China Strong-Arms its Markets

Published January 8

China’s indexes conspicuously opened roughly 3% higher on Friday. Sure they had the benefit of currency inaction by government overseers, versus the devaluations of previous days, but the mood was entirely too sanguine nonetheless. For those of us already skeptical of the conventions of the mainland, rumors of government support of equities via strategic purchases were easily believable if not expected. For European investors, it appears the same holds true given their cautious reception of the news. And for U.S. markets, it will at least provide a reprieve, while we contend with critical economic data of our own that threatens to confirm China economic softness is contagious. See the full report on China Strong-Arms a Rally.

Sector Security	Early Indication 7:30 AM ET
SPDR S&P 500 (NYSE: SPY)	+0.6%
SPDR Dow Jones (NYSE: DIA)	+0.7%
PowerShares QQQ (Nasdaq: QQQ)	+0.7%
iShares Russell 2000 (NYSE: IWM)	+0.2%
Vanguard Total Stock Market (NYSE: VTI)	+0.4%
Vanguard FTSE Europe (NYSE: VGK)	-0.0%
iShares China Large-Cap (NYSE: FXI)	+0.9%
Deutsche X-Trackers Harvest CSI 300 (NYSE: ASHR)	+2.0%
iPath S&P 500 VIX ST Futures (NYSE: VXX)	-2.4%
SPDR Gold Trust (NYSE: GLD)	-0.8%
United States Oil (NYSE: USO)	+0.7%

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. Article is relevant to Deutsche Bank (NYSE: DB), Banco Santander (NYSE: STD), ITA (Nasdaq: ITUB), UBS (NYSE: UBS), Westpac Banking (NYSE: WBK), Lloyds Banking Group (NYSE: LYG), Barclays (NYSE: BCS), Credit Suisse (NYSE: CS), Allied Irish Bank (NYSE: AIB), Banco Latinamericano (NYSE: BLX), National Bank of Greece (NYSE: NBG), Royal Bank of Canada (NYSE: RY), BBVA Banco Frances (NYSE: BFR), The Bank of Ireland (NYSE: IRE), Bank of Montreal (NYSE: BMO), Canadian Imperial Bank of Commerce (NYSE: CM), ING Groep (NYSE: ING), Citigroup (NYSE: C).

China's Death by a Thousand Cuts Policy

Published January 7

As I watched events unfold overnight, with China’s CSI 300 Index tripping its first trading curb in 13 minutes and its second after a half-hour of trading and two minutes after restarting, it became clear what the problem was. China is allowing the devaluing of the yuan, but unlike it managed it in August with one fell swoop, this time it is via several smaller devaluations. This death by a thousand cuts appears to be just as painful as the quick slice in August, but it should end soon, possibly even this week. That means that equities can start to recover starting next week, or importantly, when the yuan has reached the point where China will defend it again. Where is that? I’m hearing somewhere between 5.6 and 5.7 Yuan per U.S. dollar onshore; it’s currently at 5.5921. In other words, this is not a forever problem, so there will soon be an important point to buy stocks. However, I do not believe that point is today. As for China, I’ll have some proposals for its best steps to long-term prosperity, along with a purely communist solution in two follow-up reports. See the full report on China's death by a thousand cuts.

Sector Security	01-07-16 11 AM ET
SPDR S&P 500 (NYSE: SPY)	-1.0%
SPDR Dow Jones (NYSE: DIA)	-0.7%
PowerShares QQQ (Nasdaq: QQQ)	-1.0%
iShares Russell 2000 (NYSE: IWM)	-1.1%
Vanguard Total Stock Market (NYSE: VTI)	-0.9%
iShares China Large-Cap (NYSE: FXI)	-1.5%
Vanguard FTSE Europe (NYSE: VGK)	-1.0%

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. This article should interest investors in Boeing (NYSE: BA), Raytheon (NYSE: RTN), Digital Globe (NYSE: DGI), GenCorp (NYSE: GY), General Dynamics (NYSE: GD), Goodrich (NYSE: GR), Northrop Grumman (NYSE: NOC), Honeywell (NYSE: HON), Lockheed Martin (NYSE: LMT), Rockwell Collins (NYSE: COL), L-3 Communications (NYSE: LLL), EMBRAER (NYSE: ERJ), FLIR Systems (Nasdaq: FLIR), BE Aerospace (Nasdaq: BEAV), TransDigm (NYSE: TDG), Spirit Aerosystems (NYSE: SPR), CAE (NYSE: CAE), Alliant Techsystems (NYSE: ATK), Hexcel (NYSE: HXL), Triumph Group (NYSE: TGI), Esterline Technologies (NYSE: ESL), Moog (NYSE: MOG-A), Heico (NYSE: HEI), Teledyne (NYSE: TDY), Curtiss-Wright (NYSE: CW), Cavco (Nasdaq: CVCO), Skyline (NYSE: SKY), Nobility Homes (Nasdaq: NOBH), Palm Harbor Homes (Nasdaq: PHHM), Mohawk Industries (NYSE: MHK), Interface (Nasdaq: IFSIA), Albany International (NYSE: AIN), Unifi (NYSE: UFI), Illinois Tool Works (NYSE: ITW), Tyco International (NYSE: TYC), Cummins (NYSE: CMI), Kubota (NYSE: KUB), Ingersoll-Rand (NYSE: IR), Dover (NYSE: DOV), ITT Corp. (NYSE: ITT), Flowserve (NYSE: FLS), Pall (NYSE: PLL), Dresser-Rand (NYSE: DRC), SPX (NYSE: SPW), Gardner Denver (NYSE: GDI), IDEX (NYSE: IEX), Nordson (Nasdaq: NDSN), Graco (NYSE: GGG), Actuant (NYSE: ATU), Middleby (Nasdaq: MIDD), ABB (NYSE: ABB), Eaton (NYSE: ETN), Nidec (NYSE: NJ), Rockwell Automation (NYSE: ROK), Ametek (NYSE: AME), Regal Beloit (NYSE: RBC), Thomas & Betts (NYSE: TMB), Woodward Governor (Nasdaq: WGOV), Caterpillar (NYSE: CAT), Deere (NYSE: DE), CNH (NYSE: CNH), Joy Global (Nasdaq: JOYG), Bucyrus (Nasdaq: BUCY), Agco (Nasdaq: AGCO), Emerson Electric (NYSE: EMR), Parker Hannifin (NYSE: PH), Roper Industries (NYSE: ROP), Pentair (NYSE: PNR), Waste Management (NYSE: WM), Republic Services (NYSE: RSG), Fastenal (Nasdaq: FAST), Vulcan Materials (NYSE: VMC), MDU Resources (NYSE: MDU), Martin Marietta Materials (NYSE: MLM), Owens Corning (NYSE: OC), Valspar (NYSE: VAL), Precision Castparts (NYSE: PCP), United States Steel (NYSE: X), Reliance Steel (NYSE: RS), CRH (NYSE: CRH), CEMEX (NYSE: CX), Eagle Materials (NYSE: EXP), Fluor (NYSE: FLR), McDermott International (NYSE: MDR), Foster Wheeler (Nasdaq: FWLT), Empresas ICA (NYSE: ICA), Stanley Black & Decker (NYSE: SWK), Timken (NYSE: TKR), Kennametal (NYSE: KMT), Leucadia National (NYSE: LUK), Masco (NYSE: MAS), Weyerhaeuser (NYSE: WY), Quanta Services (NYSE: PWR), Chicago Bridge & Iron (NYSE: CBI), EMCOR (NYSE: EME), Snap-on (NYSE: SNA), Toro (NYSE: TTC), GM (NYSE: GM) and Ford (NYSE: F).

