perceptions_now wrote on Jun 3^rd, 2013 at 5:24pm:

The Japanese slide continued today, dropping nearly another 4% (518.89 points), to finish at 13,009.

This continues the trend since May 23, when the Nikkei finished just under 16,000, at 15,926 and the % drop since then is quickly closing on 20%.

http://www.investing.com/indices/japan-ni225

There Is A Bubble In U.S. And Japanese Stock Markets, Here's Why

It is fairly obvious to investors that the Nikkei has gotten a bit bubbly of late. It ran up 80% over the last few months on expectations that the multi-decade deflationary cycle that Japan has been fighting could be broken by "Abenomics" and inflation could be created.

It is clear by the drop of 17% in the Nikkei over the last few days that the hopes and expectations of investors in regards to inflation are not being matched by reality.

The trigger for the 17% drop appeared to be related to Fed Chairman Bernanke's appearance before U.S. lawmakers a little over a week ago. In that session, Bernanke repeatedly stated that the central bank cannot affect long-term growth, it can only provide short-term liquidity support in times of crisis. Bernanke went on to state that the long-term solution must be given by the fiscal authorities, not the central bank.

Over the past few months, Japan has been adding about $75 billion per month in liquidity, which is about three times the amount that the U.S. is currently creating, relative to GDP.

Given the fact that Japan has a debt load of about 220% to GDP, its options for fiscal stimulus are quite limited. As Bernanke made clear, central banks cannot create value--they can only create liquidity to fight a short-term crisis.

In order to create inflation, the Japanese government would need to spend money that would get into the hands of the bulk of consumers to the point where they could bid prices up. However, that pesky 220% debt load keeps Japan from doing any major stimulus as it would likely destabilize its extremely delicate bond market to the point of collapse.

It is not that difficult to see how Japan is between a rock and a hard place in regards to what actions the monetary and fiscal authorities can take. The deflationary pressures are very strong and when they try to do a monetary stimulus it just creates a bubble, as seen in the Nikkei over the last few months. If they were to do a fiscal stimulus package of any significance it would add to the high debt load to the point of collapsing the bond market. That reality thing is a pesky little bugger.

Now About The U.S.
Given that the recent Japanese drama of Abe's money printing scheme took place over the past six months or so, it is quite easy to find the flaws and weaknesses of their actions. The 80% rise in the Nikkei has been dramatic, as has been the 17% drop. Somewhat less dramatic but likely more dangerous, is the similarity of the bubble that has been created by the Fed in U.S stocks over the last four years.

Prior to the financial crisis, the U.S. debt to GDP was only about 65%. This allowed for a significant amount of fiscal stimulus in the aftermath of the crisis. This largely came in the form of extended unemployment benefits, food stamps, etc.


Now we have the sequester and significant concerns over the size of the national debt. Cuts to government spending continue.

Since the financial crisis, many investors bought stocks on the premise that inflation would rise significantly as a result of the amount of money being printed by the Fed. The same logic was used by investors in regards to gold. The flaw has been seen in that theory with gold. It appears that it is also being seen in the Nikkei. Now it may be starting to be seen in U.S. stocks.

The Fed's latest inflation numbers show 0.7%--significantly below the Fed target of 2%.

Conclusion:
The combination of Japan's demographics in regards to aging, its high debt to GDP, the lack of inflation and the size of the recent monetary stimulus all conspired to show investors a fairly clear picture of the cause and effect of the actions taken in a fairly compressed time period.

The same forces are at work in the U.S. However, our QE programs have been less dramatic in size, relative to GDP and the time periods have been longer in regards to the life of the QE programs (starting in 2009). Our debt load is less dramatic. Our aging demographics are not quite as severe (yet). And, our stock market run has been over the period of four years, rather than six months.

The premise that has caused the stock run is the same in both Japan and the U.S., and it is flawed. The premise is that the government can create inflation. This is proving to be much more difficult that expected.

As the reality of the deflationary pressures make themselves clear and central banks admit their limitations- as Bernanke did about a week ago- I would expect a similar reaction in U.S. stock markets as has been seen in the Nikkei over the last few days.

