Author: freesbee

ZERO HEDGE reports

For those who wrongly believe that the biggest real estate bubble in the world is in Manhattan, the following may come as a surprise: according to Dylan Grice, in central Hong Kong, a 400 sq. foot property recently sold for HK$14MM, or about $1.8 million: an insane $4,500 per square foot. And that’s just the beginning. Yet, as we have started to speculate recently, is this precisely the goal of Ben Bernanke ” to create pockets of silly inflation within China so that the country is eventually forced to unpeg the CNY? If so, this is a huge gamble, as the bulk of the country still has far more slack than America ever can. And while China, and the bulk of its wealthy citizens, continue to pretend there is no bubble (created by the same free credit mechanism that results in the 2008 near-death of the US economy), has, as Dylan muses, China “already lost control? And if so, who’s to say what will happen if the asset inflation goes into reverse? Maybe when the authorities engineer the slowdown they desire and tell investors it’s safe to buy again, those investors? won’t want to buy. In which case a hard landing shouldn’t be beyond the realms of imagination.” Grice then proceeds to explain the obvious, namely that the fall out of the inevitable collapse of the Chinese bubble will be unprecedented, as not only the EM world, but the developed economies have all hitched their fates upon the successful continuation of the Chinese bubble ” the same bubble Bernanke has to unwind to get the much desired CNY reflation. Grice says “Go to Ireland and ask them how they feel about bubbles. They’ll tell you a bubble is a curse, not a blessing.” Of course, Ireland is about to be bailed out. Who, however, will be able to bail out China when the overheating economy gets it trillions in loan supports taken out? That one not even Chairman Ben will be able to rescue”¦
In his must read piece which once again explains why the Emerging Market bubble is the greatest threat to the entire world, a theme which little by little is getting ever more traction, Grice first looks at a post-bubble economy. That of Japan.
This is why the comparison with Hong Kong could not be more shocking (and more deja vu-ish). Here is how Grice views the former British colony:
Why are China’s residents ” traditionally so careful (growing up under a communist regime will do that to you) ” throwing all caution to the wind? Here is one possible reason.
Here Grice once again returns to his recent meme that it is in fact China’s fault for not letting its currency appreciate, and in doing so not only is it reaping the benefits of having a monetary policy that mimics that of the Fed, but an FX regime which allows it to extract far more benefits from the globalized system. The only Achiles Heel ” inflation. And that is what Grice believes will bring the whole theater down.
Which of course brings up the old staple of decoupling, which ironically is most relied upon as a driving force of growth, just before it is proven to be a lie (see 2007).
And yet, very little happens. And here is the kicker. Grice speculates that unlike the Fed which at least pretend to be ahead of a bubble (although we know now this is only a myth), could China’s regulators (PBoC et al) in fact realize that it has already lost control? If so, the repercussions are tremendous, as the entire world is now driving at 60 miles headed straight into a brick wall and nobody is even attempting to be behind the wheel.
The risk: a complete collapse of everything, and the biggest deflationary collapse in history, which is precisely why the Chairman’s last response at D-Day will be to print an infinite amount of money to save whatever Keynesian remains are left.
How much time is left?
One thing is certain: the end, as fatalistic as it appears, is coming, and judging by today’s token 50 bps RRR hike, may be closer than expected.
?

INVESTING CONTRARIAN

See the original post:
In Hong Kong $1.8 Million Gets You 400 Sq. Feet, And Other Observations On The Biggest Bubble Ever, From Dylan Grice

