and now "rumoured" to be bidding for US energy compoany Anadarko.

http://www.theaustralian.com.au/business/city-beat/anadarko-gains-as-bhp-rumour-returns/story-fn4xq4cj-1225979264045

With China heading toward a new normal of slower growth, this will slow the purchase of commodities, commodity driven countries and their currencies.

China news growing in the Australian mainstream media and very lively in Australian blog sites. For good reason.

Think i over did it.

Mike

 

mrobinson's picture
mrobinson
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Re: Daily Digest 1/2 - Gold and Silver Stocks in New Year, ...

One more

http://delusionaleconomics.blogspot.com/

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Re: National Geographic - 7 Billion

I say, forget National Geographic, or read it at the library for free. Why help pay for corporate media just because they do some cool reporting occasionally and make some pretty maps? They helped cover up 9/11 (and no, let's not debate that, in case you don't understand by now).

Here's a few other objections, straight from Wikipedia, another unreliable source, but these quotes and judgments are, in my opinion,  accurate:

Linda Steet in her book Veils and Daggers: A Century of National Geographic's Representation of the Arab World criticizes National Geographic for its

masculinist rhetoric, the one-directionality of its cross-cultural contact, its claim of objectivity and representations that build layers of a.. world hierarchy.[6]

Lutz and Collins in their book Reading National Geographic argue that National Geographic is intimately tied to the American establishment and "cultivates ties to government officials and corporate interests".[7] Rothenberg suggests that National Geographic, as a part of mainstream popular culture, has historically helped to articulate a particularly American identity in opposition to "both old Europe and primitive non-Western regions... an identity of civic and technological superiority but yet, a distinctly benign and friendly identity".[8]

The book Reading National Geographic notes how photos are sometimes electronically manipulated.[9] In one photo of bare-breasted Polynesian women, the skin color was darkened.[9] Women with light skin have not appeared topless in the magazine.[9] The book also documents how NG photographers have encouraged their subjects to change costumes when their clothing was seen as "too drab" for the magazine.[9] Summarizing an analysis of NG photographs from 1950-1986, the authors argue the following themes: "The people of the third and fourth worlds are portrayed as exotic; they are idealized; they are naturalized and taken out of all but a single historical narrative; and they are sexualized. Several of these themes wax and wane in importance through the postwar period, but none is ever absent."[10]

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es2
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Re: Daily Digest 1/2 - Gold and Silver Stocks in New Year, ...

Niall Ferguson Video Lecture - "Empires On The Verge Of Chaos"

ForaTV, in conjunction with the Australian Broadcasting Corporation, shares another terrific must watch presentation, this time by one of our favorite socioeconomic historians, Niall Ferguson, who in this lecture talks in depth, and with an objective perspective that only few can share, about empires on the verge of decline, emphasizing the precarious position the US has found itself in, now that China's ascendancy is undisputed, and only matched by the accelerating descent of the once great US nation.

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Coupla interesting stories in NYT today (Sunday)

First off, incoming NY gov Cuomo is talking tough about pensions, etc. (echoes of NJ gov Christie):

http://www.nytimes.com/2011/01/03/nyregion/03cuomo.html?_r=1&ref=us

http://www.nytimes.com/2011/01/02/nyregion/02inaugural.html?ref=andrewmc...

Replace "Europe's" with "America's" and you have a story relevant to us Yanks (and, I hardly doubt, young people all over):

http://www.nytimes.com/2011/01/02/world/europe/02youth.html?src=me&ref=g...

And lastly, echoing Dr. Chris' thoughts about how China is out in the world making friends/influencing people and buying up everything in sight (with, presumably, US dollars):

http://www.nytimes.com/2011/01/03/world/asia/03china.html?ref=business

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flavian
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electric cars

"This prototype carries a 48-kWh lithium-ion battery ... The current range is about 90 miles ...With a fast-charging station, it took an hour to recharge the batteries to almost 100 percent."

Fuel consumption:

The generation of 48kWh results in 48kg of CO2, so must be around 13kg of coal.

Producing those fancy lithium batteries polutes the air a lot more and eats waaay more gas than those fossil-fuel cars you are comparing against.

The cost to produce those batteries says it all about the energy put into production, the polution created to mine all that lithium or nickel, to transport it all aroud the globe and so on.

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Re: Daily Digest 1/2 - Gold and Silver Stocks in New Year, ...

New Gerald Celente video

http://vinceseconomicblog.wordpress.com/2011/01/03/gerald-celente-whats-...

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Re: Daily Digest 1/2 - Gold and Silver Stocks in New Year, ...
Damnthematrix wrote:

#16 According to a recent AARP survey of Baby Boomers, 40 percent of them plan
to work "until they drop".

At least this one stat is better than I would have guessed. Only 60% are still dreaming. Maybe a little less than 60% since some will actually have an income that doesn't include Social Security, I hope.

SS

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Re: Daily Digest 1/2 - Gold and Silver Stocks in New Year, ...

mrobinson, thanks for all the links to international news sites!  -It's good to be able to see things from others' perspectives as well as our own!

Sager, isn't the news in NYS just sad?  i guess on another hand maybe it is good that measures are at least being taken to try to deal with its problems...

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SagerXX
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Re: Daily Digest 1/2 - Gold and Silver Stocks in New Year, ...
pinecarr wrote:

Sager, isn't the news in NYS just sad?  i guess on another hand maybe it is good that measures are at least being taken to try to deal with its problems...

It'll be interesting to see if Cuomo is serious about trying to do something constructive, or if he's just blowing sunshine up our hind ends.  I'm open to the possibility of the former, but am also realistic about the heinous state of NYS politics.  And the powers with which he will have to contend are deeply entrenched.

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