European Economic Outlook: Back In Recession

European Economic Outlook: Back In Recession:

High frequency indicators in the past month continue to depict Europe's darkening economic landscape. The composite Purchasing Managers Index (PMI) for the eurozone, an indicator of manufacturing trends, fell to 47.2 points in October from 49.9 points a month earlier, the biggest drop since July 2009. At the same time, new orders in eurozone manufacturing fell for the third month in a row, while export orders lost ground for the fifth consecutive month. The contraction in activity has also spread to services, with the eurozone services PMI in October at its lowest since July 2009.



In Standard & Poor's view, Europe's approaching recession first took hold in Spain, Portugal, and Greece, and the economic woes are now spilling over into the eurozone's core of France and Germany. The composite PMI for France and Germany dipped below the 50-point mark in October--a signal of recession--continuing the downtrend it started in September. Also, in October Italy's composite PMI recorded its sharpest monthly decline since 2009.



In revising our forecasts for 2012 and taking a first look at 2013, we have once again cut our 2012 real GDP growth forecasts for France to 0.5% from 0.8%, Germany to 0.8% from to 1%, and Italy to 0.1% from 0.2%. We now expect a mild recession in first-half 2012 in the eurozone, ahead of a modest pick up in the second part of the year. We anticipate eurozone real GDP growth to average 0.5% next year.

Turmoil In Financial Markets Is Adding To The Gloom

Monetary conditions are still supportive, based on current levels of short-term interest rates. The European Central Bank (ECB) cut its policy rate by 25 basis points (bps) on Nov. 2, 2011, to 1.25% and we expect it will cut rates again in December or in January. Meanwhile, the Bank of England's Monetary Policy Committee has reiterated that its policy rate would remain on hold at 0.5% for the foreseeable future. However, transmission to the real economy remains problematic, in our view. Loans to non-financial corporations in the eurozone inched up a meager 1.3% in the 12 months to September. Loans to households advanced 3.2% over the same period, but housing loans in specific countries, such as France, inflated this slightly stronger growth.



At the same time, the latest ECB survey of loan officers showed that banks are tightening their credit standards. Financial institutions are having a tough time accessing funding, and their stock market losses over the summer have prompted many to deleverage and speed up the restructuring of their balance sheets. We anticipate that credit conditions will worsen in the coming quarters, accentuating recessionary pressures.

Trade Performance Is Key

Financial markets have increasingly focused their attention on trends in each European country's current accounts since 2008. This is because current accounts provide a meaningful indicator of a country's dependency on the rest of the world to finance its economic growth. Permanent current account deficits imply ever growing indebtedness.



But it is worth stressing that a country's current account position (surplus or deficit) depends essentially on its trade performance. This is because a surplus in services (tourism, other exportable services) is hardly ever sufficient to offset a deficit in foreign trade of goods. Even for Europe's best performer, Germany, exports of services only amount to 20% of exports of goods.



A look at France's current accounts shows they moved from surplus in the early part of the previous decade to deficit in 2005, virtually in sync with the deterioration in the French trade balance in the past six years. Similarly, we observe that Italy's current accounts and trade balance have both deteriorated steadily in parallel since 2003.



By contrast, Spain's current accounts have started to improve since 2007, mirroring a reduction in the country's trade deficit. In other words, foreign trade performance remains essential for the success of a country's overall debt reduction.

Export Performances Wary Widely Across Countries

To assess how some eurozone countries have been faring in terms of trade performance since 2000, we have compared their exports of goods with those of Germany's. The ratios of France and Italy have, over time, declined against German exports. French exports equaled 55% of German exports at the beginning of the century, but then dropped to 40% by year-end 2011. We note, however, that this ratio stabilized to a degree during the 2009 recession. This is because French exports are less exposed than Germany's to non-European markets, where the downturn was particularly severe. However, since the beginning of 2010 the downward trend seems to have resumed. The decline in the ratio for Italy is equally pronounced. Italian exports had fallen to 35% of German exports at midyear 2011, versus about 45% of German exports in 2000. Correcting these imbalances will require proactive, long-term economic policies, in our opinion for both France and Italy.



U.K. exports have benefited greatly from the pound devaluation since 2007. Between September 2007 and September 2011, U.K. exports of goods grew a cumulative 33%, compared with Germany's 10% advance in the same period. By contrast, between 2003 and 2007, U.K. exports rose only 14%, versus 39% for Germany.



Spain's exports have remained remarkably stable when measured against German exports of goods. This means that as domestic demand for foreign products contracted, the subsequent reduction in imports of goods has fueled a progressive rebalancing of Spain's current accounts and trade balance since 2007. In other words, rather than a marked counterperformance in its exports to foreign markets, excessive domestic demand has prompted Spain's external imbalance to a large degree. This is also true for Portugal, where exports have remained very stable when compared with Germany's.



Ireland's performance falls in the middle. In the first part of the previous decade, we see the decline in Irish exports as correlated to the booming domestic economy, and a trade off between export growth and domestic demand prospects. Since 2008, Irish exports have stabilized as domestic demand contracted.

Another Recession Draws Nearer In Europe

With world trade growth poised to slow in 2012, in our opinion Europe's economic outlook once again appears increasingly somber. The necessary reductions in most European countries' overall indebtedness, via improvements in their current accounts, will in our view be all the more difficult to achieve. We believe that those countries where exports of goods have posted significant counterperformances in the past 10 years--namely France and Italy--face a particularly challenging task ahead.

Will Indian Budget last till December..? 74 % is over

In signs of deterioration of the country's financial situation, the government's fiscal deficit has risen to Rs 3.07 lakh crore, or 74 per cent of the Budget estimates, in the first seven months of 2011-12.

According to the Controller General of Accounts (CGA) data, the government's fiscal deficit went up to Rs 3.07 lakh crore, or 74.4 per cent of the Budget estimates at the end of October, as non-tax revenue growth declined.

The Centre's fiscal deficit -- gap between overall expenditure and receipts -- was 42.6 per cent of the estimates in the same period last year.

For 2011-12 fiscal, the government has estimated a deficit of Rs 4.12 lakh crore or 4.6 per cent of GDP.

The rise in fiscal deficit is mainly on account of lower mobilisation of non-tax revenue compared to same period last year when it had mobilised over Rs 1.08 lakh crore on account of 3G and BWA spectrum auctioning.

The revenue receipt stood at over Rs 5.39 lakh crore during the seven-month period against the Budget estimate of Rs 7.89 lakh crore for the entire fiscal. This is 45.5 per cent of the estimates.

At the end of September, non-tax revenue collection has stood at 54.4 per cent of Budget estimates, compared to 119 per cent in the same period a year ago.

The government has so far mobilised just Rs 1,145 crore from disinvestment. This is far less than the target of Rs 40,000 crore set for the entire fiscal.

Disinvestment plan of the government has been hit due to uncertainty in the stock market fuelled by global economic slowdown.

