“Private credit is contracting on both sides of the Atlantic. The M3 money data is flashing early warning signals of a deflation crisis next year in nearly half the world economy. Emergency schemes that have propped up spending are being withdrawn, gently or otherwise.” says Telegraph.

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said he’s been buying longer maturity Treasuries in recent weeks amid a re-emergence of deflation concern.

Take technology toys for one.  Nintendo just announced a 20% price cut on their hot-selling gaming console, the Wii. The price cut will be effective from September 27 and Nintendo Wii will be sold for a new price of $199.

“Unemployment benefits have masked social hardship unto now but these are starting to expire with cliff-edge effects.The jobless army in Spain will be reduced to €100 a week; in Estonia to €15.” Says Telegraph.

The overwhelming fact is that private spending has slumped in the deficit countries of the Anglosphere, Club Med, and East Europe but has not risen enough in the surplus countries (East Asia and Germany) to compensate. Excess capacity remains near post-war highs across the world.

The World is “HOPING” for a V shaped recovery but the reality is going to be very, very different…

The discovery of water has been  announced in three research papers in the online edition of the journal Science and it will encourage those who want to establish human colonies on the moon.

An American instrument on India’s first lunar satellite has detected surprisingly large amounts of water locked up in the moon’s rocks and soils.

“This is a major discovery that will have a significant impact on international plans for exploration of the Moon,” said Marc Norman, a lunar researcher at the Australian National University. “One caveat – it is important to realise that this is not liquid water like our oceans, nor ice like on the Mars polar caps. Rather this water on the moon appears to be bound up with minerals,” he said.

The scientific question now is where the lunar water came from ???

Very interesting article in FT about Commercial Real state in Europe :

“European commercial property owners face debt time-bomb”:

“European commercial property owners face a wave of complex debt refinancings and restructurings that pose a threat to the sector, according to bankers and industry groups.

There is mounting concern among industry professionals about how to restructure or refinance the $2,100bn of European commercial property loans, in particular the $200bn in CMBS.

Close to £43bn of loans to the commercial property sector are due for repayment this year alone, according to De Montfort University research.

Half of the outstanding European CMBS market needs to be repaid in 2011 and 2012, and CMBS in default have already proved difficult to restructure”.

Maybe, Eurozone is even in worse shape that US. So much for a strong € !!!

source : Liscio Report

Wal-Mart CEO said yesterday that “Our customers have been under a real strain” and that the paycheck cycle has ” been more exaggerated and pronounced in recent months”

He added “This new focus on frugality and especially on the deferral of purchases for things that are not needed right now, are the New Normal… I do not believe this will change as the Economy gets better. The deferral of purchases will be with us for a long,long time ”

Do you remember our last post about THE NEW NORMAL ? http://www.lateralthinking.biz/the-new-normal.html

We believe that the new focus on frugality by the US consumer will persist for a long time…

FrankFurt Motor Show was used by RENAULT to  reveal four electric concept cars and new alliances that it hopes will put the company at the forefront of the drive toward this technology.

Launching the concepts at the Frankfurt Motor Show, Chief Executive Carlos Ghosn said : “electric cars will make up 10% of total global car volumes by 2020″.

Renault’s concepts for the market are the Twizy and the Zoe city cars, the Fluence family sedan and the Kangoo zero-emissions people carrier.

Mr. Ghosn said he expects the Twizy concept to go into production in the second half of 2011, while the Zoe will be launched mid-2012. The Fluence will be the first to be launched, hitting the market in the first half of 2011. Renault has decided to launch the car in Israel.

Renault has been working with California-based Better Place on its electric car technology for the past two years. Better Place has developed platforms for charging the car batteries and interacting with the electricity supply grids, both in the home and on the streets.

“The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination ” says Daylymail.

With Baltic Dry Index 40 % below its peak ( beginning 2008), it shows that the WEST is on “saving mood”.

These empty ships should be carrying Christmas over to the West. All retailers will have already ordered their stock for the festive season long ago. With more than 92 per cent of all goods coming into the UK by sea, much of it should be on its way here if it is going to make it to the shelves before Christmas…

But retailers are running on very low stock levels, not only because they expect consumer spending to be down, but also because they simply do not have the same levels of credit that they had in the past and so are unable to keep big stockpiles.

So much for the V shaped recovery !!!

Financial Times says that some 40 per cent of US families now on food stamps have “earned income”, up from 25 per cent two years ago.

The agriculture department, which runs the programme, attributes this rise to workers having their hours cut back.