Baidu (BIDU) – Beaten Back by China but Buy it Here

Baidu (Nasdaq: BIDU) has been beaten down over the last few months by bad news about economic activity in China and by some relatively disappointing earnings news from an important stock of the region as well. That situates the stock well heading into its own earnings report, but upside may be limited in this environment. Downside risk should be limited here as well, so I see the stock as okay to buy for the long-term here but I would not stake a short-term trade purely on the EPS report. See my full prescient report on Baidu here.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

The Chinese Data that Lifted Stocks has Gaping Holes

By The Greek:

China reported its March imports increased by 14.1%. Smart money has been hopeful of a middle class growth explosion in China since Nixon opened the door. On the surface, the day’s data seemed to offer some evidence of burgeoning domestic demand for goods and services from hopefully a fast growing Chinese middle class. When it finally happens, China bulls hope it will be a rising tide to lift all ships.

Security	04/10/13 Change
SPDR S&P 500 (NYSE: SPY)	+1.2%
SPDR Dow Jones Industrial Ave. (NYSE: DIA)	+0.9%
PowerShares QQQ (Nasdaq: QQQ)	+2.0%
iShares Russell 2000 (NYSE: IWM)	+1.8%
SPDR Gold Trust (NYSE: GLD)	-1.7%
SPDR S&P China (NYSE: GXC)	+0.9%

Unfortunately, there are some holes in the report. First of all, I think most of us can agree that we can never really trust any data that comes out of China. Also, oftentimes temporary issues like pricing, weather or holidays play roles in lifting a number. It happens all the time in monthly economic data in the U.S., so why not in China? In actuality, two out of the three listed factors here did play a role in making the report seem more bullish than it was.

In fact, closer inspection of the Chinese trade data shows that it likely benefited from following the week-long Lunar New Year holiday, which created some pent-up demand. Higher pricing in crude oil imports certainly lifted the figure as well, given that barrels imported hardly changed while imports were reported up 10.9%.

Strong imports of iron ore were reportedly lifted simply by comparison with a very weak prior month level of imports. For the quarter, iron ore imports were actually about flat against last year. A similar story exists to explain the strong copper import growth in March.

And oh by the way, Chinese export growth, which measures demand from the U.S., Europe and the rest of Asia slowed in March. Obviously, we got a little ahead of ourselves on Wednesday, but with capital continuing to flow into equity funds, what are full pockets to do but find good news where only moderately positive data may exist. The economic situation remains at issue both in the U.S. and abroad, as evidenced by data point after data point. At times, markets and economies diverge, and one is not always a perfect predictor of the other. Even those who argue the market’s case do so based on better economic expectations. However, I think we can all agree that the current situation is still far from adequate.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

China Real Estate Insight

A fresh perspective was provided on the state of the Chinese real estate market Wednesday when China’s leading residential real estate developer reported its first half results. China Vanke sounded a lot like the National Association of Home Builders (NAHB) often does here at home, as it blamed banks and the government for its bad news. Truth be told, big lenders have opened up to more lending, just not in the mortgage market – at least based on the latest data out of Bank of America (NYSE: BAC).

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

America’s biggest builder, PulteGroup (NYSE: PHM), could not have said it any better, when China Vanke complained that government efforts to mitigate China’s once quickly expanding real estate bubble was hampering its operation. Vanke said hawkish Chinese Central Bank actions of the past, which it is now reversing, plus real estate industry focused initiatives to curb speculative investment have basically been effective. However, Vanke put it a different way, noting that the efforts have forced developers to lower prices (aka stopping the bubble) and slow investment. That’s not a bad thing if smaller poorly capitalized operators are acting speculatively. Vanke indicates that this could lead to a housing shortage in the coming year. Gee, that sounds familiar… I think I’ve heard the same thing from Hovnanian (NYSE: HOV) to D.R. Horton (NYSE: DHI) to you name the American builder… The new home market here at home may be short inventory, but the overall real estate market remains flooded.

Vanke indicated that smaller enterprises have reduced new construction. The developer said starts were down 15% in the second quarter, year-to-year, and its realized prices were down 11% in the first half. China has reason to be careful though, as real estate development has contributed 10% to GDP over recent history. Some have reported signs of life among solid market drivers, with first-time home buyers and move-up buyers picking up activity in the second quarter.

There is risk that a shaken Chinese authority might ease restrictions too aggressively if Chinese GDP slows too much for comfort. If that happens, then perhaps fear of collapse will drive eventual catastrophe, just like what happens here every three years or so.

Chinese shares were hardly shaken Wednesday, with the Shanghai Shengzhen CSI 300 up just fractionally and the Hang Seng down fractionally. In later trading, American traded China focused portfolios looked better, with the iShares FTSE China 25 Index (NYSE: FXI) up about 0.2% after a better start. The Guggenheim China Real Estate (NYSE: TAO) security better reflected the real estate news back home, as it declined 0.2% on the day. In comparison, American shares were slightly higher, with the SPDR S&P 500 (NYSE: SPY) up fractionally and the SPDR S&P Homebuilders (NYSE: XHB) up 0.8% Wednesday.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Jobless Claims, China Steals Jobs, Boeing Layoffs

Which One of These Things Doesn't Look Like the Others?

Remember that old Electric Company or Sesame Street skit referenced in the title here? Boeing's layoffs don't look like the others, for now, while jobless claims still above 400K have a lot to do with all the work American companies have shifted abroad and the unfair trade play of China generally, stealing our jobs. This article just brushes on it, but please use the opportunity to vent via the "Discuss" tab below nonetheless.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Jobless Claims, China Steals Jobs, Boeing Layoffs

Weekly Initial Jobless Claims were reported today for the period ending January 15. We've been tracking the holiday sponsored miscue that had jobless claims dip below 400K, before suffering a sort of pent-up demand spike last week. That prior period claims count was revised today, to a still troubling 441K, from the initially reported 445K. This latest weeks' data perhaps offered a normalization of the flow of newly jobless, and may be our first indicator since mid-December of the real weekly jobless rate.

