Helicopter Wen

Below are two interesting quotes on how to create a new bubble, “the Chinese way”:

– From Wu Xiaoling, former People’s Bank of China vice governor, interviewed by National Business Daily:

“Under conditions of overcapacity, excess money supply will not lead to rises in price indexes, but it could generate asset bubbles. The money has really gone out and if it is a time when there is no investment in the real economy and no one will put the money in banks to earn interest, then the funds will flow into the property market and stock market”

– From Hu Shilu, editor of Caijing:

“These astronomical increases in currency and lending are a double-edged sword that can support GDP growth as well as endanger the economy.

…It’s high time we re-emphasize the actual policy of moderation. A moderately loose monetary policy is necessary for an unpredictable, downward-sloping economy. However, monetary policy that’s too loose will have more drawbacks than merits once an economy levels out. It’s only a matter of time before loose monetary policy leads to inflation and asset bubbles. “

No wonder why the Chinese stock market is so far the best performer in the world this year (+88.84% !)

Impressive new sales

The seasonally adjusted New Home Sales (annual rate) increase by 11% MoM to 384K, from a revised 345K. Sounds impressive, no?

Well, let’s look at the graph:

Hum… And this number has a statistical error of ±13.2%

The only good news it that the inventory / sales ratio is down to 8.8 months, which makes sens as news construction is down by more than 55%:

Are the seasons changing?

No one would argue that we are in the middle of a very severe worldwide recession, green shoots believer or not. In such an environment, business is not business “as usual”, and former seasonal patterns in the job market (carmaker mid-year layoffs…) might not be holding.

As a consequence, the Non Seasonal Adjusted data could be showing a different figure than the Seasonal Adjusted. And they are:

A lot of companies probably changed their “normal” hiring pattern in response to the crisis. We should be careful not to read to much into small changes.

Green shoots?

For a first post, I would like to start with a bit of humor. Warren Buffett was interviewed by CNBC on June 24 and this is his comment regarding the “green shoots”:

“BECKY:  We hear people on our air all the time who talk about the ‘green shoots’ that they’re seeing.  Are you seeing any of those green shoots?

BUFFETT:  (Laughs.)  I looked.  I wasn’t seeing anything.  I had a cataract operation on my left eye about a month ago and I thought maybe now I’ll be able to see green shoots.  We’re not seeing them.  Whether it’s retailing, manufacturing, wherever.  We have a big utility operation.  Industrial demand is down like we’ve never seen it for a simple thing like electricity.  So it hasn’t happened yet.  It will happen.  I want to emphasize that.  But it hasn’t happened yet.”

One of Warren Buffet favorite economic indicator is the Railroad US Freight Carloads indicator. And it is still not looking very good:

Association of American Railroads US Freight Carloads, weekly update: