BLS EMPLOYMENT SITUATION – OCTOBER 2011

http://www.bls.gov/news.release/pdf/empsit.pdf

* Nonfarm payroll employment trended up in October (+80,000)
* Unemployment rate was little changed at 9.0 %

MoM change in K

Category....................................Oct...........Aug...........Sept.................Oct.

 .................................................2010.......2011........2011p...........2011p

Total nonfarm.............................171.........104............158....................80

Total private..............................143...........72............191..................104

Goods-producing........................1............-13.............29...................-10

Private service-providing1........142............85............162.................114

Government................................28............32.............-33.................-24

Thots & Observations....

1) The change in TNFP (total nonfarm payroll) employment for August was revised from +57K to +104K and the change for September was revised from +103K to +158K.

 IMHO, it shows that the BLS preliminary estimates data tend to be adjusted upwards in future mths as more data streamed in; only to follow the ADP Private Payrolls data.

2) So jobs add in the previous 2 mths had been underestimated.

3) As with the ADP data, Goods-producing industries remain weak, whilst the Service Providing Industries power on.

4) Govt Sector continues to be weak, with the State govt losing 20K jobs.

ECB Bonds Purchases

ECB rate cut was pre-emptive, bond buys temporary -Stark

Fri Nov 4, 2011 10:38am EDT

* Says Draghi made clear bond-buy programme is temporary* Puts onus on governments to tackle crisis via reforms
* Suggests Thursday's rate cut should have been expected
* Sees "strong cooling" of economy

By Sakari Suoninen and Eva Kuehnen

FRANKFURT, Nov 4 (Reuters) - The European Central Bank's interest rate cut on Thursday was a pre-emptive strike, policymaker Juergen Stark said on Friday, and urged the bank to call an early halt to its sovereign bond-buying programme.

The comments by Stark, who will step down from the bank's six-strong Executive Board at the end of the year, signal the ECB is not preparing to cut its key policy rate again this year.

He also stressed that the bank's programme of buying sovereign debt was temporary and dismissed suggestions it should be made permanent even as the ECB faces pressure to ramp up purchases to tackle the euro zone debt crisis.

The controversial programme has increasingly come into focus as the debt crisis has deepened due to uncertainty about Greece's future in the euro zone. Many analysts see ECB bond buying, and the firepower it could unleash, as the only way to steady markets.

Stark is quitting the ECB early this year in what sources have said is a protest against the bond-buying programme.

The ECB's new president, Mario Draghi, said on Thursday the programme was "temporary" and "limited", reiterating the stance of his predecessor Jean-Claude Trichet and suggesting Draghi wants to keep up pressure on euro zone governments engulfed by the debt crisis to reform.

"Mario Draghi made clear that this is a temporary measure and it's no secret that I have never been a particular fan (of the programme)," Stark told a conference in Frankfurt.

"I expect that we should end this programme as soon as possible, because it sets false incentives for member states, for governments to bring their budgets in order."

After the event, Stark expanded on his comments, ruling out making the programme permanent, as was suggested during the Cannes G20 meeting.

"This is not an option," he told reporters.

Stark suggested markets were wrong to have been surprised by Thursday's ECB decision to cut rates to 1.25 percent at its first policy meeting under Draghi.

"Yesterday's decision has nothing to do with pragmatism," Stark said, adding that he made the proposal to cut rates.

"We are witnessing a strong cooling of the global economy and in the euro zone."

But, he also flagged that the ECB plans to keep rates on hold until at least the end of the year.

"We anticipated the deterioration of the economic situation over the next couple of weeks, so this was a pre-emptive decision," the German said. "We never pre-commit, but I would like to stress this was a pre-emptive decision."

Stark's fellow Executive Board member, Jose Manuel Gonzalez-Paramo said on Friday that inflation should remain the central bank's priority.

"Monetary policy must remain focused on its key objective of delivering price stability," he said in Madrid.


SELF-HELP PROGRAMME
Stark's opposition to the ECB's bond buying is based on a belief, shared by many at the central bank, that the onus should be on the crisis-hit countries to make economic reforms and fears that ECB market intervention, which can reduce government borrowing costs, could reduce their incentive to reform.
Stark said euro zone countries receiving aid from their wealthier peers must use that help to put themselves on a stable footing.

