05/28/2012
05/27/2012
05/26/2012
Eurozone PMI Disaster - Worst Downturn Since Mid-2009, Manufacturing and Composite at 35-Month Low; Expect Numerous GDP Downgrades, Missed Budget Targets
Markit Reports Eurozone PMI Suffers Worst Downturn Since Mid-2009
Europe is in a full-blown recession and for the first time in about a year we did not see any Pollyanna comments from Markit economists.
Perhaps the news has sunk in that as I have repeatedly said, this recession will be long and deep and Germany would not escape.
Expect Numerous GDP Downgrades, Missed Budget Targets
All GDP estimates from the Eurozone to-date have been pure bunk. Expect numerous downgrades after this disastrous report. If countries are to meet debt-to-GDP targets still more austerity measures will be forthcoming which will mean more layoffs, higher unemployment, and lower revenues.
In short, Spain, France, Italy will find it impossible to meet budget targets as the recession picks up steam.
Containment Theory Blows Sky High
For a look at just released PMI reports from Germany and France, please see Containment Theory Blows Sky High: German Manufacturing PMI Plunges to 45; French Manufacturing PMI Plunges to 44.4, Sharpest Contraction in 3 Years
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Flash Eurozone PMIFull-Blown Recession
- Composite Output Index at 45.9 (46.7 in April). 35-month low.
- Flash Eurozone Services PMI Activity Index at 46.5 (46.9 in April). 7-month low.
- Flash Eurozone Manufacturing PMI at 45.0 (45.9 in April). 35-month low.
- Flash Eurozone Manufacturing PMI Output Indexat 44.7 (46.1 in April). 35-month low.
The Markit Eurozone PMI® Composite Output Index fell to a near three-year low in May, according to the preliminary ?flash? reading which is based on around 85% of usual monthly replies. The index fell for the fourth month in a row to 45.9, down from 46.7 in April, to signal the fastest rate of decline of private sector economic activity since June 2009. Output has fallen eight times in the past nine months
Activity fell at the fastest rates for seven months in services (and the second-fastest in 34 months), while manufacturing production dropped at the steepest rate since June 2009. The goods-producing sector posted the stronger overall rate of contraction.
Incoming new business in the Eurozone private sector declined for the tenth successive month in May. Moreover, the pace of contraction was the fastest over this sequence, and the strongest since June 2009. Manufacturers continued to post a steeper drop in new orders than their service sector counterparts. France posted a steeper drop in new business than Germany, while the rest of the Eurozone continued to see a stronger average rate of decline than the ?big-two?.
Reflective of the sustained fall in new workloads, private sector firms in the Eurozone continued to post declining outstanding business mid-way through Q2. The rate of decline was little-changed from April?s 33-month record. By sector, manufacturing and services registered broadly similar rates of contraction. The ?big-two? both posted weaker falls in backlogs than the rest of the Eurozone.
Private sector employment in the Eurozone declined for the fifth successive month in May. The rate of job shedding was close to April?s 26-month record, but modest overall. This reflected a return to workforce growth in Germany, albeit at a marginal rate. Jobs were cut for the third month running in France, and for the twelfth consecutive month outside the ?big-two? on average.
Commenting on the flash PMI data, Chris Williamson, Chief Economist at Markit said: ?The flash PMI indicated that the Eurozone downturn gathered further momentum in May, with business activity and new orders both falling at the fastest rates for just under three years. ?The survey is broadly consistent with gross domestic product falling by at least 0.5% across the region in the second quarter, as an increasingly steep downturn in the periphery infects both France and Germany.
Europe is in a full-blown recession and for the first time in about a year we did not see any Pollyanna comments from Markit economists.
Perhaps the news has sunk in that as I have repeatedly said, this recession will be long and deep and Germany would not escape.
Expect Numerous GDP Downgrades, Missed Budget Targets
All GDP estimates from the Eurozone to-date have been pure bunk. Expect numerous downgrades after this disastrous report. If countries are to meet debt-to-GDP targets still more austerity measures will be forthcoming which will mean more layoffs, higher unemployment, and lower revenues.