The average working week is now about 33 hours, the lowest on record, while the number forced to work part-time because they cannot find full-time work has risen more than 50 per cent in the past year to a record 8.8m. Wages and benefits have decelerated.

The food stamp data suggest that “the labour market problems are more significant than you would expect, given just the unemployment rate”, said John Silvia, chief economist at Wells Fargo. “For me it suggests the consumer is not going to rebound or contribute to economic growth for the next year, as the consumer would in a traditional economic recovery.”

Kevin Concannon, undersecretary for food, nutrition and consumer services at the agriculture department, called the increased enrolment of working families “very significant”.

Do we really think that US consumer is going to come back anytime soon ???

As PIMCO´s managers say: ” We are heading into what we call the New Normal, which is a period of time in which economies grow very slowly as opposed to growing like weeds, the way children do; in which profits are relatively static; in which the government plays a significant role in terms of deficits and reregulation and control of the economy; in which the consumer stops shopping until he drops and begins, as they do in Japan (to be a little ghoulish), starts saving to the grave.”

The investment implications of this New Normal evolution cannot easily be modeled econometrically, quantitatively, or statistically. The applicable word in New Normal is, of course, “new.”

The successful investor during this transition will be one with common sense and importantly the powers of intuition, observation, and the willingness to accept uncertain outcomes.

As of now, PIMCO observes that the highest probabilities favor the following strategic conclusions:

1. Global policy rates will remain low for extended periods of time.
2. The extent and duration of quantitative easing, term financing and fiscal stimulation efforts are keys to future investment returns across a multitude of asset categories, both domestically and globally.
3. Investors should continue to anticipate and, if necessary, shake hands with government policies, utilizing leverage and/or guarantees to their benefit.
4. Asia and Asian-connected economies (Australia, Brazil) will dominate future global growth.
5. The dollar is vulnerable on a long-term basis.

Let´s see if Governments Bureaucrats start getting it and understand that the “good old days” are gone for a long,long time…

Source Eurostat

The Spanish unemployment rate hit 17.9% at the end of the Q2 2009, according to Spain’s National Statistics Institute (INE), the highest level in the eurozone and well above the 8.9% average of the 27 EU member states. In fact, Spain makes up over half of the past year’s increase in eurozone unemployment, with over 30% of the eurozone’s jobless living in Spain. The Organization of Economic Cooperation and Development (OECD) predicts that Spain’s jobless will reach 20% of the workforce during 2010, gradually edging closer to the historic high of 24% recorded in 1994.

Every country across Europe has suffered from the economic contraction. Yet Spain’s catastrophic housing collapse and towering unemployment figures make its plight stand out. The downturn has been aggravated by Spain’s rigid and antiquated labor regulations. As Luis Garicano of the London School of Economics argues, “that the crisis has hit Spanish employment disproportionately is due to the catastrophic way the labor market works.” Unless action is taken to remedy the underlying causes of Spain’s unemployment crisis, the country faces a prolonged and dire recession.

In short, quick-fix programs cannot alleviate Spain’s unemployment sickness. Only widespread and effective reforms to reduce wage indexation, equalize dismissal costs of temporary and permanent employees, and reduce the power of collective‐wage bargaining can solve this entrenched problem. These reforms are essential under the conditions of a single currency to allow Spain to compete and avoid asymmetric shocks.

“Starting Sept. 16, China will put into effect a new agreement governing how banks trade domestic financial derivative products among themselves. But as a condition of dealing with foreign banks, China’s five largest commercial banks are seeking to impose tough credit demands that will be hard to comply with, according to lawyers and sources at several foreign banks.” Said WSJ.

Bank of China Ltd., Industrial & Commercial Bank of China Ltd., China Construction Bank, Agricultural Bank of China Co. and Bank of Communications dominate the domestic money markets, supplying as much as 80% of market liquidity. Not being able to deal with them would punch a big hole in the operations of foreign banks in China.

China’s derivative markets are rapidly developing, and foreign banks have been hoping their extensive international experience will help them tap a steadily increasing stream of revenues from those markets.

Under the new trading regime, banks will only be allowed to trade with counterparties with whom they have signed a master agreement. That agreement will initially cover existing trading in interest rate swaps, bond forwards, foreign exchange swaps and forwards and cross currency swaps.

But the five big banks are insisting that foreign banks, and in some cases their major shareholders, guarantee the credit of their China units before they sign any agreement, according to foreign bankers with direct knowledge of the situation. All five banks declined to comment on the new arrangements.

China is dictating its own rules after last 2 years catastrophe !!!