Friday, 1 June 2012

March of the lemmings ....

I heard Thomas Hearn from Credit Suisse's Global Economics Unit being interviewed on Bloomberg when I first got up this morning. I was pretty dopey as I tried to shave, but what I was hearing certainly got my eyes open. It seems like overnight the Chinese PMI came in at 50.4 in May, its lowest in five months, down from 53.3 in April. This showed what I'd long thought i.e. Chinese manufacturing was close to hitting a wall. Mr. Hearn seemed shaken, but not stirred sticking to his line of Chinese GDP growing at 8% this year. Really? Why do these people not see the trend?

Of course the Chinese stock market on the day started to rise into the close believing the government bailout was imminent. The problem remains that the Chinese are big savers, they aren't going to spend like teenage girls at a shopping mall in L.A. .... cut rates and people will buy real estate which will increase the credit problems in the long run because things don't go up for ever. The leadership knows all this, so any stimulus will focus on some infrastructure projects. Good news for Caterpillar (CAT) and fellow heavy machinery makers.

Anyway as I write this US overnight futures started to rally as nervous shorts started to cover ahead of the May jobs report from the US later today. Don't discount the fact that it's Friday .... the lab rats of global markets have been trained to cover on Fridays because policy response comes on weekends. Jeezus!

Late yesterday Q1 growth for the US was revised down from 2.2 to 1.9, then add to that the ADP employment report, which suggested that the private sector created only 133,000 jobs in May. I don't like the ADP report, so take it as a trend indicator only. And if all that wasn't enough the Chicago PMI came in at 52.7 v. the expectations for 56.5. Not good. QE3 more likely?


I know I've mentioned Morgan Stanley a few times recently, but here we go again. The foot in mouth award for the year has a new nominee .... it's fellow Aussie and MS CEO James Gorman. The Chief Facebook salesman dismissed outrage over Facebook’s IPO by calling investors who had expected immediate gains “na├»ve” ... they had “bought it under the wrong pretences”. Nice one JG, congratulations on playing into the public perception of banker stereotype. “Give this a little bit of time ... We’re only on day eight here.” Please spare us, you got greedy to print a bigger number and when institutions got some negative briefings the public got stuck with the deal. This will end badly and I'll predict Mr. Gorman will appear on Capitol Hill, botch his testimony and within 18months be joining me for a coffee at Coluzzi's in Sydneys Kings Cross after a morning bike ride.

"JG . . . I'll get the next coffee . . . "
No riding or gym for me today, my exercise will be detailing the car as I need to sell the beast in the next 4 weeks. I'll hear the Swiss will be pretty picky about cars and you rarely see a dirty car in the streets of Geneva, so this will be 2 hours of washing and waxing. At least the sun is out and thats got to make it easier to get a nice shine.


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