Claims ran at 404K, just above that important psychological threshold, which we have posited has been a catalyst for the fall market burst, in addition to the GOP Congressional push. The four-week moving average of jobless claims slipped by 4,000 this week, to 411,750, and represents a more accurate barometer of the state of labor. It has been slowly trending toward the ordinary though magic mark, which will then be replaced by 300K (matters more).

The advanced seasonally adjusted insured unemployment rate held unexpectedly at 3.1% in the January 8 period. The Greek was looking for this figure to revive post the holiday effect, after dropping by two-tenths in the holiday week. It's a suspect reading in my view, and may dip next week. It is impacted by folks dropping out of the labor force and the unemployment pool, some of which we believe occurred on despair through the holidays, but also by people getting jobs.

Sifting through corporate news isn't offering signs of a new tide today though. Boeing (NYSE: BA) announced it would let 1,100 people go from its C-17 operations, some 24% of the product workforce, including folks in Long Beach, California; St. Louis, Missouri; Mesa, Arizona; and Macon, Georgia. Domestic orders, a.k.a. from the Defense Department, are on the decline, given government capital constraints. However, Boeing sees burgeoning international demand and wants to simply slow production while it continues to capture that increasing business channel.

The question to answer moving forward is whether corporations are going to find earnings growth from revenue gains or whether they'll be cutting more costs, which could include further layoffs. Many signs point to that happening still in the state and municipal arena, especially within hot spot regions of the country, like Illinois, California and others including New York.

One question Americans should be asking their Congressmen today, ahead of their interrogation of Chinese President Hu Jintao, should be, are American workers benefiting from the growth of companies like Apple (Nasdaq: AAPL)? And don't forget to ask them what we can do to create American manufacturing jobs in the alternative energy space, something that is not likely to happen at the status quo. They'll all be made in China, unless the Chinese play fair on the yuan and stop stealing our jobs.

FYI:

The highest insured unemployment rates in the week ending Jan. 1 were in Alaska (7.2 percent), Puerto Rico (6.1), Idaho (5.6), Oregon (5.6), Wisconsin (5.6), Pennsylvania (5.4), Montana (5.1), Connecticut (5.0), Rhode Island (4.9), Illinois (4.7), and New Jersey (4.7).

The largest increases in initial claims for the week ending Jan. 8 were in New York (+24,363), California (+17,536), North Carolina (+16,873), Texas (+13,828), and Illinois (+11,211), while the largest decreases were in Oregon (-9,579), Iowa (-3,122), Michigan (-3,101), Wisconsin (-2,029), and Kentucky (-1,006).



Article should interest investors in Paychex (Nasdaq: PAYX), Manpower (NYSE: MAN), Robert Half International (NYSE: RHI), 51Job Inc. (Nasdaq: JOBS), Monster World Wide (NYSE: MWW), Korn/Ferry International (NYSE: KFY), Administaff (NYSE: ASF), Kforce (Nasdaq: KFRC), TrueBlue (NYSE: TBI), Dice Holdings (NYSE: DHX), Kelly Services (Nasdaq: KELYA), SFN Group (NYSE: SFN), CDI Corp. (NYSE: CDI), Cross Country Healthcare (Nasdaq: CCRN), On Assignment (Nasdaq: ASGN), AMN Healthcare Services (NYSE: AHS), Barrett Business Services (Nasdaq: BBSI), Hudson Highland Group (Nasdaq: HHGP), StarTek (NYSE: SRT), RCM Technologies (Nasdaq: RCMT), VirtualScopics (Nasdaq: VSCP), American Surgical (OTC: ASRG.OB), Medical Connections (OTC: MCTH.OB), iGen Networks (OTC: IGEN.OB), St. Joseph (OTC: STJO.OB), General Employment Enterprises (NYSE: JOB), Total Neutraceutical (OTC: TNUS.OB), TeamStaff (Nasdaq: TSTF), Stratum (OTC: STTH.OB), Purespectrum (OTC: PSRU.OB), Corporate Resource Services (OTC: CRRS.OB), Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), Citigroup (NYSE: C), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), TD Bank (NYSE: TD), PNC Bank (NYSE: PNC), General Electric (NYSE: GE), Wal-Mart (NYSE: WMT), McDonald's (NYSE: MCD), Alcoa (NYSE: AA), American Express (NYSE: AXP), Boeing (NYSE: BA), Caterpillar (NYSE: CAT), Cisco Systems (Nasdaq: CSCO), Chevron (NYSE: CVX), DuPont (NYSE: DD), Walt Disney (NYSE: DIS), Home Depot (NYSE: HD), Hewlett-Packard (NYSE: HPQ), IBM (NYSE: IBM), Intel (Nasdaq: INTC), Johnson & Johnson (NYSE: JNJ), Kraft (NYSE: KFT), Coca-Cola (NYSE: KO), 3M (NYSE: MMM), Merck (NYSE: MRK), Microsoft (Nasdaq: MSFT), Pfizer (NYSE: PFE), Procter & Gamble (NYSE: PG), AT&T (NYSE: T), Travelers (NYSE: TRV), United Technologies (NYSE: UTX), Verizon (NYSE: VZ), Exxon Mobil (NYSE: XOM).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Trade Deficit Expands on China Gap

The trade deficit expanded in August, and the country specific gap with China proved a key driver. With the Treasury report on foreign trading partners due Friday, and with capital controls being discussed privately, and given the fact that the federal government seems to have few bullets left in its traditional expansionary arsenal, this data seems to only provide further impetus to act against the yuan. After all, rising demand for imports could have instead manifested as increased demand for American made goods made by American workers who currently sit on the sidelines of an unfair playing field.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Trade Deficit Expands on China Gap

With China on our minds, the International Trade Report gets a bit more than its usual attention today. This latest report covering August showed the trade gap expanded to -$46.3 billion, from the -$42.6 billion deficit seen in July (revised). Economists were looking for a trade deficit of -$44.3 billion for August. The expansion came on a greater increase in imports than exports, and an 8.1% expansion of trade deficit with China. The three-month moving average, which perhaps better weeds out noise, also showed the trade deficit expanded to -$46.2 billion, up from $44.7 billion in July. Without a leveling of the playing field, this trend, which has been clear for years now, will only continue, and the unfair divergence will widen.