In short, Spain, France, Italy will find it impossible to meet budget targets as the recession picks up steam.
Containment Theory Blows Sky High
For a look at just released PMI reports from Germany and France, please see Containment Theory Blows Sky High: German Manufacturing PMI Plunges to 45; French Manufacturing PMI Plunges to 44.4, Sharpest Contraction in 3 Years
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
05/25/2012
New Friend With a Different Perspective on Wealth
A new friend of mine seems to have a very different perspective than I do when it comes to money and wealth. As we have gotten to know each other, I've been surprised at the ways this comes to light and how it makes us react differently in situations.
I'll call my friend Bob. Bob and I have very similar jobs and (I assume) incomes. We live in the same neighborhood as well. You would think we would have similar tastes and views. But Bob traveled a very different road than I did to get where we both are now.
Bob grew up in a middle class family in the midwest. His parents were both union workers, and from what he has said they were provided for but there was never much extra to go around. He's worked since he was 13 years old, at least in the summers. He had many negative encounters with the "rich kids" and the "rich schools" which have shaped his perspective. He mentioned one situation where he qualified to play in a golf tournament at a local country club as a kid, but he and his father were turned away when he showed up without a collared shirt on. Other times he witnessed privileged kids head to the woods to smoke pot while he headed to work after school.
He struggled at first in college due to a mediocre public school education, but he out-worked his peers and ended up on the Deans list the last 6 semesters. Later he went on to get a scholarship to a top rate MBA program, though he still took out nearly 6 figures in debt to get that degree. Bob has worked hard all along the way to get everything he has, and he works several hours a day more than I do even though we have similar jobs and responsibilities. I wonder if he'll always feel he has something to prove.
Now Bob lives in Dallas surrounded by - in his view - ridiculously materialistic, entitled, overdressed, evangelical or faux-religious, small minded Southern conservatives who more often than not never had to work that hard and yet expect to be handed everything in life.
Part of his views on the wealthy are, I think, skewed by his overlapping experience with Southern culture. He was exposed to Southerners, wealthy folks, and entitled young MBA students all at once when he moved down here for school, and I pointed out that those three groups are sometimes separate and distinct. It's not just the rich folks down here who dress up for football games and church, are comfortable with what he describes as ongoing segregation, and join sororities and fraternities. Many Southerners are not actually bigots, despite traditions that sometimes exclude women (like the Masters). And as a Private Banker I can assure you that some of the most entitled preppy materialistic people out there actually don't have any wealth at all.
Most of you know my background which, while not overly indulgent, was certainly privileged. My family lived in rural Alabama without cable TV, luxury cars or designer clothes - but my grandparents provided for my private education all the way through college, and I was exposed to foreign travel and the arts as a child. I always knew how to act and was comfortable in the theater, in a country club, just as I was comfortable running around the woods barefoot, hanging out in the Wal-Mart parking lot on Friday nights and eating lunches at the Dairy Queen. In a small town the rich folks and poor folks all talk the same, go the same churches, cheer at the same high school football games. Plus I was "rich" but didn't really know it - my parents were very down to earth and didn't value materialism, as they grew up poor themselves. So I kind of can see "Privilege" from both sides.
Last night Bob and I talked for almost 3 hours about all these issues. I was fascinated, appalled, defensive, and surprised by many of his opinions. He said he "simply doesn't relate" to "those people" - meaning those who wear expensive clothes and grew up with money and go to country clubs and had their educations handed to them. That's fine and understandable except that his tone and emphasis seem to go further - he seems actually bitter and even hateful toward those people, not merely indifferent (at times in conversation - not publicly of course). He seems to take pride in rejecting materialism, in working hours longer than he needs to, in bashing those who simply were born with a bit more than he had.
I challenged him to figure out why he has such an aversion to those with money, things that cost money, and places that require money. He loves golf, for instance, and plays regularly - yet he claims to hate country clubs and everything they represent. He hates those who care about expensive clothes and dress up for innocuous events, though he seems to appreciate my look just fine (not to mention that he regularly looks pretty sharp himself, as I'm sure do most of his MBA buddies and fellow bankers). He resents those who never had to work as hard as he did, but he readily admits that many of his colleagues and classmates who fit that bill are smart and normal and down to earth and deserving.
To sum up the paradox, he seems to truly dislike all the trappings of privilege and those who represent privilege as a group, but he seems to be simultaneously drawn to it and openly respects and pursues individuals who may embody all those same traits. (I mean, he continues to value friendship with me, after all, and I possess pretty much everything he professes to reject!).
Anyway we argued and discussed and pondered and eventually came to the conclusion that one's childhood experiences and a few memorable encounters can really shape strong stereotypes. He wrestles just like I did - and still do - with the fact that where he came from is a very different place, that he has propelled himself into a world of privilege and disposable income and free time to enjoy it all. Perhaps accepting too much of what his parents and childhood friends don't have access to would make him feel like he doesn't value his roots. I certainly relate to that guilt, that occasional feeling that I might be taking it all for granted.
He admits that his aversion to wealth isn't entirely rational, just as I admit that it certainly is appropriate in some ways. I mean there ARE a lot of unbearable entitled yuppies in this town. And wealth - specifically materialism - can change your values if you let it. What's important to both of us is that people can step back and analyze their prejudices and realize that generalizing isn't always advantageous. And as long as we can both do that and keep the dialogue open, I think we'll continue to get along just fine.
I'll call my friend Bob. Bob and I have very similar jobs and (I assume) incomes. We live in the same neighborhood as well. You would think we would have similar tastes and views. But Bob traveled a very different road than I did to get where we both are now.
Bob grew up in a middle class family in the midwest. His parents were both union workers, and from what he has said they were provided for but there was never much extra to go around. He's worked since he was 13 years old, at least in the summers. He had many negative encounters with the "rich kids" and the "rich schools" which have shaped his perspective. He mentioned one situation where he qualified to play in a golf tournament at a local country club as a kid, but he and his father were turned away when he showed up without a collared shirt on. Other times he witnessed privileged kids head to the woods to smoke pot while he headed to work after school.
He struggled at first in college due to a mediocre public school education, but he out-worked his peers and ended up on the Deans list the last 6 semesters. Later he went on to get a scholarship to a top rate MBA program, though he still took out nearly 6 figures in debt to get that degree. Bob has worked hard all along the way to get everything he has, and he works several hours a day more than I do even though we have similar jobs and responsibilities. I wonder if he'll always feel he has something to prove.
Now Bob lives in Dallas surrounded by - in his view - ridiculously materialistic, entitled, overdressed, evangelical or faux-religious, small minded Southern conservatives who more often than not never had to work that hard and yet expect to be handed everything in life.
Part of his views on the wealthy are, I think, skewed by his overlapping experience with Southern culture. He was exposed to Southerners, wealthy folks, and entitled young MBA students all at once when he moved down here for school, and I pointed out that those three groups are sometimes separate and distinct. It's not just the rich folks down here who dress up for football games and church, are comfortable with what he describes as ongoing segregation, and join sororities and fraternities. Many Southerners are not actually bigots, despite traditions that sometimes exclude women (like the Masters). And as a Private Banker I can assure you that some of the most entitled preppy materialistic people out there actually don't have any wealth at all.
Most of you know my background which, while not overly indulgent, was certainly privileged. My family lived in rural Alabama without cable TV, luxury cars or designer clothes - but my grandparents provided for my private education all the way through college, and I was exposed to foreign travel and the arts as a child. I always knew how to act and was comfortable in the theater, in a country club, just as I was comfortable running around the woods barefoot, hanging out in the Wal-Mart parking lot on Friday nights and eating lunches at the Dairy Queen. In a small town the rich folks and poor folks all talk the same, go the same churches, cheer at the same high school football games. Plus I was "rich" but didn't really know it - my parents were very down to earth and didn't value materialism, as they grew up poor themselves. So I kind of can see "Privilege" from both sides.
