Mercenary Trader's  Instablog

A reading of 45% or higher indicates extreme bullish sentiment. At 25% or below you have the opposite, a bearish extreme. The long-run average is 39%.

As TPC reports, small investor sentiment recently went from extreme bear (21%) to near extreme bull (43.9%) in just two weeks. This suggests a few possiblities:

• Small investors = headless chickens.
• Mr. Market throws a wicked curveball.
• Sentiment numbers are terminally squirrelly.
• All of the above.

As TPC points out, when small investor sentiment topped out at 48.5% earlier this year, it came just days before a big market peak.

So what do you do with this recent surge? Do you fade it? Do you take it as a sign that markets could go higher? Do you wait out the spike to see if we plummet back to bearish before the month is out?

Or, my preferred option, maybe you recognize that the majority of sentiment poll data is just noise in the first place, and stick to your logic- and conviction-based trading plan.

To the links!

• Small Investor Bullish Sentiment Soars Near 2010 High (TPC). “Talk about a schizophrenic market.  Just two weeks ago the sky was falling.”

• Bond Investors Whipsawed (WSJ). “As investors have piled into Treasury debt in recent months, skeptics have warned they were risking big losses if interest rates should jump higher suddenly.”

• Dividends Beating Bond Yields by Most in 15 Years (BB). “More U.S. stocks are paying dividends that exceed bond yields than any time in at least 15 years as profits rise at the fastest pace in two decades.”

• Wall Street Firms to Cut 80,000 Jobs in 18 Months, Whitney Says (BB). “Securities firms around the world will cut as many as 80,000 jobs in the next 18 months as revenue growth begins to slow, said Meredith Whitney…”

• Future hiring will mainly benefit the high-skilled (Yahoo). “Even when the job market picks up, many people will be left behind. The threat stems, in part, from the economy’s continuing shift from one driven by manufacturing to one fueled by service industries.”

• Food Stamp Participation Climbs 10% (MoneyWatch). “Thirteen percent of the population, or more than one in eight people.”

• Small businesses feel squeezed by Obama policies (WP). “As small businesses try to plot their recovery, attention is turning to what many owners consider burdensome policies — higher taxes, new accounting procedures and health-care mandates.”

• Cardholders Prefer Debit as Credit-Card Use Declines (BB). “Americans are shunning their credit cards and using debit to avoid incurring more debt, said Javelin Strategy & Research.”

• Economy’s Silver Lining: A Happy Hour Boom (Yahoo). “The recession has caused significant damage to jobs and the stock market. But there’s one silver lining worth toasting: a surge in “happy hour” offerings for early-bird revelers.”

• After Bargains of Recession, Air Fares Soar (NYT). “Air fares have marched steadily upward in recent months and are now close to pre-recession levels — and that’s not even counting all the fees that airlines have introduced lately.”

• Divided by a Two-Track Economy (WSJ). “While global players like industrial conglomerate 3M Co. and burger giant McDonald’s  Corp. are getting ever-bigger boosts… companies dependent on the U.S. market are hemmed in by recession-scarred consumers who are hesitant to spend.”

• U.S. Trade Deficit Narrowed in July (NYT). “The United States trade deficit narrowed by 14 percent in July as exports by American companies rose by about $2.8 billion…”

• U.S., U.K. Bond Yields Set to ‘Decline Massively’ (BB). “Interest rates cannot go up meaningfully for a very long time” in either country, the report said.”

• U.K. Trade Gap Hits Record (WSJ). “The continued failure of U.K. exporters to take advantage of a much weaker pound makes it unlikely the economic recovery will be as strong as policy makers hope…”

• Fed Banks Saw ‘Widespread Signs of a Deceleration’ (BB). “The Federal Reserve said the U.S. economy maintained its expansion while showing “widespread signs of a deceleration” in mid-July through the end of August, according to a survey by 12 regional Fed banks.”

• Outlook Gloomy at Secret Billionaire Meeting (CNBC). “This year’s group, totaling fifty individuals and including more than 10 billionaires, was decidedly pessimistic on the U.S. economy, investment opportunities and the Obama administration.”

• Paulson’s Biggest Hedge Fund Said to Lose 11 Percent This Year (BB). “John Paulson… lost 11 percent this year in his New York-based firm’s biggest hedge fund, according to a person briefed on the returns.”

• As Recovery Boosts Big Banks, Smaller Lenders Are Still Struggling (WSJ). “While large banks are showing signs of recovering from the financial crisis, many of the country’s small banks are still in big trouble.”

• Homebuilders Revive Stalled U.S. Projects as Banks Unload Lots (BB). “Builders are buying lots at less than half their original prices from lenders eager to move distressed construction loans off their books.”

• Sellers Cut Prices on 50% of Homes (housingwatch). “Homeowners are slashing prices more drastically and more frequently, according to recently released data from ZipRealty.”

