Friday, October 7, 2011

US News... BLS Jobs Data

MoM Change

 Year/mth                                               Sept        Jul        Aug       Sept 
                                                              2010     2011     2011p     2011p                     
Total nonfarm……………..………...  -29        127         57         103
Total private………………………....  109       173         42         137
Goods-producing…………………...     -6         53          -9          18
Private service-providing..………....   115       120          51        119
Government………………………...   -138       -46          15         -34
Unemployment rate held at 9.1%
About 45K telecommunications workers who had been on strike in August returned to their jobs in Sept.

My Thots.....

At last, behaving and in correlation with ADP & ETA data.
As with the ADP Employment Report, the category  driving growth is the Private Service Producing Industries.
Govt. Sector continues to be the one bleeding and subtracting jobs.

Goods Producing Industries  are not showing significant jobs add; with Manufacturing subtracting 13K jobs.
Surprisingly, Construction added 26K, the harbinger of an incipient turnaround?

Bernanke's Operation Twist is pushing 30 yr mortgage  rates below 4% for the 1st time and with Existing Home Inventory getting lower & lower, the US housing sector could really be turning!!

see below....


SATS: In talks to sell UK business (BUY, S$2.18, TP S$2.53)
Lynette Tan

Looking to sell UK food business.
SATS announced that it is in discussions with third parties to sell its UK businesses - the Daniels Group and International Cuisine. At the point of the announcement, no firm agreement has been made, and management made no disclosure on  the price it is looking at. The UK business accounted for 21% of SATS FY11 revenue. Assuming a PBT margin of 8%, this translates to ~S$29m contribution to SATS PBT (12%). The Daniels Group was owned by SFI when SATS bought over SFI in early 2009, for ~S$490m. Assuming 50% of that acquisition price was apportioned to the UK business, a sale price of £150m (~S$305m) (according to news reports) could potentially yield SATS a gain of ~S$60m (5.4 S¢/share).

Funds for other operations?
Management had always maintained that its business volume in the UK has been steady, but results have been impacted by the weak sterling. Hence, if the opportunity arises and the price is right, we think it would be better for SATS to realise its fouryear investment in the UK non-aviation food segment. While the deal to shed UK business is not cast in stone yet, there is a possibility that SATS may use the funds from the sale, to expand into other businesses, such as the cruise industry. SATS is one of the contenders to manage and operate the new International Cruise Terminal at Marina South.

Maintain BUY, lower TP to S$2.53.
SATS’ share price has come off along with the market  volatility in recent weeks. Margins are likely to remain under pressure for the next few quarters and growth in passenger travel and freight volumes could possibly slow down, given the global economic uncertainty. Nonethless, SATS’ business generates steady cash flows. We continue to like SATS for its steady dividends. We have adjusted our WACC assumptions (new: 7.4%,old: 6.6%), and our DCF-based TP is lowered to S$2.53 (from S$2.92 previously).


My Thots.....

With Clement Woon leaving and an acting CEO in charge, I wonder who is driving the decision making and the restructure process.
Was SATS actively seeking to sell?
Is this a clearly thought out strategy that had been agreed at Board level before Clement left?
Who is driving the change process?
Is it the major stakeholder, behind the scenes, such that the one seated in the chair does not matter?



Euroland news... CBs act

Please read original at WSJ.....

OCTOBER 7, 2011
Central Banks Step Up Battle to Contain Crisis


BERLIN—The central banks for the U.K. and the euro zone scrambled to inject new life into their fading economies, both acting Thursday to try to stave off recession or a credit crunch while awaiting the next moves of the region's embattled governments.

The Bank of England made a surprise decision to buy government bonds to try to bring down interest rates and spark growth, while the European Central Bank revived measures from last year to try to keep capital flowing to Europe's ailing banks.

"This is the most serious financial crisis at least since the 1930s, if not ever," U.K. bank chief Mervyn King said, explaining the decision to add money into the strained financial system. "We're creating money because there's not enough money in the economy."

A flurry of meetings by global policy makers in recent weeks has done little to inspire confidence that a permanent fix is in store for Europe's beleaguered periphery, and economic indicators in recent days have offered fresh signs that Europe risks sliding into another recession. France's statistics agency Thursday predicted recession for Spain and Italy by year's end, saying that would help drag France's growth to zero.

German Chancellor Angela Merkel met Thursday in Berlin with the heads of the International Monetary Fund, the World Bank, the ECB and the Organization for Economic Cooperation and Development. The leaders warned that the global economy, while on a path of recovery after the financial crisis, could now enter a phase of even greater danger, and Ms. Merkel noted they had agreed that capital controls should be used as a last resort.

Jean-Claude Trichet, at his last meeting as ECB president before handing the reins to Mario Draghi, again criticized European governments for failing to do more themselves.

"Governance has been insufficient," Mr. Trichet said, repeating a complaint he has increasingly made in recent months. "We cannot substitute ourselves for governments," he added.

The U.K. move to engage in more quantitative easing, or government-bond purchases, was particularly noteworthy, because economists hadn't expected such a decision for at least another month—a reflection of how much ripples from the widening crisis over Greece's debt are worrying policy makers outside the euro zone. This week Greece is expected to finish talks with the "Troika" of creditors—the IMF, the ECB and the European Commission—as the concerns that began two years ago with Athens now threaten Europe's largest economies.

The ECB didn't take a bolder step of lowering rates, though some of its governing council members pressed for that move and were outvoted. The ECB doesn't release vote tallies, but Mr. Trichet said the decision was taken by "consensus"—ECB code for several dissenting votes. The ECB kept its main interest rate at 1.5% for a third straight month, after raising it in increments in April and July.
But the bank's moves on lending programs for banks reflect the lengths to which it is going to boost Europe's financial institutions. Many analysts say such action is critical if the currency bloc is to survive the debt crisis.

The ECB voted to make longer-term loans available to banks later this year for maturities up to 13 months, ensuring banks have unlimited financing into 2013 as long as they can post collateral. Starting next month, the ECB also will buy €40 billion ($53 billion) in bank bonds backed by mortgages and other assets, known as covered bonds, a key source of funds for banks.

"The economic outlook remains subject to particularly high uncertainty and intensified downside risks," Mr. Trichet said. Officials "had a long discussion…on the pros and cons of decreasing rates or leaving rates where they are," he said.