Last night Bob and I talked for almost 3 hours about all these issues. I was fascinated, appalled, defensive, and surprised by many of his opinions. He said he "simply doesn't relate" to "those people" - meaning those who wear expensive clothes and grew up with money and go to country clubs and had their educations handed to them. That's fine and understandable except that his tone and emphasis seem to go further - he seems actually bitter and even hateful toward those people, not merely indifferent (at times in conversation - not publicly of course). He seems to take pride in rejecting materialism, in working hours longer than he needs to, in bashing those who simply were born with a bit more than he had.
I challenged him to figure out why he has such an aversion to those with money, things that cost money, and places that require money. He loves golf, for instance, and plays regularly - yet he claims to hate country clubs and everything they represent. He hates those who care about expensive clothes and dress up for innocuous events, though he seems to appreciate my look just fine (not to mention that he regularly looks pretty sharp himself, as I'm sure do most of his MBA buddies and fellow bankers). He resents those who never had to work as hard as he did, but he readily admits that many of his colleagues and classmates who fit that bill are smart and normal and down to earth and deserving.
To sum up the paradox, he seems to truly dislike all the trappings of privilege and those who represent privilege as a group, but he seems to be simultaneously drawn to it and openly respects and pursues individuals who may embody all those same traits. (I mean, he continues to value friendship with me, after all, and I possess pretty much everything he professes to reject!).
Anyway we argued and discussed and pondered and eventually came to the conclusion that one's childhood experiences and a few memorable encounters can really shape strong stereotypes. He wrestles just like I did - and still do - with the fact that where he came from is a very different place, that he has propelled himself into a world of privilege and disposable income and free time to enjoy it all. Perhaps accepting too much of what his parents and childhood friends don't have access to would make him feel like he doesn't value his roots. I certainly relate to that guilt, that occasional feeling that I might be taking it all for granted.
He admits that his aversion to wealth isn't entirely rational, just as I admit that it certainly is appropriate in some ways. I mean there ARE a lot of unbearable entitled yuppies in this town. And wealth - specifically materialism - can change your values if you let it. What's important to both of us is that people can step back and analyze their prejudices and realize that generalizing isn't always advantageous. And as long as we can both do that and keep the dialogue open, I think we'll continue to get along just fine.
05/24/2012
Greek Voters Need to Look Beyond the Lies of Bloomberg, Merkel, ECB, IMF, Ekathimerini; Greece Nightmare Coming or Already at Hand?
A half-baked editorial on Bloomberg, full of one-sided distortion, warns Greek Voters Need to Look Beyond Syriza?s Dangerous Lies.
It's certainly true that it is highly unlikely for Greece to stay in the eurozone if it defaults on debt.
I am not a fan of lies (and I have pointed out lies by Tsipras). However, I am not a fan of snakeoil, thievery, and one-sided analysis either.
Snake Oil and One-Sided Analysis
Check out the Bloomberg hypocrisy in this statement: "Other Greek politicians say they?ll seek to renegotiate the austerity package, and Europe may now listen."
Bloomberg knows full well those are blatant lies. Bloomberg could have and should have blasted the New Democrats and Pasok leaders for those lies (but chose not to).
Moreover, Bloomberg knows full well nearly all of Greece is dead set against more austerity measures. Bloomberg also knows full well if New Democracy and Pasok came flat out and said the deal will not be renegotiated they would be trounced to smithereens in the next election.
Bloomberg Hypocrisy
Bloombeg ignores the lies of Pasok and New Democracy while blasting a similar lie made by Syriza.
In essence Bloomberg wants to decide which set of lies is acceptable and which isn't.
In contrast, I have pointed out the lies made by all of them.