Link-
http://seekingalpha.com/article/1478561-there-is-a-bubble-in-u-s-and-japanese-st...
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Given the basic realities of the major Global Economic drivers, such as Demographics, Energy supply/costs & Climate Change, there is absolutely no way that what is happening is a short term liquidity issue, WHAT IS HAPPENING IS BEING DRIVEN BY LONG TERM, SYSTEMIC & THEY ARE SET IN CONCRETE.
THESE ISSUES WILL NOT GO AWAY & WE NEED TO INTRODUCE A RANGE OF BASIC SYSTEMIC CHANGES, WHICH RECOGNISE THE REALITY OF THESE CHANGING CIRCUMSTANCES, NOW!

perceptions_now wrote on Jun 7^th, 2013 at 5:50pm:


Well now, that is interesting?

I looked at the Nikkei some one & a half hours after it had closed & the following site showed the Nikkei had finished at 12,674 (as per my previous post), which was down 230 on the day!

Now, the same site shows the Nikkei finished at 12,878, only down 26.49 for the day??? 

Now it could be, I may have mis-seen what I saw, BUT I DON'T THINK SO!

http://www.investing.com/indices/japan-ni225

After topping out in May, the Dow has started to retreat & it finished down by 127 again in its last session, to close under 15000, at 14995.

http://finance.yahoo.com/q/bc?s=^DJI+Basic+Chart&t=3m

Given past trends & the state of current Economic drivers I expect this current downward DOW trend will continue for some time & other markets will also regress, including the Aussie All Ord's, which is currently down again today, by 65, to now be at 4,650.

https://invest.etrade.com.au/

Detroit defaults on some debt to avoid bankruptcy filing

(Reuters) - Detroit said on Friday it would stop making payments on some of its about $18.5 billion debt, which would put it in default, and the "insolvent" city called on most of its creditors to accept pennies on the dollar to help it avoid the largest municipal bankruptcy filing in U.S. history.

In a forceful opening salvo of negotiations with debt holders, Detroit Emergency Manager Kevyn Orr announced a moratorium on some principal and interest payments, including one payment he said was due on Friday.

Under his proposal, Orr said unsecured debt holders would be paid less than 10 cents on the dollar, but some creditors would get a bit more based on city revenue. Some $11.5 billion of the debt is unsecured and $7 billion secured, according to figures presented by Orr.

Orr said secured creditors would get better treatment, although how much better was not specified.

Secured credit means an asset is pledged to back the debt. For example, Detroit has secured its interest rate swap agreements with casino revenue.

He said the city would skip a $34 million payment due on Friday on $1.43 billion of pension certificates of participation, to allow the city to conserve cash needed to provide services to residents.

Fitch Ratings and Standard and Poor's Ratings Services immediately downgraded Detroit's rating to a level reserved for borrowers about to default.

"We expect default to be a virtual certainty," S&P said in a statement accompanying its downgrade to CC from CCC-negative.

A trustee for the bond issue will have to certify that Detroit failed to make the payment on Friday, which would trigger a formal default.

Detroit's crisis is being closely watched by U.S. debt markets. It did not immediately affect the $3.7 trillion U.S. municipal bond market, where prices ended higher on Friday.

"Financial mismanagement, a shrinking population, a dwindling tax base and other factors over the past 45 years have brought Detroit to the brink of financial and operational ruin," Orr said in a statement.

Orr said the city was "insolvent," unable to pay its debts and needed shared sacrifices from everyone, including debt holders, to have any hope of a revival.

Insolvency and inability to pay debts are two tests a government must meet for a judge to accept a Chapter 9 municipal bankruptcy.

It would be a first for a major U.S. city as New York, Philadelphia and Cleveland all avoided formal bankruptcy filings during their financial difficulties.

New York also declared a moratorium on some debt payments in the 1970s, but creditors were ultimately paid in full under a restructuring agreement, said Jim Spiotto, a municipal bankruptcy expert at law firm Chapman and Cutler in Chicago.

In addition to the financial details, the 134-page document presented on Friday describes collapsing city services, rising crime and falling tax receipts.

City workers and retirees would also face changes to their pensions and health care coverage "consistent with available funding."

Initial reaction from debt holders and labor unions was negative.

