Robert Schiller:Bubbles forever

"You might think that we have been living in a post-bubble world since the collapse in 2006 of the biggest-ever worldwide real-estate bubble, and the end of a major worldwide stock-market bubble the following year. But talk of bubbles keeps reappearing – new or continuing housing bubbles in many countries, a new global stock-market bubble, a long-term bond-market bubble in the United States and other countries, an oil-price bubble, a gold bubble, and so on.
 For example in a recent visit to Colombia a taxi driver told  me about the local real-state bubbles pointing out several homes that had been sold for million of dollars.
Colombia's Central bank maintains a home price index for 3 cities: Bogota, Medellin and Cali.
The index has risen 69%in real terms since 2004, with most of the increase coming after 2007. That rate of price growth recalls the US experience, with the S&P/Case-Shiller Ten-City Home Price Index for the US rising 131% 
in real terms from its bottom in 1997 to its peak in 2006. 
In the second edition of my book Irrational Exuberance, I tried to give a better definition of a bubble. A “speculative bubble,” I wrote then, is “a situation in which news of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, in the process amplifying stories that might justify the price increase.” This attracts “a larger and larger class of investors, who, despite doubts about the real value of the investment, are drawn to it partly through envy of others’ successes and partly through a gambler’s excitement.”
The story in every country is different, reflecting its own news, which does not always jibe with news in other countries. For example, the current story in Colombia appears to be that the country’s government, now under the well-regarded management of President Juan Manuel Santos, has brought down inflation and interest rates to developed-country levels, while all but eliminating the threat posed by the FARC rebels, thereby injecting new vitality into the Colombian economy. That is a good enough story to drive a housing bubble.

A new speculative bubble can appear anywhere if a new story about the economy appears, and if it has enough narrative strength to spark a new contagion of investor thinking.

This is what happened in the bull market of the 1920’s in the US, with the peak in 1929. We have distorted that history  by thinking of bubbles as a period of dramatic price growth, followed by a sudden turning point and a major and definitive crash. In fact, a major boom in real stock prices in the US after “Black Tuesday” brought them halfway back to 1929 levels by 1930. This was followed by a second crash, another boom from 1932 to 1937, and a third crash.

Speculative bubbles do not end like a short story, novel, or play. There is no final denouement that brings all the strands of a narrative into an impressive final conclusion. In the real world, we never know when the story is over"


Robert Schiller
Project Syndicate

U.S. Sharp price Rise of homes and Cautious Mortgage lending.prevents increase in First Time Buyers

"First-time home buyers, long a key underpinning of the housing market, are increasingly getting left behind in the real-estate recovery.

Such buyers, typically couples in their late 20s or early 30s, have accounted for about 30% of home sales over the past year. They represented 40% of sales, on average, over the past 30 years, and accounted for more than 50% in 2009, when recession-era tax credits fueled the first-time market, according to data from the National Association of Realtors.

First-time home buyers are the foundation of the real-estate market and are major contributors to their local economies, often buying up older homes, revitalizing communities and spending money on furniture and renovations.

In June, first-time buyers accounted for 29% of purchases of existing homes, compared with 32% in June a year ago, according to the NAR's June existing home-sales report released Monday.

The national median existing-home price was $214,200 in June, up 13.5% from a year ago".

From  WSJ

China's Indexes higher after IPO delays report

   Chinese shares jumped on Tuesday as the country's securities regulator is reportedly delaying massive resumption of initial public offering, easing investors' concerns over market liquidity. The benchmark Shanghai Composite Index rose 1.95 percent, or 39.11 points, to end at 2,043.88, and the Shenzhen Component Index jumped 3.64 percent, or 279.48 points, to 7,963.7.
An IPO relating to more than 80 authorized enterprises was expected to be launched before the end of July. However, it has been delayed as some firms have been asked by China's securities regulator to submit recen financial data The delay helped boost trading Tuesday.

 The government started regulatory campaigns against the rare earth industry, which stimulated the non-ferrous metal sector up 3.34 percent with two shares hitting the daily increase limit of 10 percent.

The railway sector also surged as an investment scheme is expected to be submitted to the State Council, China's cabinet, in September in order to maintain the steady development of the industry. The shares of China Railway Group Limited, the country's largest construction giant, went up 5.16 percent to 2.65 yuan per share.

Source:  Xinhua

Japan joins TPP free trade negotiations

Japanese participation in the Trans-Pacific Partnership free trade negotiations was formally approved on Tuesday after the United States completed domestic procedures that were the last obstacle to Japan's entry.

The 18th round of the TPP talks is being held in Kota Kinabalu, Malaysia, until July 25th.The Japanese delegation will join discussions at working groups that are deliberating rules for intellectual property and public procurement.
Japanese officials will have access to documents that show the current status of the negotiations in various working groups.
The officials also plan to hold separate meetings with negotiators from other countries to gather information and seek understanding for Japan's positions.

China introduces a 5 year ban on new government buildings

Central authorities on Tuesday introduced a five-year ban on the construction of new government buildings as part of an ongoing frugality campaign.

The General Office of the Communist Party of China (CPC) Central Committee and the General Office of the State Council jointly issued a directive that calls for an across-the-board halt to the construction of any new government buildings in the coming five years.

The ban also covers expensive structures built as training centers or hotels.

The directive said some departments and localities have built government office compounds in violation of regulations.

The directive called on all CPC and government bodies to be frugal and ensure that government funds and resources be spent on developing the economy and boosting the public's well-being.

According to the directive, the construction, purchase, restoration or expansion of office compounds that is done in the guise of building repair or urban planning is strictly forbidden.

The directive also bans CPC and government organizations from receiving any form of construction sponsorship or donations, as well as collaborating with enterprises, in developing construction projects.

While allowing restoration projects for office buildings with dated facilities, the directive stresses that such projects must be exclusively aimed at erasing safety risks and restoring office functions.

According to the instruction, such projects must be approved first by related administrative departments and luxury interior decoration is prohibited, with criteria and spending to be set in accordance with local conditions.

The directive stipulates that expenditures on office building restoration should be included in CPC and government budgets.

According to the instruction, buildings with reception functions, such as those related to accommodation, meetings and catering, should not be restored.

Precious Metals Prices

Gold Price     3months futures         US$ 1,328.69

Silver Price   3months futures         US$      20.20

Gold at its highest price in a Month

Gold hit its highest in a month on Monday as a retreat in the dollar pushed prices through tough resistance at $1,300 US an ounce and as fears abated that the U.S. Federal Reserve will soon curb monetary easing.

Fed chairman Ben Bernanke’s assurances last week that any withdrawal of U.S. quantitative easing, a major driver of gold prices in recent years, would depend on economic conditions had already prompted a second week of gains in gold and continued to underpin the market on Monday.

Analysts said, however, that with an end to QE still in sight, its rally is likely to be muted.

There are not many reasons to a rally in the price of gold,it is too soon to say that the price of gold has changed its trend, a weak dollar index today and some short covering rally should have underpinned the price of gold today.

Source:  Reuters

China reports first decline of FX purchases in 7 months

China reported the first decline of foreign exchange purchases in seven months amid signs the United States will "taper off" its quantitative easing policy.

Foreign exchange purchases by financial institutions, a major indictor of capital inflows or outflows, fell 41 billion yuan ($6.6 billion) to 27.39 trillion yuan last month, according to datareleased by the People's Bank of China, the central bank, on Monday.

The decline came against the backdrop of a hightrade surplus of $27 billion and strong foreigndirect investment inflows of $14 billion during thesame month.

The data show that China experienced strong capital outflows in June, a sharp reversal from early  2013, said Zhang Zhiwei, chief China economist at Nomura Holdings Inc

It said tightened regulation in recent months of cross-border trade settlements and capital flowshave "caged" arbitrage money flows disguised as trade deals, which also led to the moderation of capital inflows.

"There is no sign of a collective withdrawal of foreign investment."

Zhang said: "The capital outflows in June reinforce our view that the central bank will cut the reserve  requirement rratio by 50 basis points in each quarter from the third quarter of 2013 to the second quarter of 2014."

He said China will experience a prolonged period of capital outflows in the second half of thisyear and the first half of 2014 as growth slows and investors worry about a potential hardlanding in China.

"The PBOC will need to cut the reserve ratio to offset the negative effects from capital outflows on   domestic liquidity conditions."

In a recent statement, the PBOC said it will keep the money market stable with a combination of tools, iincluding open market operations, re-lending, rediscounting, short-term liquidity operations and standing lending facilities.

OECD : Change in international taxation. Action Plan on Base Erosion and Profit Sharing

The OECD Secretary-General Angel Gurría presented the action Plan on base Erosion and Profit Sharing  within the framework of the G20 Finance Ministers and Central Bank Governors' Meeting.

National tax laws have not kept pace with the globalization of corporations and the digital economy, leaving gaps that can be exploited by multi-national corporations to artificially reduce their taxes.

This Action Plan, which we will roll out over the coming two years, marks a turning point in the history of international tax cooperation. It will allow countries to draw up the coordinated, comprehensive and transparent standards they need to prevent BEPS," said  Secretary-General Angel Gurría. "International tax rules, many of them dating from the 1920s, ensure that businesses don't pay taxes in two countries - double taxation. This is laudable, but unfortunately these rules are now being abused to permit double non-taxation. The Action Plan aims to remedy this, so multinationals also pay their fair share of taxes."

 Recognizes the importance of addressing the digital economy, which offers a borderless world of products and services that too often do not fall within the tax regime of any specific country, leaving loopholes that allow profits to go untaxed.

Will develop a new set of standards to prevent double non-taxation. Closer international cooperation will close gaps that, on paper, allow income to ‘disappear' for tax purposes by using multiple deductions for the same expense and "treaty-shopping". Stronger rules on controlled foreign companies would allow countries to tax profits stashed in offshore subsidiaries.

Government Bonds Rates

Government Bonds

                                                                                          Price          Yield
                                                                                        Change            %

U.S. 5 Year			0/32	1.298
U.S. 10 Year			1/32	2.483
U.S. 30 Year			6/32	3.551
Germany 2 Year			-2/32	0.116
Germany 10 Year			0/32	1.520
Italy 2 Year			6/32	1.943
Italy 10 Year			21/32	4.330
Japan 2 Year			0/32	0.131
Japan 10 Year			5/32	0.791
Spain 2 Year			4/32	1.897
Spain 10 Year			12/32	4.618
U.K. 2 Year			-1/32	0.326
U.K. 10 Year			6/32	2.262

  Source: WSJ

U.S. Mortgage rates & Car loan rates

Consumer Money Rates
U.S. Mortgage Rates and Car loan Rates
                                                                                                   Change in
                                                  Rate   week         52  week       PCT PTS
                                                   %        ago         Hi      Low   52-wk

30-year mortgage, fixed	4.51	4.63	4.78	3.54	0.79	-0.20
15-year mortgage, fixed	3.63	3.65	3.84	2.80	0.51	-0.57
Jumbo mortgages, $417,000-plus	4.74	4.84	5.11	3.97	0.45	-0.90
Five-year adj mortgage (ARM)	3.71	3.87	4.06	2.80	0.76	-0.22
New-car loan, 48-month	2.65	2.61	3.72	2.42	-0.42	-3.59

Source: WSJ

Yuan has appreciated 34% against US dollar since July 21, 2005

The Chinese currency Renminbi, or the yuan, has appreciated 34 percent against the U.S. dollar since the exchange rate reform began eight years ago.

The central parity rate of the yuan stood at 6.17 yuan per U.S. dollar on Monday, according to the China Foreign Exchange Trading System.

The yuan advanced some 20 percent against the euro during this period.

Experts said after eight years of appreciation, the yuan's exchange rate is close to the equilibrium level, and a general trend of two-way exchange rate fluctuation is coming into being.

Since the beginning of the year until now, the yuan's value went up in 65 trading days and down in 63 trading days.

China discontinued the yuan peg to the greenback on July 21, 2005, and moved into a managed floating exchange rate mechanism based on market demand and supply, with reference to a basket of currencies.