"Solidarity is not a one-way street," he said. "It calls for input from both sides, from those who give as well as those who take. The financial support of the donor countries helps the crisis states to buy time to carry out reforms."

ECB bond buying has helped keep surging Italian bond yields in check as Italy's high debt has become a focus of market attention. Italy agreed late on Thursday to allow the IMF to monitor its progress in carrying through economic reforms whose delay has sapped market confidence in the country and ravaged its government bonds.

Draghi, himself an Italian, gave no hint on Thursday that the ECB's bond-buy programme would be accelerated despite the chaos in Greece threatening to engulf the much larger economies of Italy and Spain.

"At this juncture they want to stress that they don't see it as their remit to be the lender of last resort to governments," RBS economist Nick Matthews said of the ECB, adding that the central bank still wanted markets to function in an orderly way to allow the transmission of its monetary policy.

"If the governments are trying to put the Italian politicians under pressure to put in place the necessary reforms, you don't want to let them off the hook by all of a sudden buying huge amounts of their bonds," he added. "So it's a balancing act we've got here."

Matthews expected the euro zone's rescue fund, the European Financial Stability Facility, would have insufficient firepower to restore order to markets, even if it is leveraged to 1 trillion euros, and that the ECB would ultimately have to increase its bond purchases.

"We think that ultimately they will be forced to step up massively their bond purchases in order to prevent a new escalation of contagion risks across the system," said Matthews, who was among a minority of economists who forecast the ECB's rate cut on Thursday.

DBS High Notes

This article by BT's Michelle Quah on 4/11/2011 tells about the DBS High Notes investor's disappointment. Did DBS really win?

Excerpts....  The 220 investors who collectively lost $18 million when the DBS High Notes 5 structured product went belly up in 2008 have expressed their disappointment in the Court of Appeal's decision on Wednesday to dismiss their claim against DBS Bank. 'We are disappointed that the court appears to have resolved this inconsistency and based its decision by relying on documents that did not involve us, that did not form part of our contract with DBS and which we never saw until after the hearing of the appeal,' the investors said in a statement yesterday. 'Nonetheless, given that there are no other avenues of recourse, we have no choice but to accept the decision. We have tried our best to recover some of the life savings that so many of our group members have lost and are sad that we have been unsuccessful,' they added. At the heart of the investors' claim was that the credit event redemption amount (CERA) to be paid out to them, in the event that Lehman defaulted, was defined differently in four different instances in the DBS High Notes 5 pricing statement, thereby rendering the notes void for uncertainty. The Court of Appeal agreed there were inconsistencies between the four definitions of CERA in the pricing statement and directed DBS to produce the product's reference notes. The court found that the definition there was the same as the third CERA description in the pricing statement. 'The result was that owing to Lehman's bankruptcy, the CERA payable to HN5 holders on their investment was indeed zero,' the Court of Appeal ruled. It agreed with an earlier High Court ruling that the DBS High Notes 5 contract was not void for uncertainty and dismissed the investors' appeal with costs. The 21 investors, who brought the lawsuit against DBS on behalf of 199 others, were represented by Siraj Omar of Premier Law LLC. DBS was represented by Senior Counsel Davinder Singh and Una Khng of Drew & Napier. Some 9,900 people here have lost most, if not all, of their investments totalling about $520 million in Lehman-linked products, such as the DBS High Notes, Minibonds, Merrill Lynch Jubilee Series 3 LinkEarner Notes and Morgan Stanley Pinnacle Series 9 and 10 Notes, distributed by DBS and other financial institutions.

BT

__________________

My Thots....

Losing money an a high note.
Lost monies in the DBS High Notes 5 structured product, lost in the verdict;  possibly,  have to pay for the high flying lawyers that DBS hired to win the case.


Legally, DBS won.
In terms of Goodwill, I wonder.....

Would anybody trust the RMs pushing financial products at the counters ( or Cubicles), anymore?

Sembcorp

Sembcorp

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_B6BFD967AF3968624825793D0080F9CA/$file/SCI_9M2011_ResultsSlides.pdf?openelement

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_B6BFD967AF3968624825793D0080F9CA/$file/9M2011SGXNet-Final.pdf?openelement

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_B6BFD967AF3968624825793D0080F9CA/$file/SCI_9M2011_PressRelease.pdf?openelement

ECB under Super Mario

ECB’s Mario Draghi Offers Hope He Can Do What Europe Needs.

