All eyes on Greece, yet again – sorry

Australian retail sales unexpectedly declined by -0.1% MoM (a gain of +0.2% was expected) in December. Real retail sales for the 3 months to 31st December increased by +0.4%, lower than the +0.6% forecast.

Some 29k job losses were recorded in December, though Bloomberg reports that a private sector survey suggests jobs gains in the new year.

The RBA, I believe, will cut interest rates by 25bps (to 4.0%) tomorrow, following the 25 bps cut in November and December last year. The A$ is currently around US$1.0720, down a bit, but off its lows. Still believe that at over US$1.07, the A$ its overvalued against the US$, particularly as China is expected to slow down (materially?) this year.
The Australian PM, Ms Gillard seems to be coming under pressure – Mr Rudd, the person she ousted and now the Australian Foreign Minister, seems keen to return to his previous position;

Chinese New Year retail sales growth grew by 16% – yes a whopping number to you and m, but the slowest pace since 2009. It was 19% last year. Luxury goods seem to have been impacted. Time to short the sector? Certainly worth a look. Hong Kong retail sales are expected to rise by 15% this year, well below last years 25% rise.
Bloomberg reports that Casino operators in Macau may be hit – in my opinion WILL be hit – another short?
Been reading some reports that inflation in China may well rise towards the end of the 2nd Q 2012. January’s number is to be released this Wednesday. Will follow carefully. May be a reason why China has not eased as expected. However, Chinese data….. Personally, I will follow India – should provide the signal.

The IMF has warned that problems in Europe could cut GDP growth in China by up to a half, though they are still forecasting 8.0% GDP growth this year and next. The IMF/Ms Lagarde’s comments may well be more than a little bit influenced by Lagarde wanting China to cough up for her bail out fund, though Europe is China’s main trading partner. By the way, unlike most, I believe China will contribute to increase the IMF bail out fund – it’s in their interests boys and girls.

Interestingly, China will supersede France as Germanys leading trading partner shortly, according to the FT.

Please IMF, send that note to Mr Jim O’Neill, who believes that EM’s are decoupled. By the way, I raised this whole decoupling idea with a number of very, very, very serious players in India – needless to say, they were not convinced and that’s putting it mildly. India does not rely on exports – domestic consumption is far more important, by the way. However China does rely, inter alia, on exports;

Yet more public demonstrations against Mr Putin. However, whilst Mr Putin remains assured of returning as President he will not be able to be as cavalier as before. Hopefully, that means we don’t have to see those awful photos of him flexing his muscles and trying to be the equivalent of a “dinky toy” Arnie. Capital flight out of Russia continues – indeed some suggest its increasing;

OK, sorry, but Greece yet again. Apparently there were some tough negotiations over the weekend. The problem does not seem to be with the private sector lenders re PSI, but with the Troika. The Troika are refusing to budge, demanding (I must say) pretty savage cuts. Greek politicians have totally lost credibility – are you surprised? Demands from the Troika will increase – The German’s are refusing to increase the size of the E130bn 2nd bail out package. Even if a “deal” is agreed (which logic would suggest should be the better option for Greek politicians – but Greek politicians and logic !!!!) this time around, Greece WILL DEFAULT.

Bloomberg reports that an agreement is near, whilst the FT suggests that it is not. Bloomberg reports that the Greeks have “agreed” (whats the worth of a agreement by the Greeks) to further spending cuts of 1.5% of GDP – competitiveness measures are proving more difficult. Its all totally Greek, as usual. Apparently the Greeks have been set a deadline of 9.00am London time to respond.

Interestingly, I would have expected that the vast majority of you would disagree with my view that Greece should be let go. Indeed, quite the reverse, by a massive majority – interesting. Just reconfirms my view that after an initial sell off, investors may well welcome the move – assuming that the Euro Zone creates a cordon around the rest of the PIIGS – Portugal, in particular.

On a separate point, Mr Ackermann is pushing the Euro Zone/IMF to agree a deal – he has also been advising Germany – does that sound like a conflict of interest to you. Mr Ackermann is CEO of Deutche Bank (who will have to take further hits if there is a Greek default) and Chairman (need to check) of the IIF (who are negotiating with the Greeks/Troika on PSI). You will recall that he initially pushed for just a 20% odd haircut;

Euro is trading below US$1.31 (currently US$1.3075). I will continue with my strategy of shorting around US$1.32, but am getting very close to my limit;

The FT reports that the EBA (European Banking Authority) is to challenge a “significant proportion of capital restructuring plans” submitted by European banks, who must reach a 9.0% Core Tier 1 capital ratio by end June. Are you surprised – thought not. Basically banks are fiddling the risk weighted assets, proposing unrealistic plans for asset sales and are over optimistic re profitability. Basically, stay away from banks that need to raise capital. However, it appears that the EBA is caving into pressure – what else would you expect from an EU institution;

Analysts are likely to increase their GDP forecasts for both the US and the UK, given much better recent economic data. Still early days and I remain of the view that both the FED and the BoE (the BoE this week) will introduce QE3. Essentially, they will both want any upturn to become embedded and self sustaining;

The FT reports that investors in US mortgage securities may have to take a US$40bn loss in respect of mortgage foreclosure abuses. The US Housing Secretary suggests that this amount is just a “down payment” !!!!! and that banks will have to pay up/agree to reductions in principal etc, etc in due course !!!!;

Whilst Asian markets are up, European markets are likely to be tricky at the opening due to Greece. Please Turkey, cant you take them over.

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