Mr. Trichet's remarks suggest his successor, Italian central banker Mario Draghi, may have to lower interest rates soon, analysts said. "They've opened the floodgates with liquidity [for banks], now the focus shifts to interest rates," said RBS economist Nick Matthews, who expects a rate cut next month at Mr. Draghi's first meeting as ECB president.

Other central banks are acting sooner. The U.S. Federal Reserve took new steps last month to lower long-term interest rates and jump-start spending and investment.

Mr. Trichet leaves the ECB at the end of the month with the euro zone on the cusp of recession; inflation at 3%, a three-year high; commercial banks groaning under the strain of exposure to Greece and other highly indebted euro-zone governments; and an ECB that is divided on how to respond. Neither the financial-market turmoil nor the economic outlook for the 17-nation euro zone are likely to improve in the near term, which the ECB acknowledged by extending its emergency support programs for banks into 2013.

The Bank of England decided to revive its asset-purchase program, known as quantitative easing, by purchasing an additional £75 billion ($116 billion) in government bonds, on top of the £200 billion it has already bought. "The ECB has got more scope to act than the Bank of England, but clearly the Bank of England has been prepared to take more risks" to stimulate its economy, said Howard Archer, economist at IHS Global Insight.

On the surface the move seems designed to soften the effects of the U.K. government's austerity program, which has raised some questions over whether it goes too far. The U.K. Treasury also is planning to buy billions of pounds of corporate bonds issued by small and midsize companies to free up capital for struggling firms unable to tap banks for loans, but said that doesn't amount to backing off austerity plans because the program won't add to the U.K. deficit.

Separately, the European Banking Authority said Thursday it can't rule out launching a new round of stress tests for Europe's banks. Politicians and central bankers have been increasingly outspoken in recent days on the possible need for a forcible recapitalization of Europe's banks.

Ms. Merkel reiterated Thursday that if needed, state help should be granted to recapitalize banks. "The damages that arise otherwise would be much greater in scale," the chancellor said after the Berlin meeting.

The euro-zone economy grew at an annualized rate of just 0.7% in the second quarter, and probably didn't fare better in the third quarter. Data published Thursday showed German manufacturing orders fell 1.4% in August compared with July, adding to indications that growth is faltering in Europe's biggest and, recently, its strongest economy.

Recent data have suggested the U.K. is also at risk of falling into a recession. However, Britain's statistics service said Thursday that output in the dominant services sector grew 0.2% in July compared with June, a modest increase that economists said lessened the chances that the economy was already contracting in the third quarter.

—Jason Douglas contributed to this article.



My Thots....

The CBs are buying time while their govts get their acts together.

Weekly ETA Initial Claims Data

This week seasonally adjusted initial claims was 401 K.
4wk MA was 414K.
Just below, the inflexion point of 420K which points to a jobs recovery.

So far the ADP data and the Initial Claims data has behaved.
Tommorow's BLS data (which tend to be volatile of late)  will confirm whether the Jobs recovery is on path.
Lets hope that they all correlate!!

Legacy of Trichet

For more go to Reuters website....

Trichet leaves ECB, and opinion, divided
FRANKFURT | Thu Oct 6, 2011 10:36am EDT

FRANKFURT (Reuters) - After keeping his cool for almost eight years, European Central Bank President Jean-Claude Trichet exploded last month.

The Frenchman, renowned for his nuanced and composed answers to journalists' questions, launched into a passionate defense of the ECB's record when asked about calls from some in Germany for a return to the Deutschmark.

"I would like very much to hear the congratulations for an institution which has delivered price stability in Germany over almost 13 years," he said, visibly angered at his monthly news conference, the penultimate one of his reign.

He then turned his ire on France, Germany and Italy for weakening Europe's budget rules, saying the ECB only bought the bonds of countries mired in the euro zone debt crisis because of the fiscal indiscipline the big three countenanced.

"It was because the governments in question had not behaved properly," he said in a six-minute tirade, the likes of which reporters covering his ECB presidency have never seen before.

Trichet, 68, had good reason to get worked up: Juergen Stark, one of the ECB's most experienced policymakers, had just decided to quit the central bank in protest at the bond-buying program -- the second German to do so this year.

Trichet's decision last year to take the ECB on its bond-buying adventure was the pivotal moment of his presidency. In doing so he led the bank beyond its core inflation-fighting mandate and into the fiscal arena.

The controversy has been all the greater because the decision was not simple or by any means unanimous at the ECB.

Asked in May last year whether the bank would consider buying euro zone sovereign bonds to help tackle the debt crisis, Trichet said ECB policymakers had not even discussed the option. Other ECB officials had publicly denounced the idea as violating the principles of strict monetary management.

Four days later, the ECB said it would start buying bonds.

Trichet, who presided over his last ECB policy meeting on Thursday, only made the U-turn after securing a pledge from euro zone governments that they would set up a bailout fund to aid the crisis-hit states.

For some, this quid pro quo marks him out as a European visionary who stepped quickly into a policy void that governments were too flat-footed to fill, acting purposefully to save the euro zone project of which he sees himself as guardian.

Whether history judges Trichet as a savior of the euro project or an irresponsible central banker whose ego took the ECB into risky new territory depends on the fate of the currency bloc, which is still playing out.

Guntram Wolff, deputy director of the Bruegel think tank, said under Trichet the ECB has fully discharged its primary mandate for maintaining price stability and deservedly received praise for responding quickly to the 2007-2009 financial crisis.

"But Trichet's legacy is unfinished," Wolff wrote in a report 'Changing of the guard -- huge challenges ahead for the new ECB president'. "We still have to see whether he will be the 'man who saved the euro'."

The decision to begin buying sovereign bonds to lower spiraling government borrowing costs has proved especially controversial in Germany, where the resignations of Stark and Bundesbank chief Axel Weber have shaken faith in the ECB.

"The ECB didn't have to do that," said Manfred Neumann, emeritus economics professor at Bonn University. "I would even say it was a playing field that Trichet took to gladly.

"I think he is the first of the Bundesbank presidents and the two ECB presidents who has stepped beyond the confines of his post, and thereby endangered the bank in the long-term," added Neumann, who was doctoral adviser to Jens Weidmann, Weber's successor as Bundesbank chief, and remains close to him.
Even German President Christian Wulff has questioned the legality of the bond-buy plan, which the ECB says smoothes the transmission of its monetary policy in the markets.

