Smart Links 24 July 2012
Commentary on the shift in manufacturing away from low wage to high technology countries, the sport of politics, let Greece go, rethinking retirement, and Canadian consumers go very long car loans.
It’s about the robots and other things.
Foreign Policy -- The Future of Manufacturing Is in America, Not China
How new technology is driving a U.S. industrial comeback.
Financial Times -- Corporate Japan: Back on track
After decades of introspection the country’s dealmakers have returned to the global acquisition trail.
In DOW we trust.
New York Times -- The Long-Term Argument for Dow 20,000
AFTER the last several years, you don’t need a finance course to know that stocks are risky.
Romney has been cast as a killer of American jobs and a liar. Now it’s his move.
New Yorker -- Sorry!
In 1935, the year that Parker Brothers came out with Monopoly, Oswald B. Lord, of Park Avenue, New York, invented a board game called Politics.
Parting is such sweet sorrow: let Greece go and watch the economy grow.
Telegraph -- Euro exit and depreciation would bring economic gains
In an exclusive extract from his updated book, Roger Bootle explains why allowing a country such as Greece to leave the euro is not as hard as critics think.
Finding a solution to retirement.
New York Times -- Our Ridiculous Approach to Retirement
I WORK on retirement policy, so friends often want to talk about their own retirement plans and prospects. While I am happy to have these conversations, my friends usually walk away feeling worse — for good reason.
John Mauldin on Japan.
It has been said that you can’t consider yourself a real global macro trader until you have lost money shorting Japanese bonds. Japan is a bug in search of a windshield – but it keeps dodging. Japan has a debt-to-GDP ratio that is approaching 230% (at a rate of increase of 8-10% a year!).
The savings rate is declining rapidly and will soon go negative. At that point, the thought is, Japan will need to seek out foreign investors to buy its bonds. And who will buy a Japanese bond at 1% for ten years? If rates rise only 2%, then Japan would be spending almost 80% of tax revenues on just the interest on its bonds.
I would submit that that is not a workable business model.
So traders keep shorting Japanese bonds (JGBs). And they keep losing money.
But what if Japanese rates never rose? How could that be, you ask?
Given that Japan will collapse if interest rates rise, I would suggest that interest rates will not be allowed to rise. The Bank of Japan will fire up the printing press for their own version of Operation Twist, but on a scale that will make the other central bankers of the world jealous.
So then Japanese bonds don’t revalue (on an internal basis). But the consequence is that the Japanese yen goes seriously south. Can you say 125 to the dollar? 150? 200? Do I hear 250?
At what point will you be able to buy a Lexus cheaper than you can buy a Kia?
Think that will make Korea happy? Or any of Japan’s Asian neighbors? Think the Japanese care?
They will continue to churn out quality products made with robots that will compete very favorably with those of any industrial country. Japanese equities will soar in such an environment (in terms of a depreciating yen), which makes buying cutting-edge Japanese stocks and shorting the yen an interesting trade.
Canada’s stretched households.
Globe and Mail -- Debt-burdened Canadians succumb to lure of long-term car loans
Massive mortgage debt is top of mind for Bank of Canada Governor Mark Carney, but in his quest to curtail Canadians’ borrowing, he might want to start thinking about the vehicles sitting in their driveways and garages, too.
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