Perspectivas Pesimistas: Leer el parrafo fin al

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Roubini: "Reflections on the latest sucker's rally"

by CalculatedRisk on 3/14/2009 09:45:00 PM

The linked post is very long ... long even by Roubini standards! This is actually a short excerpt ...

From Nouriel Roubini: Reflections on the latest dead cat bounce or bear market sucker's rally

It is déjà vu all over again. We have already seen this Groundhog Day movie at least six times over and over again in the last year or so: the market starts to rally – this time around about 8% in a week - and the chorus of optimists starts to say that this is the bottom of the economic and financial crisis and that we are at the beginning of a sustained stock market rally that signals the true end of this bear market.

Next Roubini outlines what he sees as the arguments of the optimists:

[H]ere are the arguments of the optimists:

1. While the first derivative of economic activity is still negative the second derivative is becoming positive around the world: i.e. output, employment, demand etc. are still contracting but they are – or will soon be - contracting at a slower rate than in Q4 of 2008. As long as the second derivative is positive rather than negative economic activity will bottom out some time in H2 of 2009 and the recession will be over sooner rather than later.

2. The policy stimulus, both monetary but especially fiscal, in the US, China and the rest of the world is starting to have traction and will contribution to the slowdown in the rate of economic decline and eventually –sooner rather than later – contribute to the economic recovery

3. Stock markets have already fallen in the US and globally by over 50% and are now way oversold. Earnings have fallen a lot but will recover soon as economic activity will soon stabilize. And since stock markets are forward looking and bottom out 6 to 9 months before the end of the recession we must be now at the bottom if the economy will recover by H2 or, at the latest, by year end.

4. Banks and financial stocks are way oversold; Citi, JP Morgan, Bank of America and other banks are now saying that they will be profitable this year and that they will not need any further injection of capital by the government. The financial system is solvent and the undershooting of banks' equity prices was way too excessive.

Let us explain again – as we discussed most of these points here before – and flesh out in more detail why each of these optimistic arguments is incorrect or, at least, too early and exaggerated.

My main interest is in point #1 - economic activity - and Roubini quotes a post he wrote on March 2nd. (See Roubini's post for his discussion of the other 3 points.

"For those who argue that the second derivative of economic activity is turning positive (i.e. economies are contracting but a slower rate than in Q4 of 2008) the latest data don't confirm this relative optimism. In Q4 of 2008 GDP fell by about 6% in the US, 6% in the Eurozone, by 8% in Germany, by 12% in Japan, by 16% in Singapore and by 20% in South Korea. So things are even more awful in Europe and Asia than the US ...

First, note that most indicators suggest that the second derivative of economic activity is still sharply negative in Europe and Japan and close to negative in the US and China: some signals that the second derivative was turning positive for US and China (a stabilizing ISM and PMI, credit growing in January in China, commodity prices stabilizing, retail sales up in the US in January) turned out to be fake starts. For the US, the Empire State and Philly Fed index of manufacturing are still in free fall; initial claims for unemployment benefits are up to scary levels suggesting accelerating job losses; the sales increases in January is a fluke (more of a rebound from a very depressed December after aggressive post-holiday sales than a sustainable recovery).

For China the growth of credit in China is only driven by firms borrowing cheap to invest in higher returning deposits not to invest; and steel prices in China have resumed their sharp fall. The more scary data are those for trade flows in Asia with exports falling by about 40 to 50% in Japan, Taiwan, Korea for example. Even correcting for the effect of the new Chinese Year exports and imports are sharply down in China with imports falling (-40%) more than exports. This is a scary signal as Chinese imports are mostly raw materials and intermediate inputs; so while Chinese exports have fallen so far less than the rest of Asia they may fall much more sharply in the months ahead as signaled by the free fall in imports.

With economic activity contracting in Q1 at the same rate as in Q4 a nasty U-shaped recession could turn into a more severe L-shaped near-depression (or stag-deflation) as I argued for a while (most recently in my Sunday New York Times op-ed). The scale and speed of syncronized global economic contraction is really unprecedented (at least since the Great Depression) with a free fall of GDP, income, consumption, industrial production, employment, exports, imports, residential investment and, more ominously, capex spending around the world. And now many emerging market economies – as argued here for a while- are on the verge of a fully fledged financial crisis starting with Emerging Europe."

