"However, the monthly increase represented the smallest rise since September 2006. Indeed, after rising at between $40bn and $50bn per month in the first seven months of this year, Chinese foreign exchange reserves rose by just $23bn in August and $24bn in September"
EADS announced Q3 "earnings" today, wherein they reported a loss of "only" €776 million, better than the expected €1.15 billion loss. But the insight on currency hedging is instructive; through the first 9 months of the year, EADS saw $11.8 billion worth of hedges mature: th4e average rate was 1.14 EUR/USD. In their stead, EADS has placed fresh hedges totally $15.1 billion, with an average rate of 1.37. That is a material change in competitiveness that is no doubt being mirrored elsewhere in Europe (or at least France); why else would Nicolas Sarkozy warn the US Congress that dollar weakness could lead to "economic war"?
Speaking of the US Congress, the Joint Economic Committee welcomes Ben Bernanke to the dance floor today for testimony on the US economic outlook. We can expect him to be peppered with queries on subprime, housinng, and the banking system, and perhaps also the level of the dollar. Yesterday's barrage of Fed speakers made it pretty clear that they are comfortable with where rates are as things currently stand, though we should probably expect BB to note that the Fed stands ready to act should conditions deteriorate markedly from here.
What's interesting is that several of yesterday's speakers also mentioned the level of the dollar, a topic that has been absent from their comments for the past several years. Could we perhaps be morphing towards a May 2006 scenario, wherein the Fed belatedly realizes that they are suffering from a credibility deficit and decides to "talk tough" to restore the balance, even in the face of crumbling risky asset prices?.
If deals and capital spending follow, it would represent a U-turn by BP. It is also understandable why oil majors use cautious long term forecasts. Nonetheless with spot oil prices now almost four times BP’s current planning assumption, it looks likely that Mr Hayward will turn the capex tap on.
When Bundchen, 27, signed a contract in August to represent Pantene hair products for Cincinnati-based Procter & Gamble Co., she demanded payment in euros, according to Veja, Brazil's biggest weekly magazine. She'll also get euros for the deal she reached last October with Dolce & Gabbana SpA in Milan to promote the Italian designer's new fragrance, The One, Veja reported. Bundchen earned $33 million in the year through June, Forbes reported in July.
Declines within Exxon’s refining and marketing business were no surprise. The entire sector has taken a hit, with third quarter refining earnings generally down by half as compared with a year ago and margins down as much as 90 per cent from May highs. Exxon’s malaise was less severe than most, with refining profits down 30 percent. But the company’s shares slipped 2.7 per cent on concerns over its weak exploration and production volumes. Exxon’s upstream business is generally a strength, but the volatility of its profits there is bound to increase as price-sensitive gasoline becomes a bigger proportion of its production.
Likewise, some current home owners may be planning to ‘trade down’ later in life, for instance when the family home gets replaced by a smaller property when the children leave home, following retirement or following the death of one’s spouse. For them the fundamental value of their endowment exceeds the present discounted value of their current and future planned consumption of housing services. Against that, there are also persons planning to trade up in the housing market.
The argument for an effect of housing wealth on consumption over and above the pure wealth effect, is that housing wealth is collateralisable. Households-consumers can borrow against the equity in their homes and use this to finance consumption. If they are otherwise liquidity-constrained or credit-constrained, a boost to housing wealth would boost consumption by more than the pure wealth effect.
A new book* by Roman Frydman and Michael Goldberg coins the phrase “imperfect knowledge economics” to describe this world of fundamental uncertainty. They use the systematic failure of attempts to analyse exchange rate swings to illustrate the hopelessness of a search for economic explanations that transcend time and place. Frequent discontinuities and transitions in the ways market participants view events mean that economic models, like historical narratives, are context specific. The search for “sharp prediction” – the mantra of the modern scientific economist who seeks to replicate the successes of physics for social science – is doomed to failure.
The explosion of wealth, much of it held in financial form, among oil- and gas-exporting nations, many of which adhere, at least notionally, to fundamentalist-literalist forms of Islam, has led to an explosion of financial engineering aimed at circumventing the Quranic ban on riba. Considerable ingenuity and vast amounts of resources are devoted to the construction of financial products that are economically equivalent to interest-bearing loans or interest-bearing bonds, but theologically equivalent to permissible Islamic risk-sharing instruments. The process of certifying financial products as Sharia-compliant is time-consuming and costly; those with the religious authority to provide the desired certification (typically Islamic scholar-jurists) often don’t understand finance. Financial experts tend not to be well-versed in Sharia law and its application to financial structures. Those with the power of certification can extract significant rents from the issuers and buyers of Sharia-compliant problems.
If either of Bo (Xilai - current trade minister) or Zhou (Xiaochuan - Governor of the Peoples' Bank of China) are promoted onto the Standing Committee, I think we may end up seeing smarter and more preemptive activity in dealing with China’s monetary imbalance. If inflation figures for September and October stay above 5% or even accelerate I think we may see an acceleration of RMB appreciation even earlier than expected. This is all speculation, but like a lot of people in China I will be following the NPC rumor mill very closely.
"Piggot came to see me, and desire my going down to Brampton Court, where for Piggot’s sake, for whom it is necessary, I should go, I would be glad to go, and will, contrary to my purpose, endeavour it, but having now almost 1000l., if not above, in my house, I know not what to do with it, and that will trouble my mind to leave in the house, and I not at home."
