Fragile, Fragile, Very Fragile!

The economy could easily get worse from this fragile recovery. A lot of “worse than expected” are happening around the world and in U.S.

Germany expected inflation rate to raise as the growth revived, but surprised!

“But Mr Weber’s comments suggest the ECB will wait for firm signs of a broad-based and sustainable recovery before implementing any “exit strategy”.

Underlying the weakness of inflationary pressures, Germany reported industrial producer prices had fallen 7.8 per cent in the year to July – the largest such fall since records began in 1949. The drop resulted from lower oil prices but also the slump in demand over the past 12 months, economists said. ”

Sometimes I’m sure that is economy fragile or the recovery fragile…The Fed and IMF are just non-stopping to advertise this fragile recovery. Definitely no fundamentals. In this case, Mr Weber is more realistic.

“He went on: “It is too early to pull back support measures . . . The economy is not yet standing on its own feet, and the financial markets are still reliant on central bank help.” Even if growth accelerated, it would not be until 2013 that levels of prosperity seen last year were reached again, Mr Weber added, “and there is a danger that the economy grows in the next decade at a trend rate that is slower than in the past decade”.”

http://www.ft.com/cms/s/0/f9ad308c-8ca7-11de-a540-00144feabdc0.html

Corporate bond defaults hit record

“The number of companies defaulting on their debts has risen to record levels this year, according to Standard & Poor’s, while investment returns for risky corporate debt have skyrocketed since January.

S&P said 201 borrowers with $453.1bn in debt have defaulted this year, exceeding the 126 defaults for all of 2008, which comprised debt worth $433bn. ”

The defaults have not stopped speculative debt from being this year’s best performing sector for investors as they look instead to a virtuous cycle that enables more financially strapped companies to refinance as the market rallies, a scenario that portends lower future defaults.

“The number of defaults is impressive but, on an absolute month-to-month basis, it has been coming down steadily,” said Martin Fridson, chief executive of Fridson Investment Advisors. “It makes sense that the market has been rallying since then.” He added: “The virtuous cycle is a function of the high-yield new issue market reopening in response to the increased confidence in credit that provides the bridge for companies to get over any near-term maturities that could threaten their solvency.””

http://www.ft.com/cms/s/0/28aa86cc-8cef-11de-a540-00144feabdc0.html

Consume sentiment is clear, afraid or can’t spend. Sears reports a surprise second-quarter loss, as sales slump at its Sears and Kmart stores. Shares look headed to discount rack.

“The surprisingly weak result against a very easy comparison “points to the underlying weakness of the franchise,” said Credit Suisse analyst Gary Balter in a research note. “We envision continued market share losses. As we look out to the remainder of the year, the comparison continues to get more challenging.”

The operator of about 3,900 Sears and Kmart stores said U.S. comparable-store sales slumped 8.6%, including a 13% decline at Sears and a 3.9% decrease at Kmart. ”

http://www.marketwatch.com/story/sears-holdings-swings-to-loss-as-sales-slump-2009-08-20

The University of Michigan’s consumer sentiment index dipped to 63.2 in August from 66 in late July. Economists thought it would rise to 69.

Initial U.S. jobless claims rise by 15,000 in latest week
First-time claims highest in three weeks

“WASHINGTON (MarketWatch) — First-time filings for state unemployment benefits rose by 15,000 to a seasonally adjusted 576,000 last week, marking the highest level in initial claims since July 25.

Both initial claims and continuing claims ticked up in the latest readings, indicating that it’s still very tough to find or keep a job.

Economists surveyed by MarketWatch were expecting initial claims to drop back to 550,000. A year ago, initial claims were 438,000.

The four-week average of initial claims moved to its highest level since July 11, rising by 4,250 to 570,000.

Continuing claims rose in the week ending Aug. 8, reversing a recent string of declines that had provoked a debate about whether companies were hiring more or unemployed workers were exhausting their benefits.

Continuing jobless claims climbed by 2,000 to 6.24 million, also the highest since the end of July. But the four-week average of those claims declined by 2,500, to 6.26 million. ”

http://www.marketwatch.com/story/initial-us-jobless-claims-rise-by-15000-2009-08-20

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• Monday: Watch Dubai and the international response closely.
• FYI: IMF USD ($) SDR Valuation for 10/19/09
• Jobs are scarce now, and will be fewer.

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