Tagged with: bankruptcy, china, ECB, Economy

ZERO HEDGE reports

In a just released report, New York State’s Comptroller Thomas DiNapoli presents his expectations for what is set to be another bumper year for Wall Street. Per the report: “The first quarter of 2010 was among the most profitable on record ($10.3 billion), but in the? second quarter profits eased (to $3.8 billion) and were more in line with pre-crisis levels. It appears that profits were relatively modest in the third quarter as well, but 2010 could still be the fourth most profitable year for the securities industry in New York City.” Yet here is the most relevant piece: “While it appears that the cash bonus pool will be smaller than
last year, the average bonus paid to employees in the securities
industry in New York City may be a bit larger, since the pool will be
divided among fewer workers given continued staff reductions”. Money well earned. So summarizing the report ” in a year when US underemployment persists at around 17%, when the US federal debt is at nosebleed levels, when well over 40 million Americans are on foodstamps, when personal bankruptcies are at the highest they have been in 5 years, when GDP is about to turn red again, when America still doesn’t have a formal budget, the average banker bonus may be one the biggest ever on record. Peasants ” 0; Kleptocrats ” 1.
Highlights from the report:
And some more details on the ever interesting topic of banker comp:
Personal income in New York State fell by 3.1 percent in 2009″the first annual decline in 70 years. The decline was due in large part to a steep drop in employment and cash bonuses in the securities industry.
Wages (i.e., base salary and bonuses realized during the calendar year) make up the largest portion of personal income. Wages paid to securities industry employees who work in New York City fell by 28.5 percent in 2009 ($20.5 billion), the largest decline in at least 30 years (see Figure 21). This drop represents 64.3 percent of the total decline in wages that occurred in New York City in that year. The large decline reflects employment losses and a steep drop in cash bonuses for work performed in 2008, most of which were paid? during the first few months of calendar year 2009.
The average wage in the securities industry in New York City posted a record decline in 2009, falling by 20.5 percent to $311,330. Average wages in the securities industry in other parts of New York State and in the rest of the nation ($202,000 and $141,980, respectively) were much lower than the average in New York City, because New York City is home to some of the most highly compensated positions in the industry, such as chief executives and investment bankers.
Securities industry wages rose by 18.5 percent in the first quarter of 2010, reflecting an increase in cash bonuses for work done in 2009, when the industry reported extraordinary record profits. Since about 30 percent of all industry wages are generally paid in the first quarter of the year, this strong gain will likely boost wages for all of 2010.
The disparity in pay between the securities industry and other private sector jobs has generally widened over the past three decades (see Figure 22). In 1981, the average wage in the securities industry was nearly twice as high as other private sector jobs, but by 2007 it was 6.2 times higher. Although the average wage in the securities industry in New York City contracted sharply in 2009, it was still 4.9 times higher than the average for all other private sector jobs in New York City ($63,650).

Wall Street Bonuses
The Office of the State Comptroller estimated that cash bonuses paid to securities industry employees located in New York City for work performed in 2009 grew by 17 percent to $20.3 billion (see Figure 23), following a 47 percent decline in 2008.2 Despite record profits, the growth in the 2009 cash bonus pool was restrained by federal intervention and the public’s outcry over the industry’s compensation practices.

Changes in compensation practices have slowed the growth in cash bonuses, with a greater share of bonuses deferred to the future. According to a global study conducted by Mercer earlier this year, many of the 61 financial firms surveyed have begun to replace cash bonuses with increased base salaries and deferred compensation.
Financial firms, like many other businesses, report compensation (i.e., base salaries, fringe benefits, and bonuses, including deferred remuneration) on an accrual basis of accounting. As such, cash bonuses paid in January and February of one year, for work performed during the prior calendar year, are reported in the prior year’s financial statements. Tracking the compensation trends of firms during the year provides insight into the size of the bonus pool, much of which will be paid out at the beginning of the following year. For example, most of the resources that were set aside by financial firms for cash bonuses during 2010 will be paid out in January and February of 2011.
The amount of revenue set aside by member firms of the New York Stock Exchange to fund compensation was down by only 4.4 percent in the first half of 2010, even though net revenues and profits were down sharply (by 26.8 percent and 61.1 percent, respectively). Compensation may have fallen further in the third quarter. In the aggregate, Goldman Sachs, JPMorgan Chase Investment Bank, and Morgan Stanley reported a 7.1 percent reduction in compensation through the third quarter of 2010.
The securities industry has reported declines in revenues, profits, and compensation as 2010 has progressed, and compensation was down compared to one year ago. While it appears that the cash bonus pool will be smaller than last year, the average bonus paid to employees in the securities industry in New York City may be a bit larger, since the pool will be divided among fewer workers given continued staff reductions. It is difficult to predict, however, the impact of regulatory reforms (both enacted and anticipated) on? compensation practices, which could result in the deferral of a larger share of bonuses. An analysis of personal income tax withholding patterns, beginning in late December 2010, will clarify the change in the cash bonus pool.
Full report.

INVESTING CONTRARIAN

Continue reading here:
New York Comptroller Anticipates Larger Average Wall Street Bonuses In 2010
Tagged with: bond, gold, PIIGS, sterling

ZERO HEDGE reports

As of today, one of the world’s top oil exporters announced that has exchanged about $15 billion of its FX reserves into gold. Earlier, Iran announced that the country has converted about 15% of its foreign exchange reserves into gold, and “will not need to import the metal for the next ten years.” There is your mystery buyer to all that gold the IMF was selling in Q3″¦ And since Ahmadinejad said that Iran’s total FX reserves exceed $100 billion, the amount of gold in stock held by Iran is more than $15 billion. Which is equivalent more than 345 tonnes at a closing price of about $1350. Which also means that the WGC’s official gold holdings are in dire need of an update, as Iran does not appear anywhere on the IMF’s listing of official gold holders, and with over 345 tonnes, it would make Iran a top 15 holder of the yellow metal.
From Bloomberg:
?