If Not Now When?
Merkel, the IMF, the ECB, and all the eurocrats in Brussels know another election is coming up. If terms of the bailout were to be renegotiated ever, logic would dictate now is the time.
Are we supposed to believe there will be a significant change of heart in Germany and Brussels after another Troika-clown is Prime Minister?
The rest of Europe is not doing anything to help Greece.
Lending Greece money in which most of the money goes straight back to the lenders to pay interest is not going to help Greece. Nor are hikes in the VAT and other taxes.
Certainly the Pact With the Devil Over Gold is not in Greece's best interest.
Simply put, Tsipras is correct in his desire to tell the Troika to go to hell. The rest of his message is clearly a lie, but at least Tsipras has the essential idea: The only way Greece can get out of its odious debt is to default.
Greece Nightmare Coming or Already at Hand?
The Greek website Ekathimerini is on a major fearmongering campaign as evidenced by Nightmare foretold if Greece heads for euro exit
Let's stop right there for a little dose of reality. The first paragraph alone shows Greece is already in a nightmare scenario.
Greece would have been better off defaulting three years ago, two years ago, and last year.
Yet here we are with Bloomberg and Ekathimerini (among numerous others) fearmongering about a Greek exit.
They should have been equally adept at raising issues why Greece should not be in the Eurozone in the first place.
Since that is water over the dam already, the pertinent question is what is best for Greece going forward. I propose that another 10 years of austerity and depression is not the answer. I also believe that is what Greece is doomed to if it manages to stay in the eurozone that long.
Fearmongering by Ekathimerini Resumes With Intensity
Let's return now to Ekathimerini for some massive fearmongering.
Greece needs to do what is best for Greece.
Short-term there will likely be intense breakup pain in Greece if it exits the eurozone. However, if Greece manages its cards correctly, Greece will recover far faster by telling the Troika to go to hell than by living the nightmare for 10 more years.
Icelandic Solution
Greece and Iceland are not the same. Iceland has exports and a work ethic. However, the facts show that Iceland recovered far faster because it had the courage to default, telling eurocrats where to go.
Simply put, Greece has nothing to lose and everything to gain by exiting the euro, the exact opposite of what Bloomberg and most of mainstream media would have you believe.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Tsipras and his Syriza party are selling the Greek people a falsehood: namely, that Greece can renounce the terms of its bailout agreements with the euro-area governments and still receive their money. If voters believe him, and he attracts enough votes in elections on June 17 to follow through with his threats, then his country, Europe and the global economy will live for years with the consequences.Snakeoil vs. Lies
Tsipras hardly has a mandate -- he won 16.8 percent of the vote on May 6, and may increase that to 20 percent or more in June. But polls suggest Syriza is now fighting for first place with the center-right New Democracy party. In Greece, that matters, because the top party gets an extra 50 seats in the 300-seat parliament.
Europe?s politicians, across the political spectrum, need to make clear the distinction between Syriza and other parties that disagree with Europe?s austerity strategy. They need to say, repeatedly, that they want to help Greece, but they cannot, and it cannot remain in the euro, if its leaders simply abandon the commitments the country signed.
Greeks need to know that when they vote on June 17. And they need to know that what Syriza and its young leader are telling them is a lie.
It's certainly true that it is highly unlikely for Greece to stay in the eurozone if it defaults on debt.
I am not a fan of lies (and I have pointed out lies by Tsipras). However, I am not a fan of snakeoil, thievery, and one-sided analysis either.
Snake Oil and One-Sided Analysis
Check out the Bloomberg hypocrisy in this statement: "Other Greek politicians say they?ll seek to renegotiate the austerity package, and Europe may now listen."
Bloomberg knows full well those are blatant lies. Bloomberg could have and should have blasted the New Democrats and Pasok leaders for those lies (but chose not to).
Moreover, Bloomberg knows full well nearly all of Greece is dead set against more austerity measures. Bloomberg also knows full well if New Democracy and Pasok came flat out and said the deal will not be renegotiated they would be trounced to smithereens in the next election.