• Dangerous Defeatism is taking hold among America’s economic elites (Telegraph). “Goldilocks has played a trick on America.”

• Kohn: Fed must embark on new stimulus blitz (Telegraph). “The Federal Reserve must embark on a new blitz of measures should the recovery continue to make little dent in unemployment, a leading light at the central bank for the last four decades has said.”

• Obama kicks off campaign with $50B infrastructure plan (Reuters). “President Barack Obama… proposed a six-year plan on Monday to rebuild aging roads, railways and runways with an initial $50 billion investment.”

• Quantifying The Top 10 China Risks (ZRH). “We present the top 10 items that are of concern to investors in China, and are likely to provide even more ammunition to the ever increasing roster of China bears.”

• U.S.-China Trade Tensions May Be Close to Boiling Over (WSJ). “U.S. lawmakers could soon replace feisty rhetoric with action on China and its currency policy.”

• Strong yuan would hurt China (Reuters). “China must resist external pressure for yuan appreciation because a stronger exchange rate would take a big bite out of economic growth, according to a pair of senior government researchers.”

• China $20 Billion Trade Surplus May Add Yuan Pressure (BB). “China posted a third straight trade surplus of more than $20 billion in August even as imports leaped, highlighting friction with the U.S. over claims that the nation’s currency is undervalued.”

• Is China Actually Bankrupt? (MSN) “The nation has erected a complex system for magically making its debts disappear, but a look up China’s sleeve shows that its IOUs may equal its GDP.”

• Japan alarm over China’s JGB purchases (FT). “China’s purchases of JGBs is an especially sensitive issue as it plays into anxieties in Japan about the strengthening yen and its impact on the economy.”

• Xie: Empty Flats Spell Trouble (CIB). “Measuring the size of the property bubble in China by reference to the number of empty flats has become a hot topic of discussion.”

• Goldman Sees $80 Trillion Emerging-Nation Stock Market by 2030 (BB). “The market value of emerging-market stocks may surge more than fivefold to $80 trillion in two decades, overtaking developed nations, as China becomes the world’s largest stock market, Goldman Sachs Group Inc. said.”

• Australia Gets Money, China Gets Australia (BBBW). “How’s that supposed to make a country feel?”

• India Stuck With Glut of Grain (WSJ). “India’s monsoon season is nearing its end. The nation’s food problems are not.”

• Sowing Seeds of Fear (WSJ). “With Russia playing an increasing role in the international food chain, the health of the new winter wheat crop is being watched by traders, food companies and aid agencies around the globe…”

• What peak oil? Why an oil glut is ahead (Fortune). “…the United States has more petroleum on hand today than it has had since at least the beginning of the first Gulf War.”

• Gasoline Glut Rides Out Summer (WSJ). “U.S. gasoline stockpiles have defied gravity this summer, growing by an unprecedented amount at a time when inventories typically fall.”

• Oil price surges after Midwest pipeline shuts down (Yahoo). “Oil prices surged Friday after a pipeline that delivered oil to Midwest refineries was shut down, raising questions about how long the supply may be disrupted.”

• Japan Has More Than Just a Yen Crisis (BBBW). “The currency crisis is merely one symptom of the country’s general aversion to change after the boom-and-bust 1980s.”

• Germany adds to euro troubles (FT). “The euro hit record lows against the Swiss franc and the Australian dollar this week as worries over the health of the eurozone financial system resurfaced to undermine the single currency.”

• Aussie hits all-time high against euro (FT). “The Australian dollar climbed to a record high against the euro and a four-month peak against the US dollar as stronger-than-expected employment data lifted the currency.”

• Japan Plans Intervention to Stem Rise in the Yen (NYT). “The Japanese government is gearing up to intervene in global currency markets to curb a strengthening yen, Prime Minister Naoto Kan said Friday…”

• Michael Lewis: Beware of Greeks Bearing Bonds (VF). “Greeks are sure of one thing: they can’t trust their fellow Greeks.”

• Data Show German Economic Juggernaut Slowing (NYT). “A surprise fall in exports and near-zero growth in industry output in July suggested on Wednesday that the German industrial juggernaut may slow somewhat after building up record momentum earlier this year.”

• Trichet calls for tougher euro rules (FT). “Eurozone members that break the region’s rules on public finances should be excluded temporarily from Europe’s political decision-making, the president of the European Central Bank has proposed.”

• Trichet was ‘outraged’ by Slovakia’s loan refusal (FT). “… the ECB should not support euro entry to applicants that may behave similarly..”

• Highest Paid Athlete Hailed From Ancient Rome (Discovery). “Ultra millionaire sponsorship deals… are just peanuts compared to the personal fortune amassed by a second century A.D. Roman racer.”

