Daily Digest

Daily Digest 1/7 - World Bank Issues Yuan Bonds, China Takes Pressure Off Euro, China Could Affect Gas Prices

Friday, January 7, 2011, 11:00 AM
  • 2010 Year in Review: Fugly Gives Way to Muddling
  • 2011: Year of the Yellow Brick Road
  • World Bank Issues Its First-Ever Yuan Bonds
  • What could Trigger a Global Double Dip Recession in 2011? Russia
  • Fortunes Due and Fitting
  • China Helps Take Pressure Off Euro
  • China's Growing Auto Industry Could Affect U.S. Gas Prices
  • Artificial Palladium Is a Big Story in the Midst of Japan's Rare Earth Squeeze

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2010 Year in Review: Fugly Gives Way to Muddling (ChrisM - Worth a read!)

Every December I write a Year in Review. Last year's was entitled, 30 Years of Investing from the Cheap Seats and posted at Jesse's Cafe Americain. It provided personal context not to be repeated here, looked back over 30 turbulent years of investing, and attempted to look forward. To my surprise, emails poured in from money managers and investors, including some that would legitimately be called Masters of the Universe.

This year's is similar with redundancy avoided where possible. It opens with a highly personalized survey of my own efforts to get through another turbulent year en route to a stable retirement. This is followed by a brief update of what is now a 31-year quest for a soft landing. I conclude with a snapshot of thoughts and ideas that are currently on my radar.

2011: Year of the Yellow Brick Road (joe)

Let's enjoy the dream for a moment: the Federal Reserve (Fed) has sprinkled money on the economy, Congress has kept taxes low and we see signs of a recovery. A recovery driven by consumers with more disposable income. Where do they get it from? The reduced payroll tax? Maybe, but how about all the money consumers have at their disposal now that they have stopped paying their mortgage? What a wonderful life this must be! Because the Fed doesn't quite believe in the recovery, we believe QE2 will run it's course - Fed Chairman Bernanke has repeatedly stated that one of the grave policy mistakes during the Great Depression was that monetary policy was tightened too early. He appears committed to not letting history repeat itself; investors may want to trust him on that, as well as his commitment to push inflation higher. Ultimately, the Fed would like to engineer higher home prices so that consumers are no longer "under water.

World Bank Issues Its First-Ever Yuan Bonds (dejan)

The World Bank said in a statement dated Monday that it is raising 500 million yuan ($76 million) by issuing the two-year bonds, which pay out 0.95 percent in interest semiannually. It said the money would be added to its normal pool of cash, rather than being raised for a specific purpose. The bonds are issued by the Washington-based lender's International Bank for Reconstruction and Development arm and get its "AAA" rating, the highest possible.

What could Trigger a Global Double Dip Recession in 2011? Russia (walter)

Rumors are the Goldman Sachs and other global investment banks  will deliberately and simultaneously short their positions on gold,  oil/gas and other commodities soon, making  even more money on the  downside, (on credit default swaps and in the derivatives market), just like they did in the financial collapse after 2008. That's bad news for commodity exporters.

Fortunes Due and Fitting (john)

This year may start out looking like the last, dipping down later and then resurfacing with hope. Like last year, 2011 will be a year of transitions. What's kept the global economy stable – fiscal and monetary stimulus in the West and asset bubbles in the developing world – may also act as a catalyst for the next crisis. The timing for that crisis will likely occur in late 2012. Last year began with an overwhelmingly bullish sentiment. The consensus was that the "cycle" had turned, and that the upward trend would last for years. But by the middle of the year, the evidence came to suggest that the economic bounce didn't expand beyond the stimulus. The global economy didn't behave like a stalled car which would simply accelerate after a push.

China Helps Take Pressure Off Euro (dejan)

On Wednesday, Spain signed more than a dozen business accords with China, two days after Vice Premier Li Keqiang wrote in daily El Pais that his country will keep on buying Spain's public debt as a show of support. That follows similar deals and promises from China for already bailed-out Greece and Portugal, seen by many as the next weakest link in the 17-country eurozone.


China's Growing Auto Industry Could Affect U.S. Gas Prices (woodman)

China added more than 2 million cars last year, a 29 percent increase. So how does that affect the regular U.S. driver? It's all about the price of oil. Alisa Roth explains.


Artificial Palladium Is a Big Story in the Midst of Japan's Rare Earth Squeeze

This past Summer there was a rather significant imbroglio between China and Japan in which it was reported that China was suspending delivery of rare earth minerals to Japan over a fishing boat incident. (The issue of China’s current stranglehold on rare earths I covered myself here last Spring.) Whatever the true story is on this Japan/China incident, ever since Japan has been looking into finding new sources of rare earths. It’s not like these rare earth minerals don’t exist anywhere else, it’s just that the rest of the world has stopped mining for them. In fact, as recently as the 1980s, the US dominated production.

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