Exports

Exports increased by $0.3 billion, on a similar increase in the export of services; goods exports remained the same as in July. Exports of consumer goods were relatively unchanged, but this could be a somewhat different story if American made goods stood on fair footing with China.

Decreases in the export of capital goods were offset by increases in the export of food products. Prices were higher for food products though, and thus likely played a role, along with the US filling of the hole left by the Russian export ban. Agricultural goods represent a dynamic area though, with sensitivity to many factors.

Exports of wheat were up 37.9% in August, but exports of soybeans increased 86.3%. While some of this may be on seasonal factors, there is also a replacement demand for food crops that occurs when a shortfall arises in another. We saw this when ethanol demand drew corn, and led farmers to employ more acreage to it, leaving less of other crops and driving an overall increase in the price of foods (due to less corn for food and less other crops generally). This may not be exactly the same case with wheat though, considering it is the main raw ingredient for most breads, and perhaps irreplaceable.

Also of interest, nonmonetary gold exports increased 47.5% in August, as gold prices continued to rise. Civilian aircraft exports decreased by 46.9% in August, but aircraft imports also fell.

Imports

Imports increased by $4.1 billion in August, on a $3.9 billion increase in the import of goods and a $0.2 billion increase in services imports. The increase in imports was largely driven by consumer goods demand, capital goods, and also automotive vehicles and parts. However, we regularly warn investors not to read too much into this, because much of it is likely due to Americans' intensified interest in lower cost items given the economic environment. Thus, it may not be as much a sign of an improving economic environment as it is a fickle shopper with little money to spend.

Increases in fuel and energy imports played a role in aggregate on the general imports rise, but nothing stood out on its own. Crude oil imports rose 1.3%. Industrial metals imports decreased. Imports of semiconductors rose by 22.7% though.

Country Specific Trade

Deficits were recorded, in billions of dollars, with China $28.0 (expanded from $25.9), OPEC $9.0 ($8.0), European Union $8.1 ($9.9), Mexico $6.0 ($5.3), Japan $5.8 ($4.9), Germany $3.4 ($3.6), Nigeria $2.7 ($2.4), Ireland $2.5 ($2.4), Venezuela $2.2 ($1.8), Canada $2.2 ($1.4), Korea $1.3 ($1.0), and Taiwan $1.2 ($1.0).

Clearly, trade with America's largest trading partner, China, is in focus, given the intensification of US government pressure on China with regard to its yuan policy. Imports from China grew 6.1% to a record $35.29 billion. Meanwhile, exports fell $92 million to $7.25 billion.

The August figures show surpluses, in billions of dollars, with Hong Kong $1.9 ($1.8 for July), Singapore $1.1 ($1.2), Australia $1.0 ($0.9), and Egypt $0.4 ($0.4).

President's IT Manufacturing Dream

The President has high hopes that America can expand its exportation of high technology and new technologies, but the US currently has a trade deficit in "advanced technology products," mostly due to American shipping of manufacturing overseas and due to the borrowing of technology by some of our foreign trade partners. This is why we see the sharp increase in the semiconductor commodity; it is a commodity, though, and not generally difficult to produce anymore on average. Of course, advanced semiconductors are mostly developed and produced in technologically advanced nations like ours.

Take note that the great demand of our developed marketplace, economy and civilization also hungers for and draws advanced goods, and thus will always act as a natural cross-current to the President's dream. Without a fair currency environment though, not only will America never export solar panels into China, but Americans will buy all of theirs from China as well.

Advanced technology products exports were $21.8 billion in August and imports were $30.6 billion, resulting in a deficit of $8.8 billion. August exports were $2.1 billion less than the $23.9 billion in July, while August imports were $0.2 billion less than the $30.8 billion in July. Again, the cross-current mentioned above will always come into play.

Against Last Year

The year-to-year comparison is important in this report, as it offers better insight into trade trends.

Goods:

The August 2009 to August 2010 increase in exports of goods reflected increases in industrial supplies and materials ($7.2 billion); capital goods ($6.4 billion); automotive vehicles, parts, and engines ($2.0 billion); consumer goods ($1.3 billion); other goods ($1.2 billion); and foods, feeds, and beverages ($1.0 billion).

The August 2009 to August 2010 increase in imports of goods reflected increases in industrial supplies and materials ($12.0 billion); capital goods ($8.3 billion); consumer goods ($7.4 billion); automotive vehicles, parts, and engines ($6.1 billion); foods, feeds, and beverages ($1.1 billion); and other goods ($0.5 billion).

Services:

The August 2009 to August 2010 increase in exports of services was $4.4 billion. The largest increases were in other private services ($1.5 billion), royalties and license fees ($1.3 billion), and travel ($1.1 billion). Within other private services, the largest increase was in business, professional, and technical services.

The August 2009 to August 2010 increase in imports of services was $2.8 billion. The largest increases were in other transportation ($1.2 billion), other private services ($0.6 billion), and royalties and license fees ($0.4 billion). Within other private services, the largest increase was in business, professional, and technical services.



Article should also interest investors in Deutsche Bank (NYSE: DB), Banco Santander SA (NYSE: STD), IberiaBank (Nasdaq: IBKC), Barclays (NYSE: BCS), Mitsubishi UFJ Financial (NYSE: MTU), Itau Unibanco Holding (Nasdaq: ITUB), Lloyd's Banking Group (NYSE: LYG), Mizuho Financial (NYSE: MFG), Banco Santander- Chile (NYSE: SAN), Citigroup (NYSE: C), National Bank of Greece (NYSE: NBG), Allied Irish Bank (NYSE: AIB), Credicorp (NYSE: BAP), Westpac Banking (NYSE: WBK), Grupo Financiero Galicia (Nasdaq: GGAL), Banco Latinamericano de Comer (NYSE: BLX), J.P. Morgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), Nasdaq: MEAFX, Nasdaq: EBASX, Nasdaq: EVASX, Nasdaq: MACSX, Nasdaq: MATFX, NYSE: CZJ, Nasdaq: CHINA, PCX: FXI, PCX: CYB, NYSE: IWM, NYSE: TWM, NYSE: IWD, Nasdaq: AACFX, Nasdaq: GOPAX, Nasdaq: CHUSX, Nasdaq: GCHAX, Nasdaq: BUFCX, Nasdaq: DXHSX, Nasdaq: XHAOX, Nasdaq: NGCAX, Nasdaq: LNGZX, Nasdaq: DPCTX, Nasdaq: EICGX, Nasdaq: EPHCX, Nasdaq: FHKAX, Nasdaq: FHKCX, Nasdaq: IFCAX, Nasdaq: JCOAX, Nasdaq: XCAFX, Nasdaq: MCHFX, Nasdaq: NPCAX, Nasdaq: OBCAX, Nasdaq: UHPIX, Nasdaq: XGCHX, Nasdaq: TCWAX, Nasdaq: HPCHX, NYSE: ACH, Nasdaq: CHINA, Nasdaq: CBAK, Nasdaq: CSUN, NYSE: CHN, NYSE: GCH, Nasdaq: SOLF, Nasdaq: CAAS, NYSE: GE, NYSE: F, NYSE: X, NYSE: PGC, Nasdaq: HPCCX, NYSE: RTP, NYSE: BHP, NYSE: WMT, NYSE: TGT, Nasdaq: COST.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

