1. Base Money vs. Excess Reserves & Credit Growth in a glance.
Still seeing banks preferring to have their money deposited with the
FED other than lending it out or worse, having no people to lend to.
Chart 1. Base Money vs. Excess Reserve and Chart 2. Credit growth.
2. A share time
As previously said, most of the A Share mutual funds are now running
at or close to their maximum stock holding limit of 85%. So for the
market to continue to rally, it requires bullets from either corporate
or retail investors.
A better way of playing (Or manipulating) this, is to keep the overall
market looking good and hot, by popping up big index weighting names
like Oil, Steels, Banks and Properties, while taking profit on those
100%+ thematic names. That is exactly what was happening for the past
2 weeks. Since 5th May, while Shang Hai Composite index was still
rallying, more than 60% of the stock names have dropped more than 2%.
Same thing happened when the market topped at the end of 2007, while
index and big names were still marching higher, 80% of stocks have
already seen their high 2-3 weeks before the index peak.
Few numbers below, fyi.
SHComp SZComp Mid-Small Cap
7/11/08-30/4/09 44.24% 79.04% 105.47%
SH50 SZ100 Mid-Small Cap
04/05/09-Now 6.64% 7.22% 3.91%
(SH50 and SZ100 are used cos they are more big index names
concentrated compared with SHComp and SZComp)
3. Credit Card Delinquency bits
Below is the figure of credit card delinquency rate in April
March April
Amex 8.8% 10.1%
Citi 9.66% 10.21%
BoA 8.8% 10.1%
Wells Fargo 9.68% 10.03%
Jpm 7.13% 8.07%
Given April is the month in which household receive check of their tax
return, a decrease in delinquency rate was normally observed compared
to this year’s big jump. Total lost of credit card business, is
estimated to be around 70-75 Bln USD in 2009 according to Jpm, using a
10%+ rate.
4. A very good point made by Bridgewater on Unemployment.
"Normally, labor markets lag the economy because incremental spending
transactions are financed via debt, stimulated by interest rate cuts.
But as long as credit remains frozen, spending will require income,
and income comes from jobs. And debt service payments are made out of
income. Therefore, in a deleveraging environment job growth becomes an
important leading, causal indicator of demand and other economic
conditions.
"... The bounce in the economy and the stabilization in markets
reflect government actions that are big enough to impact near-term
growth rates, but are not sufficiently directed at the root problem of
excessive indebtedness to produce permanent healing. The deterioration
in employment markets will continue because companies' profit margins
are so deeply damaged that a little bounce in growth won't do much to
alter their need to cut costs. This deterioration in labor markets
will undermine demand and continue to pressure loan losses, which will
keep the pressure on the banks and elevate the cost of capital for
tentative borrowers, inhibiting credit expansion."
5. New Business Weekly
Cars from BYD and the electricity re-fill from Better Places.
http://www.betterplace.com/
The Wall Street Journal reports that Better Place Inc. has
demonstrated its battery exchange technology for the first time in
Yokohama, Japan. The company has posted a video demonstration of the
process in which a specially designed electric car has a depleted
battery exchanged for a recharged battery in under a minute. Here are
two interviews with Better Place founder Shai Agassi explaining the
technology and vision for his company:
http://money.cnn.com/video/
6. For those who can understand Chinese, quote of the week
就宏观经济而言，“最糟糕的时期”或许正在过去，
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