Bloomberg Hypocrisy
Bloombeg ignores the lies of Pasok and New Democracy while blasting a similar lie made by Syriza.
In essence Bloomberg wants to decide which set of lies is acceptable and which isn't.
In contrast, I have pointed out the lies made by all of them.
If Not Now When?
Merkel, the IMF, the ECB, and all the eurocrats in Brussels know another election is coming up. If terms of the bailout were to be renegotiated ever, logic would dictate now is the time.
Are we supposed to believe there will be a significant change of heart in Germany and Brussels after another Troika-clown is Prime Minister?
The rest of Europe is not doing anything to help Greece.
Lending Greece money in which most of the money goes straight back to the lenders to pay interest is not going to help Greece. Nor are hikes in the VAT and other taxes.
Certainly the Pact With the Devil Over Gold is not in Greece's best interest.
Simply put, Tsipras is correct in his desire to tell the Troika to go to hell. The rest of his message is clearly a lie, but at least Tsipras has the essential idea: The only way Greece can get out of its odious debt is to default.
Greece Nightmare Coming or Already at Hand?
The Greek website Ekathimerini is on a major fearmongering campaign as evidenced by Nightmare foretold if Greece heads for euro exit
In Athens, the homeless are on the streets in growing numbers, soup kitchens feed twice as many people as a year ago, and the poor are diving into garbage bins in search of scrap they can sell.Dose of Reality
Greece is close to breaking point as it struggles with austerity targets set by creditors, but this is just a foretaste of the nightmare of unrest, hunger and even anarchy that could engulf the debt-crippled nation if it is forced out of the euro.
If the exact economic impact of such a move is hard to nail down - newly issued drachmas devalued by up to 70 percent, runaway inflation, a banking meltdown, a collapse in trade - the implications for ordinary Greeks crushed by the debt crisis are even harder to predict.
Without international bailout cash, salaries and pensions would go unpaid and violence, political extremism and uncontrolled emigration could quickly follow.
Let's stop right there for a little dose of reality. The first paragraph alone shows Greece is already in a nightmare scenario.
Greece would have been better off defaulting three years ago, two years ago, and last year.
Yet here we are with Bloomberg and Ekathimerini (among numerous others) fearmongering about a Greek exit.
They should have been equally adept at raising issues why Greece should not be in the Eurozone in the first place.
Since that is water over the dam already, the pertinent question is what is best for Greece going forward. I propose that another 10 years of austerity and depression is not the answer. I also believe that is what Greece is doomed to if it manages to stay in the eurozone that long.
Fearmongering by Ekathimerini Resumes With Intensity
Let's return now to Ekathimerini for some massive fearmongering.
Provopoulos warned as long ago as December that a return to the drachma would be «real hell», with Greeks forced to resort to barter during the transition period between the two currencies, «trading a kilo of olive oil for three kilos of flour».What's Best for Greece
"NIGHTMARE SCENARIO"
"There will be shortages in basic staples. Without fuel, the army and the police would not be able to move their vehicles.
A former finance minister, Yiannos Papantoniou, saw trouble ahead nearly a year ago: «Greece would not be able to support 11 million people so there will be huge emigration flows,» he told Reuters Insider television last July.
«Disruptions, social disruptions will come. I would say a regime of total anarchy."
Greece needs to do what is best for Greece.
Short-term there will likely be intense breakup pain in Greece if it exits the eurozone. However, if Greece manages its cards correctly, Greece will recover far faster by telling the Troika to go to hell than by living the nightmare for 10 more years.
Icelandic Solution
Greece and Iceland are not the same. Iceland has exports and a work ethic. However, the facts show that Iceland recovered far faster because it had the courage to default, telling eurocrats where to go.
Simply put, Greece has nothing to lose and everything to gain by exiting the euro, the exact opposite of what Bloomberg and most of mainstream media would have you believe.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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