US & Europe United Against China in Fair Trade Quarrel

Today's Coffee

A busy business day offers a slew of market moving datapoints. The US market seems to be benefiting somewhat from a favorable service sector report, showing a better pace of economic expansion in the critical segment of the US economy. The Asia-Europe Summit and an unexpected expansionary action by the BOJ also offered significant support to global trading today. The combination of these factors has the Dow up 1.7% today. Find all the day's market moving factors analyzed below.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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US & Europe United Against China in Fair Trade Quarrel

Europe came out strong on the side of the US with regard to China's currency manipulation, despite a recently offered Chinese incentive to look the other way. That unified position boosts the probability of China choosing fairness over trade war in response to American complaints. ISM's Non-Manufacturing Index eased concerns about slippage in American economic growth, and the two factors combined to give support to trading.

International Wire

The Bank of Japan (BOJ) issued its latest monetary policy decision today, cutting its key rate for the first time in about two years. The BOJ move took its key lending rate to effectively zero percent. The BOJ also announced a $418 billion quantitative easing program to spur economic growth. The move gave strength to gold (Dec. Delivery up 1.75% to $1,340 per ounce), oil (WTI Crude Nearest Delivery +1.4% to $82.60), but the dollar weakened as attention turns to the US Fed to make similar moves.

The Asia-Europe Summit is underway in Brussels, with niceties exchanged between EU and Chinese leadership initially. ECB Chief Jean-Claude Trichet perhaps had the most controversial statement, simply talking along the lines of US Treasury Secretary Geithner in saying that China had not evolved its currency as expected. In fact, EU representatives did not take the bait offered by China when it said it would buy Greek debt; instead they kept to the critical position against the Chinese unfair currency status. Somewhere in Athens, George Papandreou popped an aspirin.

The European positioning is critical to US interests, because we are much more persuasive aligned then we would be alone. China moved to alter the anticipated European response, by addressing the Europeans' most pressing needs. The Chinese Premier showed up in Greece over the weekend, and after visiting the Parthenon, offered to buy Greek debt. It was quite a bribe. We have to wonder how China feels about those Greek bonds now, given the European stance on the yuan today.

The highly anticipated meeting between China's Premier Wen Jiabao and Japanese Prime Minister Naoto Kan at the Asia-Europe Summit concluded with Japan announcing its maritime spat with China had concluded (geopolitical factor effectively defused). Sometimes all it takes is a face to face meeting to fix things that seem otherwise complicated.

Economic Reports

The International Council of Shopping Centers (ICSC) published its latest Weekly Same-Store Sales data Tuesday morning. For the period ended October 2, same-store sales fell 0.8% against the prior week's activity, which was up 0.4% against the week before. On a year-over-year basis, sales continued to soften against normalizing comparables from the prior year, rising just 2.4% in this latest check (+3.6% week before).

Now that we have cleared the Labor Day holiday and the back-to-school impact, we are receiving clearer reads on consumer spending activity through this report, but the news was not good (as predicted here). Redbook reported year-over-year sales rose 2.7% for the same period. The ICSC blamed harsh weather on the drop, but we expect time and data will prove otherwise.

ISM Non-Manufacturing Index

The Institute for Supply Management (ISM) posted its Non-Manufacturing Index this morning. The September reading of the index showed improvement, to a mark of 53.2, from 51.5 in August. Economists had forecast the service sector barometer might reach just 52.0. The reading continues to mark economic expansion, above the 50.0 water mark.

The service sector dominates 90% of US economic activity, and so the measure is important and driving stocks today. However, the market is enthused because the index did not deteriorate further; the mark still stands precariously close to economic contraction territory.

There was some other good news within the report though that likewise supports the day's trading direction. While current business activity moderated, or grew at a slower pace, new order activity gained pace.

DC Doings

In DC doings, a Senate subcommittee is holding a joint hearing to determine how the president might use an expedited recession authority.

Corporate Wire

In corporate news, Walgreens (NYSE: WAG) posted better than expected September sales and its shares are up 3.3% as a result today. Talbots (NYSE: TLB) noted a third quarter sales decline, and its shares are likewise lower today, down 11.5%. British Airways PLC (LSE: BAY.LN) noted its sharpest traffic gain in two years this September, and its first increase since February; BA's shares are up 6.5% as a result. US Airways (NYSE: LCC) shares are up about a percentage point after it noted an increase in September traffic and revenue, and announced expectations to turn a profit this year. American Express (NYSE: AXP) shares are down another 3% today, after losing 6.5% yesterday, as it determined to fight a US antitrust complaint rather than settle like its peers MasterCard (NYSE: MA) and Visa (NYSE: V). Google's (Nasdaq: GOOG) Android is the top smart phone choice of consumers over the past month, according to Nielson, with RIM's (Nasdaq: RIMM) and Apple's (Nasdaq: AAPL) well-known rival products tying for second.

Look for Intel's (Nasdaq: INTC) CEO to discuss innovation before the Council on Foreign Relations in New York. Metals USA's (Nasdaq: MUSA) IPO lockup period concludes Tuesday. In New York City, the India Investment Forum will host India's finance minister and executives from 40 high-growth and significant Indian firms.

Remember "Rogue Trader" Jerome Kerviel, of Societe' Generale? His trial has concluded, and the poor fellow seems to have been attributed all blame for his actions and ordered to pay his former employer an impossible amount of money in retribution, $4.9 billion euros to be exact. Oh and he will also spend three years in prison. And what is Societe Generale's punishment for its role? After all, it was responsible for the selection of employees and the supervision of them, and also for the design and implementation of a system of trading that might not allow for such aggregious trading activity and losses. What is Societe Generale's penalty? It's a tarnished brand.

The day's earnings schedule includes reports from Diamond Foods (Nasdaq: DMND), Rocky Mountain Chocolate Factory (Nasdaq: RMCF), Team Inc. (Nasdaq: TISI), Wolverine World Wide (NYSE: WWW) and Yum! Brands (NYSE: YUM). Cedar Fair LP (NYSE: FUN) has a conference call scheduled to discuss its long-term strategy and financial goals. Iron Mountain (NYSE: IRM) and ONEOK Partners (NYSE: OKE) have investor days scheduled.