In reality, the transmission argument is just a fig leaf that has failed to hide the discomfort the German-led minority at the ECB feels over the plan. Stark held out longer than Weber, but also ultimately left in protest.

Weber voiced his objection to the program from the start, earning a public rebuke from Trichet who realized the need for the Governing Council to stand square behind the plan for it to convince markets -- and hold down government borrowing costs.

Paul de Grauwe, economics professor at Belgium's Catholic University of Leuven, said the half-hearted approach to the plan that resulted from the Germans' objections doomed it to failure.
"This bond-purchase program is a shambles," said de Grauwe, himself once a candidate for an ECB board position.

"It reflects the split within the ECB and also within the euro zone about what exactly should be done. He (Trichet) has been a victim of Germany and the satellites of Germany. That has made effective action very difficult."

Economists polled by Reuters rate Trichet's handling of the financial crisis at seven out of 10.
News of Weber's resignation, which Reuters broke in February of this year, shook the ECB to its core. Stark's resignation has rocked it further.

Weber was in pole position to succeed the Frenchman but felt he could not represent the 23-member Governing Council when he was in the minority on the bond-buy issue, which he worried exposed the ECB to risks it should not be taking.

The rift did not heal with Weber's departure and the news that Stark is resigning turned it into a full-on institutional crisis, with many in Germany concerned that the ECB is losing its Bundesbank-style grounding and may go soft under the leadership of incoming president Mario Draghi, an Italian.

"If Draghi reshuffles (jobs within the board), the battle really is on," said Neumann. "Then the Germans really would have to rethink whether they can accept the central bank as it is."

The internal divide at the ECB, which Weidmann is left spearheading on Germany's side, has arisen despite Trichet making considerable efforts to take a German-style approach to monetary policy.
This has even been at the cost of his relations with his native France. Trichet has a fractious relationship with French President Nicolas Sarkozy, who early in his presidency leant on the ECB to cut interest rates.

Trichet brushed off this French push in 2007, telling reporters in Portugal: "France has a culture of protest. If you want to be seen as intelligent, you have to protest."

Trichet has shown little tolerance of dissent at the ECB -- especially this year, when he became increasingly worried the bank could be forced to finance an insolvent Greek state and its banks.
Trichet was one of very few policymakers dealing with the crisis to be born during or before World War Two. German Finance Minister Wolfgang Schaeuble is another -- both were born in 1942.

Growing up in the shadow of the war marked them, and made them willing to set aside narrow national interests for the good of the European project that they see as a means to secure peace and prosperity on the continent -- perhaps more so than younger leaders like Sarkozy and Germany's Angela Merkel.
This personal background made Trichet almost obsessive about finding a solution to the crisis. He became more commanding this year, euro zone insiders say.

Described by some as "controlling", he came down hard on dissenters and "hit the roof" when one stepped out of line.

On one occasion, the ECB issued a new version of comments made by the bank's vice president, Vitor Constancio, on a Greek rescue plan. Just weeks later, another ECB policymaker, Ewald Nowotny, made a rapid about-turn after he said a rescue deal could involve a short-term default by Greece -- a scenario Trichet opposed. Last year, he slapped down Weber after his public criticism of the bond-buy plan.

"Trichet-era autocracy has to end," said David Marsh, co-chariman of think tank OMFIF, arguing Draghi should allow other board members to speak at the monthly news conferences.

Trichet's iron-fist leadership style is aimed at delivering a clean, consistent message. Here he has largely succeeded.

His use of code words such as "strong vigilance" -- usually indicating a rate rise is one month away -- has endeared him to financial markets after the erratic performance of his predecessor, Dutchman Wim Duisenberg.

"Jean-Claude Trichet has, in some very difficult and turbulent times, delivered a decisive contribution to securing the stability of the euro and the financial system," said Deutsche Bank Chief Executive Josef Ackermann.

But for all Trichet's talk of delivering price stability, his legacy hangs on the May 2010 decision to begin buying bonds to prop up debt-laden euro zone nations.

Otmar Issing, one of the euro's founding fathers and a career-long monetarist hawk, told Reuters earlier this year that in buying government bonds the ECB had "crossed the Rubicon".
The question for Draghi, who takes over the ECB presidency on November 1, is can the ECB get back to the other side?

Trichet led the ECB deeper into uncharted territory this year, presiding over a decision to reactivate the bond-buy program after a 19-week pause to prop up Italy and Spain, despite opposition from Weidmann, Stark and two other Governing Council policymakers.

The decision was announced in a statement issued in Trichet's name, unlike the ECB's announcement last year that it was beginning the program, which was in the name of the whole Governing Council.
Reactivating the plan may have prevented Italy from succumbing to the crisis -- a scenario that could have triggered the end of the euro zone -- but the Germans' fears appear to be materializing.

In the absence of intense market pressure, Rome had made haphazard progress in implementing austerity measures, which the ECB apparently demanded before intervening to buy Italy's bonds.

In a thinly veiled attack on the bond plan, Weidmann said last month the lines between monetary and fiscal policy had been blurred. "In the long run this strains the trust in the central banks," he said.
For some, the Bundesbank takes too narrow a view -- one that could have pushed the euro zone over a cliff if adhered to.

"I don't think the Bundesbank-style, 110-percent focus on austerity and inflation fighting would have served Europe well," said Sassan Ghahramani, president and CEO of U.S.-based SGH Macro Advisors, which advises hedge funds.

"In the fullness of time, I think Trichet will go down as one of the great economic leaders in Europe," he said.
 (Additional reporting by Annika Breidthardt and Philip Halstrick, editing by Mike Peacock)


My Thots.....

In the old CNA forum, I had discussed this before.
What is the evolving role of CBs (Central Bankers) in the face of a major crisis like the GFC or the current Euroland Sovereign Debt Crisis (SDC)  ?
Is it one of just maintaining price stability as viewed by the German camp of Weber & Stark
Does the role involves crisis management to prevent a collapse in the monetary system from which there will be huge repurcussions on the economy resulting in unemployment and maybe even panic and anarchy?
Trichet decision last May to start buying sovereign bonds was a turning point in his tenure at the ECB; previous to which he had shown great prudence and reluctance to use the "bazooka", so to speak.
Previously, he had only bought "covered" bonds during the GFC, and sterilise the effects, afterwards.
(Covered bonds are European style AAA rated  and asset backed in terms of collaterals by a deeper pool which must be constantly monitored and topped up; this offers added protection in that the assets are On B/S vs US style ABS which can  be Off B/S, so that monitoring of the pool is whole lot more transparent.)
The discussion is moot, but that does not deter him from acting.
He was flexible and bold enuf to act alone, if it needed be....