INVESTING CONTRARIAN
Link:
Iran Announces It Has Converted 15% Of Its $100 Billion+ In FX Reserves Into Gold
Tagged with: crash, currency, reminibi, silver, sterling

Huffington Post
Ratcheting up the debate over the influence of outside groups in congressional elections, the Democratic National Committee has made a major ad purchase pushing the case that the November elections could very well be “stolen” by foreign influences.
The committee is airing a spot on national cable this coming week that turns an already harsh spotlight on the roles being played by former Bush strategists Karl Rove and Ed Gillespie in addition to the Chamber of Commerce. Pivoting off reports that the business lobby has used foreign donations for its campaign activities, the spot ends with fairly conspicuous if not ominous shot of Chinese currency being stacked up ” ostensibly for use against Democratic candidates.
“Karl Rove, Ed Gillespie: They’re Bush cronies. The US Chamber of Commerce: They’re shills for big business,” the ad goes. “And they’re stealing our democracy. Spending Millions from secret donors to elect Republicans to do their bidding in Congress. It appears they’re even taking secret foreign money to influence our elections. It’s incredible, Republicans benefiting from secret foreign money. Tell the Bush Crowd and the Chamber of Commerce ” stop stealing our democracy.”
The spot, timed to preempt Rove and Gillespie’s appearances on the Sunday talk show circuit, echoes what has quickly and clearly become the closing argument Democrats (from the White House on down) are making as the election nears. But it comes at a time of conflicting reports over the veracity of the charges. On Saturday the New York Times published a story questioning a basis of the report uncovering the Chamber’s foreign pools of cash. Specifically, the story quoted White House counsel Bob Bauer acknowledging that there was no specific evidence that the Chamber had crossed legal lines by using foreign money for its electioneering.
“The DNC ad is rubbish,” said Tom Collamore, senior vice president of Communications and Strategy for the U.S. Chamber. “The U.S. Chamber will continue to discuss ways to create jobs and grow the economy no matter how often others may try to change the conversation. We’ve been working for growth, jobs, and opportunity for 100 years and we won’t be deterred now.”
The Center for American Progress, which runs the Think Progress site that published the original report, has responded to critics by noting that the fundamental question at the heart of the debate had still not been answered: “How many foreign sources of funding does the Chamber have?” A spokesman for the DNC, likewise, pointed to a lack of transparency and disclosure on the part of the Chamber as the basis for the ad.
“They all can, of course, clear all this up by releasing their donors,” said DNC Communications Director Brad Woodhouse. “We just think that it is vital that the American people know that this election is on the verge of being stolen by secret donors, anonymous special interests, and possibly foreign corporations. And these folks aren’t lurking in the shadows refusing to reveal themselves and their intentions and interests because they have the greater good in mind. It’s because they want to get their fingers back in the till and exert the influence they had when Republicans were last in charge.”
INVESTING CONTRARIAN
Link:
DNC Makes Major Ad Buy Accusing Chamber Of Potentially “˜Stealing’ Election
Tagged with: precious metals, treasury

ZERO HEDGE reports

Submitted by Jim Quinn of The Burning Platform
Consumer Deleveraging = Commercial Real Estate Collapse
There is a?Part 2 to the story of??Consumer Deleveraging?that
will play out over the next decade. Consumers will deleverage because
they must. They have no choice. Boomers have come to the
shocking?realization that you can’t get wealthy or retire by borrowing
and spending. As consumers buy $500 billion less stuff per year,
retailers across the land will suffer. To give some perspective on our
consumer society, here are a few facts:
Despite the ongoing recession and the fact that consumers must reduce
their spending over the next decade, irrationally exuberant retail CEOs
continue their death march of store openings. Below are announced
expansion plans for some major retailers:
Retailers expanding into an oversaturated retail market in the midst
of a Depression, when anyone without rose colored glasses can see that
Americans must dramatically cut back, are committing a fatal mistake.
The hubris of these CEOs will lead to the destruction of their companies
and the loss of millions of jobs. They will receive their fat bonuses
and stock options right up until the day they are shown the door.

All of the happy talk from the Wall Street Journal, CNBC and the
other mainstream media about commercial real estate bottoming out is a
load of bull. It seems these highly paid “financial journalists” are
incapable of doing anything but parroting each other and looking in the
rearview mirror. Sound analysis requires you to look at the facts, make
reasonable assumptions about the future and report the likely outcome.
Based on this criteria, there is absolutely no chance that commercial
real estate has bottomed. There are years of pain, writeoffs and
bankruptcies?to go.

