Death Star Economics



Adverse QE reactions: VIX vs business


There won’t be a news brief tomorrow, Friday, 21 September 2012.

The collective monetary easing exercise that the US, the EU and Japan have engaged in recently [and the UK has alluded to], seems to have done some good. Via MarketBeat:

The Chicago Board Options Exchange’s Volatility index, or VIXis back below 14 and pushing against five-year lows (annotation: this only happened three times in the past five years). More global monetary easing appears to have been the best medicine to cure investor anxiety.

Five years! That’s all the way back to 2007, a year before Lehman, almost to the date. But of course, this is no reason to relax:

Earlier this month Bank of America Merrill Lynch noted that when the VIX has been this low, it has risen over the next 12 months about two-thirds of the time.

Yet, the eurozone PMI shows that the ECB’s bond-purchasing plan hasn’t really made that promised difference just yet, and Japanese exports have slipped 6% YOY.

Meanwhile, the EU is preparing for Wen Jiaboa’s visit and abolished an investigation into the Chinese telecommunications companies Huawai and ZTE Corp. The two were under scrutiny over illegal state subsidies. Of course, EU officials deny that it has anything to do with China’s visit to the west. Another investigation regarding solar panel manufacturer was launched earlier this month. So for the US engaging in trade wars with China is one thing. It’s been kind of an issue for ages, plus there’s the whole world domination angle to it. But for the EU, the picture looks pretty different. Just minutes after they tried to get into the books of Gazprom (the Russians? Really?), they now want to screw the Chinese over. Something tells me Europe is not in the position to criticize anyone right now, particularly those who are still sitting on money (or resources = money). read article

The fun fact of the day: Bruce Willis’ loss-making France-based vodka manufacturer (he’s a minority shareholder, 2.6%, but still) that needs restructuring of its €441m debt mountain. read article

[Some early] Weekend reading:

– Men and cooking: haute macho, read article

– the global brand that Occupy would like to be, read article

 Hayek on China (not personally), read article

So long.



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One Response

  1. […] After solar panels and telecommunications, China and the EU are fighting about another traded good: steel. The European Commission says China has paid illegal subsidies to steel companies to dodge the market price of organic coated steel, making Europe’s manufacturers pay higher import tariffs on Chinese products. read article […]

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