Hugh Hendry watch

Here's some linkage and video of hedge fund manager Hugh Hendry.

NY Times article - July 19, 2010

Vdeo interview posted July 23:

Chinese property developers cut prices.

From Chinadaily:

BEIJING - More property developers have began to cut prices and adjust their business portfolios to cope with sluggish transaction numbers due to government tightening of the real estate sector.   According to Li Wenjie, general manager of property agency Centaline China's North China Region, most Beijing developers have lowered prices by 15 percent on new projects.
Shenzhen-based Vanke, the country's largest real estate firm, made public sale prices of a large-scale project in Beijing over the weekend, with units priced 1,600 yuan ($236) lower than the expected price of 15,000 yuan per square meter.

Shanghai-headquartered Shimao Group just launched an upscale residential project called "Royal Garden" in Beijing's Central Business District area at a price of 65,000 yuan per sq m. The average price of similar projects nearby has been close to 70,000 yuan per sq m.

Of course the article quotes real estate firms spinning the lower prices but as I have mentioned previously first volume slows and then the price cuts start.  Is the beginning of the end or just the end of the beginning? 

Consumer credit keeps rolling downhill.

Earlier this month the Fed released the consumer credit data for May.  Total consumer credit keeps rolling downhill with no sign of slowing down.  I've included a longer term year over year chart as well as a more recent graph showing total consumer credit outstanding.

As you can see from this longer term year over year chart a sustained decline in lending has not occurred since this data series began at the end of World War II.  This is just one example of how this recession is different than all other post WWII slowdowns.

Looking at graph #2 for a shorter time period one again sees the steady decline in consumer credit.  Compare this to the early 90's where consumer credit levelled off but did not decline. 

In my opinion until the employment numbers start to seriously improve and home prices start creeping upwards we are going to see continued declines in consumer credit and thus sluggish growth (at best) in the overall economy.

Source: Federal Reserve

Unemployment claims and Google trends continue to diverge

One of my topics (and headscratchers) recently has been the disparity between the Google Trends unemployment data and initial unemployment claims data from the government.  While both of them are trending upwards the difference between the two data series grows. 

Here's a few possible reasons why:

• The Google Trends data changes. A lot.  As I update my data series I have noticed the entire set has changed (all the way back to 2005!) up to 10%  Comparing the older and newer data series gives you the same shape of the graph for year over year purposes but seeing data change that much is perplexing.  I've emailed Google about this but we'll see if I get any response. 
• The strong seasonality of layoffs (Go look at the government non seasonally adjusted data. It is very 'spikey') could be making the two series non comparable at this time of year. Even though both series are compared on a year over year basis something may still be incorrect.
• There could just be anxiety about losing ones job right now and those searches are showing up in the Google data.
• Census workers are getting laid off right now and looking for new jobs but they may not be showing up in the unemployment claims data.
• The Google data is relative to all other searches which should remove the bias of greater internet usage over time but it may not properly isolate this specific function used more as compared to others. 

Looking at the data you can see both series tend to follow the same direction but the Initial Claims data leads the Google Trends data (the graph is of a 30 day simple moving average of the daily data)  This time the Google data is leading the Initial Claims data (or is just plain wrong)  I could perhaps be asking too much of the Google data as well. Considering the slope of both is upwards I should perhaps call it good . . .

I don't have any bets placed due to this data but I'm still hopeful something can come of this series.  In a few hours we'll see if I'm still banging my head against a wall or onto something.

Source: Federal Reserve, Google

Inflation watch -- Headline inflation rolling over.

Inflation data was released recently.  The headline rate of inflation continues to roll downwards towards zero as the chart shows.  (Source: Federal Reserve)  With oil prices no longer going higher it is likely the headline inflation rate will continue declining.  'Core' inflation (red line)  has been stuck at 1% for the last few months but the longer term trend looks downwards to me as well.  The housing component is stuck in negative territory.

Overall the trend is down for all the sub components of inflation. 

Late Night Linkage

Postings have been light due to some business related demands.  Here's some links to my recent reads from the last few days.

Humor
Vuvuzela -- Will it blend? Youtube

Gold
Telegraph - did BIS gold swap spook the markets?

China
From Chinadaily - Property restrictions continue.
Chinadaily - Home price appreciation slows.
Chinadaily - Rate of lending slows in China.

Residential
From CalculatedRisk - A Chapter 13 bankruptcy can wipe away a 2nd lien.

Commodities
From FT -- The financialization of commodities.

LNG
From Hellenicshipping - A lot of spare LNG ships standing idle.

Lumber
Globe and Mail - Canada exporting lumber to China.

Sovereign debt
CalculatedRisk - How much debt is there and what is the probability of default?  It's a multi part series. Good stuff.
GMO - White paper on defaults in history. Very good. Intend to write longer blog post about this.

BP / Oill spill
WSJ - BP has replaced old cap, trying new one in an attempt to stop leak.  (This is at least 24 hours old.)

Euro
Telegraph - Legal challenges to bailout of Greece.
WSJ - Moody's downgrades Portugal.

Debt
Annaly - The debt deleveraging continues.

Unemployement claims and Google Trends. Not much clarity.

Ok call that a whiff. . .  Initial unemployment claims were released today and showed a decline.  I'm going to keep my eye on these series and see if the two continue to diverge  . . .