As usual Professor Roubini makes some strong arguments. And I agree that economic activity is contracting in Q1 2009 at about the same pace as in Q4 2008. However, I think the composition of the contraction is different in Q1 (and following the normal business cycle). Most of the real GDP decline in Q1 will be from slumping investment and an inventory correction, whereas in Q4, declines in personal consumption (PCE) were an important contributor to the economic slump.

Maybe PCE will start cliff diving again, but so far the recession (no matter how severe) is still following the normal temporal pattern. Note: Even the Great Depression followed the normal pattern - just more so! Although there are still severe economic problems ahead, I think the shift in the composition is a potential positive. (See:Business Cycle: Temporal Order)

It is still way to early to call the bottom - and even after the economy bottoms, I think the recovery will be very sluggish for some time - but I am watching for the signs (seeLooking for the Sun). Roubini concludes:

So, in conclusion and caveat emptor for investors: Dear investors, do enjoy this dead cat bounce and bear market sucker's rally ... don't wait too long until you jump ship while the financial Titanic hits the next financial iceberg: you may get squeezed and crashed in the rush to the lifeboats.

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Blame the Economists, Not Economics

Blame the Economists, Not Economics

Wednesday, 11 March 2009 10:50
Dani Rodrik

CAMBRIDGE - As the world economy tumbles off the edge of a precipice, critics of the economics profession are raising questions about its complicity in the current crisis. Rightly so: economists have plenty to answer for.

It was economists who legitimized and popularized the view that unfettered finance was a boon to society. They spoke with near unanimity when it came to the "dangers of government over-regulation." Their technical expertise - or what seemed like it at the time gave them a privileged position as opinion makers, as well as access to the corridors of power.

Very few among them (notable exceptions including Nouriel Roubini and Robert Shiller) raised alarm bells about the crisis to come. Perhaps worse still, the profession has failed to provide helpful guidance in steering the world economy out of its current mess. On Keynesian fiscal stimulus, economists' views range from "absolutely essential" to "ineffective and harmful."

Dani Rodrik

Dani Rodrik, Professor of Political Economy at Harvard University's John F. Kennedy School of Government, is the first recipient of the Social Science Research Council's Albert O. Hirschman Prize. His latest book is One Economics, Many Recipes: Globalization, Institutions, and Economic Growth.

On re-regulating finance, there are plenty of good ideas, but little convergence. From the near-consensus on the virtues of a finance-centric model of the world, the economics profession has moved to a near-total absence of consensus on what ought to be done.

So is economics in need of a major shake-up? Should we burn our existing textbooks and rewrite them from scratch?

Actually, no. Without recourse to the economist's toolkit, we cannot even begin to make sense of the current crisis.

Why, for example, did China's decision to accumulate foreign reserves result in a mortgage lender in Ohio taking excessive risks? If your answer does not use elements from behavioral economics, agency theory, information economics, and international economics, among others, it is likely to remain seriously incomplete.

The fault lies not with economics, but with economists. The problem is that economists (and those who listen to them) became over-confident in their preferred models of the moment: markets are efficient, financial innovation transfers risk to those best able to bear it, self-regulation works best, and government intervention is ineffective and harmful.

They forgot that there were many other models that led in radically different directions. Hubris creates blind spots. If anything needs fixing, it is the sociology of the profession. The textbooks at least those used in advanced courses - are fine.

Non-economists tend to think of economics as a discipline that idolizes markets and a narrow concept of (allocative) efficiency. If the only economics course you take is the typical introductory survey, or if you are a journalist asking an economist for a quick opinion on a policy issue, that is indeed what you will encounter. But take a few more economics courses, or spend some time in advanced seminar rooms, and you will get a different picture.

Labor economists focus not only on how trade unions can distort markets, but also how, under certain conditions, they can enhance productivity. Trade economists study the implications of globalization on inequality within and across countries. Finance theorists have written reams on the consequences of the failure of the "efficient markets" hypothesis. Open-economy macroeconomists examine the instabilities of international finance. Advanced training in economics requires learning about market failures in detail, and about the myriad ways in which governments can help markets work better.

Macroeconomics may be the only applied field within economics in which more training puts greater distance between the specialist and the real world, owing to its reliance on highly unrealistic models that sacrifice relevance to technical rigor. Sadly, in view of today's needs, macroeconomists have made little progress on policy since John Maynard Keynes explained how economies could get stuck in unemployment due to deficient aggregate demand. Some, like Brad DeLong and Paul Krugman, would say that the field has actually regressed.

Economics is really a toolkit with multiple models - each a different, stylized representation of some aspect of reality. One's skill as an economist depends on the ability to pick and choose the right model for the situation.

Economics' richness has not been reflected in public debate because economists have taken far too much license. Instead of presenting menus of options and listing the relevant trade-offs - which is what economics is about - economists have too often conveyed their own social and political preferences. Instead of being analysts, they have been ideologues, favoring one set of social arrangements over others.

Furthermore, economists have been reluctant to share their intellectual doubts with the public, lest they "empower the barbarians." No economist can be entirely sure that his preferred model is correct. But when he and others advocate it to the exclusion of alternatives, they end up communicating a vastly exaggerated degree of confidence about what course of action is required.

Paradoxically, then, the current disarray within the profession is perhaps a better reflection of the profession's true value added than its previous misleading consensus. Economics can at best clarify the choices for policy makers; it cannot make those choices for them.

When economists disagree, the world gets exposed to legitimate differences of views on how the economy operates. It is when they agree too much that the public should beware.

Dani Rodrik, Professor of Political Economy at Harvard University's John F. Kennedy School of Government, is the first recipient of the Social Science Research Council's Albert O. Hirschman Prize. His latest book is One Economics, Many Recipes: Globalization, Institutions, and Economic Growth.

© Project Syndicate 1995-2009

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Macroperu Buy American Act = Proteccionismo

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Subpart 25.2—Buy American Act—Construction Materials

25.200 Scope of Subpart.

(a) This subpart implements—

(1) The Buy American Act (41 U.S.C. 10a - 10d);

(2) Executive Order 10582, December 17, 1954; and

(3) Waiver of the component test of the Buy American Act for acquisitions of commercially available off-the-shelf (COTS) items in accordance with 41 U.S.C. 431.

(b) It applies to contracts for the construction, alteration, or repair of any public building or public work in the United States.

25.201 Policy.

Except as provided in 25.202, use only domestic construction materials in construction contracts performed in the United States.

25.202 Exceptions.

(a) When one of the following exceptions applies, the contracting officer may acquire foreign construction materials without regard to the restrictions of the Buy American Act:

(1) Impracticable or inconsistent with public interest. The head of the agency may determine that application of the restrictions of the Buy American Act to a particular construction material would be impracticable or would be inconsistent with the public interest. The public interest exception applies when an agency has an agreement with a foreign government that provides a blanket exception to the Buy American Act.

(2) Nonavailability. The head of the contracting activity may determine that a particular construction material is not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities of a satisfactory quality. The determinations of nonavailability of the articles listed at 25.104(a) and the procedures at 25.103(b)(1) also apply if any of those articles are acquired as construction materials.

(3) Unreasonable cost. The contracting officer concludes that the cost of domestic construction material is unreasonable in accordance with 25.204.

(b) Determination and findings. When a determination is made for any of the reasons stated in this section that certain foreign construction materials may be used, the contracting officer must list the excepted materials in the contract. The agency must make the findings justifying the exception available for public inspection.

(c) Acquisitions under trade agreements. For construction contracts with an estimated acquisition value of $7,443,000 or more, see Subpart 25.4.

25.203 Preaward determinations.

(a) For any acquisition, an offeror may request from the contracting officer a determination concerning the inapplicability of the Buy American Act for specifically identified construction materials. The time for submitting the request is specified in the solicitation in paragraph (b) of either 52.225-10 or 52.225-12, whichever applies. The information and supporting data that must be included in the request are also specified in the solicitation in paragraphs (c) and (d) of either 52.225-9 or 52.225-11, whichever applies.

(b) Before award, the contracting officer must evaluate all requests based on the information provided and may supplement this information with other readily available information.