Meanwhile, the revenue deficit, the difference between revenue earned and expenses, during April-October this year stood at Rs 2.43 lakh crore, or 79 per cent of the budget estimates.

Comments :

As Write, so much is being written about and spoken about the Governments lethargy and Tactlessness that no more words can define them. 

It seems that, Mr Singh is showing Aloofness and High handedness with the opposition. He cannot now be said as Economist only. 

The F. D. I. in Retail is hated policy and more so a politically incorrect timing. 

It seems that, Dr. Singh will soon be replaced from the top job. Who will be Next..? that's the Q for 2012

United Banking Money dousing Action: Press Releasse

For release at 8:00 a.m. EST

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity. 

These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements has been extended to February 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.

As a contingency measure, these central banks have also agreed to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. At present, there is no need to offer liquidity in non-domestic currencies other than the U.S. dollar, but the central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise. These swap lines are authorized through February 1, 2013.

Federal Reserve Actions
The Federal Open Market Committee has authorized an extension of the existing temporary U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank through February 1, 2013. The rate on these swap arrangements has been reduced from the U.S. dollar OIS rate plus 100 basis points to the OIS rate plus 50 basis points. In addition, as a contingency measure, the Federal Open Market Committee has agreed to establish similar temporary swap arrangements with these five central banks to provide liquidity in any of their currencies if necessary. Further details on the revised arrangements will be available shortly.

U.S. financial institutions currently do not face difficulty obtaining liquidity in short-term funding markets. However, were conditions to deteriorate, the Federal Reserve has a range of tools available to provide an effective liquidity backstop for such institutions and is prepared to use these tools as needed to support financial stability and to promote the extension of credit to U.S. households and businesses.

http://www.ecb.int/press/pr/date/2011/html/pr111130.en.html.

PRESS RELEASE

30 November 2011 - Coordinated central bank action 
to address pressures in global money markets

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.

These central banks have agreed to lower the pricing on the existing temporary US dollar liquidity swap arrangements by 50 basis points so that the new rate will be the US dollar Overnight Index Swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from 5 December 2011. The authorisation of these swap arrangements has been extended to 1 February 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.

As a contingency measure, these central banks have also agreed to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. At present, there is no need to offer liquidity in non-domestic currencies other than the US dollar, but the central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise. These swap lines are authorised through 1 February 2013.

European Central Bank Decision

The Governing Council of the European Central Bank (ECB) decided in co-operation with other central banks the establishment of a temporary network of reciprocal swap lines.  This action will enable the Eurosystem to provide euro to those central banks when required, as well as enabling the Eurosystem to provide liquidity operations, should they be needed, in Japanese yen, sterling, Swiss francs and Canadian dollars (in addition to the existing operations in US dollars).

The ECB will regularly conduct US dollar liquidity-providing operations with a maturity of approximately one week and three months at the new pricing. The schedule for these operations, which will take the form of repurchase operations against eligible collateral and will be carried out as fixed-rate tender procedures with full allotment, will be published today on the ECB’s website.

In addition, the initial margin for three-month US dollar operations will be reduced from currently 20% to 12% and weekly updates of the EUR/USD exchange rate will be introduced in order to carry out margin calls. Those changes will be effective as of the operations to be conducted on 7 December 2011. Further details about the operations will be made available in the respective modified tender procedure via the ECB’s Website.

EURO will Glitter more when out of FIRE...

Its not data and its not the statement of any European leader. The close reading of the press and market trading pattern indicate that EURO Will be saved.
Well, this may not appear sensational but the currency trading much higher than its low made earliear this year and rallied hard thereafter.  Inherently, the rise coincides with fall of $ and conjoins with rise in Gold and other precious metals. The FED's easing and twisting is abetting the fall of Euro, as an indirect back up.

Euro as an Alternative to Dollar was a serious talk, among many asian and European economists and Politicians. US has turned the tables and saved the currency. at least, for the next foreseeable future. The epithet of PIGS a Wall street consecrate for slinging the Euro. While, the debt markets more controlled by Wall street bankers and Independent countries are beneficiaries of the crisis. Its pay back for the European, for the Mutiny against Greenback.

Alan Greenspan and co., never appreciated the even existence and abhorred its Rise. US always felt threatened and greenback was actually challenged by China, alongwith Germany and France. Post 2008, the questions about Dollar's existence as Reserve Currency were raised, threatening the US's economic might. In last 18 months now Euro is on the brink of a deep fall, straight away in the grave. The fears of Euro to end in next week or in a month are now being discounted .

The currency markets have yet to write off , Euro. Its still trading as a vary credible currency. It shows the health of the currency and indicates the bankruptcy of the Dollar. As a matter of fact the pair traded at 1.15 in the beginning of the crisis, at the start of this year, which is currently much above that.

The interest rate in Euro zone is above that is prevailing in US, but much below that in many Asian countries like India, China and Brazil.

Albeit, inherent and technical coordination in constituents of Euro are dissipation of political bankruptcy and short sightedness.

Euro's fission thus appears to be unreality. While, the political conviction to keep EURO afloat appears to be dwindling in to the oblivion.

Still, its unlikely that Euro will be break, as a matter of fact, in case, the weaker part of EURO exit the consortium, which may strengthen the intrinsic Euro value.

The stitching and patching exercise is making EURO undeniable and a strong currency. In Times to come Only, to replace the Gold. But, Wait for it, to  come out of this dreadful Night

Even, Gold has to meets fire first, then Glitters.

U.S. Weekly Financial Notes: Not Getting Our House In Order

U.S. Weekly Financial Notes: Not Getting Our House In Order: Despite the Thanksgiving holiday, the 12 U.S. congressional members of the “Super Committee” offered nothing to be thankful about. The disappointing not-so-super committee failed to reach an agreement to produce a package of deficit reduction measures. It instead called for Congress to work out an agreement before painful automatic budget cuts are initiated in 2013.



Other economic releases this week include:

• U.S. October existing home sales rose 1.4% over September to annualized 4.96 million units. The months’ supply of unsold homes fell to 8.0 months in October from 8.3 months in September. The median home price fell to $162,500 from $165,800 the month before.


• U.S. third-quarter GDP was revised down to a 2.0% annualized growth rate from the earlier estimated 2.5% rate in the advanced report.


• U.S. October personal income was up 0.4% over September, while consumer spending rose just 0.1%. The saving rate rose to 3.5% in October from 3.3% the month before. The U.S. personal consumption expenditures (PCE) price index fell 0.1% over September.


• October U.S. durable goods orders fell 0.7% over the prior month. Capital goods orders, excluding defense and aircraft, leading indicators for business investment, fell 1.8% over September, though are still up year-to-date 11%.


• Initial jobless claims rose 2,000 to 393,000 in the week ended November 19, higher than the 375,000 mark, which indicates a recovering jobs market. Continuing claims rose to 3.691 million in the week ended Nov. 12 from 3.623 million the prior week.


• Thomson Reuters/University of Michigan’s U.S. consumer sentiment index rose to 64.1 in the final November reading from the 60.9 in October.