Let’s look at some facts about the commercial real estate market and then assess the future:
Do these facts lead you to believe that the commercial real estate
sector has bottomed, as stated in the Wall Street Journal? The Federal
Reserve realized the danger of a commercial real estate collapse to the
banking system over a year ago. They have encouraged banks to extend and
pretend. The website www.MyBudget360.com describes in detail what has occurred:
What has happened is the Fed has
allowed this shadow monetization of the debt and banks let borrowers
roll over CRE debt without even making payments in many cases!? Think of
an empty shopping mall.? There is no buyer for this in the current
market.? So why would a bank want to foreclose on the borrower??
Instead, they pretend the asset is worth $10 million while the borrower
makes no payment and the Fed keeps funneling money into the banking
system.? In the end, the value of the dollar gets crushed and you end up
bailing out the banking system. Commercial real estate has collapsed
even harder than residential real estate.? This market is enormous in
terms of actual debt.? There is no official bailout on the books but it
is occurring through a slow and deliberate process.? Banks know that
they are essentially insolvent and they are dumping this junk onto the
taxpayer.
?This grim story began between 2004 and 2007. The horrifying ending
will be written between 2011 and 2014. Commercial real estate loans for
office buildings, malls, apartment buildings and hotels usually have 5
to 7 year terms. If you thought the debt induced bubble in real estate
only affected residential real estate, you are badly mistaken. Before
the boom, a normal year would?see $100 billion in commercial real estate
transactions. Between 2004 and 2007 there were $1.4 trillion of deals
done, with 2007 reaching a peak of $522 billion of commercial real
estate deals. Shockingly, the Wall Street banks, run by MBA geniuses,
loaned developers a half trillion dollars at the very peak in the
market. Sounds familiar. Thank God the taxpayer has bailed these
Einsteins out so they could live to make more bad loans and collect big
fat bonuses.

Commercial real estate prices rose 90% between 2001 and 2007, driven
by the loose monetary policies of the Fed and complete lack of risk
management on the part of the banks making the loans. Knuckle dragging
mouth breather developers built malls, apartments, offices and hotels
with abandon as billions of dollars rained down on them from Wall
Street. The consumer delusion of debt financed wealth led to the
developer delusion that 100% occupancy and increasing rents for all
eternity were guaranteed.

Commercial real estate prices have dropped 42% in just over a year.
This means that the $6 trillion value of all the commercial real estate
in the country has dropped to $3.5 trillion. The debt remained in place.
The billions in debt issued in 2003 ” 2005 is coming due between 2010
and 2012. The underlying assets are worth billions less than the debt
that must be refinanced. Commercial loan payments by owners can only be
made from cash flow generated by rental income. A key requirement in
generating rental income?is tenants.
?
Let’s examine the current state of vacancy rates for offices,
shopping malls and rental properties. The current office vacancy rate of
17.5% is the highest since 1993 and is just below the all-time high
18.7% in 1992. The WSJ has concluded, with no data or analysis, that the
vacancy rate has bottomed. As the employment data proves, companies are
not hiring employees. New companies are not being formed. Government
mandates and regulations regarding healthcare and uncertainty about
taxes will keep the formation of new small companies at a minimum.
Conglomerates continue to ship jobs overseas. Part 2 of this Depression
will drive more companies out of business. Office vacancies will remain
at record levels for the next five years.?

Mall vacancies between 9% and 11% are at record levels. There is
absolutely no chance that these vacancy rates decline over the next few
years. With consumers deleveraging, wages stagnant, unemployment high,
and retail oversaturation, there are thousands of retail stores destined
to close up shop. Ghost malls are in our future. They will come in
handy as homeless shelters and soup kitchens. Mall developers will be
defaulting in record numbers.

Apartment vacancy rates peaked at 11% in 2009, the highest level in
history. With millions of vacant homes and millions of available rental
units, rental rates will stay low for years. The cashflow of apartment
developers will under stress and will lead to more loan defaults.

Based upon the current rising delinquency rates of 15.7% for
commercial real estate loans and 9.05% for CMBS, there is no bottom in
sight. Only raging mindless optimists like Larry Kudlow could?ignore the
facts and conclude that all is well in commercial real estate world.
Banks pretending that the loans on their books?aren’t worth 40% to 50%
less, while?also pretending that borrowers with negative cash flow can
make loan payments, is not a solution. It is a Federal Reserve
encouraged fraud.?Allowing?loans to be rolled over with no hope of ever
being repaid will only prolong the pain and delay the inevitable.?