Source: Xinhua

G-20 countries ask for careful future changes in accomodative monetary policy

Finance ministers and central bank chiefs from the Group of 20 nations agreed Friday to make future changes to unconventional monetary policy carefully at a two-day meeting in Moscow, as possible tapering of the U.S. central bank's ultraeasy monetary is expected to rattle financial markets and hurt emerging economies, sources close to the matter said.

China is apprehensive of Japan becoming nationalistic after P.M. Shinzo Abe landslide victory in the upper house election

China is growing apprehensive of Japan becoming nationalistic after Prime Minister Shinzo Abe's ruling coalition scored a comfortable win in Sunday's upper house election, giving his party and its ally control of both chambers of parliament for the first time in six years.

"We hope Japan will be sincere in dealing with and settling relevant problems," Chinese Foreign Ministry spokesman Hong Lei told Kyodo News in a statement, adding that Beijing's stance remains unchanged and that it wants to develop bilateral ties "by learning from history and facing the future."

Chinese media and some experts expressed concerns over a potential negative impact on already strained bilateral relations that may arise from the election outcome and said that they will be closely watching Abe's remarks in the days ahead to gauge whether he would moderate or toughen his already firm stance toward Beijing.

Precious Metals Quotes

Gold prices climbed Monday, on track for a third consecutive gain, as reduced expectations that the U.S. Federal Reserve will soon taper its bullion-friendly stimulus program boosted the metal at the expense of the U.S. dollar.

As of 03:16 ET, gold for immediate delivery climbed 1.81 percent or 23.47 points to trade at $ 1,317.23 after opening at $1,296.19, having earlier hit a high of $1,322.86, and a low of $1,296.00.

Dollar-denominated gold prices advanced after dollar fell against key rivals as Federal Reserve chairman Ben Bernanke’s comments on stimulus lacked any confirmation on when the Fed’s will start scaling back its stimulus.

Bullion's have been pressured by expectations the Fed’s will pare back its $85 billion-per-month bond purchase program. The Fed's quantitative easing schemes have boosted gold’s appeal as a hedge against inflation

Dollar index, which measures the strength of the green Benjamin in front of a basket of major currencies after the recent sell-off that started with Ben Bernanke’s dovish comments last week. The USDIX fell on Monday to trade around 82.57 after opening at 82.69, hitting a high of 82.72 and a low of 82.48.

Other precious metals tracked gold higher where:

• Silver gained 2.44% to trade around $ 19.98
• Platinum went up 0.59% to $ 1,438.55
• Palladium inched 0.09% up to $ 750.70

Source  Oilngold

China's Wuhan East Lake Hi-Tech Industrial Development Zone

Optical-electronics, telecommunications, and equipment manufacturing are the core industries of Wuhan East Lake High-Tech Development Zone (ELHTZ) while software outsourcing and electronics are also encouraged.

ELHTZ is China's largest production centre for optical-electronic products with key players like Changfei Fiber-optical Cables (the largest fiber-optical cable maker in China), Fenghuo Telecommunications and Wuhan Research Institute of Post and Telecommunications (the largest research institute in optical telecommunications in China). Wuhan ELHTZ also represents the development centre for China's laser industry with key players such as HUST Technologies and Chutian Laser being based in the zone.

In 2007, 465 new projects were approved in ELHTZ, and by the end of 2007, more than 2,000 high-tech enterprises had set up business in the zone. More than 20 enterprises based at ELHTZ, such as Wuhan East Lake High-tech Group, HUST Technology and Yangtze Telecommunication, have been listed on stock exchanges in China.

Source: RightSite.Asia

Precious Metals Quotes

Gold Price       3months Futures         US$  1,315.09

Silver Price     3months Futures         US$       19.87

China's first "blue economy" zone in east China's Shandong Province has QI growth of 10.2%

Recent data suggest that China's first "blue economy" zone in east China's Shandong Province has become a new engine for growth -- and one that grew faster than the entire provincial GDP in the first quarter.

The sector recorded a growth rate of 10.2 percent in the first quarter, exceeding the provincial average by 0.5 percent. Its total output last year hit 2.4 trillion yuan (about 391 billion U.S. dollars), accounting for one-fifth of the nation's total marine output, according to statistics from the Shandong Development and Reform Commission (SDRC).

