Jun 11, 2008|
Fedspeak, China's lead & more
Fed says it again!How the Fed 'created' the crisis?
But will you believe? "The Fed's powerful doses of interest rate cuts, the government's US$ 168 bn stimulus package, further progress in the repair of problems in financial and credit markets, a gradual ebbing of the drag from the deep housing slump and still solid demand from abroad for US exports should help the economy over the remainder of this year," says Ben Bernanke, the US Federal Reserve chief. Another set of lies Chairman Sir, despite maintaining that the housing pain continues to hurt and rising energy prices continue to pose serious threats to the US economy? The fact that the Fed had been denying the stretching of housing and credit bubble till about a few months back and had protected the banks for all their misdemeanors that led to the crisis in the first place?
Americans cutting back?
Another 'believe it or not' for the day! Sounds strange, but the spendthrifts who have not really been concerned about 'economics' all these years and have splurged on consumption, with or without money (using their credit cards), are gradually cutting back on consumption. This is seen from the results of a poll conducted by CNN's financial website which shows that most Americans think gas prices will continue to rise and that current economic conditions are poor.
Facing the spectre of gasoline (petrol) prices rising to as high as US$5 per gallon, 'they are driving less and seriously considering chucking their gas guzzlers', says the outcome of the poll. Interestingly, the effects of high gas prices go beyond driving habits. The poll also shows that a majority of respondents are cutting back significantly on household spending. Now that's pain at the pump and in the house!
Oil to cool down, says energy agency...Boiling oil, falling stocks & more
Cutting back by the Americans as also lower demand from emerging economies in light of high fuel prices and an economic slowdown are cited as factors that will led to lower demand for oil going forward. This is a forecast of the International Energy Agency (IEA), which is an energy policy adviser to the Organisation for Economic Co-operation and Development (OECD), a group of 30 advanced economies, mostly in the West.
The agency has forecasted that global oil consumption would average 86.8 m barrels per day in 2008, still 0.9 % higher than the demand in 2007. Its report further states that the reduction of price subsidies in recent weeks for fuel in non-OECD countries including Indonesia, Malaysia, Sri Lanka, Taiwan and India should slightly tame oil demand growth in these regions. The rush by consumers in the West to buy more fuel efficient vehicles as also a higher usage of public transport shall aid the overall slowdown in oil demand going forward. Utopian thoughts? In the meanwhile, the chief executive of a Russian energy giant has forecasted crude prices to reach US$ 250 a barrel in the 'foreseeable future'!
...but the argument will continueFood vs. Fuel: Why the argument?
Bloomberg reports that cold and wet weather has delayed corn and soybean planting and seed emergence in the US, increasing the risk of lower yields and reduced inventories for the crop in 2009. That should intensify the ongoing debate of food vs. fuel, considering that green fuel pros have been accused of diverting a large produce of corn towards production of ethanol, an environment friendly fuel. As reported, corn harvest in the US will be 10% lesser than a year ago. Further, inventories are projected to fall to a 13-year low. As a matter of fact, corn is the biggest crop in the US, valued at US$ 52 bn in 2007, with soybeans in the second place at US$ 27 bn.
China leads India...
...even when one considers the drop in stock prices! As reported, the Shanghai Composite Index plunged 7.7% yesterday after the country's central bank tightened credit norms. Chinese financial markets were closed Monday for a national holiday, so Tuesday was the earliest chance for investors to react to a weekend decision by the central bank ordering banks to keep more deposits on hand. Chinese stocks have fallen by almost 50% over the past eight months (double of the Indian markets' 25% decline), making the country as amongst the worst performing stock markets in the world during this period.
As a matter of fact, late last weekend, the People's Bank of China announced a 1% increase in cash reserve ratio (CRR - amount of funds that banks have to keep with the central bank as reserves; higher CRR means lower funds with banks to lend), to be effected in two equal tranches on June 15 and June 25. After the increases, banks will be required to keep 17.5% of their deposits in reserve - a record high ratio. This latest increase in the CRR, the fifteenth in the past 18 months, has been aimed at easing inflation that is at 12-year highs.
As for the Indian central bank - the Reserve Bank of India (RBI) - rising inflation has added pressure to hike interest rates, especially with economists expecting inflation to rise to a 13-year high of 9.5% over the next few months. That will be a severe blow for Indian banks' credit growth prospects with the same already slowing down on the back of high interest rates and a general slowdown in economic activity.
More Views on News
Jun 10, 2017
Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.
Aug 19, 2017
Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.
Aug 18, 2017
Buying the index now will hardly help make money in stocks even in ten years.
Aug 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.
Aug 17, 2017
PersonalFN simplifies the mutual fund account statement for you.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407