The facts are that hundreds of billions in commercial loans are
coming due, with a peak not being reached until 2013. If banks were to
properly account for the true value of these loans, hundreds of regional
banks would be forced to fail. This is unacceptable to government
authorities. They will insist that the fantasy continue. Banks and real
estate developers will pretend to be solvent, hoping the economy will
miraculously repair itself and eventually make them whole. I understand
these bank CEOs and delusional developers also believe in Santa Claus,
the Easter Bunny, and the Efficient Market theory. It seems our entire
financial system is based upon debt, fantasy, fraud, and delusion.

INVESTING CONTRARIAN

Read the original post:
Guest Post: Consumer Deleveraging = Commercial Real Estate Collapse

Tagged with: YUAN

ZERO HEDGE reports

Submitted by Jim Quinn of The Burning Platform
Peak Denial About Peak Oil
It is par for the course that with oil hovering between $70 and $80
per barrel Americans have continued to buy SUVs and Trucks at a rapid
pace. Politicians don’t have constituents screaming at them because gas
is $4.00 per gallon, so it is no longer an issue for them. They need to
focus on the November elections. It is no time to discuss a difficult
issue that requires foresight and honesty. It is no time to tell the
American public that oil will be over $200 a barrel within the next 5
years. Anyone who would go on CNBC today and declare that oil will be
over $200 a barrel would be?eviscerated by bubble head Bartiromo or
clueless Kudlow. Bartiromo filled up her Escalade this morning for $2.60
a gallon, so there is no looming crisis on the horizon. The myopic view
of the world by politicians, the mainstream media and the American
public in general is breathtaking to behold. Despite the facts slapping
them across the face, Americans believe cheap oil is here to stay. It is
their right to have an endless supply of cheap oil. The American way of
life has been granted by God. We are the chosen people.

A funny thing happened on our way to permanent prosperity and
unlimited cheap oil. The right to prosperity was yanked out from
underneath us by the current Greater Depression. The worldwide economic
downturn has masked the onset of peak cheap oil. Therefore, when it hits
America with its full fury, it will be a complete surprise to the
ignorant masses and the ignorant politicians who run this country. A
Gallup Poll in August asked Americans about our most important problems.
Where is the concern about future energy supplies? It isn’t on the
radar screens of Americans. They are probably more worried about whether
The Situation will hook up with Snookie on the Jersey Shore reality
show.

It is not surprising that the American public, American politicians,
and the American media don’t see the impending crisis. The organizations
that have an interest in looking farther than next week into the future
have all concluded that the downside of peak oil will cause chaos
throughout the world. The US Military, the German Military, and the UK
Department of Energy have all done detailed studies of the situation and
come to the same conclusions. Social chaos, economic confusion, trade
barriers, conflict, food shortages, riots, and war are in our future.

http://www.acus.org/docs/051007-Hirsch_World_Oil_Production.pdf
The U.S. was warned in 2005. Its own Department of Energy
commissioned a report by Robert Hirsch to examine peak oil and its
potential consequences to the US. The introduction stated:
“The peaking of world oil production
presents the U.S. and the world with an unprecedented risk management
problem. As peaking is approached, liquid fuel prices and price
volatility will increase dramatically, and, without timely mitigation,
the economic, social, and political costs will be unprecedented. Viable
mitigation options exist on both the supply and demand sides, but to
have substantial impact, they must be initiated more than a decade in
advance of peaking.”
The main conclusions reached by the experts who worked on this report were:
The Hirsch Report clearly laid out the problem. It urged immediate
action on multiple fronts. It is now 5 years later and absolutely
nothing has been done. In the meantime, it has become abundantly clear
that worldwide oil production peaked between 2005 and 2010. The Hirsch
Report concluded we needed to begin preparing 20 years before peak oil
in order to avoid chaos. We are now faced with the worst case scenario.

http://www.fas.org/man/eprint/joe2010.pdf
The US Military issued a Joint Operating Environment report earlier
this year. They have no political motivation to sugarcoat or present a
dire picture. This passage is particularly disturbing:

A severe energy crunch is inevitable
without a massive expansion of production and refining capacity. While
it is difficult to predict precisely what economic, political, and
strategic effects such a shortfall might produce, it surely would reduce
the prospects for growth in both the developing and developed worlds.
Such an economic slowdown would exacerbate other unresolved tensions,
push fragile and failing states further down the path toward collapse,
and perhaps have serious economic impact on both China and India. At
best, it would lead to periods of harsh economic adjustment. To what
extent conservation measures, investments in alternative energy
production, and efforts to expand petroleum production from tar sands
and shale would mitigate such a period of adjustment is difficult to
predict. One should not forget that the Great Depression spawned a
number of totalitarian regimes that sought economic prosperity for their
nations by ruthless conquest.
Here is the summary of their analysis:

To generate the energy required worldwide by the 2030s would require us to find an additional 1.4 MBD every year until then.
During
the next twenty-five years, coal, oil, and natural gas will remain
indispensable to meet energy requirements. The discovery rate for new
petroleum and gas fields over the past two decades (with the possible
exception of Brazil) provides little reason for optimism that future
efforts will find major new fields.
At
present, investment in oil production is only beginning to pick up,
with the result that production could reach a prolonged plateau. By
2030, the world will require production of 118 MBD, but energy producers
may only be producing 100 MBD unless there are major changes in current
investment and drilling capacity.
By
2012, surplus oil production capacity could entirely disappear, and as
early as 2015, the shortfall in output could reach nearly 10 MBD.
Energy
production and distribution infrastructure must see significant new
investment if energy demand is to be satisfied at a cost compatible with
economic growth and prosperity. Efficient hybrid, electric, and
flex-fuel vehicles will likely dominate light-duty vehicle sales by 2035
and much of the growth in gasoline demand may be met through increases
in biofuels production. Renewed interest in nuclear power and green
energy sources such as solar power, wind, or geothermal may blunt rising
prices for fossil fuels should business interest become actual
investment. However, capital costs in some power-generation and
distribution sectors are also rising, reflecting global demand for
alternative energy sources and hindering their ability to compete
effectively with relatively cheap fossil fuels. Fossil fuels will very
likely remain the predominant energy source going forward.

Just this week, the German magazine Der Spiegel obtained a
confidential?study about peak oil that was done by the German military.
According to the German report, there is “some probability that peak oil
will occur around the year 2010 and that the impact on security is
expected to be felt 15 to 30 years later.” The major conclusions of the
study as detailed in Der Spiegel are as follows:
Even the International Energy Agency, which has always painted a rosy
picture of the future, has even been warning about future shortages due
to lack of investment and planning.
http://www.worldenergyoutlook.org/docs/weo2009/WEO2009_es_english.pdf
Americans think that the discovery of oil on our soil in 1859 has
entitled us to an endless supply. It is not so. We account for 4.3% of
the world’s population but consume 26% of the world’s oil. As China,
India and the rest of the developing world become economic powerhouses,
they will consume more and more of the dwindling supply of easily
accessible oil. As the consumption curve continues upwards, the
production curve will be flat. The result will be huge spikes in prices.
It will not be a straight line, but prices will become progressively
higher. As the studies referenced above have concluded, the result will
be economic pain, social chaos, supply wars, food shortages, and a
drastic reduction in lifestyles of Americans. They won’t see it coming,
just like they didn’t see the housing collapse coming or the financial
system collapse coming. They’ll just keep filling up those Escalades
until the pump runs dry.
?

INVESTING CONTRARIAN

More:
Guest Post: Peak Denial About Peak Oil
Tagged with: eur/dollar, eurozone, FED, treasury

Huffington Post
Google revolutionized the way people access information. Now it wants to transform how people get entertainment.
The search giant is touting an ambitious new technology, called Google TV, that would marry the Internet with traditional television, enabling viewers to watch TV shows and movies unshackled from the broadcast networks or cable channels on which they air. Users would need to buy a TV or set-top box with Google software that could connect to the Internet, along with a keyboard to type commands. Users could also use their iPhone or Android phone to operate Google TV.
INVESTING CONTRARIAN
View post:
Google TV Plan Is Causing Jitters In Hollywood
Tagged with: PIIGS