The Jefferies & Co. (NYSE: JEF) Global SpecPharma & European Healthcare Conference offers presentations by ARIAD Pharmaceuticals (Nasdaq: ARIA), Covidien (NYSE: COV), Impax Laboratories (Nasdaq: IPXL), Merck (NYSE: MRK) and Watson Pharmaceuticals (NYSE: WPI).

The William Blair & Company Emerging Growth Stock Conference brings news from Aruba Networks (Nasdaq: ARUN), Aspen Technology (Nasdaq: AZPN), Delcath Systems (Nasdaq: DCTH), Encore Capital Group (Nasdaq: ECPG), Lawson Products (Nasdaq: LAWS), NetLogic Microsystems (Nasdaq: NETL), Kenexa (Nasdaq: KNXA), Brookdale Senior Living (NYSE: BKD), BioMimetic Therapeutics (Nasdaq: BMTI), Cambium Learning (Nasdaq: ABCD), Town Sports International (Nasdaq: CLUB), Accretive Health (NYSE: AH), CDC Software (Nasdaq: CDCS), Lancaster Colony (Nasdaq: LANC), Envestnet (NYSE: ENV), ACI Worldwide (Nasdaq: ACIW), Blue Coat Systems (Nasdaq: BCSI), Merge (Nasdaq: MRGE), Houston Wire & Cable (Nasdaq: HWCC), Monotype Imaging (Nasdaq: TYPE), Sharps Compliance (Nasdaq: SMED), Fred’s (Nasdaq: FRED), SuccessFactors (Nasdaq: SFSF), Harbin Electric (Nasdaq: HRBN), NewStar Financial (Nasdaq: NEWS), SXC Health Solutions (Nasdaq: SXCI), Virtusa (Nasdaq: VRTU), NetLogic Microsystems (Nasdaq: NETL), Cardtronics (Nasdaq: CATM), Catalyst Health Solutions (Nasdaq: CHSI), Exponent (Nasdaq: EXPO), Transcend Services (Nasdaq: TRCR), Aspen Technology (Nasdaq: AZPN), EXACT Sciences (Nasdaq: EXAS), Mercury Computer (Nasdaq: MRCY), WebMD (Nasdaq: WBMD), and Parexel (Nasdaq: PRXL).

SuperGen (Nasdaq: SUPG), Sucampo Pharmaceuticals (Nasdaq: SCMP), Adventrx (AMEX: ANX) present at the Biotechnology Industry Organization Annual BIO Investor Forum.

Superior Energy Services (NYSE: SPN), McDermott International (NYSE: MDR), Noble Energy (NYSE: NBL), Brigham Exploration (Nasdaq: BEXP), EOG Resources (NYSE: EOG), Pioneer Natural Resources (NYSE: PXD), Hercules Offshore (Nasdaq: HERO), Oceaneering International (NYSE: OII), Warren Resources (Nasdaq: WRES), Key Energy (NYSE: KEG), Gulf Island Fabrication (Nasdaq: GIFI), Parker Drilling (NYSE: PKD) and Rosetta Resources (Nasdaq: ROSE) present at the Johnson Rice & Company Energy Conference.



Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

China & Terror - The Wolves Cry

Pre-Market Wire
Greek Factor: -1

While there are two economic reports on tap for 10:00 AM release, the pre-market is abuzz with terror threats and China travails. Chinese representatives have been active this weekend, following US legislative action last week and ahead of this week's EU-Asia summit. Meanwhile, the US government sounded the alarm on a new terror concern in Europe. But if you hold on long enough, you'll have Factory Orders and Pending Home Sales to guarantee your heart attack this Monday morning.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

(Tickers: NYSE: CMN, NYSE: SKY, Nasdaq: SCOK, NYSE: MOS, Nasdaq: ASIA, Nasdaq: PRASX, NYSE: PUA, NYSE: NWD, NYSE: PCP, NYSE: ATK, NYSE: LMT, NYSE: COL, Nasdaq: AVAV, Nasdaq: ATRO, NYSE: HON, Nasdaq: CRDN, NYSE: BA, NYSE: CGT, Nasdaq: MEAFX, Nasdaq: EBASX, Nasdaq: EVASX, Nasdaq: MACSX, Nasdaq: MATFX, NYSE: CZJ, Nasdaq: CHINA, PCX: FXI, PCX: CYB, NYSE: IWM, NYSE: TWM, NYSE: IWD, Nasdaq: AACFX, Nasdaq: GOPAX, Nasdaq: CHUSX, Nasdaq: GCHAX, Nasdaq: BUFCX, Nasdaq: DXHSX, Nasdaq: XHAOX, Nasdaq: NGCAX, Nasdaq: LNGZX, Nasdaq: DPCTX, Nasdaq: EICGX, Nasdaq: EPHCX, Nasdaq: FHKAX, Nasdaq: FHKCX, Nasdaq: IFCAX, Nasdaq: JCOAX, Nasdaq: XCAFX, Nasdaq: MCHFX, Nasdaq: NPCAX, Nasdaq: OBCAX, Nasdaq: UHPIX, Nasdaq: XGCHX, Nasdaq: TCWAX, Nasdaq: HPCHX, NYSE: ACH, Nasdaq: CHINA, Nasdaq: CBAK, Nasdaq: CSUN, NYSE: CHN, NYSE: GCH, Nasdaq: SOLF, Nasdaq: CAAS, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ)

China & Terror - The Wolves Cry

Between terror threats levied against the region and the Chinese activity, Europe has its hands full this morning. Just when we thought the threat of sovereign default and euro disintegration were enough to handle! It looks like Europe and China will be the themes to our upcoming Monday release of "This Week," but for now, please chew on Monday's economic data slate and other market moving events.

China on my Mind
Greek Factor: 0

China's markets will be closed Monday, and through the week, but China is in the news nonetheless. The emerging giant is hosting the latest UN Climate Change Conference. Meanwhile, its Premier Wen Jiabao, visited Greece on his way to the EU-Asia Summit in Brussels. He offered some support for the Achilles heel of Europe. China's leader said his rich nation would support Greece's capital raising efforts, once it returned to the debt market. He also extended $5 billion in credit to Greek shipping companies that purchase Chinese made vessels. He said he offered all this because he would like to see a stable euro, but it seems he may also be worried Europe might go the route of the US with regard to his nation's currency status and his country's trading irregularities.