In April 2010, the State Council, China's cabinet, approved the establishment of the Shandong Peninsula Blue Economic Zone as one of three pilot zones for the development of China's marine economy.

The economic zone covers 159,500 square km of offshore waters and 64,000 square km of land in six cities and two coastal counties.

A development plan for the economic zone was approved by the State Council in early 2011 as part of China's national development strategy. According to the plan, the Shandong provincial government will coordinate the development of its land and marine economies and strengthen exploration, especially in emerging marine industries.

In just two years since the economic zone was established, the area has encountered unprecedented growth in maritime equipment manufacturing, oceanic chemicals, fishing, transport as well as tourism.

Japanese P.M. Shinzo Abe wins elections

 "Japanese Prime Minister Shinzo Abe's ruling coalition scored a decisive victory in an election on Sunday - so big that there are suspicions he will lose interest in difficult economic reforms and pursue his nationalist agenda instead.

"We've argued that our economic policies aren't mistaken, and the public gave us their support. People now want to feel the benefits. The economy indeed is improving," a weary but confident-sounding Abe said at LDP headquarters late on Sunday after his ruling coalition's victory was assured.

"We'd like to do our best to generate a positive cycle - in which job conditions improve and wages rise, boosting personal consumption and prompting companies to invest more - as soon as possible," he said.

But some, including Japanese businesses with a big stake in the matter, worry the hawkish leader will shift to focus on the conservative agenda that has long been central to his ideology.

That agenda includes revising the post-war pacifist constitution, strengthening Japan's defence posture and recasting Tokyo's wartime history with a less apologetic tone.

Ties with China and Japan have been seriously strained by territorial rows and feuds over wartime history. Concerns are simmering about the risk of an unintended clash near disputed isles in the East China Sea where Japanese and Chinese vessels have been playing a cat-and-mouse game for months.

Source: Reuters

Marc Faber Thoughts

About the end of bond buying by the Fed.

First of all, whenever

the market is obsessed with one indicator, whether in the 1970s when it

was the money supply, or in the 1980s, when it was the deficit,

employment, it usually loses its relevance. But, I believe that the Fed

will continue to monetize. We had quantitative easing (QE)1, QE2 and now

we are in QE3.

In 2009 they started with QE1, (I believe) we

would go up to QE99 or there will be an unlimited QE over time, I still

believe that. The only thing is that over time the impact of QE or money

printing loses its traction. This QE has not boosted employment for the

ordinary people but has boosted the asset prices that are owned by very

small portion of the population, the 1 percent, it is not even 1

percent, it may be 0.5 percent that benefits from rising stock prices,

rising high end property prices in the Hamptons, in the US. Property

prices over the last 12 months are up 35 percent, but it does not

benefit the man on the street, but they will continue to do it. — in moneycontrol

Deloitte. Shale Gas: Oil and gas Reality check 2013

 The shale gas industry is only a regional experience circumscribed to the U.S. which is already exploiting some of its resources,while building an infrastructure to export  gas as LNG.
 Optimistic economic journalism has since lately written about the U.S. shale gas boom production
as a game changer for the price of oil and gas prices at global markets. But Deloitte's research has found that in a closer examination of the development of the world's shale gas industry, only the
U.S. is currently exploiting its resources,other countries with certain exploration and known
reseves of shale gas are China,Argentina and Poland, but are only in a nascent stage. So for the time
being and for the forseeable future, next 3 years, the US shale gas production will have limited impact on global markets.
 "The U.S. is on the cusp of becoming a shale globalizer"says Deloitte. With low local prices and surging production U.S. gas producers want to export gas as LNG to profit from substantially higher prices in Asia. Still the export of U.S. gas is pending, Government exports approval are the most
important matter.

The propect of U.S. gas exports has many observers(many in Asia), hopeful that U.S LNG indexed to
Henry Hub prices will also be exported, eroding the existing long-term contract price indexed to crude
oil.

International Energy Agency: Medium-Term Renewable Energy market Report

Power generation from hydro, wind, solar and other renewable sources worldwide will exceed that from gas and be twice that from nuclear by 2016, the International Energy Agency (IEA) said today in its second annual Medium-Term RenewableEnergy market Report  (MTRMR).    