Huffington Post
Buried amidst the increasingly gloomy economic news of the last few weeks ” which includes stubbornly high unemployment, rising foreclosures and a grim outlook from the Fed, among other factors ” is a growing sense of doom among some prominent economists.
More than a few top economic thinkers have significantly upped the chances of a return to a recession. Today, the noted bear Nouriel Roubini, the cofounder and chairman of Roubini Global Economics and a professor at New York University’s Stern School of Business, delivered a grim prognostication via Twitter: “Risk of a double dip recession in advanced economies (US, Japan, Eurozone) has now risen to 40%.”
Roubini is not alone in his concern. Last week, David Rosenberg, the Gluskin Sheff economist (formerly of Merrill Lynch), whose words have become must-read barometers of bear-ishness, said that the chances of a double-dip recession in the U.S. are now “higher than 50-50.”
Yale’s Robert Shiller, one of the nation’s preeminent housing experts and the co-creator of the widely watched Case-Shiller Index, also said last week that there’s greater than a 50 percent chance of falling into another downturn. The culprit, according to both Rosenberg and Shiller, is, quite simply, jobs. Here’s Marketwatch:
Earlier this month, a paper written by a visiting scholar at the San Francisco Fed put the odds of a second recession in the next next 10 months at “no greater than a coin toss.”
Mohamed El-Erian, the CEO of PIMCO, the world’s largest bond investor, who the creator of the now ubiquitous phrase “new normal,” said earlier this month that the U.S. faces a 25 percent chance of a double dip and deflation.
The dire forecasts are coming even from some of Wall Street’s most profitable banks. Last week, Goldman Sachs warned in an email to clients that the chances of another downturn are “25 to 30 percent.”
INVESTING CONTRARIAN
Visit link:
Economists See Increased Chance Of Double-Dip Recession

Tagged with: bond

Huffington Post
How would you manage 250 operating companies spread over three industries that do business in more than 60 countries?
That’s a question Johnson & Johnson CEO William Weldon has thought about every day since taking the top job at the 120-year old company in 2002.
Rather than impose a tight-fisted command-and-control leadership model, Weldon operates with a hybrid philosophy, first implemented in the 1980s. Following in the footsteps of his predecessors, Weldon hires and promotes top talent, and then provides his division heads a great deal of autonomy to make decisions on go-to-market strategies, product development and other key issues. While he leads from the company’s headquarters in New Brunswick, N.J., he encourages business leaders to drive decision-making deep into their organizations, and to operate with the spirit of entrepreneurs.
Between 2002 and 2009, the strategy worked like a wonder drug. During this period, sales at the consumer products, pharmaceutical and medical device giant nearly doubled to $62 billion while annual profits jumped by more than $6 billion.
This year, however, the company’s management model has been called into question. The reason is due to the poor handling a product recall by J&J’s McNeil Consumer Healthcare. The division responsible for products like Children’s Tylenol and Motrin tried to limit the scope of a product recall, even dubbing it a “product retrieval”. The actions angered the FDA and members of Congress, who immediately called for hearings.
Since then, critics have called for the ousting of McNeil’s management team. Others have wondered J&J should change its management philosophy.
So far, J&J is sticking by its management model”and for good reason. The reality is that problems at McNeil notwithstanding, it works. So much so that business leaders and management theorists are studying it. In particular, thought leaders are analyzing how Weldon blends decentralized decision making with authoritative leadership. Rather than choose one model over the other, he blends the best from each to achieve higher returns.
The decentralized structure, for example, allows those employees closest to customers to pursue opportunities without interference from their superiors. At the same time, the company’s formal hierarchy enables J&J’s executive team to set broad corporate objectives that serve the company as a whole. Case in point: improved collaboration.
Due to the decentralized nature of the company, whose operating units are based all around the world, J&J has not historically transferred institutional knowledge throughout its ranks. But in recent years, Weldon has pushed the company to make better use of its collective product expertise and customer knowledge. This collaborations led to the development of several product breakthroughs, including the health care industry’s first drug-enhanced stent.
“While our people operate in a small-company setting, they also have access to the know-how and resources of a Fortune 50 company,” says Weldon. “It’s like having dozens of strategic partners at their fingertips.”
The approach will surely come in handy as J&J addresses the problems with McNeil and pursues its top priorities”increasing innovation, maximizing the product pipeline, expanding its global footprint and leveraging talent.
Limited to authoritative leadership model or democratic decision making, J&J might not achieve these diverse and lofty goals. A lack of central authority would limit its ability to muster the corporate resources to support a major push into emerging economies. And an absence of local decision making would hamper efforts to pursue breakthrough innovations in niche markets. Weldon understands this and thus leverages the power of the “and.”
Tight-fisted authority or egalitarian leadership? J&J prospers by doing both.
Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco, and the author of Doing Both: How Cisco Captures Today’s Profits and Drives Tomorrow’s Growth. Follow Inder on Twitter at @indersidhu.
INVESTING CONTRARIAN
View original post here:
Inder Sidhu: In Command But Not in Control By Design: J&J’s Management Model