Terror Warnings
Greek Factor: -1

Has the boy cried wolf too often, or has it just been too long since the wolf last wandered into town, so that we've all forgotten about him and his teeth? The US government issued a travel warning to Americans traveling to Europe. Intercepts of communications and the presence of EU residents choosing to holiday in terrorist training camps had the US government sounding the alarm sirens this weekend. Americans are to be on the look out for Mumbai (Bombay) style attacks of terrorists armed with automatic weapons seeking havoc in crowded places throughout Europe, and a few specific locations (London is high on the list).

Yet, the interviews we've seen depict Americans as unalarmed. We worry though that the individuals chirping so confidently today, will be the same birds running around like chickens without heads when chaos does eventually break loose. Thus, we've come full circle and are now as unprepared mentally for terrorism as we were on 9/11.

Pay Attention!

The US government would not issue a warning like this these days if three conditions did not exist, no matter what the few representatives acting without license have said on camera. The government would raise this alarm only if a real threat existed; if it was relatively imminent or timing unpredictable and near; and if it was outside of its control to stop or contain. Therefore, yes, you should be concerned if you are traveling to Europe. Yes, the wolf is loose; and yes, the boy is crying loudly but should be obeyed.

Pending Home Sales
Greek Factor: 0

Two economic reports are scheduled for Monday morning. Look for the Pending Home Sales data release for the month of August at 10:00 AM. The release for July showed a 5.2% gain against June, to a mark of 79.4. July's reading benefited as it followed two months of decline in the absence of the housing stimulus. Housing continued soft through the summer though, and so we expect a temporary bounce of the dead-cat sort could be exposed in the Pending Home Sales data of the next couple months. It's old news though, and so understood.

Factory Orders
Greek Factor: -1

Factory Orders are due for release at 10:00 AM. Economists expect the data to show a 0.3% decline for August, given the Durable Goods Orders data that has already been released. Durables fell 1.3%, but when excluding transportation, rose by 2%. Motor Vehicles sales were so so in September, after a slip in August, and manufacturing was generally reported soft through the summer. Last week, ISM showed manufacturing remained sketchy in September.

Corporate Wire

The day's short earnings schedule includes Cantel Medical (NYSE: CMN), Skyline (NYSE: SKY), Sinocoking Coal & Coke (Nasdaq: SCOK) and The Mosaic Company (NYSE: MOS).



Relevant Tickers: Nasdaq: ASIA, Nasdaq: PRASX, NYSE: PUA, NYSE: NWD, Nasdaq: MEAFX, Nasdaq: EBASX, Nasdaq: EVASX, Nasdaq: MACSX, Nasdaq: MATFX, NYSE: CZJ, Nasdaq: CHINA, PCX: FXI, PCX: CYB, NYSE: IWM, NYSE: TWM, NYSE: IWD, Nasdaq: AACFX, Nasdaq: GOPAX, Nasdaq: CHUSX, Nasdaq: GCHAX, Nasdaq: BUFCX, Nasdaq: DXHSX, Nasdaq: XHAOX, Nasdaq: NGCAX, Nasdaq: LNGZX, Nasdaq: DPCTX, Nasdaq: EICGX, Nasdaq: EPHCX, Nasdaq: FHKAX, Nasdaq: FHKCX, Nasdaq: IFCAX, Nasdaq: JCOAX, Nasdaq: XCAFX, Nasdaq: MCHFX, Nasdaq: NPCAX, Nasdaq: OBCAX, Nasdaq: UHPIX, Nasdaq: XGCHX, Nasdaq: TCWAX, Nasdaq: HPCHX, NYSE: ACH, Nasdaq: CHINA, Nasdaq: CBAK, Nasdaq: CSUN, NYSE: CHN, NYSE: GCH, Nasdaq: SOLF, Nasdaq: CAAS, NYSE: PCP, NYSE: ATK, NYSE: LMT, NYSE: COL, Nasdaq: AVAV, Nasdaq: ATRO, NYSE: HON, Nasdaq: CRDN, NYSE: BA, NYSE: CGT.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Trade Deficit Expands in June 2010

Trade Deficit Expands

It looks as though June's stronger dollar played a short-term role in international trade. The latest trade report showed an expanded deficit, mostly due to the trade of non-petroleum goods and an expanded trade deficit with China, the EU and OPEC nations. We found it troubling to see exports fell in June, while imports grew. The best case realistic scenario is one where both imports and exports are growing.

Markos N. Kaminis earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, for Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV & radio. While writing for Wall Street Greek, he presciently predicted the financial crisis in detail.

(Tickers: NYSE: TK, NYSE: NM, NYSE: NNA, NYSE: NMM, NYSE: TNP, NYSE: OSG, NYSE: ISH, NYSE: EXM, NYSE: SB, NYSE: SEA, NYSE: GNK, NYSE: DSX, NYSE: DAC, NYSE: TNP, NYSE: NSC, NYSE: CNI, NYSE: CSX, NYSE: UNP, NYSE: FDX, NYSE: UPS, NYSE: KSU, NYSE: BNI, NYSE: AG, NYSE: POT, NYSE: XOM, NYSE: COP, NYSE: OXY, NYSE: BP, NYSE: X, NYSE: RTP, NYSE: BHP, NYSE: MON, NYSE: CAT, Nasdaq: TOPS, Nasdaq: DRYS, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ)

Trade Deficit Expands in June 2010

The headline report today came in the form of the International Trade data for the month of June. The report was released in the pre-market, and offered an exaggeration of expectations. Economists expected the deficit to show modest expansion in June, to $42.35 billion. Rather, the deficit widened broadly to -$49.9 billion, the widest mark since October 2008. While a return to the economic activity of years past should translate into higher trade deficit, the drivers this month were not entirely positive in nature. The trade deficit for June will also play a negative factor in Q2 GDP revision.

The deficit expanded, not due to faster growth in imports than exports, which would be healthy and normal historically speaking, but due to polar divergence between imports and exports. While imports increased by $5.9 billion, exports dropped $2.0 billion against May levels. All the action was centered around the trade of goods versus services, and goods carry 3.4 times the importance of services in trade, based on June's data.

You might have expected the deficit to be greatly impacted by reduced European demand for US exports given EU issues, and the deficit between the EU and US did expand to $7.8 billion, from $6.2 billion. However, it was an expansion of the trade deficit with China that did most of the driving in June, with deficit expansion to $26.2 billion, from $22.3 billion.

The deficit also expanded between OPEC nations and the US, to $8.9 billion from $7.8 billion. We would expect this to be the result of change in the price of energy and petroleum based goods in June. However, oil prices came down sharply from May, and the average price of oil in June was lower as a result of little change through the month. Indeed, the non-seasonally adjusted petroleum deficit stood at $21.2 billion, while the non-petroleum unadjusted deficit was $40 billion. The government notes the numbers do not add up due to seasonal adjustment and rounding. Petroleum imports greatly outweigh exports, and so the petroleum trade deficit actually narrowed slightly in June. It seems something else is driving the general trade deficit expansion between the US and OPEC nations. After inspection, it was the seasonal adjustment to petroleum trade that led to the expansion, and volumes demanded increased by 32 million barrels. Perhaps Gulf moratorium and related issues played a role.