By the Editors Nov 4, 2011 7:00 AM GMT+0800

The new head of the European Central Bank demonstrated yesterday that’s he’s ready to step in to support the euro-area economy. We hope that also means he’s willing to do what it takes to save the euro.

After only three days as president of the ECB, Italy’s Mario Draghi oversaw the euro area’s first interest-rate cut in more than two years, lowering the central bank’s target rate by 0.25 percentage point to 1.25 percent. The decision surprised investors and economists, most of whom had expected Draghi to hold rates steady in his debut meeting at the ECB’s helm.

In the subtle game of monetary policy, it was a bold move, and one that could distinguish Draghi from his predecessor, Jean-Claude Trichet. The ECB’s primary mandate is to control inflation, which is currently running at 3 percent, well above the central bank’s 2 percent target. But Draghi, with the unanimous support of the bank’s 23-member Governing Council, put more weight on the deteriorating outlook for the euro-area economy, which he says is headed for a recession.

The big question now is where Draghi will stand on a larger issue: Whether the ECB will pledge the trillions of euros needed to guarantee the financing needs of solvent euro-area governments. The central bank, with the power to print euros, is the only European institution that can credibly make such a promise, which would be the linchpin of any plan to resolve finally the region’s sovereign-debt crisis.

 

No Backstop

Under Trichet, the ECB had been unwilling to be the euro’s backstop. Together with Germany, the bank has essentially been betting that the threat of financial disaster will maintain pressure on countries such as Italy to agree to reforms, including a European authority that could take over the finances of troubled governments. It’s a laudable goal, but one that could take years to reach, whereas a market meltdown could do irreparable damage to the global economy in a matter of weeks.

On the surface, Draghi’s position is identical to Trichet’s. In a news conference yesterday, he said the central bank can’t do politicians’ jobs and act as the lender of last resort to governments. He characterized the bank’s purchases of government bonds, which amount to some 174 billion euros ($240 billion) so far, as “temporary” and necessary to restore “the functioning of monetary policy transmission channels.”

Draghi, though, has vast leeway in interpreting that last clause, which is central banker-speak for intervening in various markets to make sure interest-rate policies have the desired effect. In an emergency, it could be used to justify a blanket guarantee on newly issued government debt. After all, if credit markets freeze on concerns that European governments can no longer borrow, monetary-policy transmission channels -- even at a target rate of zero -- won’t function very well.

If and when Draghi finds himself staring into the abyss, we hope he’ll remember the mantra of Federal Reserve Chairman Ben S. Bernanke during the 2008 crisis: Do whatever it takes.

___________________

My Thots...

Shorts be forewarned.
Super Mario passed his 1st test with flying colors!!
He might be amenable to using the ECB to leverage on the EFSF for the bazooka effect (aka TARP starring Bernanke & Paulson). Something the legacy driven  conservative Trichet  was reluctant to do.
There should now be no doubts in the bond vigilantes' minds, whatsoever,  that he will be prepared to buy bonds of Italy and Spain, in the secondary mkts to bring down  premiums over bunds, to alleviate  and bring down borrowing costs in a crisis.

That photo of Super Mario propping up the Euro with his finger is no illusion!!

FOMC Statement

Release Date: November 2, 2011

For immediate release

Information received since the Federal Open Market Committee met in September indicates that economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year. Nonetheless, recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has increased at a somewhat faster pace in recent months. Business investment in equipment and software has continued to expand, but investment in nonresidential structures is still weak, and the housing sector remains depressed. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.
 
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.


Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Charles L. Evans, who supported additional policy accommodation at this time.


________________________

My Thots....

To me the biggest positive comes from the attached release :-   http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20111102.pdf

if U look at Pg 2 of the slides, U will see quite a benign outlook for the US economy....
1) GDP is expected to trend up to 3 to 4+ % in 2015
2) Unemployment rate is expected to trend down to 6.5 to 7+% in 2015
3) PCE inflation is expected to trend down  to 2% and stay at 2% levels from 2013 to 2015.

Now let's revert our discussion to the FOMC Statement.

