SZ News

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Budget surplus, strong currency to the point where it weakens exports if they don’t buy sufficient fx to keep the currency down. Fits the pattern.

Swiss July Consumer Indicator Declines to Lowest in 1 1/2 Years
Aug. 30 (Bloomberg) — A gauge of Swiss consumer demand dropped to the lowest in 1 1/2 years in July, adding to signs the economy is cooling.

The consumption indicator declined to 1.29 from a revised 1.52 in the previous month, Zurich-based UBS AG said in an e-mailed statement today. That’s the lowest since February 2010. It had previously reported a June reading of 1.48.

Switzerland’s Government Expects Budget Surpluses Through 2013
Aug. 30 (Bloomberg) — Switzerland’s government said it expects to post budget surpluses in every year through 2013.

The consolidated surplus for the state, cantons, communities and the country’s social-security system will widen to an estimated 0.8 percent of gross domestic product this year from 0.4 percent in 2010, the government in Bern said in an e-mailed statement today. In 2012 and 2013, the surplus may narrow
to 0.6 percent and 0.5 percent of GDP, respectively.

Public debt under the European Union’s so-called Maastricht criteria will decline to an estimated 36.4 percent of GDP this year from 38.4 percent in 2010, according to the statement. In 2012 and 2013, it is seen decreasing to 35.7 percent and 34.1 percent, respectively.

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Central Banks Cannot Go Bust – But Can Cause Trouble

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CNBC: Central Banks Cannot Go Bust – But Can Cause Trouble

As previously discussed, since the S&P downgrade, the talk of the US becoming the next Greece has gone conspicuously quiet.

And, as suggested may happen, the anti deficit talk is shifting to inflation.

And that’s a much tougher sell in Congress. Especially with no forecast showing any inflation risk, including tips, and a Fed still fighting deflation.

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July CPI Shows 1st Increase In 2.5 Years

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Bet they’re sorry now for all that deficit spending, two decades of 0 rates, and untold QE ‘money printing’- inflation is finally ripping!

Not

July CPI Shows 1st Increase In 2.5 Years

May 25 (Dow Jones) — Japan’s core consumer price index rose 0.1% in July from a year earlier for the first time in two and a half years, despite a revision to the data’s base year giving a downward bias to the index, government data showed Friday.

The outcome was higher than the median forecast for a 0.1% drop in a poll of economists surveyed by Dow Jones and the Nikkei. The index declined 0.2% from a year earlier in June.

Core CPI for the Tokyo metropolitan area–an early indicator of price trends for the rest of Japan–fell 0.2% on year in August, compared with a forecast 0.1% fall. In July, it declined 0.1%.

The results came after the government changed the data’s base year to 2010 from 2005, which was expected to produce a lower-than-usual figure.

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Jackson Hole- comments tomorrow’s speech by Fed Chairman Bernanke

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First, I see no public purpose in burning any crude oil to fly the Chairman and his entourage to make any speech.

He could just as easily deliver this one from the steps of the Fed in DC.
Congress should demand a statement of public purpose before endorsing any travel by its agents.

Next is what I expect from the speech.
The short answer is not much.

I don’t see more QE as the purpose of QE is to bring long rates down, and they are already down substantially. And the Fed now has sufficient evidence to confirm that long rates are mainly a function of expectations of future FOMC votes on rate settings.

To that point, when the Fed announced QE, and market participants believed it would spur growth, and therefore FOMC rate hikes somewhere down the road, long rates worked their way higher. And when the Fed ended QE, and market participants believed the economy would be slower to recover, long rates worked their way lower. Not to mention China hates QE and it still looks to me there’s an understanding in place where China allocates reserves to $US as long as the Fed doesn’t do any QE.

The Fed could cut it’s target Fed funds rate, the cost of funds for the banking system, down to 0 and lower that cost of funds by a few basis points. But those few basis points can hardly be expected to have much effect on anything.

It’s not the Fed has run out of bullets, it’s that the Fed has never had any bullets of any consequence.
And with the few it’s fired, it hasn’t realized the odds are the gun has been pointed backwards.
For example, it still looks to me lower rates, if anything, reduce aggregate demand via the interest income channels.

And QE isn’t much other than a tax on the economy, that also removes interest income.

So look for a forecast of modest GDP growth with downside risks, core inflation remaining reasonably firm even as unemployment remains far too high, all of which support continued Fed ‘accommodation’ at current levels.