• Oil prices fell to $96/barrel on Wednesday afternoon morning from $99/barrel the previous week.

The Real Economy

U.S. third-quarter GDP was downwardly revised to a 2.0% rate of annualized growth from an earlier estimated 2.5%. The reading was weaker than the 2.5% rate expected by consensus, though better than the 0.7% average rate for the first half of the year. The bulk of the revision came from inventory reduction, though personal consumption expenditures, equipment spending, government spending, and construction were also revised down. Only net exports were upwardly revised.



The larger contraction in inventories explains most of the overall downward revision in the report. Inventories now subtract $47.6 billion rather than the earlier estimated $33.7 billion. The revisions take 1.6% off the GDP growth, rather than 1.08% in the advanced report. If the inventory component were flat, GDP would have been 3.6%.



The sharp contraction can be read two ways. Lean inventories can be considered good news for fourth-quarter growth prospects, as businesses need to stock up shelves to be ready for holiday sales. However, the reluctance to hold inventories also indicates that businesses remain concerned that product won’t sell, so they are holding back on stockpiling the products.



Consumer spending rose 2.3% in the second quarter, slightly downwardly revised from the 2.4% rate previously estimated, and higher than the 1.3% rate in the second quarter. Real government purchases were down 0.1% (versus a previous estimated flat reading). The decline is largely due to the 1.4% drop (versus a 1.3% previously expected decline) in state and local spending as politicians continue to clean up their books. Federal spending was also revised down to a 1.9% gain (was up 2.0%). Private fixed investment was downwardly revised slightly, and across all sectors, but to a high 12.3% rate in the third quarter (versus 13.7%), to still offset the weakness in the government. Net exports added an upwardly revised $15.7 billion to third-quarter growth (was estimated at $7.0 billion), to contribute 49 basis points (bps) to GDP growth.



October orders for durable manufactured goods fell 0.7% over the September rate, not as bad as the 1.0% decline expected by consensus and our expected 1.3% drop. However, it comes after the prior month was sharply downwardly revised to 1.5% decline (previously down 0.6%). The drop was largely from a 16.4% drop in aircraft orders due to a pullback in Boeing orders after a 26.8% decline in September. Auto orders actually jumped 6.2% on continued improvement in supply deliveries following the Japan earthquake disruptions. Excluding transportation, orders were largely as expected, reporting a 0.7% October rise from a downwardly-revised September figure. Core capital goods orders--excluding defense and aircraft, a key leading indicator for business investment--fell 1.8% over September. They are still up 11.0% year-to-date. Core shipments were down 1.1%, though are up 9.6% year-to-date. Inventories rose 0.5%, and are up 11.7%, year-to-date. The strength of the current expansion depends more on the rebound for businesses than consumer spending, as we need sustained strong investment growth to see the usual sharp bounce in income and sales that generally follows deep recessions. The slowdown in core shipments and orders, if it holds through the year, implies softer capital spending in the fourth quarter than the 7.9% we currently expect.

A Home For The Holidays

Surpassing expectations, October existing home sales rose 1.4% over the previous month to an annualized 4.96 million units, after sales in September fell to 4.9 million. Sales are up 13.5% from the 4.38 million units in October 2010. As the Realtors Association reported, existing home sales have remained close to the current level for most months of this year. Despite favorable affordability conditions, rising rents and that “more creditworthy borrowers are trying to purchase homes,” contract failures have quadrupled over last year as banks tighten lending requirements and appraisals. Lower limits on loans for conventional mortgages are also hindering sales by forcing even the most creditworthy borrowers to pay high interest rates. In October, only the Northeast reported a decline--of 5.1%--over September. Other regions saw double-digit, year-over-year sales gains. Condo/co-op sales remained flat at a seasonally adjusted 590,000 unit rate, while single-family home sales rose 1.6% to 4.38 million units. The median home price fell to $162,500 in October from $165,800 the month before, and is down 4.7% over last year. The inventory of unsold homes edged down to 8.0 months from 8.3 months in September. It is still well above the 5.5- to 6-month average in normal market conditions and doesn’t take into account the shadow inventory of distressed homes that have yet to enter the market, which adds a few more years of excess supply to the market. This demand and supply imbalance will likely add downward pressure on home prices and keep the housing recovery weak.



In addition to signing the dotted line on their new homes, consumers also kept on spending, and their moods lifted this month. October consumer spending slowed down and posted a rise of only 0.1% over September. Disposable income rose 0.3%, while the saving rate rose to 3.5% from 3.3% in September. The PCE price index fell 0.1%, while the core rate, excluding food and fuel, rose 0.1% in October. A bigger boost was seen in the University of Michigan’s consumer sentiment index which rose 3.2 points to 64.1 in the final November reading. Current conditions climbed to 77.6 from 75.1 in October. The economic outlook index climbed to a four-month high of 55.4 in November from 51.8 the previous month. Inflation expectations one year ahead remained at 3.2%, the same rate as in October.

Thanks For Nothing

On the eve of Thanksgiving, amid the mixed and subpar U.S. economic data on hand, along with warnings of a much worse outlook for the eurozone, we thought that the 12-member Super Committee would have been motivated to definitely agree on some sort of partial plan before the deadline this week. We were wrong. The Super Committee failed to come up with any plan, passing the ball on to Congress to tackle the deficit before painful automatic budget cuts kick in 2013. While politicians on both sides of the aisle are devising ways to circumvent the spending cuts, President Obama, Speaker Boehner, and House Democratic Leader Pelosi have signaled their intention to stick to the original deal. While our baseline forecast factors in an extension of the 2% payroll tax holiday or long-term unemployment benefits, the failure to reach a deal increases the risk that no compromise will be reached to extend these benefits, which will be forced to expire at year’s end.



The Federal Reserve said on Tuesday that it would be requiring the largest U.S. banks with $50 billion or more in assets to stress test their books against a deep recession, with the unemployment rate of 12% in 2012 and 13% in 2013 and GDP falling 8%, peak to trough. How these institutions perform on these tests will factor into if and how much they can extend share buybacks and dividends. The move is likely an effort to reduce worries on whether U.S. banks can withstand the risk of the eurozone crisis spreading on our shores. Let’s hope it works.

Financial Market Highlights

Treasury yield curve

The 10-year Treasury yield dropped to 1.94% on Wednesday (early afternoon) from 2.01% last week, on speculation that the spreading European debt crisis is slowing global growth while the apparent failure of the U.S. deficit reduction Super Committee continued to bolster demand for U.S. treasuries. The rate on three-month Treasury bills gained 1 basis point (bp) this week to 2 bps. The two- to 10-year spread dropped 8 bps to 171 bps over the week and was 64 bps lower than a year ago. The 10-year Treasury spread above inflation-protected bonds, a measure of inflation expectations, dropped 11 bps over the past week to 141 bps and was 3 bps above the previous year.

