Oil Prices
Oil prices touched the $118 levels on news about US Navy firing on some Iranian boats carrying crude oil and on reports about BP shutting down its pipelines system supplying 700,000 barrel per day to UK and a pipeline attack in Nigeria
Compared to the global demand supply scenario, these news piece in themselves are not significant enough to warrant such a sharp increase in crude oil prices over the past few days.
One of the indicator of a bubble is high sensitivity and volatility of price's to the most insignificant of news.
Is that what is happening now..?
Some Views on the current downturn in the US economy
A view gaining more and more momentum is that the US housing will probably go through another round of correction to the extent of almost another 30% from the current levels.
Key Leading indicator for a recovery
As per Peter Bernstein (Financial Historian), the housing trouble has to at least flatten out before a recovery can take place in the US economy. In essence the real estate bubble needs to burst.
Measures from the US Government
India
Exports have driven Japan’s economy in recent years, contributing close to half of its GDP growth on average from 2002 to 2007. But there is concern that Japan’s growth engine may be stalling. Export growth fell to 2.3% yoy in March the slowest pace in three years
UK
As mentioned in my previous posts, housing problem surfacing in UK markets. Bank of England would be issuing bonds in exchange of mortgage backed securities. However that does not tackle the fundamental problem of overvalued real estate. UK economy likely to go the US way to a large extent.
China
Consensus expects slower growth this year. In the range of 9% compared to 11% range expected earlier. Still a healthy growth rate, but the slowdown is unmistakable. Will it get worse, especially due to higher oil prices and linkage with US economy.
Oil prices touched the $118 levels on news about US Navy firing on some Iranian boats carrying crude oil and on reports about BP shutting down its pipelines system supplying 700,000 barrel per day to UK and a pipeline attack in Nigeria
Compared to the global demand supply scenario, these news piece in themselves are not significant enough to warrant such a sharp increase in crude oil prices over the past few days.
One of the indicator of a bubble is high sensitivity and volatility of price's to the most insignificant of news.
Is that what is happening now..?
Some Views on the current downturn in the US economy
- General Electric CEO Jeff Immelt said the U.S. economy is in the worst condition since the burst of the dotcom bubble and that housing hasn't been in such a bad shape since Great Depression. Immelt feels that things could get worse for the U.S. economy.
- Nobel prize winning Economist Joseph Stiglitz too feels that this is likely to be one of the worst economic downturns since the Great Depression.
- As per New York Stern University Professor Nouriel Roubini , Real indicators show consumers cutting back on daily expenses . Financial sector losses on credit cards, auto loans rising, and mortgage defaults likely to increase further
- Sixty percent of the public say they are now less comfortable about making a a bigticket financial commitment, such as buying a home or a car, than they were just six months ago,
- Consumer confidence in US is now at its 26 years low , according to University of Michigan Consumer Confidence survey . The survey found that high food and fuel prices, coupled with falling incomes and falling home values, have driven consumers to save their money rather than spend it.
- Orders to factories for bigticket manufactured goods fell for a third straight month in March, the longest string of declines since the 2001 recession.
- The unemployment rate climbed to 5.1% in March as businesses laid off the largest number of workers in five years.
- Mortgage delinquencies and foreclosure on the rise.
A view gaining more and more momentum is that the US housing will probably go through another round of correction to the extent of almost another 30% from the current levels.
Key Leading indicator for a recovery
As per Peter Bernstein (Financial Historian), the housing trouble has to at least flatten out before a recovery can take place in the US economy. In essence the real estate bubble needs to burst.
Measures from the US Government
- The U.S. Treasury will start sending tax rebate checks to Americans next week in order to pump $50 billion into the U.S. economy by the end of May
- Fed has already cut the benchmark borrowing costs to 2.25 percent from 5.25 percent since midSeptember. Fed might drop the rates another 25 basis points, but overall they are plan to step away and observe if all the efforts going on will work or not.
India
- Inflation continues on its upward trend
and rose to 7.33 % during the week ended April 12, compared to 7.14
%according to data from the Ministry of Commerce and Industry. The rise
in inflation was driven by increasing cost of food items and rising
iron and steel prices - GDP growth estimates now in 7% range compared to more than 8% that was expected till a few months back
- Rising fuel prices have an impact which runs across sectors including steel, cement and power generation sectors. This in turn seeps through the rest of economy by way of higher prices. Oil now rules in the $118 range compared to $ 60 range just a year back. Coal price have doubled (or more in certain cases) over the past one year. This is largely on supply side concerns as against oil, where there is likely to be a significant speculative interest.
- Real estate prices have corrected in pockets, but not consistently enough. Expect another 20 to 30% overall correction
- Slowdown beginning to make its presence felt in the 2007 Q4 corporate results. Next couple of quarters likely to show a more severe impact
- Wages and increment in Indian corporates starting to get impacted
- Interest rates ruling high, thus curbing investment and growth
- Inflation eating into Indian consumers disposable incomes.
- General Electric CEO Jeff Immelt said the U.S. economy is in the worst condition since the burst of the dotcom bubble and that housing hasn't been in such a bad shape since Great Depression. Immelt feels that things could get worse for the U.S. Economy. Similar views being shared by Nobel prize winning Economist Joseph Stiglitz and Prof. Nouriel Roubini (New York Stern University)
- Consumer confidence in US is now at its 26 years low , according to University of Michigan Consumer Confidence survey .
- The unemployment rate climbed to 5.1% in March as businesses laid off the largest number of workers in five years.
Exports have driven Japan’s economy in recent years, contributing close to half of its GDP growth on average from 2002 to 2007. But there is concern that Japan’s growth engine may be stalling. Export growth fell to 2.3% yoy in March the slowest pace in three years
UK
As mentioned in my previous posts, housing problem surfacing in UK markets. Bank of England would be issuing bonds in exchange of mortgage backed securities. However that does not tackle the fundamental problem of overvalued real estate. UK economy likely to go the US way to a large extent.
China
Consensus expects slower growth this year. In the range of 9% compared to 11% range expected earlier. Still a healthy growth rate, but the slowdown is unmistakable. Will it get worse, especially due to higher oil prices and linkage with US economy.