Emerging from the meeting, one bond holder who asked not to be identified, said of Orr's proposal to pay them only pennies on the dollar: "It's just too much. It is an unprecedented amount to ask."

In the past, bondholders have not lost the principal amount owed them as a result of the financial restructuring of major cities such as New York and Cleveland.

Much of Detroit's debt is insured, giving bondholders protection against defaults. Two of the insurers, National Public Finance Guarantee Corp, a unit of MBIA and Assured Guaranty Ltd, confirmed they attended the meeting.

Link -
http://www.reuters.com/article/2013/06/14/us-usa-detroit-creditors-idUSBRE95D0OS...
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Yep, recovery is well underway, in the USA???

$A at lowest level since September 2010

OVERSEAS holidays and imported goods are set to get more expensive as the Australian dollar plummets below 93 US cents for the first time since September 2010.

The currency was been sold heavily since US Federal Reserve chairman Ben Bernanke announced on Thursday morning Australian time that its stimulus measures would end in mid-2014

.

BK Asset Management managing director Kathy Lien says the Australian dollar was sold off more than other currencies, as foreign investors also brace for more Australian interest rate cuts.

"The Aussie's been hit the hardest," she said from New York.

An end to the US central bank's bond buying program, known as quantitative easing, also makes the greenback more attractive to investors.

"Less quantitative easing means the Federal Reserve is pumping less money into the economy

and no longer aggressively devaluing the (US) dollar," Ms Lien said.

The Australian dollar was buying 92.77 US cents at 7.45am AEST, after hitting a 33-month low of 92.63 earlier on Thursday morning.

On Wednesday afternoon, it was still worth a shade under 95 US cents.

A weaker local currency is good for exporters, like manufacturers and tourism operators, who have struggled to sell their products as the Australian dollar held above parity with the greenback for most of the past year.

Link -
http://www.theaustralian.com.au/news/breaking-news/a-falls-below-93-us-cents-33-...
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Oh & btw, the DOW fell 2006 overnight, DOW Futures are now down around 40 & the All Ords is also down around 60.

http://www.investing.com/indices/major-indices
https://invest.etrade.com.au/

China June official PMI slips to 50.1, adds to growth worries

(Reuters) - Growth in China's vast factory sector slowed to multi-month lows in June on faltering new orders, a pair of surveys showed on Monday, boding ill for the world's second-largest economy still smarting from fears of a credit crunch.

Economists said the two purchasing managers' indices (PMI) reinforced their concerns that China's economic cooldown could deepen in the second quarter, especially with Beijing looking increasingly reluctant to take action to stimulate growth.

"The Chinese economy is still struggling at the bottom," said Haibin Zhu, chief China economist of JPMorgan in Hong Kong.

Zhu said slowing growth in China's factory sector, as well as tighter monetary conditions in coming months after a squeeze in the interbank market in the last two weeks, could further hobble the Chinese economy this year.

The official PMI slipped to 50.1 in June from May's 50.8, just a whisker above the 50-point level that indicates growth. The last time the reading fell below 50 was in September.

A separate PMI survey, conducted by Markit and sponsored by HSBC, fell to a 9-month low of 48.2 from May's 49.2.

Yet, China's leaders appear to be comfortable with the country's slower pace of growth, with President Xi Jinping saying over the weekend that officials should no longer be lauded as "heroes" if they chase economic growth at all costs.

The surveys showed demand slackening at home and abroad.

LEADERS AT EASE ON SLOWING GROWTH
Despite growing worries from investors, China's new leadership of President Xi Jinping and Premier Li Keqiang, who formally took office in March, appeared comfortable with the economic slowdown and reiterated efforts to speed up reforms.

"We need to improve method and means of measuring performance," said President Xi, during a weekend meeting with his high-ranking team. "We should no longer call someone a hero simply based on GDP growth rate."

Link -
http://www.reuters.com/article/2013/07/01/us-china-economy-pmi-idUSBRE96001I2013...
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Demographics, Energy & Climate issues, will ensure that Growth will not return to the highs experienced in the last half of the last century, so YES WE WILL NEED A NEW MEASURING STICK TO MEASURE OUR ECONOMIC PERFORMANCE!!! 

Oh & btw, the All Ords finished down 85.7 today, at 4,690.