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The Economy, Stock Market, and Whatever...

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Re: The Economy, Stock Market, and Whatever...

Postby GoodOl'Days » Tue Aug 17, 2010 1:14 am

To make a fantasy sports reference, Why are people doubting the most dominant governing body of all-time?
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Re: The Economy, Stock Market, and Whatever...

Postby StlSluggers » Tue Aug 17, 2010 9:07 am

sometimes, the news just confuses the hell out of me:

Marketwatch.com wrote:Loan demand has stopped plunging

WASHINGTON (MarketWatch) -- Businesses are finding it easier to get loans from banks, the Federal Reserve reported Monday, based on its quarterly survey of bankers.

That's great news for those who think the credit squeeze has prolonged the agony of the recession by starving well-run businesses of the money they need to stay in business or to expand.

For the first time since 2006, banks reported easing their lending standards for small businesses, the Fed said.

Sounds good, right? Then there's this:

But some critics argue that it's not the supply of credit that's been the problem, it's the lack of demand.

Businesses just don't want to borrow. Bigger businesses that are growing have all the credit they need without going to the bank: They are sitting on piles of retained earnings. Plus, they've been borrowing plenty of money in the bond markets, as indicated by the reports of record sales of junk bonds.

Did that paragraph really just say that big businesses have ample credit but don't want to borrow but are borrowing and, when they do so, are borrowing through junk bond sales (thus bypassing their open lines of credit)? I'm assuming they're doing that because they're actually getting better rates/terms in the junk market, but still... That paragraph makes me :-S .

Anyway, I'll just stick to this portion and assume that this is generally good news:

The banks told the Fed that demand for commercial and industrial loans was unchanged compared with April. That sounds awful, until you realize that unchanged demand is actually a huge improvement from earlier in the year, when outstanding loan balances were dropping at a double-digit pace.

Over the past three months, in fact, balances are down just 2% annualized, according to weekly data from the Fed. A year ago, balances were plunging at a 25% annual rate.

Over the past month, loan balances are rising at a 3% annual rate.

Together, the two reports from the Fed -- the quarterly survey of bank loan officers and the weekly data on bank balance sheets -- show credit is beginning to flow from banks to businesses again.

In other news...

What's the best way to get your stock price to jump 30% at once? Reject a $130/share bid, and everyone will assume you have an even better bid on tap.

:-°
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Re: The Economy, Stock Market, and Whatever...

Postby Pogotheostrich » Tue Aug 17, 2010 9:51 am

StlSluggers wrote:
Pogotheostrich wrote:
The Artful Dodger wrote:The government is still the biggest restriction to China's growth, given that doing business as a foreign company is tough (i.e. forced joint venture, IP rights don't carry the same clout, privacy issues). That said, there's a massive demand for all kinds of products and services in China and it's too good to pass up on the sheer market opportunity. Personally, I'd move to China if the government wasn't so dodgy.


And that's the rub. The Chinese government makes it harder to do business in China if you are a foreign company. The want to foster the domestic companyies and they want technology to stay within their borders. Once the cost of labor rises something will have to change or the economy won't keep up this kind of growth.

Except that their commu-capitalist socio-economic combination gives them the luxury of keeping those wages artificially suppressed (granted, they can't completely enslave their people, but they can keep their labor force cheaper than most others). For that reason, their economic output is more likely capped at the lesser of population+technology (i.e.-productivity) or worldwide consumption.


The thing is they don't have to rise that much to make it more profittable to move production back to North America because the shipping costs are also rising.
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Re: The Economy, Stock Market, and Whatever...

Postby StlSluggers » Tue Aug 17, 2010 10:02 am

Well then... They better get the gestapo out now before those people start wanting a better life for their children than what they had, now hadn't they?
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Re: The Economy, Stock Market, and Whatever...

Postby Pogotheostrich » Tue Aug 17, 2010 11:09 am

StlSluggers wrote:Well then... They better get the gestapo out now before those people start wanting a better life for their children than what they had, now hadn't they?

That or they could create domestic industries that will be able to provide jobs and goods for new generation of Chinese consumers. :-D
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Re: The Economy, Stock Market, and Whatever...

Postby StlSluggers » Tue Aug 17, 2010 9:48 pm

Pogotheostrich wrote:
StlSluggers wrote:Well then... They better get the gestapo out now before those people start wanting a better life for their children than what they had, now hadn't they?

That or they could create domestic industries that will be able to provide jobs and goods for new generation of Chinese consumers. :-D

Oh, please.
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Re: The Economy, Stock Market, and Whatever...

Postby StlSluggers » Fri Aug 20, 2010 8:58 am

Wheat-crop scare rattles global nerves

TOKYO (MarketWatch) -- The recent run-up in wheat prices to their highest level in almost two years may offer the good kick-in-the-pants the world needs to realize just how fragile the global grain market really is.
...
Wheat futures prices closed above $8 per bushel on the Chicago Board of Trade earlier this month, the highest settlement price for a most-active contract since August 2008, after Russia placed a temporary ban on grain exports in the face of a devastating drought.

That's a price spike of nearly 70% in two months.
...
And while the drought in Russia and the surrounding region is the "catalyst" for the higher grain prices, it's not the "cause," he said.

The "real cause ... is [the] world's just-in-time inventory approach to Agri-Food," he said, referring to agricultural foods which include grains and meats.

The global food crisis of 2007-2008, a time when food prices surged and grain prices reached record highs, is a good example of that.

The food crisis was "a warning, not a one-off event," said Chris Mayer, contributor to The Daily Reckoning and editor of Capital and Crisis.

"It was a warning telling us how fragile the food supply system is," he said.
...
"The heart of the matter is that commodities continue to draw in a great deal of investment money, increasing the volatility," said Newsom. "With world stock markets still in a state of flux, long-term investment money has nowhere to go so it migrates to short-term commodities, chasing the latest headlines along the way."

At the same time, "there is not a lot of fat built into the [food supply] system and it remains susceptible to supply-side shocks," said Mayer.

Isn't "investment money", or speculation, the same thing that many pundits theorized caused a lot of the oil price swings last year? :-[
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Re: The Economy, Stock Market, and Whatever...

Postby RugbyD » Sat Aug 21, 2010 11:28 am

StlSluggers wrote:
But some critics argue that it's not the supply of credit that's been the problem, it's the lack of demand.

Businesses just don't want to borrow. Bigger businesses that are growing have all the credit they need without going to the bank: They are sitting on piles of retained earnings. Plus, they've been borrowing plenty of money in the bond markets, as indicated by the reports of record sales of junk bonds.

Did that paragraph really just say that big businesses have ample credit but don't want to borrow but are borrowing and, when they do so, are borrowing through junk bond sales (thus bypassing their open lines of credit)? I'm assuming they're doing that because they're actually getting better rates/terms in the junk market, but still... That paragraph makes me :-S .

Junk bonds are generally advantageous right now for companies that can get them done. Relative to bank loans they have the following advantages:
1) longer maturities
2) no covenants
3) unsecured (sometimes)
4) fixed interest rate (rates can only go up, just a matter of when)
5) tight spreads (aka low rates) in part due to high demand from yield-seeking investors (investment-grade, treasuries, and equities are all quite unappealing right now)

Also, much of recent junk bond issuance is just refinancing current bond debt or current bank loans.
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