• New Zealand earthquake rips new fault line (Mail). “The earthquake that devastated a city in New Zealand tore open a new 11ft faultine in the Earth’s surface.”

• As Stadiums Vanish, Their Debt Lives On (NYT). “How municipalities acquire so much debt on buildings that have been torn down or are underused illustrates the excesses of publicly financed stadiums and the almost mystical sway professional sports teams have over politicians, voters and fans.”

• Bowerbirds trick mates with optical illusions (naturenews). “If elaborate decor fails to please her, perhaps she will fall for a trick used in châteaux gardens, Las Vegas casinos, and the Parthenon in Athens.”

Copper, aka Dr. Copper, has long been known as the “metal with a PhD in economics.”

But what about oil? Isn’t oil, in some ways, a much more powerful barometer for both the state of the global economy and the general economic mood?

Copper is revered as an economic bellwether because it is used in so many things. From washing machines to vehicle wiring to housing construction, the red metal shows up most everywhere.

But copper is also subject to manipulation more so than oil, in part because of storage factors (copper is easier to warehouse) and in part because the copper market is so small, relatively speaking — small enough to get pushed around by stuff like this:

Copper fell the most in a week after a report that Chinese regulators are investigating positions in rubber futures spurred speculation that some traders may be forced to sell commodities…

“The actions in China overnight are simply a warning shot to speculators,” said Alex Heath, the head of industrial-metals trading at Royal Bank of Canada Europe in London. “Liquidation by a number of local brokers on hearing about the investigation unnerved the whole market.”

- Bloomberg, Copper Falls Most in a Week on Report of Chinese Investigation

And in fact, with China looming so large these days, ol’ doc copper has become even more of a speculative football than it’s been in the past. The red metal is turning into a fast-buck exposure vehicle for anyone dreaming of those 64 million vacant Chinese properties and all the air conditioners sure to be installed.

Crude oil is subject to speculative pressures too, of course, but let’s not forget that oil is the most important commodity in the world. (Sorry gold. You’re up there, but…)

I mean, come on: Wars have been fought over oil. How many wars have been fought over copper? The insatiable global demand for energy, and the geographical diversity of buyers and sellers, further makes it hard to distort the oil market.

And right now the message of the oil market is ‘blah.’

As you can see from the chart, oil has done a whole lot of nothin’ over the past year and a half or so. After humping back up to the 200 week EMA like an old man climbing stairs, crude has spent most of its time in an uninspired range… trapped in the ’70s, like an endless episode of Starsky and Hutch.

If you’re a card-carrying peak oil theorist, this is kind of a weird phenomenon. If you’re a true believer in the “emerging markets century,” it’s also a bit of a weird phenomenon.

I mean, what about those three billion new capitalists? What about that $2500 car that’s selling like hotcakes in India? All the easy oil is gone! Oil should be killing it! Right?

You would think so, especially given the powerful E.M. drivers in play.

Try this news flow on for size:

• India GDP rose at 8.8% in Q2, the fastest pace in 2 1/2 years.
• Brazil also grew faster than expected.
• Australia is killing it on the growth side too.
• And two weeks ago or so, Chinese manufacturing saw a pop.

Growth uber alles! That’s a lot of good news. You can throw in a positive ISM number and better than expected jobs data from America too.

And what did oil do? Jack squat.

Why might this be? Well, in part because we have more oil in storage now than we’ve seen in decades.

As Fortune reports in “What Peak Oil? Why an Oil Glut is Ahead,”

Despite the Iraq War and the resulting production disruptions, despite the moratorium on drilling in the Gulf, despite turmoil in Nigeria and ongoing cross-border transshipment quarrels in Central Asia and the multiple, repeated declarations that “peak oil” has arrived and supplies will inevitably dwindle, the United States has more petroleum on hand today than it has had since at least the beginning of the first Gulf War.

In addition to an oil glut, we also have a gasoline glut. The Summer 2010 driving season wasn’t all it was cracked up to be in the good old US of A, and the stockpiles of gasoline normally worked through by now are still around. This is more bad news for the oil price, as refiners will have less need to replenish gasoline stocks (and thus less need for crude as a raw input).

Flat as a BRIC

So, okay. Crude oil is feeling blah because we’ve got black stuff coming out our ears, with yet more supply coming online via Central Asia and Iraq.

But does that say much about the rest of the global economy? What about emerging markets — we just scanned the good news, those are still hot, right?

Cue the weekly charts…

What we have above are long-term charts for the major BRIC ETFs: Brazil, Russia, India, China. Notice a pattern here? They all look like oil… flat, range bound and listless.

Here is what I get from this:

• It may be the “emerging markets century,” but the U.S. economy still dominates.
• As it stands, Uncle Sam is still in a deep, deep funk.
• Emerging markets may be the future… but the future isn’t here yet.
  