In fact,  Trichet in his last move at the ECB, announced tonite, continues that stance of prudence by holding interest rates yet showing flexibility in offering 1yr TALF style term loans and resuming covered bond purchases......

There are “intensified downside risks” to the economic outlook, ECB President Jean-Claude Trichet said at a press conference in Berlin today. He said the ECB will resume covered- bond purchases and reintroduce yearlong loans for banks as the sovereign debt crisis threatens to lock money markets. ECB policy makers left the benchmark interest rate at 1.5 percent, resisting calls to reverse its two rate increases this year.

Markets are likely to be reassured by his moves, while awaiting the EC which is proposing coordinated action to recapitalize banks, according to Commission President Jose Barroso.

In the absence of Fiscal unanimity as politicians dither, it should be remembered it was the bold actions by Trichet/ECB that bought them time!!

Thursday, October 6, 2011

Steve Jobs

Today, we mourn the death of a visionary.
I viewed this U tube video quite some time ago and I got my kids to view it too.
It is highly inspirational.
In it Jobs, talk about the critical turning points in his life and how he overcame adversity and turned each of those turning points into opportunities.
An adopted child, his natural/biological mother wanted him to go to College. But, his adoptive parents were poor and he found the fees at Reed college to be too onerous for them.
So he dropped out of day college after 6 mths and dropped into night classses for 18mths where he learnt calligraphy - that's where all the beautiful fonts like San Serif etc  in the Mac (later copied by Microsoft) came from.
He talks about how his adversities -- he slept on dorm floors of his friends rooms, collected recycled Coke bottles and  walked  7 miles every Sunday night for one good meal each week at the Hare Krishna temple -- prepared him for his calling (or is it recalling) at Apple.

The speech comes in 3 stories...

In "Connecting the Dots"; his 1st story...
"You can't connect the dots looking forwards, you can only connect them looking backwards "

The 2nd story "Love and Lost", teaches us not to give up when we are rejected, when we fail...
His sacking by John Sculley resulted in him getting into and setting up the NEXT platform and in the birth of PIXAR. He found his love (wife) and the wind for the 2nd flight when he was sacked -
"The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life."

In the same positive attitude he tackles his illness Pancreatic Cancer in the 3rd Story...
  " No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new."

Is Death to be feared?
This is how Jobs viewed death....

"If today were the last day of my life, would I want to do what I am about to do today?" And whenever the answer has been "No" for too many days in a row, I know I need to change something.

Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart"

Jobs, a Buddhist, spoke of  "letting go" in other speeches....
Knowing that you will die, that you can fail, frees you from the fear of losing it all, of letting go...

Let Go...
 Stay Hungry,  Stay Foolish

Can Apple , let go of  her iconic founder and still flourish ?
- Much depends on Job's choice of successor, Tim Cook

Other tributes....!

Here's the transcript,  the genius  and the tenacity of the man comes thru...

Stanford Report, June 14, 2005

'You've got to find what you love,' Jobs says

This is a prepared text of the Commencement address delivered by Steve Jobs, CEO of Apple Computer and of Pixar Animation Studios, on June 12, 2005.

I am honored to be with you today at your commencement from one of the finest universities in the world. I never graduated from college. Truth be told, this is the closest I've ever gotten to a college graduation. Today I want to tell you three stories from my life. That's it. No big deal. Just three stories.

The first story is about connecting the dots.

I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in for another 18 months or so before I really quit. So why did I drop out?

It started before I was born. My biological mother was a young, unwed college graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife. Except that when I popped out they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking: "We have an unexpected baby boy; do you want him?" They said: "Of course." My biological mother later found out that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would someday go to college.

And 17 years later I did go to college. But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents' savings were being spent on my college tuition. After six months, I couldn't see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn't interest me, and begin dropping in on the ones that looked interesting.

It wasn't all romantic. I didn't have a dorm room, so I slept on the floor in friends' rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example:

Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer, was beautifully hand calligraphed. Because I had dropped out and didn't have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can't capture, and I found it fascinating.

None of this had even a hope of any practical application in my life. But ten years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, it's likely that no personal computer would have them. If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the dots looking forward when I was in college. But it was very, very clear looking backwards ten years later.

Again, you can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.

My second story is about love and loss.

I was lucky — I found what I loved to do early in life. Woz and I started Apple in my parents garage when I was 20. We worked hard, and in 10 years Apple had grown from just the two of us in a garage into a $2 billion company with over 4000 employees. We had just released our finest creation — the Macintosh — a year earlier, and I had just turned 30. And then I got fired. How can you get fired from a company you started? Well, as Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well. But then our visions of the future began to diverge and eventually we had a falling out. When we did, our Board of Directors sided with him. So at 30 I was out. And very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.

I really didn't know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down - that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure, and I even thought about running away from the valley. But something slowly began to dawn on me — I still loved what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love. And so I decided to start over.

I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.

During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought NeXT, I returned to Apple, and the technology we developed at NeXT is at the heart of Apple's current renaissance. And Laurene and I have a wonderful family together.

I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did. You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle.

My third story is about death.

When I was 17, I read a quote that went something like: "If you live each day as if it was your last, someday you'll most certainly be right." It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: "If today were the last day of my life, would I want to do what I am about to do today?" And whenever the answer has been "No" for too many days in a row, I know I need to change something.

Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas. I didn't even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctor's code for prepare to die. It means to try to tell your kids everything you thought you'd have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes.

I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and I'm fine now.

This was the closest I've been to facing death, and I hope it's the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept:

No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.

Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation. It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late 1960's, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and polaroid cameras. It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions.

Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: "Stay Hungry. Stay Foolish." It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you.

Stay Hungry. Stay Foolish.
Thank you all very much.