Credit markets

Risk aversion remained in all market segments this week as worries rose that the eurozone debt crisis is spreading to core eurozone countries. The equity market volatility index (VIX), a measure of the market’s uncertainty, dropped to 31.97 from 34 the previous week. The T-bill-to-eurodollar (TED) spread, a measure of banks’ willingness to lend, increased 2 bps to 47 bps this week and was up 33 bps from a year ago. Fixed mortgage rates remained unchanged this week at 4%, keeping borrowing costs near the lowest on record, as investors sought the safety of government bonds amid turmoil in the eurozone. Mortgage applications fell 1.2% during the week ended November 18, after a 10% rise the prior week. The refinance index dropped 4%, after falling 12.1% the prior week. The purchase index rose 8.2% this week, after dropping 2.3% the prior week.

Fed policy and interest rate outlook

The FOMC maintained the federal funds rate at a record low of 0%-0.25% at its Nov. 1-2 meeting, and did not make any changes in its monetary policy stance. It will continue to reinvest principal payments into mortgage-backed securities, though it decided not to move into another round of quantitative easing at this time. While the Fed kept in place the "significant downside risks" phrase, the Fed's outlook was slightly more upbeat, stating that third quarter economic growth "strengthened somewhat," on a reversal of "temporary factors." The surprise in the statement was the one dissent on the dovish side of the board from Chicago Fed President, Charles Evans, who "supported additional policy accommodation at this time." Earlier, the Fed released its new economic projections, which were weaker than the June forecasts. The Fed cut the "central tendency" projection of 2011 GDP growth to 1.6%-1.7% from 2.5%-2.9%, with the core consumer deflator forecast up 1.8%-1.9% (from 1.5%-1.8%). The Fed lowered its jobs forecast and expects unemployment to fall to around 8.6% in late 2012, to around 8% in 2013, and between 6.8% and 7.7% at the end of 2014. Minutes to the FOMC September 20-21 policy meeting showed that policymakers were split on what type of accommodative monetary tools the central bank should use to try and kick-start the economy. While there were a number of opinions on the inflation outlook, most judged that inflation risks were roughly balanced with little risk of deflation. The Fed decided to extend the maturities on its balance sheet (Operation Twist), though two officials wanted to do more and some wanted to hold open the option for QE3. However, the members generally anticipated a pick up in the pace of the recovery although they saw "significant" risks to growth, with the recovery more vulnerable to shocks. The Beige Book compendium of reports from the 12 Federal Reserve district banks (released October 19) indicated that stronger economic activity than in the last survey, with most districts reporting economic growth as “modest” or “slight.” The report showed an increase in manufacturing activity, and gains in consumer spending coming largely from car sales and tourism. Several regions noted that an uncertain economic outlook is keeping businesses cautious and holding back business spending.

Global interest rates

Government long-term bond yields were largely up this week. Key central banks remain cautious in their outlook. Recent trends include:

• The ECB reduced its benchmark refinancing rate to 1.25% on Nov. 3. New ECB president Mario Draghi said that growth in the eurozone was likely to remain weak and the region was headed for a “mild recession” by next year. He added that Europe’s financial crisis and a slowdown in global growth meant that the eurozone faced an “environment of high uncertainty.”


• The Bank of England held its bank rate at 0.5% at its November 10 meeting as policymakers gauged the capacity of their 275 billion pounds ($438 billion) stimulus to ward off the dangers posed by the eurozone’s debt crisis.


• The Bank of Japan left its ultra-loose monetary policy steady at a range of 0.0%-0.1% in its Nov. 15 monetary policy meeting. It cut its economic assessment as the economy faces adverse effects from the slowdown in the global economy, the appreciation of the yen and flooding in Thailand.


• The U.S. Federal Reserve left the federal funds rate at 0%-0.25% at its Sept. 21 meeting. The Fed stated that it will sell $400 billion worth of shorter-term Treasuries it holds and reinvest in Treasuries maturing between six and 30 years by the end of June 2012, confirming that it would implement “Operation Twist” in its FOMC statement.


• The People’s Bank of China raised its benchmark interest rate by 25 bps to 3.5% on July 6, its third rate hike this year, in order to rein in high inflation. The move comes despite recent fears of an economic slowdown in the country, indicating that taming inflationary pressures remains a top priority for the Bank.


• The Bank of Canada held its target overnight rate at 1% on Oct. 26, amid weak economic growth and lower inflation forecasts.


• The Norges Bank held the deposit rate steady at 2.25% during its meeting on Sept. 21.


• Sweden’s Riksbank maintained its seven-day repo rate at 2% on Oct. 27, indicating that it would reduce its tightening outlook on signs of a slowing economy and rising uncertainty as European leaders struggle to contain the debt crisis.


• The Swiss National Bank cut its interest rate target band to 0.00%-0.25% from 0.00%-0.75% to stem the rise of the Swiss franc.


• Poland’s central bank left its seven-day reference rate at 4.50% on Nov. 9 on heightened uncertainty about global economic developments, as it continues to monitor what impact the eurozone debt crisis will have on the Polish economy.


• The Reserve Bank of Australia cut its benchmark interest rate for the first time in 2.5 years by 25 bps to 4.5% as inflation risks fade, unemployment rises and the global economic outlook continues to worsen.


• The Reserve Bank of New Zealand left its key rate unchanged at 2.5% on Oct. 26 given the rising uncertainty on the European debt crisis as well as slow global economic growth that threatens the nation’s recovery from the February earthquake.


• South Korea’s central bank left its key interest rate unchanged at 3.25% in its Nov. 11 monetary policy meeting for a fifth straight month, rejecting any increase amid fresh fears over Europe’s debt crisis and easing inflation.


• The Bank of Thailand left its benchmark overnight rate unchanged at 3.50% on Oct. 19, halting a seven-month streak of monetary tightening, as it assesses the nation’s mounting economic losses caused by the worst floods in five decades.

Foreign exchange rates





The dollar remained strong this week until Tuesday against other major currencies on worries about Europe’s debt problems, and the inability of U.S. lawmakers to agree on a deficit cutting plan left investors shifting into safe haven assets like the U.S. dollar. The euro dropped to $1.333 on early Wednesday afternoon from Friday’s $1.351 as investors shunned eurozone assets on concerns over the stability of the region’s banks and signs that the debt crisis is starting to threaten even Germany. The yen fell to ¥77.57 per dollar on Wednesday (early afternoon) from ¥76.89 per dollar on Friday. The U.S. trade deficit narrowed unexpectedly in September to its lowest level this year to $43.1 billion from a revised $44.9 billion in August. Exports surged 1.4% to $180.4 billion in September, boosted by overseas shipments of industrial supplies, capital equipment, and autos. Imports rose a meager 0.3% to $223.5 billion, burdened by a decline in imports of consumer goods.