25.204 Evaluating offers of foreign construction material.

(a) Offerors proposing to use foreign construction material other than that listed by the Government in the applicable clause at 52.225-9, paragraph (b)(2), or 52.225-11, paragraph (b)(3), or covered by the WTO GPA or a Free Trade Agreement (paragraph (b)(2) of 52.225-11), must provide the information required by paragraphs (c) and (d) of the respective clauses.

(b) Unless the head of the agency specifies a higher percentage, the contracting officer must add to the offered price 6 percent of the cost of any foreign construction material proposed for exception from the requirements of the Buy American Act based on the unreasonable cost of domestic construction materials. In the case of a tie, the contracting officer must give preference to an offer that does not include foreign construction material excepted at the request of the offeror on the basis of unreasonable cost.

(c) Offerors also may submit alternate offers based on use of equivalent domestic construction material to avoid possible rejection of the entire offer if the Government determines that an exception permitting use of a particular foreign construction material does not apply.

(d) If the contracting officer awards a contract to an offeror that proposed foreign construction material not listed in the applicable clause in the solicitation (paragraph (b)(2) of 52.225-9, or paragraph (b)(3) of 52.225-11), the contracting officer must add the excepted materials to the list in the contract clause.

25.205 Postaward determinations.

(a) If a contractor requests a determination regarding the inapplicability of the Buy American Act after contract award, the contractor must explain why it could not request the determination before contract award or why the need for such determination otherwise was not reasonably foreseeable. If the contracting officer concludes that the contractor should have made the request before contract award, the contracting officer may deny the request.

(b) The contracting officer must base evaluation of any request for a determination regarding the inapplicability of the Buy American Act made after contract award on information required by paragraphs (c) and (d) of the applicable clause at 52.225-9 or 52.225-11 and/or other readily available information.

(c) If a determination, under 25.202(a), is made after contract award that an exception to the Buy American Act applies, the contracting officer must negotiate adequate consideration and modify the contract to allow use of the foreign construction material. When the basis for the exception is the unreasonable price of a domestic construction material, adequate consideration is at least the differential established in 25.202(a) or in accordance with agency procedures.

25.206 Noncompliance.

The contracting officer must—

(a) Review allegations of Buy American Act violations;

(b) Unless fraud is suspected, notify the contractor of the apparent unauthorized use of foreign construction material and request a reply, to include proposed corrective action; and

(c) If the review reveals that a contractor or subcontractor has used foreign construction material without authorization, take appropriate action, including one or more of the following:

(1) Process a determination concerning the inapplicability of the Buy American Act in accordance with 25.205.

(2) Consider requiring the removal and replacement of the unauthorized foreign construction material.

(3) If removal and replacement of foreign construction material incorporated in a building or work would be impracticable, cause undue delay, or otherwise be detrimental to the interests of the Government, the contracting officer may determine in writing that the foreign construction material need not be removed and replaced. A determination to retain foreign construction material does not constitute a determination that an exception to the Buy American Act applies, and this should be stated in the determination. Further, a determination to retain foreign construction material does not affect the Government's right to suspend or debar a contractor, subcontractor, or supplier for violation of the Buy American Act, or to exercise other contractual rights and remedies, such as reducing the contract price or terminating the contract for default.

(4) If the noncompliance is sufficiently serious, consider exercising appropriate contractual remedies, such as terminating the contract for default. Also consider preparing and forwarding a report to the agency suspending or debarring official in accordance with Subpart 9.4. If the noncompliance appears to be fraudulent, refer the matter to other appropriate agency officials, such as the officer responsible for criminal investigation.

Macroperu Producción Industrial en Estados Unidos

El Banco Central de los Estados Unidos publicó el dia de hoy el índice de producción induastrial de Estados Unidos. Según las nuevas estadística en el mes de febrero la produccion de este sector descendio 1,4 por ciento repescto al al nivel del mismo indicador en el mes de enero; la tasa anual de descenso fue 11,2 por ciento. Otros reportes confirman estas tendencias. Cabe preguntar, dado estos , cual es la base objetiva del optimismo de los mercados bursátuiles, que iniciaron a principio de la semana pasada una recuperación.