3 Points stand out:-

1) The FOMC observation that 3Q outlook strengthened; in spite of weaknesses in the labour mkts and the non residential structures categories.
2) The statement that FOMC anticipates that Unemployment rate will decline---- but, only gradually towrads its 2% mandate.
3) That the FOMC is maintaining Op Twist but is prepared to do QE 3.0 (adjust the size of those holdings), if  appropriate.

IMHO, a positive and benign outlook for the US economy; provided that the Eurozone do not fall off the cliff.

Greece referendum

Greek cabinet backs referendum

Posted: 02 November 2011 1027 hrs

ATHENS: Greek Prime Minister George Papandreou secured the unanimous backing of his cabinet for a referendum on the eurozone debt rescue plan, government spokesman Elias Mossialos said early Wednesday.

The cabinet also approved Papandreou's decision to hold a parliamentary vote of confidence on his government, Mossialos told reporters.

Several socialist deputies had already denounced the referendum plan on Tuesday, with one member quitting the parliamentary group to fight it.

That defection left the socialists with just 152 deputies in the 300-seat parliament, suggesting that the outcome of Friday's confidence vote was far from a foregone conclusion.

At the emergency cabinet meeting called late Tuesday, Papandreou had insisted on the need for a referendum.

"The referendum will be a clear mandate, but also a clear message inside and outside Greece on our European course and our euro membership," he said.

Explaining his opposition to calls for an early election, he argued that "everything would stop" in an election campaign and the country would "be dragged to a risk of bankruptcy".

Papandreou added that his EU peers "had been advised" of his plans "and will respect and support" the country's efforts.

Earlier Tuesday, Defence Minister Panos Beglitis backed the referendum.

"The Greek people must assume their responsibilities on how they want the country to continue its course and exit from the crisis," he told private Skai radio.

During trading Tuesday, Greek stocks plunged 6.92 percent in response to Papandreou's surprise referendum announcement late the previous day.

Adding to the chaos, Greece's foreign minister cancelled meetings with three foreign ambassadors, while Finance Minister Evangelos Venizelos was hospitalised with an inflamed appendix.

The semi-state Athens News Agency said Venizelos had made a flurry of phone calls to senior players at the European Commission and the International Monetary Fund as well as to his German counterpart Wolfgang Schaeuble.

On Wednesday, Papandreou is due in the French resort town of Cannes to face G20 leaders at their summit on Thursday and Friday.

He will attend a working dinner with host Nicolas Sarkozy of France and German Chancellor Angela Merkel.

Also present will be EU president Herman Van Rompuy, EU commission chief Jose Manuel Barroso, eurozone chief Jean-Claude Juncker, new ECB chief Mario Draghi and IMF managing director Christine Lagarde, Papandreou's office said.

In a phone call with Merkel on Tuesday, Papandreou insisted the referendum would strengthen Greece in the eurozone and globally, his office said.

But on Tuesday, former deputy minister Milena Apostolaki quit the socialist parliamentary group, saying she would keep her seat to fight the referendum plan.

"I have an obligation to resist this erroneous political choice that divides the nation," she said in a statement.

Vasso Papandreou, head of the parliamentary economic affairs committee, then called for early elections and a temporary unity government to "safeguard" last week's eurozone deal to slash Greece's huge debt.

"The country is threatened by imminent bankruptcy," said Vasso Papandreou - no relation to the prime minister.

Another socialist deputy, Eva Kaili, threatened to defect if the government persisted with the referendum plan, and a statement from six socialist party members also called on the premier to resign.

Many analysts have warned that early elections would fail to produce a strong majority in parliament and would plunge the country into political uncertainty. Papandreou's term ends in 2013.

But with leaders of the world's 20 biggest economies getting ready for the Cannes summit which is focused on the economic crisis, Papandreou's unexpected move has triggered fears the rescue efforts could rapidly unravel.

He has faced increasing dissent within his own party over the tough austerity policies required by the EU and the IMF, which have sparked general strikes and sometimes violent street protests.

Although the EU deal agreed last Thursday included an agreement to write off 100 billion euros ($137 billion) of debt owed by Greece, Athens still has to implement a painful package of austerity measures in return.

Also on Tuesday, a state security council chaired by Papandreou replaced the heads of the general staff, the army, navy and airforce.