Commodity price indices

Commodity prices rose this week as investors rushed to the safe haven assets as debt woes increased in the U.S. and Europe. Oil prices fell sharply to $96.01/barrel on Wednesday (early afternoon) from the prior week’s $99.02/barrel, dented by weak economic data in China and the U.S., while eurozone debt worries and sluggish growth kept investors wary of holding demand-sensitive commodities. Brent crude oil prices rose to $107.69/barrel from $109.45/barrel the previous week and continue to remain high relative to West Texas Intermediate (WTI). Natural gas prices dropped slightly to $2.50/mbtu this week from $2.52/mbtu in the previous week. Gold prices fell to $1,682/ounce on Wednesday (early afternoon) from $1,728/ounce a week earlier, as investor anxiety deepened over the European debt crisis, prompting the resulting rise in the U.S. dollar to mitigate the impact of safe-haven bullion buying. Livestock prices remained stable this week and are up 6.2% over the past year.

U.S. equity market

U.S. equity markets weakened further this week to their lowest level in a month, as fears that the eurozone debt crisis is spreading and a downward revision of U.S. third quarter GDP weighed on investor sentiment. The S&P 500, Dow, and Nasdaq were down and trading at 1,168, 11, 327, and 2,474, respectively, on Wednesday (early afternoon). Stocks were in a bear market from October 2007 until March 2009. Despite recent losses, they have now recovered much of those losses. All market indices remain up during the past year. The S&P 500 is now down 7.1% from the end of 2010 level of 1,258 and is up 72.7% from its March 9, 2009 low of 676.

U.S. equity market by sector

Equity sectors remained under pressure over the past week through Tuesday. Uncertainty about the progress of the eurozone bailout plan continues to hang over the financial sector, which plunged 4.9%, followed by material stocks, which were down 4.5%. Utilities and energy shares saw the largest 12-month gains (up 10.3% and 8.2%, respectively). Financial stocks, burdened by Europe’s debt crisis, posted the largest 12-month decline (down 15.7%).

Global Standard & Poor’s stock indices

World equity markets hit their lowest level in six weeks this week through Tuesday, as investors fretted as the cost of insuring European government debt against default rose to a record on concerns that the region’s crisis is worsening. Asia-Pacific markets led the decliners (down 5.5%), followed by Latin American markets (down 4.1%). All the major global equity markets have now turned negative for the 12-month period led by Japanese markets (down 20.1%), except U.S. markets, which were up 1.6%.

Global equity market performance by sector

International sectors dropped this week through Tuesday. Material stocks dropped the most (down 7.5%), followed by the financial sector (down 7%). During the past year, consumer staples stocks posted the largest gains (up 4.4%), followed by health care stocks (up 3.1%). In contrast, financial stocks dropped the most during the past year (down 21.4%), followed by material stocks (down 15.6%).

Black Friday: Not So Good

Black Friday: Not So Good:

It’s probably no surprise to Financial Armageddon readers that many media outlets are trumpeting this weekend’s jump in retail sales, with some even suggesting (praying?) that it means consumers are finally emerging from their recessionary funk:

“Retail Sales Break Records, Cyber Monday Up Next” (USA Today)

Buyers are expected to log in for online sales on Cyber Monday.

Retail sales broke records during Thanksgiving weekend, hitting an estimated $52 billion in stores and online and more records the National Retail Federation said Sunday.

This year’s sales are up from $45 billion last year. A record 226 million shoppers visited stores and websites over Black Friday weekend, up from 212 million last year. The average holiday shopper spent about $400 this weekend, up from $365 last year.

Big Black Friday weekends aren’t always a sign of consumers’ confidence in the economy: The previous top weekend was in the depths of the recession in 2008. But this year’s holiday shopping was more of a splurge than a scrounge for cheap necessities.

But as is usual nowadays, there’s less there than meets the eye.

Among other things, there are a multitude of costly factors that helped bring about this “splurge,” including:

Steep discounting

“Black Friday Deals Lure ‘Extreme Couponing’ Consumers: Retail” (Bloomberg)

Emily Findley, 12 weeks pregnant, set up camp outside a Best Buy Co. location in Greensboro, North Carolina — 32 hours before the store was scheduled to open at midnight on Black Friday.

Sleeping on a makeshift bed of blankets on the sidewalk under the yellow Best Buy sign, the 24-year-old teacher and her husband Charles were determined to get their hands on a 42-inch, flat-panel Sharp Corp. television for $199.99, a savings of about $300, she estimated.

“I compare this to extreme couponing,” said Findley, who plans to spend about $500 on holiday gifts this year, up $200 from 2010. “It’s worth it. I want to save money.”

From Mall of America in Bloomington, Minnesota, to The Galleria in Houston, retailers unleashed a blizzard of deals as Black Friday — the biggest shopping day of the year — got off to its earliest start ever. The discounting has been more widespread than last year as retailers tried to woo shoppers spooked by global economic uncertainty and stagnant job growth.

Earlier sale times, longer store hours

“Black Friday Draws Younger Shoppers” (Bloomberg)

Retailers may have lured more shoppers on Black Friday as an earlier start to their bargain bonanzas drew younger consumers.

Toys “R” Us Inc. opened at 9 p.m. on Thanksgiving, an hour earlier than last year. Wal-Mart Stores Inc. (WMT) started offering its deals one hour later, followed by midnight openings at Macy’s Inc. (M), Best Buy Co. and Target Corp. (TGT) that drew young consumers to the biggest retail day of the year for the first time.

“It was definitely a younger customer, under 20 for the most part, and they were shopping in groups of friends, four and five at a time,” Macy’s Chief Executive Officer Terry Lundgren said yesterday of the crowd of 10,000 that waited at the chain’s flagship store in Manhattan. “It was almost a continuation of whatever social experience they were having hours before.”

Easier credit terms

“Retailers Try to Lure Shoppers with Layaways” (CBS News)

CBS News correspondent Tony Guida reports that shoppers say they worried about over-extending themselves in these tough times, but retailers are ready for them with an old favorite.

The layaway is back.

Born in the Great Depression when people had little spending money and no credit, layaway is tonic for today’s great recession.

Retailers, fearing empty aisles, are turning to an old gimmick to rev up holiday sales.

“It shows that retailers are desperate to get people to spend money when they don’t have much money,” says Jack Otter, executive editor of CBS Moneywatch.

The Myles family, for instance, is buying bikes for the kids on layaway at a New Jersey Toys-r-us, saying they’re doing so because layaways let you “not overextending yourself.”

Walmart – the nation’s largest retailer – revived layaway for electronics and toys a month ago. It’s been a big hit.

“We’re getting new customers. We’re getting great layaway purchases,” says Laura Phillips, senior vice president for Toys and Seasonal Merchandising at Walmart.

Free shipping

“Free Shipping Erodes US Retailers’ Profits” (Financial Times)

Free shipping for online purchases is eroding the profitability of US retailers as they are compelled to offer the service – pioneered by Amazon – by fierce competition for the dollars of seasonal shoppers.

With end-of-year sales starting after Thanksgiving this week, on the day known as Black Friday, retailers including Walmart, Target, JC Penney and Macy’s have already reported reduced profit margins after introducing free shipping.