• The global economic recovery is hitting “stall speed.”
• We got a boost from the 2009 stimulus juice, but our problems are bigger still.
• When an airplane threatens to stall, you know what happens next.

As long as we’re talking E.M., this piece gave me a laugh: Goldman Sees $80 Trillion Emerging-Nation Stock Market by 2030.

The market value of emerging-market stocks may surge more than fivefold to $80 trillion in two decades, overtaking developed nations, as China becomes the world’s largest stock market, Goldman Sachs Group Inc. said.

Faster economic expansion and growing capital markets may lift emerging nations’ share of world equity capitalization to 55 percent by 2030 from 31 percent today…

LOL. Come on, are you kidding me?

I can’t believe I just wrote “LOL” — that should worry me — but it really fits here. Things are so in flux at this point, we don’t even know what 2013 is going to look like, let alone 2030.

China, for all we know, could turn out to be the world’s biggest protectionism casualty, or otherwise reveal itself as a giant potemkin village / ponzi scheme, or find itself engulfed by a real-estate-fueled social and financial crisis. (Puff pieces like Goldman’s, of course, remind you how badly the i-banks want a share of future business with the dragon.)

Something else amusing — while Goldman Sachs entertains bullish visions of E.M. ecstasy 20 years out, their near term view is a heck of a lot more sober.

Here’s Jan Hatzius, Goldman’s chief economist (via ZRH):

We strongly disagree with the notion that the recent slowdown in activity is a temporary “soft patch” in an otherwise fairly decent recovery…  On the contrary, we believe that the stronger growth of late 2009/early 2010 was a temporary “firm patch” in an otherwise extremely anemic recovery, and there is a sizable (25%-30%) risk of a renewed recession.

Let’s throw one more weekly chart in for good measure…

Sluggish head and shoulders anyone?

In estimating a 25% – 30% chance of renewed recession, I’d wager Goldman’s chief economist is being conservative. The “stall speed” trajectories of so many markets paint a gloomier picture.

JS

With the exception of Elisabeth Shue, who was smokin’ hot, Leaving Las Vegas is unquestionably one of the most bleak and depressing movies I have ever seen. (If you haven’t seen it, you might want to take a pass, unless you’re feeling a strong urge to get in touch with your inner nihilist.)

As with so many things, however, truth turns out to be stranger than fiction, with developments in the real Vegas even darker than the Mike Figgis film. The fallout from an epic housing bubble bust is still destroying lives, and in some cases ending them.

And what about the picture for the broader U.S. economy, and the world? There are glimmers of hope after an incredibly dark August, but Carmen Reinhart — the female half of the Rogoff-Reinhart duo who conducted an 800-year study on the economic impact of debt crisis — warns that “the future is likely to bring only hard choices.”

At least the theme music this week is a little more upbeat… to the links!

• Vegas Murder-Suicides: Economic worries taking toll in recent deaths  (LVRJ). “Maria Romano, daughter of the victims in the most recent report, said economic woes were the root of their stress.”

• All signs point to continuing Las Vegas exodus (LVS). “… slow but steady stream of Las Vegans is moving away in search of better luck, in stark contrast to the unprecedented influx of residents during the region’s boom years.”

• Homelessness Up 50% In New York City (FoxNY). “If you think you’ve been seeing more people sleep on city streets, statistics back up the perception.”

• New York Rebounds From Slump, Unevenly (NYT). “…experts on the city’s economy said the effects of the recession were spread unevenly across the local landscape, leaving many people in dire financial condition.”

• Miami: Broke City Breaking Employee Contracts (NBCM). “Mayor Tomas Regalado said he’s never seen a financial mess like this before, and his options are grim.”

• Harrisburg Defaults as Localities Struggle (WSJ). “Pennsylvania’s capital of Harrisburg said it will skip a $3.29 million municipal-bond payment due in two weeks, marking the second-largest general-obligation municipal-bond default this year.”

• Harrisburg Expects to Miss a Bond Payment (NYT). “The capital of Pennsylvania has taken a step closer to a possible bankruptcy declaration, warning this week that it was not going to make a scheduled payment of $3.3 million on its general obligation bonds because it did not have the money.”

• Tourists Return to San Francisco, Leave Their Wallets Closed (BB). “San Francisco’s $7.8 billion-a-year tourism industry, the city’s largest private-sector employer, is recovering along with the economy. The trouble is, tourists aren’t spending like they used to.”

A Rare Bright Spot?

• Payrolls data offer ray of hope for recovery (Reuters). “U.S. employment fell for a third straight month in August, but the drop was far less than expected and private hiring was a positive surprise, relieving concerns about a stalling economic recovery.”