Psicología curioso que tioma como justificación el pronóstico optimista de presidente de la FED que hace poco vaticinó el fin de la rec esión, Debemos, sin embargo, recordar que Bernanke desde hace dos años viene diciendo que la recsión terminará pronto. Como toda sla srecesiones ltienen un fin,, llegaraá un momento en el que el pronostico de Bernanke ser{a acertado. Por ahora, no hay evidencia estadistica de ningun fin: el producto y el empleo en Estados y probablemnet en Europa y la Jaón y Asia continuan desciendo.

By Bob Willis

March 16 (Bloomberg) -- Industrial production fell in February for the fourth consecutive month as auto cutbacks and collapsing exports hurt the broader U.S. economy.

Output at factories, mines and utilities dropped 1.4 percent last month, more than forecast, after a revised 1.9 decline in January, the Federal Reserve said today in Washington. The amount of factory capacity in use slumped to 70.9 percent, matching the lowest level on record.

The worst financial crisis in seven decades has choked off credit to consumers and businesses worldwide, leading to a slump in sales of cars, houses, airplanes and computers. Boeing Co. and United Technologies Corp. are among companies that have announced thousands of jobs will be cut to trim costs as the global economy contracts.

"The industrial sector is still struggling with a glut of inventories and both employment and production are likely to continue to fall," said Zach Pandl, an economist at Nomura Securities International Inc. in New York. "We're not out of the woods yet."

Economists forecast industrial production would drop 1.3 percent, according to the median projection in a Bloomberg News survey of 68 economists. Estimates ranged from declines of 2.2 percent to 0.3 percent.

Worst Since 1975

In the 12 months ended in February, industrial output was down 11.2, the biggest year-over-year decline since 1975.

Another report today showed manufacturing in New York state contracted in March at the fastest pace on record as orders, sales and inventories plunged. The Fed Bank of New York's general economic index dropped to minus 38.2, the lowest level since data began in 2001, from minus 34.7 in February.

The proportion of plants in operation matched the December 1982 reading as the lowest since data began in 1967. Economists had forecast that figure would fall to 71 percent, according to a separate Bloomberg survey.

Factory output, which accounts for about four-fifths of industrial production, decreased 0.7 percent, led by declines in furniture, appliances, machinery and computers.

Motor vehicle and parts production improved 10 percent in February after plummeting 25 percent the prior month, the report said. Automakers assembled cars and light trucks at an annual rate of 4.73 million during the month, second only to the 3.83 million assembled in January as the weakest since records began in 1967.

Auto Spillover

Excluding automobiles, factory output dropped 1.2 percent.

Utility production decreased 7.7 percent, propelled by unseasonably warm weather that caused declines in the use of electricity and natural gas. Mining output, which includes oil drilling, decreased 0.4 percent.

The auto industry is at the center of the manufacturing slump. Car sales in February slid 41 percent to the lowest rate since December 1981, according to Autodata Corp., led by a 53 percent drop for General Motors Corp.

"This remains a very challenged industry that is the reflection of the severe economic crisis," Mike DiGiovanni, chief auto market analyst at GM, said on a conference call last week.

Pittsburgh-based PPG Industries Inc., the world's second- biggest paint maker, last week said it will cut an additional 2,500 jobs because of the decline in auto sales.

Export Slump

Others are suffering from slumping demand, both here and abroad. American exports plunged in January to the lowest level since 2006, according to figures from the Commerce Department last week. The drop reflected falling sales of automobiles, semiconductors, telecommunications gear and drilling equipment.

Boeing is slashing about 10,000 jobs and has said it could cut production by about 10 percent next year if more bookings are deferred or canceled. The Chicago-based plane maker has won just 22 orders this year, down from 190 by this time in 2008, and has logged 32 cancellations.

United Technologies, the maker of Otis elevators and Carrier air conditioners, said last week it plans to cut 11,600 jobs as sales slow.

Economists surveyed by Bloomberg say the economy may shrink at a 5.2 percent pace in the current quarter after a 6.2 percent contraction in the previous three months that was the worst since 1982.

"Reports on manufacturing activity suggested steep declines in activity in some sectors and pronounced declines overall" in January and February, the Fed said March 4 in its latest regional business survey. "The drop in activity was especially pronounced for makers of capital goods and construction-related equipment and materials."

To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net.