A defence ministry source insisted the reshuffle had been previously planned and was not linked to the political turmoil.

- AFP/fa/al

http://www.channelnewsasia.com/stories/afp_world_business/view/1163017/1/.html

____________________________

My Thots....

Does the troika, all respectable members & proponents of democracy, expect GP to ram the austerity measures down the throats of Greek citizenry?

The truth of the matter is that w/o a proper mandate from the people thru some sort of a referendum, any austerity measures that George Papandreou (GP) agreed with the troika cannot be implemented with success. He had to go to the people to have the legitimacy for the huge reforms.

An election would be a total disaster as it will likely be tumultous and he would likely be thrown out.

A properly framed referendum such as " Should Greece stay in the Eurozone" would be a more safe way of gathering political legitimacy.

There are sufficient reasons to believe that a significant portion of the population are NOT paying their "dues" in taxes and faced with a choice between Greece's collapse and exit from Eurozone vs paying their "dues"; this portion of the population may even vote "Yes".

The biggest worry were the biz reports claiming that members of GP's PASOK were abandoning him for his decision to hold the referendum and that his "majority" slipped to a mere difference of "one".

With his cabinet behind him, the picture is clearing but he still has a huge challenge ahead of him.

ADP Employment Report, US ISM Report

ADP Employment Report

http://www.adpemploymentreport.com/pdf/FINAL_Report_October_11.pdf


*Total employment: +110,000 
* Small businesses:* + 58,000
* Medium businesses:** + 53,000
* Large businesses:*** - 1,000
* Goods-producing sector: - 4,000
* Service-providing sector: +114,000
Addendum:
* Manufacturing industry: - 8,000


*Small businesses represent payrolls with 1-49 employees
** Medium businesses represent payrolls with 50-499 employees
*** Large businesses represent payrolls with more than 499 employees

Note: All data included in the ADP National Employment Report is based on size of payroll. In some cases, small and medium-size payrolls belong to businesses employing more workers than indicated by the size grouping.

___________________________

Thots N Observations....

1) Service Sector and the SMEs drives growth.
2) Manufacturing and the Goods Producing Sector continues to be weak.
3) The Jobs add picture could be turning.






US ISM Report

http://www.ism.ws/ISMReport/MfgROB.cfm

PMI at 50.8%

Thots N Observations....


Good news is that New Orders, Production and Employment  Indices are growing
New Orders Index is at 52.4% in Oct (vs 49.6% in Sept).

MF Global

MF Global Meltdown Shows the Wisdom of Limits on Proprietary Trading

The bankruptcy of MF Global Holdings Ltd. is the first major U.S. casualty of the European sovereign- debt crisis. The trading firm’s demise is no small matter: Its $40 billion in debt is on the scale of Chrysler’s 2009 failure.

The MF meltdown is also sad news for creditors, shareholders and almost 3,000 employees, not to mention a humbling blow to Chief Executive Officer Jon S. Corzine, the former Goldman Sachs head, U.S. senator and New Jersey governor.

So is there anything to be learned from this mini- cataclysm? Well, yes. Three things, actually.
Lesson No. 1 is that there is no need for -- indeed, no one is even suggesting -- a bailout. MF Global took large bets on commodities, government debt, futures and derivatives, and did so with its own capital. No federally insured bank deposits or Federal Reserve discount-window loans were involved. Companies that risk their own money, or that of wealthy clients, should be allowed to fail.

Almost as soon as he arrived in 2010, Corzine set out to make MF Global a junior version of Goldman Sachs by diversifying his new firm, which until then had mostly arranged and processed trades for banks, corporations and other investors. MF Global, formerly part of Man Group Plc (EMG),was founded as a sugar broker by James Man in England in 1793. It was spun off as a public company in 2007.

The financial crisis and economic decline put a dent in trading revenue as investors reduced their risk appetites and generally had less money for trading. So Corzine pumped up the firm’s proprietary trading desk, using its small base of capital to buy European sovereign debt.


Poor Timing
To say the least, Corzine’s timing was poor, coming as many Wall Street firms were spinning off or shrinking proprietary trading desks and reducing their risk. MF Global went in the opposite direction by buying the debt of  Italy, Spain, Belgium, Portugal and Ireland, ignoring warnings of default by one or more of those countries.

