Monday, September 26, 2011

Markets flash global warnings

For months, it was all about Europe and the United States. Suddenly, investors have reason to worry about the rest of the world.

Last week, the Dow Jones Industrial Average fell 6.4%, its worst week since October 2008, letting down almost 7% for the year. The Standard & Poor's 500 index is almost as bad last week and is down 9.6% this year.

But rather than focus exclusively on the Greek debt, European banks and the U.S. economy, many investors began to twist the hands of a new set of indicators, which point to a severe downturn of the global economy.

Copper prices and the fall of shares in Shanghai, Hong Kong and Brazil all have a group of investors on board. Others focus on junk bonds and a sudden weakness of the recession in the steel industry and mining activities and business. Some investors see the main indicators of this market for a wider market.

"Copper is down, in Brazil and China," said Michael Aronstein, president of asset management market in the field, which manages over $ 1 billion. "People are expecting distant empires to stimulate growth, "he added. "That's where the disappointment will come from." Copper is down 22% in September was particularly disturbing. The demand for the metal is often viewed as directly reflecting a wide range of economic activities. Copper goes into houses, appliances and vehicles, and faces a drop in spending by consumers, businesses and governments. It is sometimes called Dr. Copper by fans as it is perceived as a better predictor of the economy as academics is perceived with doctorate.

The recent decline is a "convincing evidence of a global slowdown in manufacturing activity," said John Lonski, chief economist at Moody's Capital Markets Group.

Copper is a problem and can be treated as a sign of weakness in emerging markets, particularly China, the world's single largest consumer of copper.

Shanghai Stock Exchange fell nearly 10%, late July and was down 21% in the 'index of Hong Kong - Hang Seng. The Chinese stock market does not always reflect underlying economic activity in the country. Still, economists say China's growth is likely to slow as the second largest economy continues to downshift. Oil demand from China in since October last year, according to estimates from Platts, even if it was up 7% over the past year.

The gear reduction is in part a decision by the government to try to steer the economy away from being driven by infrastructure projects managed by the government, like its high-speed rail system.

But exports also appears to be under pressure, investors say that growth abroad slides.

"The provincial trade data from the coastal provinces of Guangdong and other places of export of China is a bad sign," according to a letter sent to investors last week by William Callanan, who runs a hedge fund content first by Fortress Investment Group. "Many cracks begin to appear" in China and other key markets in Asia. Weakness in copper and Chinese stocks may also indicate that the speculators feel a pinch, some say. In China, often day traders drive prices of copper and stores are now market players have their funding cut by lenders. Beijing has been tightening its grip on lending to try to keep inflation under wraps. Yet, all the slowdown in China is likely to hurt global growth, especially in developing countries like Brazil, which sell raw materials and other products for the rapid growth of China.

A landslide in the last week in the share of steel companies, coal mines and adds evidence of a global slowdown, because these industries are heavily dependent on growth overseas. Actions leading producers of raw materials such as Freeport McMoRan Copper & Gold, United States Steel, and Arch Coal fell 20% to 23% last week, and an index of steel producers fell by 19%.

Meanwhile, junk bonds have been under pressure for several weeks, a possible sign of problems for companies responsible for the debt. Prices of junk bonds are at levels that suggest that the standard will be about 8% of junk bond issuers over the next year, analysts said. And junk bonds have not had much of a recovery in recent weeks, even when the stocks have managed to rise, worrying some investors.

Kingman Penniman president of KDP Investment Advisers, Inc., the junk-bond research firm, says the junk-bond prices are oversold, and that the default values can be from 2.5% to 3% per year. Still, it is up to the expectations of less than 2%, within a few weeks ago. For some investors, the wide range of indicators suggest that the global economy has entered a new era, one fraught with danger.

"The world is now in a synchronized slowdown," said Mohamed A. El-Erian, chief executive officer of Pacific Investment Management Co., the largest bondholder of the world.

Mr. El-Erian argues that the weakness of copper, China and other markets "speech to the recognition of the increasing pollution of the global economy, as the sovereign of the West and emerging crises."


  1. Can you please put the links back up so we can tell what website these articles came from?

    Besides that, it seems Hollywood and Google's hosting of mindless entertainment have really gripped Americans. A flood of new gadgets for television, cell phones, and internet coming out each week or so give the illusion that mankind is progressing.

    I suppose in countries like India and China, their "standard of living" is improving. That is only technology wise of course, and says nothing about their happiness. The Chinese have never had as high of suicide rates as they do now. Even Bollywood, a Hollywood spin off, is quickly corrupting the youth of India.

    India is not the only ancient civilization to have survived because they managed to keep hidden all of their art, work, and culture from invaders. They survived for 6,000 years because they followed God and spiritual living by taking care of their animals, old and disabled people, and honoring saints. Every other culture perished.

    The occidentalizing of the east through industrialization is making their lifestyles hell. Americans only prospered in the first half of the 20th century through these methods. Why do people believe this will work universally!? Our existence is coming to an end here, our souls have been sucked dry through such excess.

    A nation which cherishes money and lust doesn't last. Our country has abandoned morality and intellect to celebrate sports figures, nude actresses, ring fighters, toys, and greed. Economic factors are hardly comparable in magnitude.

  2. I'm surprised that the "experts" are surprised. Even a cursory reading of world news explains that every country is in trouble because of the financial meltdown. The fraudulent practices that brought down the banks haven't changed--especially since taxpayer money bailed them out.

    When the banks fail again and demand taxpayer money, or when our Fed has to print wheelbarrows full of money to save them, thereby causing hyperinflation, you'll see plenty of riots and protests here.



Everyone is encouraged to participate with civilized comments.