Wednesday, October 5, 2011

ADP Employment Report & Challenger, Gray N Christmas report

ADP Employment Report

Total nonfarm private……………91
Small (1-49)………………60
Medium (50-499)…………36
Large (> 499)………………-5
Goods-producing……………….. 1
Small (1-49)………………. 5
Medium (50-499)…………..4
Large (> 499)………………-8
Service-providing………………. 90
Small (1-49)……………….55
Medium (50-499)…………32
Large (> 499)………………3

My Thots & Observations.....
Again, Service Providing Industries was the driver for jobs growth; Goods Producing Industries crept up marginally with Manufacturing actually showing a 5K decline.
In terms of size, the Large firms have been holding back and the growth is driven by SMEs.

August private payrolls were revised down to an increase of 89,000 from the previously reported 91,000.

 Challenger, Gray N Christmas report
Employers announced plans to shed 115,730 workers from their payrolls in September, making it the worst jobcut month in over two years.

My Thots & Observations.....

Most are due to restructuring to improve efficiency.
1/3 of the layoffs announced this year came from government sector.
It is, by far, the largest job-cutting sector, with 159,588 but 50,000 of which are the result of a five-year troop reduction plan announced by the United States Army; restructuring Obama style,  as he cuts spending on troops. The figure for Sept  includes 54,182 government-sector .
 The second largest job-cutting sector to date is the financial sector, which announced 54,013 planned layoffs YTD. That is up 177 percent from the 19,474 job cuts recorded over the first three quarters of 2010. Of the 54,013 financial job cuts this year, 31,167 occurred in September, with 30,000 resulting from Bank of America’s multi-year workforce reduction plan aimed at saving the struggling bank $5 billion per year.
Not necessarily bad, IMHO, but it shows that the Unemployment is NOT cyclical but structural in nature. The US economy is restructuring and last nite plea by Bernanke for the US Congress and the Obama Admin to act ( ie. no cut in spending) is crucial and must be heeded. In fact , any additional fiscal stimulus targeted to aid those workers hurt must be forthcoming, if there are not to be severe dislocations.

Hong Leong Asia

Published October 5, 2011
Hong Leong Asia to think outside China


CHINA will keep driving business, but Hong Leong Asia's new chief executive has set his sights on growing revenue from other emerging economies too.

Mr Yuen: May add a fifth business stream of providing after-market technical services

Francis Yuen, 61, who took the helm at the diversified group in May, six months after former CEO Teo Tong Kooi resigned, has big plans and a clear goal - to deliver more sustainable earnings growth.

HLA now rakes in 80 per cent of its business from China. While sales there will keep rising, Mr Yuen wants to 'grow even faster outside'. The plan is to power ahead in emerging economies like Indonesia and Vietnam, and reduce reliance on China to 65-70 per cent in the next five years by exporting from China to the region.

He sees potential to improve the industry positioning of each of HLA's four existing business lines - home appliances (Henan Xinfei Electric), diesel engines (US-listed China Yuchai International), cement (Tasek Corp) and industrial packaging (Rex Industrial Packaging and GPac Technology) - by expanding product portfolios.

There is a 'definite future' for China Yuchai, given the 'number of trucks, trailers, buses, railways, plying China, with room for many more', he told BT. The question now is: 'Are we in the diesel engine industry, or can we define ourselves to be in the wider transportation system industry?'
Similarly, Xinfei, whose profitability has taken a hit with heightened competition, may go from making refrigerators to other comfort systems. Methods of sales may vary too, says Mr Yuen, throwing out ideas like packaged home solutions to developers under the Hong Leong group and growing exports.

Acknowledging that HLA is looking to divest its industrial packaging business, Mr Yuen says migrating to higher-end medical packaging could make that arm worth keeping. HLA will make a decision by the year-end.
As for the 'good old traditional founding business of Hong Leong', the cement business, growth will continue on the back of construction demand locally and in Malaysia. Even so, HLA can 'add on business threads' to tap on the wider 'building materials' sector, he says. Smaller stakes in consumer electronics and hospitality are on the cards.

But Mr Yuen sees room to add a fifth business. This may involve providing after-market technical services of some form, says Mr Yuen, whose past 18 years of private sector experience has taught him that 'such services make a good accompaniment to the hardware' of a company. A complementary line could also help even out currently cyclical earnings.
None of this is set in stone yet, says Mr Yuen, who recently met HLA's fresh team of senior management to re-evaluate business strategies and craft a five-year plan.

It is a diverse team he has pulled together, says Mr Yuen, who aims to fill key management roles by the year-end. He will strengthen the export and M&A teams, to focus on new markets and inorganic growth, a priority for 2012.



My Thots......

There was a better write-up in "The Edge"....
Reducing reliance on China?
The implicit takeaway from this article seems to be that the China mkt is not sustainable?
This is definitely not correct !! China is too important a market, in fact diesel engine sales are still growing at healthy rates (pricing and product positioning aside)  and that is where HLA's crown jewels, CYL & Xinfei does almost all of of its biz, presently. The correct message should be to diversify CYL's  & Xinfei's markets by exporting to rapidly developing mkts like Indonesia & Vietnam; from China.
Thinking outside China does not equate to getting out of China or not doing biz from/in China!
In fact, producing from China to export to new emerging mkts, give HLA a huge competitive advantage as it allows product segmentation and re-positioning  opportunities!!

High quantity low margins now....
Towards higher quality , higher margins, sharper focus.

Tuesday, October 4, 2011

George Soros

For more read...

Thinking the Unthinkable in Europe

NEW YORK – To resolve a crisis in which the impossible has become possible, it is necessary to think the unthinkable. So, to resolve Europe’s sovereign-debt crisis, it is now imperative to prepare for the possibility of default and defection from the eurozone by Greece, Portugal, and perhaps Ireland.

In such a scenario, measures will have to be taken to prevent a financial meltdown in the eurozone as a whole. First, bank deposits must be protected. If a euro deposited in a Greek bank would be lost through default and defection, a euro deposited in an Italian bank would immediately be worth less than one in a German or Dutch bank, resulting in a run on the deficit countries’ banks.

Moreover, some banks in the defaulting countries would have to be kept functioning in order to prevent economic collapse. At the same time, the European banking system would have to be recapitalized and put under European, as distinct from national, supervision. Finally, government bonds issued by the eurozone’s other deficit countries would have to be protected from contagion. (The last two requirements would apply even if no country defaulted.)

All of this would cost money, but, under the existing arrangements agreed by the eurozone’s national leaders, no more money is to be found. So there is no alternative but to create the missing component: a European treasury with the power to tax and, therefore, to borrow. This would require a new treaty, transforming the European Financial Stability Facility (EFSF) into a full-fledged treasury.