The company now holds more than $6 billion in euro-area debt, the value of which has since tumbled. It also tried to earn interest off those assets in the overnight repurchase market. To do all this, the firm borrowed $40 for every $1 in capital, according to Egan Jones, a rating service. That’s more leverage than Lehman Brothers Holdings had when it collapsed in 2008.

And that raises lesson No. 2: Regulators this time didn’t wait for disaster to befall MF Global and its trading partners. The Financial Industry Regulatory Authority, the overseer of trading firms like MF Global, in September required it to reduce its leverage by setting aside more capital.

The unraveling came quickly. The short-term cash lenders that MF Global depended on began demanding more collateral for their loans. Ratings companies downgraded the firm, with Moody’s Investors Service citing the firm’s “outsized proprietary position.” The firm on Oct. 25 reported a net loss of almost $192 million for the latest quarter, the ninth loss in the past 11 quarters. Once Bloomberg News reported on Oct. 28 that MF Global had tapped out two of its credit lines, the shares plummeted and the firm was, for all intents, dead.

Because none of these activities took place within a bank, MF Global’s failure is contained within a relatively small circle of owners, lenders, counterparties and customers. This isn’t  to minimize the large and painful losses, but there are no public losses and, so far, little systemic fallout.

And therein lies lesson No. 3: MF Global’s wagering is a reminder why the Dodd-Frank financial reform law bars banks from making high-risk bets with depositors’ money. As Bloomberg View has written before, a big gamble that goes wrong can deplete the capital a commercial bank needs to fulfill its basic lending function. It can also put taxpayers on the hook for a bailout.

The Volcker rule, named after Paul Volcker, the former Federal Reserve chairman, would curb banks’ ability to make speculative bets for their own profit. The details of the rule are up for grabs, and will be the subject of future editorials. There’s nothing wrong with proprietary trading -- it just shouldn’t be done by federally insured, deposit-taking banks, a lesson MF Global’s collapse amply demonstrates.

Bloomberg
http://www.bloomberg.com/news/2011-10-31/mf-global-meltdown-shows-the-wisdom-of-prop-trading-limits-view.html

__________________

My Thots.....

Jon Corzine, made out to be a star with pedigreed lineage from Goldman Sachs, when he first joined MF Global has failed spectacularly; underlining the dangers of proprietary trading carried out by Investment Bankers.

The financial lobby is still trying hard to get around  Volcker's rule, by watering down the details during Dodd Frank implementation ----- that prevents a  deposit taking big banks from taking trading bets that involves those monies.

The danger is still there especially in big banks like CitiGroup, Barclays or even Soc Gen, one arm doing retail banking and taking deposits and another arm  doing investment banking, involved in proprietary  trading. The huge bets taken at the proprietary trading desks  can affect the  deposits placed by unsuspecting depositors, if nothing is done to segregate the risks at the holding co level.

MF Global's collapse should serve as a warning of the dangers of proprietary trading risks  and that it has no place in the deposit taking banks biz model.

Those arguing for limits and NOT full implementation of the Volcker Rule as it was envisaged are misguided.

PMI News

China PMI

CFLP

http://www.lifunggroup.com/eng/knowledge/research/PMI_november11.pdf


New Orders Index (NOI) was 50.5% in October, down from 51.3% in September., down from 51.3% in September.
New Export Orders Index (NExOI) dropped below the critical level of 50% in October
Taken together, the NOI and NExOI, shows that the domestic consumption is healthy and is the prime factor drving PMI growth.

Input prices index declined sharply by 10.4 ppt. to 46.2% in October (vs 56.6% in September)
---- for the first time since April 2009.

Employment index was 49.7% in October, down from 51.0% in the previous month.



HSBC

http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8736

Key points
• Output growth supported by renewed expansion of overall new orders
• Growth of new export business the highest since January
• Input cost inflation eases; charges rise at faster pace

Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said:

"The final PMI confirms the notable improvement in China’s manufacturing activities driven by rising new business from both domestic and external markets. Despite the slight uptick in output prices growth, inflation is on track for easing. This provides leeway for Beijing to fine-tune policy to strike a better balance between growth and inflation priorities. We expect stable monetary policy with targeted easing in the coming months."



