TechAgility

Japan is struggling after more than a decade to get their interest rate above 2%

Japan GDP Could Force Changes

Economy Minister Says Data May Result in New Stimulus Plan

A government survey released Tuesday showed analysts expect Japan’s economy to have contracted at a 10.59% annualized pace in quarter ended Dec. 31. A month ago, the 38 economists had expected a 5.14% contraction.

The economists also see GDP as likely to continue falling at least until the June-September quarter. Furthermore, due to expected weaker domestic demand, consumer prices are forecast to fall for all of the next two years, the survey showed.

The US is going to be in a state of recession for most of this year and possibly in to 2010 before any recovery is likely?

Alt-A loans: New fear for middle-class subprime

Gideon Spanier, Evening Standard
9 February 2009, 10:27am

We can’t say we haven’t been warned. The doom-mongers reckon America’s property market is on the verge of a new crisis as big as the subprime disaster that began in 2007. The fear is that borrowers with better credit histories, who took out Alt-A mortgages, are defaulting on a similar scale.

Global exposure to American Alt-A (it stands for Alternative-A) is estimated at $600bn – the same as subprime. Bearish observers think losses could hit $150bn. ‘the performance of Alt-A is clearly deteriorating rapidly, and we believe that 2009 will see such mortgages worsen further,’ says David Watts, an analyst at CreditSights in London.

……….

According to CreditSights, 9.2% of Alt-A mortgages from 2005 had been repossessed or were in foreclosure by December 2008. For 2006 mortgages, repossessions leapt to 17.1% by the end of 2008. The 2007 vintage is shaping up to be even worse, with 13.6% having already been repossessed.

Moody’s reckons total losses from the 2006 Alt-A vintage could peak at 20%, and the 2007 vintage may average 24%. Some have ‘performed similarly to subprime’. Historically, Alt-A losses had been just 1%.

Dozens of banks are affected because they bought parcels of Alt-A mortgages that were sold as securities and traded around the world. Britain’s Lloyds Banking holds more than £7bn worth, Barclays has over £3bn and RBS about £1.5bn. the picture is bleak.

Falling US house prices mean negative equity and fewer cheap mortgage deals. creditSights says an alarming 60% of Alt-A borrowers from the 2006 vintage are in negative equity. no wonder there is much talk about the growing trend for ‘ walkaways’ – that is people who are giving up repaying a loan because it is worth more than the value of their home.

UK is now getting more of a cold shower after RBS’s share price has fallen through the floor, and it’s starting to look possible that more than a few banks will be nationalized?

HBOS Posed Threat to Financial System, Ex-Compliance Chief Says
Bloomberg – 8 hours ago
The Treasury fully nationalized Northern Rock Plc and Bradford & Bingley Plc. RBS plans to cut as many as 2300 UK jobs, about 2 percent of the bank’s …

……..

BBC News

RBS Retreat From Global Banking Reveals Financial Protectionism Bloomberg – 12 hours ago Nationalized banks are problematic for international markets because the interests of governments and global capital don’t easily align, said Michael Marks, …

…….

British Bankers Apologize For Events That Led To Nationalization … AHN

Australia would appear to have weathered the storm reasonably well so far and the Base Rate is still at 4.25% with some wiggle room left? However I’m of the opinion that we have been somewhat sheltered by our relatively recent "Resource Boom" and the exports to China – and it looks like this is all about to end soon?

As far as China goes it is very disturbing to see some recent reports of corruption on a possibly systematic scale that tend to indicate that they have also been somewhat caught up in the Hype and have overextended themselves with too much emphasis on building Infrastructure for the sake of it?

China’s export down 17.5% in January China Daily, China China faces the worst international economic environment since the Second World War, with lingering high pressure on its exports, said Fan Jianping, …

…….

February 11, 2009

China’s economy worse than government figures suggest, experts say

Plunging exports. Factory closures. More than 20 million people thrown out of work. Official data showing that China’s economy is cooling but still growing strongly obscure what economists say is a sharp recent decline that has inflicted obvious pain.

What is happening matters far beyond China. Whether the third-largest economy is stalling or still growing could affect how quickly the world recovers. A stagnant China would mean less demand for industrial materials and consumer goods from the United States and others.

The difference lies in the way growth is measured. Beijing uses a method that compares growth in one quarter with a full year earlier and says its economy expanded by a healthy 6.8 percent in the final quarter of 2008.

But experts say that compared to the previous three months — the system used by most other major countries — China’s growth fell to as low as one per cent or possibly zero.

“The recent weakness is much worse than the long-term trend,” said JP Morgan economist Frank F.X. Gong. Merrill Lynch economist Ting Lu said fourth-quarter growth from the previous three months was “close to zero.”

…………

Related readings:
Export of high energy-consuming products down 16.2% in 2008
January coal exports down 36.3%
Steel exports drop 5.5% in 2008
Jan exports shed record 44% for 5th monthly loss

If and/or when their growth forecasts get pegged back from 6% to 2% or lower (maybe even negative?) then I think we might be looking like we might have hit bottom? But it’ll only take a natural disaster or something similar to add some more serious drops to the market?

I don’t want to be pessimistic, far from it, but I do think we need to be realistic? – as it is I don’t think we have seen the bottom yet!

The very reality is that while it looks like the world has suddenly woken up with a massive Credit Hangover, and the real antidote is deleveraging with the attendant risks of slower growth, recession, etc. all the Govt’s around the world seem to be hell bent on printing more bank notes and approving stimulus packages? Surely this isn’t the way to go? This leaves the new brave world (and the interconnected global economy) severely at risk of either a prolonged recession (or depression?) or perhaps even inflation further down the track?

written by dcaddick