"Despite a difficult economic context, renewable power is expected to increase by 40% in the next five years. Renewables are now the fastest-growing power generation sector and will make up almost a 25% of the global power mix by 2018, up from an estimated 20% in 2011. The share of non-hydro sources such as wind, solar, bioenergy and geothermal in total power generation will double, reaching 8% by 2018, up from 4% in 2011 and just 2% in 2006".
“As their costs continue to fall, renewable power sources are increasingly standing on their own merits versus new fossil-fuel generation,” said IEA Executive Director Maria van der Hoeven.
“Many renewables no longer require high economic incentives. But they do still need long-term policies that provide a predictable and reliable market and regulatory framework compatible with societal goals,” she stated. “And worldwide subsidies for fossil fuels remain six times higher than economic incentives for renewables.”
When global renewable generation rose by over 8% despite a challenging investment, policy and industry context in some areas. In absolute terms, global renewable generation in 2012 – at 4 860 TWh – exceeded the total estimated electricity consumption of China.

 Led by China, non-OECD countries are expected to account for two-thirds of the global increase in renewable power generation between now and 2018. Such rapid deployment is expected to more than compensate for slower growth and smooth out volatility in other areas, notably Europe and the US.

The MTRMR also sees gains for biofuels in transport and for renewable sources for heat, though at somewhat slower growth rates than renewable electricity. Biofuels output, adjusted for energy content, should account for nearly 4% of global oil demand for road transport in 2018, up from 3% in 2012. But advanced biofuels growth is proceeding only slowly.

As a portion of final energy consumption for heat, renewable sources, excluding traditional biomass, should rise to almost 10% in 2018, from over 8% in 2011. But the potential of renewable heat remains largely unexploited.

Government Bonds Quotes

 Government Bonds                                                         Price            Yield
                                                                                       Change             %

U.S. 5 Year			4/32	1.303
U.S. 10 Year			10/32	2.494
U.S. 30 Year			26/32	3.579
Germany 2 Year			0/32	0.091
Germany 10 Year			1/32	1.524
Italy 2 Year			3/32	2.029
Italy 10 Year			-1/32	4.416
Japan 2 Year			0/32	0.127
Japan 10 Year			0/32	0.806
Spain 2 Year			-2/32	1.977
Spain 10 Year			-7/32	4.666
U.K. 2 Year			-2/32	0.319
U.K. 10 Year			-6/32	2.286

Source  WSJ

Precious Metals Quotes

Gold Price       3months Futures        US$ 1,293.45

Silver Price     3months Futures        US$     19.47

From WSJ Doubts about China's official data

According to a Wall Street Journal article there are many doubts about the accuracy of China´s
official data.

"The official data shows growth on target at 7.5% year-on-year in the second quarter. But on a quarter-on-quarter annualized basis – the way in which growth is measured in the U.S. – the picture isn’t as rosy.

The National Bureau of Statistics put the sequential growth rate at just shy of 7% in the second quarter, up from 6.6% in the first. Estimates from investment bank analysts are in the same ballpark and also show growth accelerating moderately in the second quarter.

By contrast, business surveys show the economy continuing to lose momentum. The HSBC Markit purchasing managers’ index suggests conditions in the manufacturing sector deteriorated in June. A survey by Market News International also pointed to worsening conditions.

With political attention focused on headline numbers like GDP, some analyst favor tracking lower-profile indicators, on the theory they are less likely to be meddled with. A composite of indicators including electricity output, passenger traffic, and seaport cargo put together by Capital Economics shows growth at 6% year-on-year in May, down from 7.3% at the end of 2012"

China’s government is hoping that consumption will start to play a bigger role in driving growth. The official numbers show that effort has stalled, with growth in retail sales slowing to 12.7% in the first half of 2013.

A combination of slower wage growth and uncertainty about the economic outlook seemed to weigh on consumer sentiment. An April survey of 1,000 consumers across 12 cities by the Boston Consulting Group found that just 27% planned to increase spending in the year ahead, down from 38% in 2012.

Over invoicing by Chinese firms was evident in a sharp divergence between China’s data on exports to Hong Kong and Hong Kong data on imports from China.