S Korea PMI
http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8710

Ronald Man, Economist at HSBC in Asia said:

"Whilst uncertainty still hangs over Europe, the story in Korea is clearer. Korea’s manufacturing sector remains on track for a soft landing. The rate of contraction in October has eased, with the PMI index heading back towards the 50 no-change level. No doubt, soft global demand will hold back new orders, but a tight labour market at home and resilient Chinese growth should help Korea’s manufacturing sector push through the fourth quarter."

Taiwan PMI
http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8709

Taiwan Manufacturing PMI survey, Donna Kwok, Economist at HSBC in Asia said:

"The impact of softening Western demand is becoming more evident as output continues to cool. That said, with employment holding up better than the last downturn of 2008-2009, and with China’s manufacturing activity now stabilizing, Taiwan should be able to lean a bit more heavily on Mainland demand as it fends off the impact of US and European deleverage going forwards."


Russia PMI
http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8728


India PMI
http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8711


____________________


My Thots.....

China PMI
CFLP data and HSBC data contradicts on New Orders Index (NOI) but correlates on  Input Prices Index----- this divergence could be indicative of the many changes the SMEs are undergoing on the ground level and the differing methodologies and difficulties  in collecting consensus opinions/data, for the PMI, for the moment.

S Korea & Taiwan
If the HSBC data is to be believed, China's recovery in the PMI has helped arrest the fall in both nations PMI and helped in the stabilisation of their manufacturing activities.

Russia & India
Both countries PMI have bottomed and appears on the path of recovery.

Italian Yields

Italian borrowing yields soar above 6.0%

PARIS — Italian borrowing rates rose sharply on Monday, reaching record spreads with German rates despite a eurozone deal last week to fight the eurozone debt crisis and prevent contagion.

On financial markets, traders said that this renewed tension on Italian bond yields had pushed down European banking shares and the main stock indices, and had undermined the euro.

Yields on Italian 10-year debt rose above 6.0 percent, a level widely considered unsustainable for Italy and its 1.6 trillion euros of public debt ($2.2 trillion).

In late morning deals, the Italian yields stood at 6.111 percent up from 6.011 percent on Friday and fast nearing the record high of 6.397 percent reached on August 5.

The spread, or difference, between the yield on Italian 10-year sovereign bonds and benchmark German bonds also rose to 400 basis points.

The yield on Spanish 10-year debt rose to 5.600 percent, up sharply from 5.490 percent on Friday.
Concern that the debt crisis could spread beyond Greece, Ireland and Portugal have centered on Italy and Spain, core eurozone countries with big economies. If they were pulled down, the effects would hit the eurozone and also the global economies.

The deal agreed last week was meant to solve the Greek debt crisis once-and-for all and prevent contagion by recapitalising banks, and by reinforcing the 440-billion-euro European rescue fund created at the beginning of the crisis, the European Financial Stability Facility.

"Constant pressure on long-term Italian bond yields despite a rise in share prices (last week) underlines that the sovereign debt crisis is far from over and that markets will still test politicians," analysts at Aurel BGC brokerage said.

"There clearly needs to be a solution to increase the firepower of the EFSF. China and Brazil have been called on to play a key role in the construction of Europe," they added.

The analysts said the G20 summit this week would provide further indication of exactly how last weeks European deal will develop.

Attention will now turn to the European Central Bank, whose new head Mario Draghi said the bank will continue pushing Spain and Italy rates lower by intervening directly on the secondary markets.

Analysts at BNP Paribas said they expected the ECB "to play a more active role as the Italian 10-year rates return to these key levels".

Rates for more financially sold states meanwhile fell. German rates dropped to 2.112 percent and French rates to 3.128 percent.

AFP
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My Thots.....

It is no wonder that the bond vigilantes are at it again....
1st and foremost, Trichet passes the baton to Draghi on Tuesday and the shorts will like to test his mettle.
As an Italian himself  will Draghi have his own "inner conflicts" on buying Italian bonds on the secondary mkts after he takes over the ECB leadership ?
Then there is Berlusconi, that percieved weak link in the Italian chain of command; the Itallian ruling elites aka bureaucrats or civil service, are well respected. Will he put his plans into actions or will he filp-flop.