The proliferation of free shipping, albeit with restrictions, is a sign of retailers’ anxious attempts to woo consumers on tight budgets who have been hit hard by the weak US economy.

It also reflects the ability of Amazon – the dominant online-only retailer – to set a bar for price and other services that squeezes bricks-and-mortar rivals trying to capture a share of growing online sales. Wall Street expects their margins to shrink further before Christmas.

“The cost of getting the customers’ attention is going up, whether it’s because of free shipping, marketing or promotions,” said Adrianne Shapira, managing director at Goldman Sachs.

Increased advertising and marketing spending

“Holiday Outlook: A Boost In Ad Spending” (Media Life Magazine)

Strong retail spending will lift the ad economy

After a big slowdown in ad spending during second quarter of this year, it looks as though the media economy will be getting a retail-fueled bump to finish out the year.

Several ad categories stand to gain from what’s expected to be a good, though not great, holiday spending season.

Those categories include spot television, which lagged during the first half of the year following a decline in automotive spending, as well as spot radio and internet, which has been strong all year long.

“I’d definitely say holiday spending is up,” says Scott Kushner, vice president and associate media director for local broadcast and network radio at RJ Palmer in New York.

“I think it will be stronger than last year.”

Adding extra services

“Retailers Pulling Out the Stops For Holiday Season” (Gazette.Net)

More midlevel department stores, which have lost customers to discount retailers, are offering personal shoppers to attract consumers who have used the service at upscale stores, Hamilton said.

“Advertising these services also makes these stores, like Macy’s and J.C. Penney, seem upscale,” she said. “Like expanded store hours, this additional service is made possible by the high number of job seekers. Plus, personal shoppers may work mainly on commission, meaning that their cost to the stores is relatively low.”

Pressures on household budgets

“For Black Friday First-Timers, Not a Night of Conversion” (New York Times)

Some first-time Black Friday shoppers said the tough economy had made getting deals a necessary part of buying Christmas gifts and for everyday staples.

In Dawsonville, Ga., Meredith Blinder, 23, a photographer, met her sister, Elizabeth McDermott, 21, and a cousin at an outlet mall. All first-time Black Friday shoppers, the women said they wanted to watch the frenzy, and liked the late-night opening time.

Ms. Blinder, who recently got married, said she and her husband cut coupons and used generic goods instead of name-brand items. She said the deals she got at the mall, like 40 percent off on a sweater and scarf from Ann Taylor Loft, helped her budget, too.

“If you’re saving money on shopping, you can reallocate that to other things,” she said.

At the Times Square Toys “R” Us just after 10 p.m. on Thursday, Yasmin Santiago and Dexter Valles were trying to fit several boxes of diapers into a small hand cart. The couple, parents of twins, said the special on diapers was worth the late-night trip, since Ms. Santiago was on leave from her job as an assistant teacher.

“We have twice the children, and half the income,” Mr. Valles said.

The truth is, while revenues may have seen an uptick that makes for breathless headlines, odds are that profits will have suffered equally as dramatically over the past few days as retailers pulled out all stops and competed head-to-head for cherry-picking and cash-constrained customers who are still in no position to spend like they once did.

I would also point out an ironic twist to this weekend’s “positive” turn-of-events. As ShopperTrak founder Bill Martin notes in “Black Friday Sales Rise 6.6% to Record: ShopperTrak,” the end-of-the-week increase was” the largest year-over-year gain in [that firm's] National Retail Sales Estimate for Black Friday since the 8.3 percent increase we saw between 2007 and 2006.” For those with short memories, that weekend arrived just before the economy and just after stocks began to careen into a dark abyss.

Déjà vu all over again?

ICRA, OECD, rating agencies downgrade Indian Growth prospects

Rating agency Icra today joined rest of the forecasters to peg down economic growth to 7.3-7.5 per cent from 7.5-7.7 per cent projected earlier, besides pegging Q2 GDP numbers at 7 per cent, following the overall contraction in growth indicators.

This is the lowest projections so far from leading agencies as the forecasts from the Government, RBI, Crisil and CMIE are all above or at 7.6 per cent.

Icra has also warned that Government will not be able to meet fiscal deficit target of 4.6 per cent and said it will shoot up to 5.5 per cent.

"In the light of the dampening business sentiment, sluggish domestic industrial growth in Q2, intensifying macroeconomic headwinds, and the likelihood of lower exports in H2 of the current fiscal, we revise downward our GDP forecast for this fiscal to 7.3-7.5 per cent from the earlier expectations of 7.5-7.7," the agency said in a report.

"Given the anticipated moderation in growth of tax revenues, low likelihood that Government will meet its divestment target, and the additional borrowing it has planned, we also expect fiscal deficit to worsen to around 5.5 per cent of GDP," the report said.

On the second quarter GDP numbers - expected on Wednesday - Icra said it sees growth slowing down to 7 per cent from 7.7 per cent in Q1, led by easing of manufacturing growth, contraction in mining and quarrying output and a mild moderation in the pace of growth of the services sector.

On Sunday, research agency CMIE too revised downward GDP forecast to 7.8 per cent this fiscal from 7.9 per cent. Earlier, RBI had pegged down its forecast to 7.6 from 8 per cent. Another rating agency Crisil has also revised its growth estimate from 7.7-8 to 7.6 per cent.

Warning that next fiscal may also be tough, Icra said "while the execution of ongoing projects and healthy order books may support growth in the current year, investment growth is likely to moderate substantially in FY13 unless policy issues are addressed and there is a substantial pick up in the pace of implementation of big ticket economic reforms."

However, the report is a bit positive on inflation. It said headline inflation is likely to have peaked and will decline to around 7 per cent by March, unless commodity prices jump sharply in the coming months. Core inflation stood at 9.72 per cent in October.

But it warned any further fall in the rupee will exacerbate inflationary pressures. The rupee lost 14.5 per cent since January and touched a life-low of Rs 52.72 last Wednesday against the American dollar. However, after weeks of free fall it gained 25 paise to 51.95 today.

On fiscal deficit, Icra warned it may even cross 5.5 per cent and touch 5.8 per cent if oil companies are further compensated for under-recoveries in H2. Tax collection grew by 14 per cent in H1 against a budget forecast of 18 per cent.

The report warned that elevated input prices, higher interest rates and a falling rupee are likely to compress the margins of producers, leading to further slower tax mop.

Overall, the fiscal deficit in H1 reached 68 per cent of the budget estimate for the year, which pegged the deficit at 4.6 per cent of GDP. The Government is set to borrow Rs 4.7 trillion against Rs 4.17 trillion earlier announced.

Pointing out that growth impulses and business sentiments have weakened in the recent months due to a litany of factor led by regulatory issues, it said issues related to environmental clearances and land acquisition have dented business confidence and a marked slowdown in announcements of fresh projects and capacity enhancement.