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BERKSHIRE WARRANTS FOR 700M SHRS EXERCISE PRICE $7.142857/SHR

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Once again, management is quick to sell the shareholders down the river with a fat coupon, low strike, dilutive preferred.

This is one of the inherent risks of being a common shareholder under current law.

It keeps stocks cheaper than otherwise, which makes them more attractive as takeover candidates, as
when you own the whole thing you don’t have this risk.

BUS 08/25 13:10 Berkshire Hathaway to Invest $5 Billion in Bank of America
BN 08/25 13:12 *BERKSHIRE WARRANTS FOR 700M SHRS EXERCISE PRICE $7.142857/SHR
BN 08/25 13:10 *BOFA TO SELL 50,000 SHRS PFD, LIQUIDATION VALUE $100K/SHR
BN 08/25 13:10 *BERKSHIRE HATHAWAY TO GET WARRANTS TO BUY 700M SHRS :BAC US
BN 08/25 13:10 *BERKSHIRE HATHAWAY TO INVEST $5B IN BANK OF AMERICA :BAC US
BN 08/25 13:10 *BOFA TO SELL 50,000 SHRS PFD :BAC US
BN 08/25 13:10 *BOFA TO SELL 50,000 SHRS :BAC US
BN 08/25 13:10 *BERKSHIRE HATHAWAY TO INVEST $5B IN BANK OF AMERICA

Berkshire Hathaway to Invest $5 Billion in Bank of America

By JoAnne Norton

August 25 (Bloomberg) — Berkshire Hathaway Inc. agreed to
buy 50,000 preferred shares of Bank of America Corp. for $5
billion, the bank said today in a statement.

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DGO

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Right, and still looks to me that with an 8%+ US federal budget there won’t be a major collapse in aggregate demand.


Karim writes:

Main story is in the revisons

  • July durables -1.5% ex-aircraft and defense (up 4% headline)
  • But the core measure was revised from -.4% to +.6% for June and from 1.7% to 1.9% for May
  • Shipments (matters more for current quarter GDP) up 0.2% ex-aircraft and defense (2.5% headline)
  • Core shipments for June revised from 1% to 1.9%
  • 3mth annualized rate for core shipments up from 11.1% to 13.6%
  • Big caveat is this is July data

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Libya

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The US sales from the strategic reserve have been about 1 million bpd and are due to end soon. Saudis have upped output by about 1 million per day as well. My concern is how the US output will be ‘replaced’ next month as it looks like Libya won’t be back online as before any time soon. So unless demand falls it will be up to the Saudis. If they don’t have the capacity they could lose control of prices to the upside.

From CNBC:

Libyan oil production was just shy of 1.6 million barrels per day in February, before the uprising swept across the country, leading to six months of civil war. Production in May was down to 60,000 barrels per day, according to the International Energy Agency (IEA).

“The medium-term outlook is that they probably have the potential to produce more than the 1.6 million, so it’s a very bullish scenario for anyone who is ready to invest in Libya,” Johannes Benigni, managing director of JBC Energy, told CNBC Wednesday morning. “The reality factor is, everyone knows that Libya was easier to run in a dictatorship than in a democratic or semi-democratic environment, and those guys first have to prove that they are able to bring back stability.”

The TNC, headed by Mustafa Jalil, appears to be relatively cohesive at the moment, but the rebels are composed of a complex mix of political, tribal and social alliances that analysts worry may not hold once their common enemy is beaten.

Benigni said that he expected that Libya could pump 400,000 barrels per day by the end of the year, but that in the best case scenario it would be 12-18 months before it returned to pre-war levels.

Goldman Sachs had forecast average output of 250,000 barrels per day in 2012, with a potential to increase to 585,000 barrels per day by the end of the year if rebels were to take control of infrastructure in the west of the country. The rebellion, which began in the east of the country, rapidly seized parts of the Libyan oil industry. Goldman’s predictions were based around output from those eastern facilities.

In a report issued on Tuesday, however, the bank said that the seizure of western oil assets increases the likelihood that output could ramp up more swiftly.

Analysts have been struggling to obtain reliable information on the state of much of the Libyan oil infrastructure. A report from Exclusive Analysis, the risk forecasting firm, said that exports would be likely to resume from the east within three months and from the west within six to nine months.

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