The details of the report show that the deficit was mostly driven by decreases in the export of capital goods ($1.4 billion), industrial supplies and materials ($1.0 billion) and increases in the import of consumer goods ($3.1 billion), automotive vehicles and parts ($1.3 billion), other goods ($0.6 billion) and capital goods ($0.5 billion). The decrease in exports is troubling in this context against a sharp increase in imports, and it may be due to the stronger dollar that existed in June.

The euro and British pound have gained ground against the dollar over the past month though, thanks to EU stress tests, and the yuan is doing the same on China's economic reins. However, in light of the latest Fed informal forecast published within its monetary policy statement, risky assets are selling off and the dollar is strengthening again.

Buyers of commodities are global shoppers, and will take from cheapest source; it seems where options exist and where differentiation is minimal, the US can't compensate its exporting activity for dollar strength. The good news is that we're a finished goods producer, wherever we still produce goods. However, with the rapid development of the emerging world, perhaps the American differentiation advantage dissipates. Perhaps then trade is even more sensitive to currency fluctuation, in the world's favor versus the US. This brings currency policy with unfair players like China into focus, and so expect to see a rising argument in the American political spectrum.

The gain in imports may also have been affected (like exports) by relative dollar strength in June, versus the organic demand for goods we would hope for in economic recovery. Are American products losing their luster overseas and at home, as we demand more payment in foreign currency and find cheaper foreign goods more appealing? I would not lose too much sleep over this, as I think it's clear this is only a temporary effect, as the dollar should lose value over time (and has since June), in my long-term view. Also, transportation costs look to rise as global growth resumes and pressures fuel prices again, putting pressure on foreign producers selling into the states.

I also look for (hope for) an American manufacturing revival in the alternative energy technology space, which could boost demand for American differentiated goods again overseas. I'm not just speaking to solar panels, but to the autos and other goods that will include new and hopefully well protected technology. This is something any American president should be seeking, as the nation has its working class majority to provide for, as well as the sophisticates we all seem to think we are.



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China - Signs of a Collapsed Export Driven Growth Model

By Guneet Singh Sahni - China Analyst:

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Nowadays if you visit China, you will observe a bulk of goods including toys, garments and electronics occupying the store shelves, giving you much better variety and quality than before. This is thanks to falling demand for goods from the world's factory, especially from the U.S. and other western countries. After riding on a wave of five years of double-digit export-oriented economic growth, China seems to face a hard landing, if one goes by last week's trade figures. China's exports data turned shockingly negative (declined by 2.2% Y/Y) in November, the first decline since June 2001 and the largest fall since April 1999. Two-thirds of China's small-toy exporters closed shop in the first nine months of 2008, according to government statistics. Closure of high labor intensive factories, including those of toys, garments and electronics manufacturers has also aggravated social unrest, by displacing sacked workers back to the countryside.

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Global Liquidity Freeze - Culprit for Declining Exports

The global slowdown resulted in a decline of China's exports by -2.2% Y/Y in November, as against growth of 19.2% Y/Y in October. The export falloff, the first since 2002, came up against consensus estimates for 15.6%. Details suggest that the fall in headline growth was led by mechanical and electrical exports. Additionally, some major customers of Chinese buyers in the U.S. and Europe could not get letters of credit (LC), thanks to the lagged effect of the global credit crunch and its leading to cancellation of Christmas orders. While the global credit market is slowly returning to normalcy, lost Christmas orders will not come back. It's clear the global liquidity freeze has dealt a severe blow to many Chinese exporters.

Early Signs of an Industrial Recession in Asia

The sharp fall in imports by 17% Y/Y, as compared to growth of 15.6% Y/Y in October, suggests a significant downturn in China's domestic demand and production cycle. However, the steep fall of import growth (against a consensus estimate of 12%) is partly attributable to lower global commodity/energy prices. In addition, the threat of an industrial slowdown in Asia looms, owing to the warning signs of a collapse in inter-regional trade and weak domestic demand within Asian economies. Some of the lead indicators for this collapse are seen in data from Korea and Taiwan, where exports fell by 18.3% Y/Y and 23.3% Y/Y, respectively, in November.

Falling Chinese import totals are partly offset by the fact that a large part of the exports from Korea and Taiwan to China are used as intermediate goods in China for further export as finished goods.

Record Trade Surplus - Global Imbalance

The trade surplus for the month of November widened to a new record high of $40.1 billion, from $35.2 billion in October (as compared to a market consensus expectation for $32 billion). This trade surplus has surpassed all records held up by any country at anytime. China is going to come under severe strain from global economies to reduce this imbalance. However, China has once again reiterated that it will not appreciate its currency by the magnitude demanded by its global trade partners, so as to keep its export sector competitive.

Hard Landings Can Lead to Serious Social Unrest

The GDP growth rate for the third quarter, which slowed to 9% Y/Y, also signifies a major concern for the economy. The central bank has already cut rates four times since September. China's November Headline CPI inflation came in lower than expected, rising 2.4% Y/Y (against consensus estimate of 3.3%), compared to 4.0% in October. This is the lowest reading in two years. That is alright for the long term, but China has a serious short-term problem. Domestic demand is still too weak to replace exports. This is evident from its November retail sales growth data, which decelerated to 20.8% Y/Y from 22.0% in October. Experts widely believe that GDP growth below 8% could lead to social unrest within China.

Consequently, in an effort to save China from hard landing effects, the Central Economic Work Conference gathered the country's top leaders last week to set the tone for a "soft landing." The meeting ended with a pledge to maintain stable, healthy growth next year through domestic demand expansion and economic restructuring.

China Will Need Special Focus on Intangible Infrastructure to Avoid Social Unrest

The government has taken a series of aggressive measures to stimulate the world's fourth-largest economy. In one of its most significant moves, China announced the mother of all stimulus packages, estimated at $586 billion or 4 trillion yuan, to be spent over the next two years. The stimulus package also paid special attention to intangible infrastructure like health and education, which is the need of the hour to stall any social unrest.

China's Defensive Armor Against Global Slowdown

The biggest challenge for Chinese policymakers will be to avoid a hard landing. A number of economists have conjured up downgrades of China, to abysmal growth rate projections ranging from 2-8%. I believe China has enough room to move on both the monetary and fiscal policy fronts to tackle the slowdown, given its large current account surplus, FX reserves, fiscal surplus and slowing inflation.


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