• Surprising Many, Manufacturing Is Bright Spot (WSJ). “The August factory report is like a shiny holiday gift found lying among depressing lumps of coals.”

• U.S. manufacturing grows again in August for 13th straight month (MBJ). “The Institute for Supply Management  is reporting manufacturing in the U.S. grew for the 13th consecutive month in August, while the overall U.S. economy has grown for 16 consecutive months.”

• U.S. Avoids Recession as Data Can’t Get Much Worse (BB). “The U.S. economy is so bad that the chance of avoiding a double dip back into recession may actually be pretty good.”

• Consumer Confidence Improves Modestly in August (Atlantic). “In the latest bit of mildly positive economic news, consumer confidence increased in August, according to the Conference Board.”

• Retailers Top Lukewarm Forecast (WSJ). “August tallies showed that all retail categories produced sales ahead of modest estimates, including department stores and teen retailers, which are among the most vulnerable to spending pullbacks.”

• Tech Rebound Hits Oakland (WSJ). “The local technology recovery has been so robust that the optimism has even spread to Oakland, not a traditional start-up hub.”

• Rosenberg Explains Why Yesterday’s ISM Was Likely Wrong, To Be Revised (ZRH). “And revised it will be: David Rosenberg explains why.”

• U.S. Car Sales Plunged in August (WSJ). “U.S. auto sales fell 21% in August compared to a very strong month a year ago, when the federal government’s “cash for clunkers” program sparked a surge in new-car buying.”

• Older Work Force Has an Ugly Wrinkle (WSJ). “This July was the worst on record for youth employment: Less than half of all 16- to 24-year-olds had a job, according to the Bureau of Labor Statistics.”

• Shoppers Still Stick To Payday Purchases (WSJ). “Consumer-products makers continue to see shoppers stock up on necessities around payday, a sign that some of the frugal habits consumers picked up in the recession linger.”

• Record number in government anti-poverty programs (USAT). “Government anti-poverty programs that have grown to meet the needs of recession victims now serve a record one in six Americans and are continuing to expand.”

• Employers Push Costs for Health on Workers (NYT). “As health care costs continue their relentless climb, companies are increasingly passing on higher premium costs to workers.”

• Retail Stocks Headed for a Markdown (Barrons). “Discouraging stock market action bodes poorly for equities and a consumer-led economic recovery.”

• John Taylor Muses On A “Supermodel” World Whose Curves Are About To Get Even Flatter (ZRH). “FX Concepts John Taylor explains why as the deleveraging process becomes globalized, he expects global yield curves to “literally” flatten. He also explains why the Jackson Hole view that the Japan analogy is overdone, is wrong.”

• Beware those who think the worst is past (FT). “We have analysed data on numerous severe economic dislocations over the past three-quarters of a century… The result is a bracing warning that the future is likely to bring only hard choices.”

• What Is A Depression Anyway, And Why We Continue To Be In It? (ZRH) “You will pardon us for posting two excerpts from David Rosenberg today, but this one is a must read, and explains more clearly than anything written on the matter why America is currently, and without doubt, in a depression…”

• Fed mulls stimulus if outlook worsens appreciably (Reuters). “The outlook for the U.S. economy would have to deteriorate “appreciably” to spur fresh support from the Federal Reserve, according to minutes of the central bank’s last policy meeting released on Tuesday.”

• Behind Stimulus Argument, Debate on Causes of Joblessness Grows (WSJ). “Washington’s response to the country’s stubbornly high unemployment will depend in part on who wins an increasingly intense debate over its causes.”

• A helicopter drop for the Treasury (Vox). “…the ineffectiveness of monetary policy can be turned on its head by using money creation to finance fiscal policy stimulus – such as a large but temporary cut in sales taxes.”

• The Paradox of the Zero Bound (HussmanFunds). “Will the policy currently in place to protect the economy against slipping into deflation end up being the primary culprit for that same outcome?”

• Bernanke Says He Failed to See Financial Flaws (NYT). “Ben S. Bernanke, who told Congress in 2007 that the subprime mortgage crisis was “likely to be contained,” said Thursday that he had failed to recognize flaws in the financial system that amplified the housing downturn and led to an economic disaster.”

• Bernanke Defends Record on Lehman (WSJ). “Federal Reserve Chairman Ben Bernanke told a panel examining the U.S. financial crisis that he had no options to prevent Lehman Brothers’ failure in September 2008 even though he knew its downfall would be “catastrophic” to the financial system and economy.”

• Ben Bernanke: new regulations may prompt ‘ too big to fail’ banks to break up (Telegraph). “America’s wave of new financial regulation is likely to prompt the country’s biggest financial institutions to break themselves up, according to the chairman of the Federal Reserve.”

• Foreclosures of million-dollar-plus homes on the rise (LAT). “The number of homes in the $1-million-and-up slice of the market that have become bank owned has tripled during the last three years in Los Angeles County, and the trend has shown little sign of slowing.”