Tagged with: ECB

Huffington Post
After his academic credentials were exposed as fraudulent, Tang Jun, heretofore one of China’s most esteemed business executive and role models, has emerged as the star in a quintessentially Chinese dramatic tragedy. His reputation endured further pummeling when, two weeks after the news of his doctored California Institute of Technology PhD emerged, another scandal broke regarding misallocation of $30 million related to a Jiangsu real estate deal. In response to the hubbub, Tang Jun, without a shred of remorse, exclaimed, “Losers cheat some people and get caught. Winners cheat the whole world all the time.”
Is Tang Jun China’s Bernie Madoff? Did he betray the good will of the Chinese people? Most admired his transformation from small potato to master and commander, a rare bi-cultural breed who leveraged stints at Microsoft and Shanda, China’s largest on-line gaming company, to represent the face of modern Chinese business. In the process, he became the nation’s highest paid executive, earning a billion renmenbi per year at New Huadu group, the conglomerate owned by Fujian native Chen Fashu, the “Warren Buffet of China.”
Is Tang Jun without moral scruples? To westerners, the answer is, of course, yes. He built his reputation on, at best, half truths and, at worse, outright deceit. Further, former colleagues at Microsoft and Shanda describe Mr. Tang as a pseudo-leader, perpetually detached, more interested in managing his image amongst foreign bosses and investors than generating lasting shareholder value.
Interestingly, however, the post-scandal reaction of many ordinary Chinese was far more ambiguous, sometimes sympathetic. Although this case unleashed a tidal wave of schadenfreude, the masses were more titillated than up in arms. According to one 35-year-old professional, “He was only doing what anyone in his position would do.” And another: “Tang Jun got caught. He pushed it too far. But, today, it’s so competitive. We have no choice but to play the damn game. Face is everything.”
In China, an ambitious, anti-individualistic and morally relativistic society, integrity is often perceived as a luxury. Despite the brutality of the Great Leap Forward, Cultural Revolution and Tiananmen Square, Mao is still considered a great leader because he unified ” i.e., stabilized ” the nation. Even Mencius, who regarded benevolence as innate, focused his philosophical energies on harnessing the power of goodness to reinforce a well-ordered social structure. Such moral utilitarianism is felt everywhere in the Middle Kingdom. From tolerance of corruption to wide availability of commercialized sex, Chinese are no-nonsense pragmatists. (Am I saying people are “immoral”? No. But, in the PRC, a non-monotheistic culture sans God or Heaven, ends justify means. Corruption lubricates business relationships. Prostitutes are less threatening to family cohesion than mistresses. )
In this respect, can-do “winners” ” people who start, forge and build things ” are infinitely more respected than guai guai “good guys.” “Face,” something Tang Jun was desperate to acquire, plays an important role in amassing the interpersonal “capital” to get things done. Face, public endorsement “reinvested” for future gain, is social currency. On the dog-eat-dog business battlefield, face is blood. It lubricates all interactions, personal and financial, and requires constant replenishment. When it dries up, a man not only moves backwards, he disappears into a sea of anonymity.
Tang Jun, 46, had a master plan. By writing books such as “My Success Can be Replicated,” he wanted to become an icon. By appearing on television shows and glossy magazine covers, he hoped to achieve guru status, a weapon he could wield on his trek to the top of Mount Glory.
However, even in a status-obsessed country such as China, substance counts. The practical Chinese revere results. They worship engineers, technocratic leaders with a master plan. They love concrete things, “infrastructure” that lifts all boats. Throughout his career, Tang Jun ignored this truth. He cultivated his image but, in the end, no one knew the man, his beliefs or his vision. I have interacted with Tang Jun in different circumstances, in both jazz bars and conference rooms. He is an almost preternatural shape shifter, projecting radically differ persona depending on his audience. Deferential to Chinese bosses and foreign boards, he is a shark with subordinates. Rarely have I met an individual capable of unleashing both yin and yang with equal vigor and, yes, aplomb.
Sadly, Tang Jun’s fabrications and moral ambiguity came to light before he could demonstrate tangibly irrefutable value as a business leader. Substantial accomplishments were not self-evident. Had he not billed himself as the incarnation of Chinese capitalism or publicized his outrageous salary, his transgressions would certainly have been forgiven and probably ignored. But this son of China flew too close to the sun. His crash to Earth was ordained.
With his image shattered, possibly for good, what will become of Tang Jun? He is currently in the United States, far from Shanghai’s wagging tongues and barking bloggers. He may simply fade away. Hopefully, however, he will do some soul searching and realize external validation never trumps genuine self-possession. In hyperkinetic, brashly materialistic boom times, the Middle Kingdom needs a real role model who extols” and perhaps even profits from ” this timeless truth.
INVESTING CONTRARIAN
See the article here:
Tom Doctoroff: Tang Jun’s Drama: A Chinese Business Tragedy

Tagged with: china, eurozone, India