Considerable monetary tightening (13 times or 525 basis points since March 2010) to combat sustained high inflation has resulted in a substantial hardening of interest rates, the reported noted.

Although the fiscal policy remains expansionary, higher outgo towards items such as subsidies (particularly fuel) and salaries (reflecting higher DA), limit the fiscal space available for boosting infrastructure spending to support investment growth, the rating agency warned.

On the global front, it said the economic environment remains bleak owing to the deepening sovereign debt crisis in Europe, impacting global trade and financial flows.

The report warned that the rupee fall may only help maintain the competitiveness of merchandise exports, demand for which is likely to suffer in light of the uncertain growth outlook for the advanced economies.

Fidelity Mutual Fund Declares Dividend

Fidelity Mutual Fund has announced dividend under dividend option of Fidelity Equity Fund and Fidelity Tax Advantage Fund. 


The quantum of dividend for the funds will be Rs 1 per unit under each scheme on the face value of Rs 10 per unit. The record date has been fixed as December 01, 2011.

National Stock exchange deivative report as on 25/11/2011

Derivatives report 25-nov-2011

View more documents from Atul Baride
This derivative is bloged here as the information is already on National Stock Exchange and the  Investors are asked to consult and think, Any recommendation in this report are not the Liability

Derivatives have misnomer being Weapons Financial Destructions and for common investors they are so. 

Equity Predictions an investment Jargons

• ​We believe investment managers can analyze numerous data sources and apply lessons learned from past economic cycles to make reasonable assessments about the global economic outlook.
• We also believe managers can make reasonable judgments about asset classes over the long term and, through rigorous bottom-up research, develop an edge regarding the outlook for individual companies.
• However, the market as a whole is much better at aggregating all the information that could affect any of the thousands of companies in the stock market than any investor could possibly be. Hence predictions of where the stock market will close on a given date are likely to be wrong.

People love bold predictions. More precisely: People love people who make bold predictions that are eventually proven correct. We tend to put such soothsayers on pedestals and anoint them heroes. And why shouldn’t we? They were able to see important outcomes that the rest of us missed.

 

Consider two notable examples:

• In 1969 quarterback Joe Namath boldly guaranteed his underdog New York Jets would beat the Baltimore Colts to win the Super Bowl. An audacious prediction, when Namath successfully led his team to beat the Colts he ensured his place in sports history.
    
• In 1961 President Kennedy called for the nation to land a man on the moon and return him safely to Earth by the end of the decade. At the time an American hadn’t even orbited the Earth, let alone made it to the moon. Considering today it takes almost a decade just to design a new rocket, Kennedy’s call to action from virtually a blank sheet of paper was truly a “moon shot.”

But our memories tend to be skewed: we remember the heroes but often forget the bold predictions that fell flat. For example:

• What was the name of the pastor who predicted the world would end on May 21, 2011? I can’t remember either. I’m sure I would remember had the world actually ended. (Well, maybe not, but you get my point.)
  
• In December 2007 sell-side equity strategist Abby Joseph Cohen predicted the S&P 500 would climb from 1,463 to reach 1,675 by the end of 2008. Given the brewing financial crisis, this was a bold call. In fact, the crisis dramatically worsened and the S&P 500 ended 2008 at 903. As the U.S. crisis recedes into memory, people have moved on.

Turning on business television, one can hear bold predictions almost daily: Where will interest rates be in the future or what actions will policymakers take to solve the European debt crisis? Every January many strategists predict the level of the stock market at year-end. It’s an annual tradition.

 

But with so many bold predictions routinely made on every side of virtually every economic issue, it can be hard to determine which predictions to take seriously. How does one make sense of the noise?

 

I believe two questions are essential to assessing predictions:

 

First, is the prediction “knowable?” Joe Namath was certainly able to influence the outcome of the Super Bowl. His prediction should have carried more weight than that of the average football commentator. We should pay more attention to those with special insights into knowable topics.

 

Second, does the person making the prediction have any downside if wrong? While President Kennedy is rightly lauded for setting the country on a path that transformed America’s standing in the world, presidents frequently make such bold calls, and the majority of them expire unfulfilled and unnoticed. For example, in 1983 President Reagan called for development of a missile shield to defend America against a nuclear attack from the Soviet Union; “Star Wars” never came to pass. In 2003 President Bush called for hydrogen cars to be commercially viable by 2020; seven years later President Obama cancelled their funding. There is little downside to Presidents setting ambitious goals – and they might improve their place in history if one of them works out.

 

In a society where we hoist the heroes but forget the mistakes, incentives are strongly skewed toward making as many bold predictions as possible, because at least a few are bound to hit. We should pay more attention to those who actually have something to lose if they are wrong.

 

So let’s analyze both questions in the context of predicting markets:

 

We at PIMCO believe certain investment topics are knowable and some are not knowable. To borrow a phrase from former Defense Secretary Donald Rumsfeld, there are Known Knowns and Known Unknowns. I will leave Unknown Unknowns for a future piece.

 

Known Knowns: 

• Global economic outlook. We believe investment managers can analyze numerous data sources on global economic activity and apply lessons learned from past economic cycles to make reasonable assessments for what the future is likely to hold. This is complicated by changing global dynamics and sometimes unpredictable politics. But a robust economic framework can yield real benefits for investors.
  
• Relative value among asset classes. Looking at the current prices of securities, such as P/E multiples, dividend yields and expected earnings growth for stocks, and spreads and yields for bonds, in the context of the current economic environment, managers can make reasonable judgments about the overall expected return from asset classes over the long term. From this perspective, managers can determine which asset classes they believe will provide the best risk-adjusted returns over time. Stress testing these assumptions against a range of economic environments is important.
   
• Outlook for an individual security, be it a stock or bond. Through rigorous bottom-up research, analyzing financial statements, meeting with management, speaking with suppliers, customers and competitors, we believe managers can develop an edge regarding the outlook for individual companies. We will often research a stock only to uncover no special view; we let a lot of pitches go by before we find a stock we like in which we believe we have found an edge.

However, innovation, business expansions and turnarounds take time. While investment managers may have confidence in a company’s growth plans, whether that expansion takes one quarter or one year to bear fruit can be hard to know. Hence, taking advantage of fundamental research often requires lengthy holding periods. We generally expect to hold stocks for three to five years.

Known Unknowns: 

• The level of the stock market on a particular date in the future. Stocks receive cash flows last in the capital structure, so any new information that can affect instruments senior to equities can also affect equities: Political events. Economic events. Interest rate moves. Industry dynamics. Management changes. Product innovation, etc.

Equity prices are continuously updating to reflect the constant stream of new information that could affect the stock. As described above, we believe we can get to know individual companies well through deep fundamental analysis. But the market as a whole is much better at aggregating all the information that could affect any of the thousands of companies in the stock market than any investor could possibly be. Think of an individual trying to compete against a supercomputer that is composed of an almost infinite number of microprocessors working in parallel crunching vast amounts of data as it pours in. The computer isn’t perfect and may not have wisdom, but it has a huge advantage over the analyst. In the short-term, equity markets contain the bulk of available information that should affect stocks.