• Paying Off the House in 15 Years (WSJ). “A growing number of homeowners are choosing to pay down their mortgages at a faster rate–even if it means a substantial jump in their monthly payments.”

• US housing woes compound job fears (FT). “Concerns that the depressed US housing sector will remain a drag on the US labour market  have mounted following the loss of nearly 120,000 jobs in construction and related businesses in the last three months for which statistics were available.”

• US homeowners flock to Florida event in desperate bid to save properties (Guardian). “More than 20,000 American borrowers to hit Palm Beach as Naca’s five-day mortgage modification marathon gets under way.”

• China Illegally Subsidized Aluminum Products, U.S. Rules (NYT). “The Obama administration, under Congressional pressure to take a tough stance on Chinese trade policies, determined on Tuesday that Beijing had unfairly subsidized $514 million in aluminum products last year.”

• Last Remaining Hopes Crushed, Homedebtors Defend Home Ownership (IHB). “Assaulted by bad news, a home debtor has launched a public relations campaign to keep the kool aid flowing.”

• China’s Rebound Eases Slump Fears (WSJ). “Manufacturing in China, set to become the world’s second-largest economy, rebounded in August, bolstering confidence that the country can propel Asia away from a double-dip recession despite weaknesses in some smaller regional economies.”

• Data Show China Growth Merely Moderating (NYT). “A bevy of manufacturing indexes from around the world on Wednesday underlined the uneven and shaky nature of the global recovery, with activity picking up a notch in the economic powerhouse of China, but cooling in the eurozone and several other Asian countries.”

• Stratfor: China Will Collapse (TPC). “George Friedman, CEO of Stratfor has the contrarian of all contrarian views on China.”

• Gray Matters in Booming China (WSJ). “It isn’t the absolute number of people that is about to become the issue, it is the number of wage earners.”

• Heavy in dollars, China warns of depreciation (Reuters). “China on Friday offered a rare glimpse into its foreign exchange reserves, confirming that they are overwhelmingly allocated in dollars, while a central banker said the mountain of cash could face depreciation risks.”

• Bumper-to-bumper as epic China traffic jam returns (Breitbart). “A huge traffic jam stretching at least 120 kilometres (75 miles) reappeared in northern China Thursday, with thousands of cargo trucks stuck in a bottleneck, state media said.”

• Renminbi dispute looks set to haunt Sino-US economic talks (FT). “Although the US Congress has discussed a number of bills in recent years that aimed to take action against China over is currency policy, analysts believe that legislation might have a realistic chance of passing this time.”

• China’s perplexing property boom (Telegraph). “It is notoriously difficult to get a handle on China’s property market – the bears talk about imploding ponzi schemes, while the bulls cite the pace of urbanization and the comparatively low amount of leverage most Chinese have on their properties.”

• U.S. Official Warns of Backlash Against China (WSJ). “China risks a backlash from the U.S. Congress unless it becomes more responsive to international concerns about its currency value and trade practices, a top U.S. State Department official warned.”

• Rising China Wages Cut Advantage Over Mexico (BB). “China’s rising wages are cutting the country’s cost advantage over other manufacturing centers such as Mexico, according to Flextronics International Ltd., the world’s second-largest custom electronics maker.”

• China Fortifies State Businesses to Fuel Growth (NYT). “As the Chinese government has grown richer — and more worried about sustaining its high-octane growth — it has pumped public money into companies that it expects to upgrade the industrial base and employ more people.”

• Beijing Pressures Japanese on Wages (WSJ). “Chinese Premier Wen Jiabao bluntly warned Japan that its companies operating in China should raise pay for their workers, part of a testy exchange on an issue that threatens to become a new irritant in relations between the Asian neighbors.”

• Backlash over China curb on metal exports (Telegraph). “China’s draconian export curbs on rare earth minerals needed by the rest of the world for frontier technologies is escalating into a serious diplomatic and trade clash with the United States and other leading powers.”

• This Time Seen Different as Emerging Stocks Top World (BB). “Emerging-market stocks are trading at the highest valuations relative to advanced-country shares in more than two years as faster economic growth persuades the biggest investors to look past historical sell signals.”

• India’s Economy Probably Expanded Fastest Since 2007 (BB). “India’s economy probably grew at the fastest pace in 2 1/2 years, adding pressure on the central bank to raise interest rates even as the global recovery falters.”

• Singapore Tightens Mortgages to Cool Property Market (BB). “Singapore increased down payments for second mortgages and imposed a stamp duty on property held for less than three years to curb speculation after home prices surged 38 percent in the second quarter.”

