Chinese Shadow Banking by RegionGetting To The Core Of Japanese Inflation, Nuclear Energy And Tripartite Security

“For months now, you’ve been hearing that Abenomics – or at least the monetary policy of Abenomics – has been a solid success.  Japanese inflation, you’ve heard, is climbing up toward the 2% target… The problem is, the Japanese inflation that people are looking at is the Japanese “core” rate (includes energy), not the “core-core” rate (doesn’t include energy or food)…Take energy and food — which is also probably under upward pressure in part due to yen depreciation — out of CPI and it is only up 0.7% y/y as food prices themselves are up 2.2%.”  Meanwhile, Abe is steering domestic policy in a U-turn over nuclear energy (alt): “the draft of a new Basic Energy Plan, made public on Tuesday, calls nuclear power an ‘important baseload electricity source’ and effectively reverses a decision made by a previous government in 2012 to close all of Japan’s atomic power plants over the next several decades.”  Also, “while India’s relationship with the United States has been faltering of late, following the arrest and mistreatment of an Indian consular official in New York, its ties with Japan are flourishing.”  Furthermore, “with China’s rise having shifted Asia’s balance of power, Indian and Japanese leaders have been seeking new security assurances… Even with a significant deepening of ties, however, bilateral relationships alone will be inadequate to counterbalance China.  Achieving an internal Asian balance of power will require India, Japan and South Korea to build a tripartite security arrangement.”  Meanwhile, “ministers in 12-nation Trans-Pacific trade talks said on Tuesday they had yet to reach agreement on tariffs and other market access issues, with the timing of a completed deal looking increasingly unclear.”

Changing Trade Patterns Could Threaten Euro Zone

“The euro zone’s formation was driven by the belief that trading links between its members would grow ever greater, transforming the currency area into a single, integrated unit that resembled the U.S. rather than a grouping of 11, and now 18, individual national economies.”  But when you have a fragmented recovery, thanks in part to rising exports to countries outside of the Eurozone (“By 2020 Italy and Germany will export more to emerging/developing markets than to euro-area partners, while the contrary will be true for France, Spain, Belgium and the Netherlands”), we may see a shift in the “cost/benefit analysis of membership in the currency area.” (e.g. “increase the likelihood of what are known as ‘heterogenous shocks,’ or setbacks that affect some euro-zone members more severely than others”)  Also, Paul Krugman would like the “Myth of German Austerity” to go away, please.  Finally, here’s something the French can be proud of?: “German workers will die five years earlier than their French neighbors if company pensions forecasts are to be believed.”

EM: Buy Johnson & Johnson, MasterCard For Emerging-Market Exposure

“Roughly one-third of S&P 500 sales are sourced from abroad.  While it would seem logical that globally oriented S&P 500 stocks would behave quite similarly to other global developed market franchises, our work indicates that they are 3X more correlated to emerging market equities.  For this reason, we recommend overweighting U.S. companies with high foreign sales (e.g. Johnson & Johnson, Estee Lauder, MasterCard, Flowserve and Apache).”

Bitcoin: Adieu

“Cyber criminals have infected hundreds of thousands of computers with a virus called ‘Pony’ to steal bitcoins and other digital currencies, in the most ambitious cyber attack on virtual money uncovered so far, according to security firm Trustwave.”  Meanwhile, ”Mt. Gox, once the world’s largest bitcoin exchange, has gone offline, apparently losing hundreds of millions of dollars due to a years-long hacking effort that went unnoticed by the company.”

Buffet: An Excerpt From Buffett’s Upcoming Letter To Shareholders

GS: @GSElevator Tattletale Exposed

UK: My Life In London’s Houseboat Slums

“I’ve often heard people ask how anyone can afford to live in London on low paid, insecure work. The truth is that some don’t really live at all; they merely exist, and their existence is bleak and unforgiving. It is not only the explicit dangers of the boats that cause this but the drudgery of daily life.”

China: A Map Of China’s Shadow Banking Exposure

USA: Labor Department To Cut Export-Price Data Due To Budget Constraints

“The export price data is part of a program that also collects data on import prices.  The department compiles a monthly report on import and export prices using data collected from U.S. companies.”


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