As a result, predicting where the Dow will close on a given date is like trying to predict where ocean waves will splash against the Newport Beach pier at a given moment in time. While oceanographers can tell us the general time and average level of high and low tide, they know the natural dynamism of the sea limits their precision to forecasting trends and averages rather than point estimates. We believe the same is true for forecasting the stock market as a whole.

To understand the second question, the downside of being wrong, it is important to consider who is making the prediction. One common group of predictors work for broker-dealers, generating investment ideas hoping investment managers will find their ideas interesting and reward them by trading with their firms. They are incentivized to offer as many ideas as possible. Some are bound to be thought-provoking, and there is little downside if their predictions are wrong: They aren’t actually investing based on their views.

 

In contrast, investment managers are seeking to generate attractive returns for their clients. Managers make decisions based on their outlook for securities and if they are wrong, there is downside: Clients may not perform as well as they hoped. While PIMCO has sought to generate strong performance for our clients over our 40-year history, we aren’t perfect, and we work hard to get as many of our calls right as possible. 

 

Most of the commentators predicting the level of the Dow at year-end are sell-side analysts rather than investment managers. This makes sense: There is little downside for being wrong most of the time. The interesting question for the investment managers who do partake in such fortune-telling is do they actually utilize their own predictions? Most equity investment managers are managing portfolios that are required to be fully invested in equities at all times. If they believe the Dow will close at 13,000 on December 31, can they actually take advantage of that view since they don’t have idle cash to put to work? And if they can’t use their own predictions, why are they making them in the first place?

If we’re right – and neither PIMCO, nor anyone else, can accurately predict the level of the stock market at a certain date in one week, one month or one year – why do so many sell-side analysts (and a few investment managers) make such predictions? And why do we pay any attention?

 

I will answer my question with a question: Why do millions of people watch professional wrestling, “The Real Housewives” or “Jersey Shore?” It makes for entertaining television.

 

My hope from this piece is not that you stop watching business television. I certainly watch regularly and I also participate, sharing PIMCO’s views. I think it is a unique medium in which to follow markets and quickly hear a variety of perspectives on important topics.

 

My hope is that it becomes a little easier to distinguish thoughtful commentators discussing knowable economic topics from entertainers throwing darts.

 

In conclusion, I will leave you with my very own bold prediction. I am utterly unqualified to make it. I have no information edge nor can I possibly influence the outcome. In addition, there is absolutely no downside to my being wrong. Are you ready for it? “The Cleveland Browns will win the Super Bowl.” You heard it here first. (Note: I didn’t specify in which year.)

Reliance Media statement : Parting Ways with Bharti

Indian Mine productions falls by 4.86 %

Ministry of Mines25-November, 2011 10:40 IST

Mineral Production during September 2011

The index of mineral production of mining and quarrying sector in September 2011 was lower by 4.86% compared to that of the preceding month. The mineral sector has shown a negative growth of 5.64% during September 2011 as compared to that of the corresponding month of previous year. The total value of mineral production (excluding atomic & minor minerals) in the country during September 2011 was Rs.13658 crore. The contribution of petroleum (crude) was the highest at Rs. 5626 crore (41%). Next in the order of importance were: coal Rs 2800 crore, iron ore Rs.2490 crore, natural gas (utilized) Rs. 1452 crore, lignite Rs. 311 crore and limestone Rs. 267 crore. These six minerals together contributed about 95% of the total value of mineral production in September 2011. Production level of important minerals in September 2011 were: coal 299 lakh tonnes, lignite 26 lakh tonnes, natural gas (utilized) 3879 million cu. m., petroleum (crude) 31 lakh tonnes, bauxite 995 thousand tonnes, chromite 258 thousand tonnes, copper conc. 11 thousand tonnes, gold 172 kg., iron ore 126 lakh tonnes, lead conc. 13 thousand tonnes, manganese ore 196 thousand tonnes, zinc conc. 114 thousand tonnes, apatite & phosphorite 185 thousand tonnes, dolomite 412 thousand tonnes, limestone 188 lakh tonnes, magnesite 18 thousand tonnes and diamond 2061 carat. In September 2011 the output of apatite & phosphorite increased by 28.44%, diamond 19.27%, manganese ore 16.82%, bauxite 8.88%, chromite 8.05%, copper conc. 5.34%, magnesite 5.16 percent. However the production of lignite decreased by 2.61%, natural gas (utilized) 2.85%, dolomite 3.13%, limestone 3.27%, petroleum (crude) 4.00%, coal 8.59%, iron ore 8.77%, gold 8.99%, lead conc. 9.36% and zinc conc. 9.36 percent.

Indian Budget deficit to rise to 5.5 %..?

The finance ministry on Friday sought Parliament’s approval for a net additional expenditure of Rs. 56,848.46 crore, which will take the fiscal deficit way past the budgeted 4.6% of gross domestic product (GDP).

Submitting the second supplementary demand for grants, the ministry projected a gross additional expenditure of Rs. 63,180.24 crore. Out of that, the government plans to meet Rs. 6,330.8 crore of expenditure through savings on the money already allocated to various departments.

The additional expenditure is a sign of pressure on government finances and indicates that a revenue shortfall is for real, said D.K. Joshi, chief economist at credit rating agency Crisil Ltd.

“As there is no revenue buoyancy, the government has to meet the additional expenditure through higher market borrowing,” he said. Concerns of additional government borrowing pushed up yields in the government securities market. The yield on the 10-year benchmark paper rose to 8.84% in intra-day trading before ending the day at 8.81%, higher than Thursday’s close of 8.79%.

In the first supplementary demand for grants in August, the government had projected an additional gross expenditure of Rs. 34,724 crore, entailing a net cash outgo of Rs. 9,016.06 crore.

In September, the government announced that it will borrow an additional Rs.52,872 crore from the market in the second half of 2011-12, raising its borrowing programme for the fiscal to Rs. 4.7 trillion.

The government had budgeted to borrow Rs. 4.17 trillion for the current fiscal. The government, which has already borrowed Rs. 2.5 trillion in the first half of the fiscal, will now borrow Rs. 2.2 trillion in the second half. Crisil has projected the fiscal deficit at 5.2% of GDP, which may need to be revised upwards, Joshi said.

M. Govinda Rao, director at the National Institute of Public Finance and Policy, said he expects the fiscal deficit at 5.5% of GDP for the current fiscal.

On Tuesday, finance minister Pranab Mukherjee said the government will find it hard to meet the 4.6% target in the year to March because any belt-tightening may hit jobs and slow economic growth even further. The economy is expected to grow 7.6% this year, down from 8.5% in the last fiscal.

“This is a difficult target, given the deterioration in the global economy and its impact on India over the last three-four months,” Mukherjee told the Lok Sabha. “We have to be careful not to overdo ourselves in reaching this target, since that can have an excessive slowing-down impact on growth.”