• Australian Growth Broadens, Reigniting Rates Pressure (BB). “Signs Australia’s economic expansion is spreading from the mining industry to households boosted the case for the nation’s central bank to resume the Group of 20’s most aggressive round of interest-rate increases.”

• Landowners Shout ‘Bingo’ as West Australia’s Mining Towns Boom (BB). “The housing shortage in a region that’s one of the world’s biggest suppliers of iron ore and natural gas is driving up costs for companies such as Chevron Corp. and BHP Billiton Ltd. as they mine raw materials to feed China’s industrialization.”

• The odd decouple (Economist). “Theories about why some rich-world economies are doing better than America’s don’t stand up.”

• Oil Should Be Around $10 a Barrel: Analyst (CNBC). “”We have so much oil right now, more than we’ve had in 27 years. Why is it 27 years? Because that’s how far our records go back. It’s probably the most in 50 or 100 years…”

• Strong Exports Lift U.S. Agriculture Sector (NYT). “Even as the broader economy falters amid signs of a weakening recovery, the nation’s agriculture sector is going strong, bolstered in part by a surge in exports, according to federal estimates of farm trade and income released on Tuesday.”

• Putin Extends Ban on Russian Grain Exports (NYT). “[Putin] announced Thursday that Russia’s ban on grain exports… would be extended well into next year because of continued uncertainty over production.”

• U.S. Benefits as Wheat Prices Soar (WSJ). “Wheat prices are heating up again as the U.S. gains favor among the world’s biggest consumers of the grain.”

• Food production: Agriculture wars (FT). “Underlying the revolution in the fertiliser industry is the increasing scarcity of another commodity: food.”

• Fears grow over global food supply (FT). “Although agricultural officials and traders insist that wheat and other crop supplies are more abundant than in 2007-08, officials fear the food riots could spread.”

• Russia opens China pipeline for Siberian oil (FT). “Vladimir Putin, the Russian prime minister, on Sunday opened a new pipeline to export east Siberian oil to China that will help Russia reorientate its oil trade towards the east.”

• Canada fund approached by China investors on Potash (Reuters). “Chinese and other investors have approached at least one big Canadian pension manager about a bid for Canada’s Potash Corp to rival BHP Billiton’s $39 billion hostile offer.”

• Maggots, Manure at Iowa Egg Farms Tied to Salmonella (BB). “Rodents and manure tracked by uncaged hens were discovered by U.S. inspectors at two Iowa farms that produced more than a half billion eggs recalled after a salmonella outbreak.”

• Sugar Imports by China May Advance 42% (BB). “Raw-sugar imports by China, the third-largest producer, may surge by as much as 42 percent in 2010 after domestic output dropped for a second straight year and demand increased…”

• Currency Trading Soars (WSJ). “Currency trading volume around the world has hit $4 trillion a day, fueled by investors in the wealthiest nations looking to diversify beyond their home markets in a time of economic turmoil.”

• Demonised ‘algos’ push the surge in FX trading (FT). “The question for the FX market is whether high-frequency dealers improve the market by adding liquidity, or whether they are instead merely price takers who contribute little.”

• Renminbi deposits jump at HK banks (FT). “Hong Kong’s banking system accumulated renminbi deposits at the fastest pace in more than two years in July after China took steps to boost the international use of its currency.”

• China Deflects Pressure for Yuan Rise (WSJ). “A senior Chinese central bank official held out little prospect of a more rapid appreciation of the Chinese currency against the U.S. dollar to address a persistent trade imbalance between the countries, despite mounting frustration in Washington.”

• Mexican Peso Has Worst Monthly Drop Since May as Growth Slows (BB). “Mexico’s peso completed the steepest monthly drop since May as concern grew the economic recovery in the U.S., the nation’s largest trading partner, is slowing and as drug violence escalated.”

• Canada’s Dollar Falls to Eight-Week Low as Economic Pace Slows (BB). “Canada’s dollar dropped to an eight- week low versus its U.S. counterpart and had its worst monthly performance since June 2009 as a report showed the nation’s economy slowed in the second quarter more than forecast.”

• Trend Strategy Is Biggest Winner in $4 Trillion Currency Market (BB). “Investors who follow trends are reaping the biggest gains in the foreign-exchange market this year as a 11 percent slide in the euro and the surge in the yen against the dollar provide the most profitable returns.”

• City of London’s dominance of forex and rates markets grows (Telegraph). “The City’s dominance of the world’s foreign exchange and interest rate derivative markets grew during the financial crisis, even as London’s banking sector imploded, new figures from the Bank of England show.”

• Swedish krona hits high against euro (FT). “The Swedish krona rose to a two-year high against the euro on Thursday after the Riksbank, Sweden’s central bank, raised interest rates and delivered an upbeat assessment of the country’s economy.”

• SNB is backed into a forex corner (FT). “…the Swiss National Bank is unlikely to revert to direct intervention to stem the currency’s appreciation, says Chris Turner, head of FX strategy at ING.”