But this presupposes a radical change of heart, particularly in Germany. The German public still thinks that it has a choice about whether to support the euro. That is a grave mistake. The euro exists, and the global financial system’s assets and liabilities are so intermingled on the basis of the common currency that its collapse would cause a meltdown beyond the capacity of the German authorities – or any other – to contain. The longer it takes for the German public to realize this cold fact, the higher the price that they, and the rest of the world, will have to pay.

The question is whether the German public can be convinced of this argument. Chancellor Angela Merkel may not be able to persuade her entire coalition of its merits, but she could rely on the opposition to build a new majority in support of doing what is necessary to preserve the euro. Having resolved the euro crisis, she would have less to fear from the next election.

Preparing for the possible default or defection of three small countries from the euro does not mean that those countries would necessarily be abandoned. On the contrary, the possibility of an orderly default – financed by the other eurozone countries and the International Monetary Fund – would offer Greece and Portugal policy choices. Moreover, it would end the vicious cycle – now threatening all of the eurozone’s deficit countries – whereby austerity weakens their growth prospects, leading investors to demand prohibitively high interest rates and thus forcing their governments to cut spending further.

Leaving the eurozone would make it easier for the most distressed countries to regain competitiveness. But, if they are willing to make the necessary sacrifices, they could also remain: the EFSF would protect their domestic bank deposits, and the IMF would help to recapitalize their banking systems, which would help these countries escape from their current trap. Either way, it is not in the European Union’s interest to allow these countries to collapse and drag down the entire global banking system with them.

The EU’s member countries, and not only those in the eurozone, must accept that a new treaty is needed to save the euro. That logic is clear. So the discussions about what to include in such a new treaty ought to begin immediately, because, even with European leaders under extreme pressure to agree quickly, negotiations will necessarily be a prolonged affair. Once the principle is agreed, however, the European Council could authorize the ECB to step into the breach, indemnifying it from solvency risks in advance.

Having in sight a solution to the eurozone’s sovereign-debt crisis would be a source of relief for financial markets. Even so, because any new treaty’s terms will inevitably be dictated by Germany, a severe economic slowdown would be almost certain. That might induce a further change of attitude in Germany, in turn allowing the adoption of counter-cyclical policies. At that point, growth in much of the eurozone could resume.
George Soros is Chairman of Soros Fund Management

Project Syndicate

My Thots......

Goerge Soros says "think of the unthinkable"...
 Protect bank deposits.
U will note he says a switch to European-level , as distinct from national-level, supervision of the banks is needed to ringfence the banks so that the default will be orderly and contagion due to collateral damage is minimised.
The core argument is that the Germans support is crucial to such a change, since they in Euroland will foot the most.
The article was written before the recent overwhelming vote in the German Parliament - German sentiments could have turned around and support could be found after the recent crisis.
Only 15 of the conservatives in Merkel's coalition deserted her, in the vote.

The logic in Soros argument is that in thinking of the unthinkable and coming up with solutions, there will be choices for the policymakers to take. And that the markets knowing that there will be solutions to  the take out the uncertainty out of those scenarios, will be calmed.

IMHO, Soros may have taken the assumptions a little too far by including the "defections" of Portugal & Ireland; as their finances are on the mend and healing - altho a Greek collapse may exacerbate  borrowing conditions and weigh down their debt repayments.

Barry Eichengreen

For more see...

Europe on the Verge of a Political Breakdown

Barry Eichengreen


BERKELEY – Europe is again on the precipice. The most recent Greek rescue, put in place barely six weeks ago, is on the brink of collapse. The crisis of confidence has infected the eurozone’s big countries. The euro’s survival and, indeed, that of the European Union hang in the balance.

European leaders have responded with a cacophony of proposals for restoring confidence. Jean-Claude Trichet, the president of the European Central Bank, has called for stricter budgetary rules. Mario Draghi, head of the Bank of Italy and Trichet’s anointed successor at the ECB, has called for binding limits not on just budgets but also on a host of other national economic policies. Guy Verhofstadt, leader of the Alliance of Liberals and Democrats for Europe in the European Parliament, is only one in a growing chorus of voices calling for the creation of Eurobonds. Germany’s finance minister, Wolfgang Schäuble, has suggested that Europe needs to move to full fiscal union.

If these proposals have one thing in common, it is that they all fail to address the eurozone’s immediate problems. Some, like stronger fiscal rules and closer surveillance of policies affecting competitiveness, might help to head off some future crisis, but they will do nothing to resolve this one.
Other ideas, like moving to fiscal union, would require a fundamental revision of the EU’s founding treaties. And issuing Eurobonds would require a degree of political consensus that will take months, if not years, to construct.

But Europe doesn’t have months, much less years, to resolve its crisis. At this point, it has only days to avert the worst. It is critical that leaders distinguish what must be done now from what can be left for later.

The first urgent task is for Europe to bulletproof its banks. Doubts about their stability are at the center of the storm. It is no coincidence that bank stocks were hit hardest in the recent financial crash.
There are several ways to recapitalize Europe’s weak banks. The French and German governments, which have budgetary room for maneuver, can do so on their own. In the case of countries with poor fiscal positions, Europe’s rescue fund, the European Financial Stability Facility, can lend for this purpose. If still more money is required, the International Monetary Fund can create a special facility, using its own resources and matching funds put up by Asian governments and sovereign wealth funds.

The second urgent task is to create breathing space for Greece. The Greek people are making an almost superhuman effort to stabilize their finances and restructure their economy. But the government continues to miss its fiscal targets, more because of the global slowdown than through any fault of its own.
This raises the danger that the EU and IMF will feel compelled to withdraw their support, leading to a disorderly debt default – and the social, political, and economic chaos that this scenario portends. In Greece itself, political and social stability are already tenuous. One poorly aimed rubber bullet might be all that is needed to turn the next street protest into an outright civil war.

Again, help can come in any number of ways. Creditors can agree to relax Greece’s fiscal targets. The limp debt exchange agreed to in July can be thrown out and replaced by one that grants the country meaningful debt relief. Other EU countries, led by France and Germany, can provide foreign aid. Those who have spoken of a Marshall Plan for Greece can put their money where their mouths are.

The third urgent task is to restart economic growth. Financial stability, throughout Europe, depends on it. Without growth, tax revenues will remain stagnant, and the capacity to service debts will continue to erode. Social stability, similarly, depends on it. Without growth, austerity will become intolerable.
Here, too, the problem has several solutions. Germany can cut taxes. Better still would be coordinated fiscal stimulus across northern Europe.

But the fact of the matter is that northern European governments, constrained by domestic public opinion, remain unwilling to act. Under these circumstances, the only practical source of stimulus is the ECB. Interest rates will have to be slashed, and the ECB will have to follow up with large-scale asset purchases like those recently announced by the Swiss National Bank.

If these three urgent tasks are completed, there will be plenty of time – and much time will be needed – to contemplate radical changes like new budgetary rules, harmonization of other national policies, and a move to full fiscal union. But, as John Maynard Keynes famously quipped, “In the long run, we are all dead.” European leaders’ continued focus on the long run at the expense of short-term imperatives may indeed be the death knell for their single currency.

Project Syndicate

My Thots....

Barry Eichengreen says think ( & act)  of solving the immediate problems first!!
In the longterm as Keynes said  "we are all dead".

He lists 3 urgent tasks that must be acted upon.... and fast?
Can Euroland deliver?

Nouriel Roubini
Debt reduction
Roubini says the debt reduction program with bondholders is unfair. He prescribes that Greece leaders, either uses or take the route of default , so as to "force" the bondholders into bigger haircuts; i.e. force-negotiate brinkmanship style, at least a 50% debt relief to the country.

Restoring competitiveness so as to retrun to growth
Roubini argues that this can only be done by leaving the monetary union so as to allow a return to a much devalued drachma.

Exit or NOT, Greece GDP is destined to fall; however an exit will lead to a faster recovery than years of deflation
He cites Argentina as an example whereby, the default led to a quicker recovery.

My Thots...
The biggest unpredictability is how the markets will react and how the Greeks themselves react?

I have my doubts....
The positives as he outlined appears to outweigh the negatives.
The question is can  an orderly breakup be possible, given the myriad of moving parts in Roubini's solution?
How do you negotiate, implement and make the market accept the transition from Euros to Drachmas in Greece itself and from a Eurozone with Greece,  to one w/o?
Once Greece leave, would the markets not expect a domino effect on the rest of Euroland eg Portugal, Ireland, Italy & Spain  will be pressured to do the same?
The imponderables and moving parts are far too many?
Assuming , default do take place, post default, how will the Drachma be accepted?
It is easy  for Roubini to shoot off a figure -- 30% depreciation he guess, to the Euro -- but, in truth nobody knows how the market will price the Drachma to the Euro. What if the value collapses to 20%; there will be heperinflation, since the Greek govt will have to print alot more, inorder to pay the debts.
Also at the moment, the Greek govt can sell her assets in Euros and settle her debts in Euros. To sell in Drachmas will mean a huge haircut for her prized national assets, it could be lelong time !!

From the sidelines, it is easy to comment, but policymakers on the hotseat may not want to or have the gumption to take those risks!!

A plea for an orderly divorce may not necessarily result in one, when you have so many partners in the Eurozone and the Troika to please and the markets have so many promiscous 'shorts' ready to rape you, the minute you turn naked when the tides go down....

Monday, October 3, 2011

PMI News... US, Euroland

US ISM Manufacturing Index

PMI surprisingly strong at 51.6% (vs 50.6% in Aug).
- indicates expansion in the manufacturing sector for the 26th successive mth,  and at a slightly higher rate than the previous mth.
New Orders Index  stayed at 49.6% (same as Aug)
Employment Index was at 53.8% (higher than the 51.8% in Aug)

My Thots...
Much stronger than I expected!


Countries ranked by Manufacturing PMI® (Sep)
Germany        50.3    24-month low

Netherlands   48.9    26-month low
Austria          48.7    26-month low
Italy               48.3    2-month high
France           48.2    26-month low
Ireland           47.3    24-month low
Spain             43.7    27-month low
Greece           43.2      7-month low
Only Germany stays in expansionary zone.
Italy surprisingly improves MoM
Greece is at a 7mth low.

Lets take a closer look at Germany's figures...


At 50.3%, the PMI barely stays above the expansion threshold.
Key points:
􀂃 Output growth picks up slightly, but New Orders fall at faster pace
􀂃 Sharpest drop in New Export business since June 2009
􀂃 Output charge inflation lowest for a year-and-a-half

My Thots...

The German data  for New Orders & New Exports look weak and  are in danger of falling, if the crisis drags....

Euroland news...

Extracted, for original see....
Greece Approves $8.8 Billion in Austerity
By Marcus Bensasson and Maria Petrakis - Oct 3, 2011 11:20 AM GMT+0800

Greece’s government pledged to fire workers as part of a 6.6 billion-euro ($8.8 billion) austerity package designed to help secure a rescue-loan payout and a second European Union-led bailout.

The steps outlined by Prime Minister George Papandreou’s administration would leave a 2012 budget deficit equivalent to 6.8 percent of gross domestic product, missing the 6.5 percent goal previously set with the EU, International Monetary Fund and European Central Bank, known as the troika. Troika inspectors agreed to the proposed 2012 budget.

The euro dropped to an eight-month low against the dollar before European finance ministers gather today to consider an enhancement to the region’s rescue fund and the risk of a Greek default. Troika members had been squeezing Papandreou for deeper spending cuts as the country’s three-year recession sapped the revenue needed to close the fiscal gap.

“Important decisions which need to be taken on a European level depend first and foremost on us,” Papandreou told his ministers last night, according to an e-mailed statement from his office in Athens. “We need to show our dedication to reaching the goals.”

Parliament Hurdle

Greece’s measures, which require parliamentary approval, aim to secure disbursement of an 8 billion-euro loan payout this month and a second rescue of 109 billion euros agreed to by EU leaders on July 21. Under the proposals, the deficit this year would be 8.5 percent of GDP, compared with the 7.6 percent target previously agreed with the troika. Next year’s gap is seen at 14.7 billion euros, according to an e-mailed statement from the finance ministry last night.


My Thots......

Outline of the approved steps that Papandreou's Admin agreed to suggest that those measures will cut the budget deficit for 2012 to 6.8%  vs the budgeted 6.5% set with the Troika, earlier in July.

It is probably what the humbled Greek govt pushed against the wall can achieve in the face of the harsh austerity pie the Greeks have to swallow.

This plan is presumably negotiated with the Troika implicit approval but must still need to pass Greek Parliament approval.

The Greeks must deliver in their half of the court according to what was agreed in July (in spirit, they have) before the troika can consider changes that can alleviate the harsh conditions meted out.
In spirit, they have,  becos there are many moving parts,  harsh austerity meant negative growth and shrinking GDP which exacerbates the deficit calculations. Nobody, not even those in the Troika can estimate the effect on the GDP arising from the changing austerity measures, so the 6.8%  (vs 6.5%)  should be acceptable....

That the 6.8% cannot be met  and is being implicitly approved, meant that  the troika acknowledges that there must be changes to the July agreement or to the existing Euroland setup; in order to rule out another round of default scares - which is what is bringing the markets to her knees....

Expanding the EFSF? Leveraging the EFSF? More Haircuts on the Lenders?

What would be brought back onto the table?

China news .......

Plse visit website at

China’s Landing – Soft not Hard

Stephen S. Roach

China’s Landing – Soft not Hard

NEW HAVEN – China’s economy is slowing. This is no surprise for an export-led economy dependent on faltering global demand. But China’s looming slowdown is likely to be both manageable and welcome. Fears of a hard landing are overblown.

To be sure, the economic data have softened. Purchasing managers’ indices are now threatening the “50” threshold, which has long been associated with the break-even point between expansion and contraction. Similar downtrends are evident in a broad array of leading indicators, ranging from consumer expectations, money supply, and the stock market, to steel production, industrial product sales, and newly started construction.

But this is not 2008. Back then, global commerce was collapsing, presaging a 10.7% drop in the volume of world trade in 2009 – the sharpest annual contraction since the 1930s. In response, China’s export performance swung from 26% annual growth in July 2008 to a 27% contraction by February 2009. Sequential GDP growth slowed to a low single-digit pace – a virtual standstill by Chinese standards. And more than 20 million migrant workers reportedly lost their jobs in export-led Guangdong province. By late 2008, China was in the throes of the functional equivalent of a full-blown recession.

Thanks to a massive fiscal stimulus, China veered away from the abyss in early 2009. But it paid a price for this bank-funded investment boom. Local governments’ indebtedness soared, and fixed investment surged toward an unprecedented 50% of GDP. Fears surfaced of another banking crisis, the imminent collapse of a monstrous property bubble, and runaway inflation. Add a wrenching European crisis to the equation, and a replay of 2008 no longer seemed far-fetched.

While there is a kernel of truth to each of these China-specific concerns, they do not by themselves imply a hard landing. Nonperforming loans will undoubtedly increase in response to the banking sector’s exposure to some $1.7 trillion of local-government debt, much of which was incurred during the stimulus of 2008-2009. But the feared deterioration in loan quality is exaggerated.

The reason: With rural-urban migration projected to exceed 310 million people over the next 20 years, there is reason to believe that much of the apparent overhang of housing supply will be steadily absorbed. Like Shanghai Pudong in the late 1990’s, today’s Chinese “ghost cities” are likely to be teaming urban centers in the not-so-distant future. Meanwhile, deposit-rich Chinese banks have ample liquidity to absorb potential losses; the system-wide loan-to-deposit ratio is only about 65% well below earlier pre-crisis levels that were typically closer to 120%, according to a recent analysis by the Xerion team of Perella Weinberg Partners.

Nor is the Chinese property market about to implode. Yes, a building boom and speculative excesses have occurred. But a year and a half ago, the government moved aggressively to dampen multiple property purchases – raising down payments to 50% for second homes and to 100% for third homes. While that halted much speculative activity, house prices have remained at elevated levels – underscoring lingering affordability issues for China’s emerging middle class.

Notwithstanding that problem, major imbalances in Chinese property markets should prove to be the exception over the next two decades.  While there could be supply-demand mismatches in any given year, with an average of roughly 15 million citizens a year slated to move from the countryside to newly urbanized areas, demand should rise to meet supply

Inflation is always a serious risk in China – especially with headline increases in the country’s Consumer Price Index surging through the 6% threshold this summer. The government has responded forcefully on four fronts:
  -    First, food inflation, which accounts for about half the recent run-up in overall prices, has been addressed by administrative measures aimed at cutting fertilizer costs and removing bottlenecks to increased supplies of pork, cooking oil, and vegetables.
  -    Second, in an effort to curtail excess bank lending, reserve ratios were increased nine times in the past 11 months.
  -    Third, the rate of currency appreciation has edged up.
  -   Finally – and perhaps most importantly – the People’s Bank of China has raised its benchmark policy rate five times since October 2010. At 6.5%, the one-year lending rate is now 0.3% above August’s headline inflation rate.

If food inflation recedes further, and the headline inflation rate starts to converge on the 3% core (non-food) rate, the result will be the equivalent of "passive monetary tightening" in real (inflation-adjusted) terms – precisely what the inflation-prone Chinese economy needs.

All of this underscores a potential silver lining. An increasingly unbalanced Chinese economy cannot afford persistent 10% GDP growth. Provided that there is no recurrence of the severe external demand shock of 2008 – a likely outcome unless Europe implodes – there is good reason to hope for a soft landing to around 8% GDP growth. A downshift to this more sustainable pace would provide welcome relief for an economy long plagued by excess resource consumption, labor-market bottlenecks, excess liquidity, a large buildup of foreign-exchange reserves, and mounting inflationary pressures.

For China, there is a deeper meaning to recent global developments.  A second major warning shot in three years has been fired at this export-led economy.  First, the United States, and now Europe – China's two largest export markets are in serious trouble and can no longer be counted on as reliable, sustainable sources of external demand. As a result, there are now major questions about the sustenance of China's long powerful export-led growth model.

Accordingly, China has no choice but to move quickly to implement the pro-consumption initiatives of its recently enacted 12th Five-Year Plan. Strategic transition is what modern China is all about. That’s what happened 30 years ago, when economic reform began.  And it needs to happen again today.  For China, a soft landing will provide a window of opportunity to press ahead with the formidable task of increasingly urgent economic rebalancing.

Project Syndicate

My Thots.....

The latest PMIs show that China's New Orders Index is always higher than her Exports Index, indicating that domestic consumption has been driving growth.....

"Wisdom is purified by virtue and virtue is purified by wisdom. Where one is, so is the other."