• Swiss franc benefits from haven status as doubts spread (FT). “The Swiss franc hit a record high against the euro and approached parity against the dollar for the first time in nine months this week as worries about the global economic recovery drove haven demand.”

• Major hedge funds cut back equity risk (Reuters). “…many money managers have shifted to more defensive investments like utilities and high dividend plays, according to a Thomson Reuters review of portfolio disclosures by 30 of the largest fundamentally-oriented hedge funds.”

• US markets suffer their worst August in almost a decade (Telegraph). “US stock markets suffered their worst August in almost a decade, as evidence mounts that the recovery in the world’s biggest economy is slowing to a crawl.”

• 17th Weekly Fund Outflow As Equity Fund Redemptions Accelerate (ZRH). “This is just getting silly: perhaps the next update on ICI mutual fund flows should occur if there is an inflow for once…ever again.”

• Could investors fleeing stocks become a lost generation? (USAT). “increasingly, investors on Main Street are not playing the stock market game with confidence like they used to, mainly because the game of making money has gotten tougher and more volatile since the financial crisis.”

• How Obama Got Rolled by Wall Street (Newsweek). “Why the 44th president is no FDR—and the economy is still in the doldrums.”

• Professionals shown up by ‘dumb money’ (FT). “While retail investors ran from equities  and piled record amounts of their cash into money market funds in 2008, what really hurts the Street is their failure to forget and come back.”

• Investors’ anger rises at poor IPO returns (FT). “Investors’ anger over the performance of stock market listings this year is rising after the fall of shares in a number of high-profile offerings below their sale price.”

• SEC probes cancelled trades in flash crash (Reuters). “The Securities and Exchange Commission (SEC) is analyzing whether the trading practice — known as “quote stuffing” — is placing some investors at a disadvantage by distorting stock prices…”

• FDIC Finds 829 U.S. Banks at Risk (WSJ). “More than a 10th of U.S. banks remain at risk of failure even as some industry indicators, including credit quality, show some nascent signs of revival.”

• The bedridden banking recovery (Fortune). “The banks are feeling less woozy but have yet to get back on their feet — let alone lend a struggling economy a hand.”

• Banks Grow Wary of Environmental Risks (NYT). “After years of legal entanglements arising from environmental messes and increased scrutiny of banks that finance the dirtiest industries, several large commercial lenders are taking a stand on industry practices that they regard as risky to their reputations and bottom lines.”

• US bank profits return to pre-crisis levels (FT). “The aggregate profit number – the highest quarterly earnings total since the third quarter of 2007 – underlines the recovery of an industry that needed billions of dollars in government help to survive the financial crisis.”

• JPMorgan Chase halting proprietary trading (Yahoo). “JPMorgan Chase & Co. is shutting down its proprietary trading desks and eliminating around 80 jobs to comply with new restrictions on investment banks, a source familiar with the situation said on Tuesday.”

• Goldman Sachs Said to Be Shutting Proprietary-Trading Division (BB). “Goldman Sachs Group Inc. is disbanding its principal-strategies business… to comply with new U.S. rules aimed at curbing risk…”

• Titan Capital Joins Black Swan’s Taleb in Raising Bets on Crash (BB). “Titan Capital Group LLC, whose flagship volatility fund rose 21.6 percent as stocks tumbled in May, has raised bets on extreme market moves because investors’ views on the economic outlook have polarized.”

• Lex: Hedge fund closures (FT). “For managers used to posting knockout numbers, operating in this kind of environment can be bruising.”

• Bruised Quant Funds Seek a Human Touch (WSJ). “Computer-driven mutual funds, chastened by a string of poor results and a wave of redemptions, are striving to bring more of a human touch to their investment decisions.”

• Chairman Of Joint Chiefs Of Staff Says National Debt Is Biggest Threat To National Security (ZRH). “Not China, not Russia, not North Korea, not Iran, not terrorists…”

• Monetary Fund Warns G-7 on Debt Levels (NYT). “The world’s most developed economies, which have been racking up spending since the mid-1960s, face record levels of debt as a result of the 2008-9 financial crisis and have little room for maneuver, the International Monetary Fund warned on Wednesday.”

• Credit is finally available, but no one wants it (Fortune). “Just when credit becomes more available, there’s little evidence of a surge in demand for it.”

• The Siren Song of Low Bond Yields (WSJ). “Extraordinarily low bond yields signal a grim economic outlook. But for governments, there is a silver lining.”

• BOJ May Forego Further Stimulus Until Forecast Review (BB). “The Bank of Japan may seek to delay implementing further monetary easing until at least October, waiting to see whether the yen’s gains and a U.S. slowdown will force it to abandon a forecast for a sustained recovery.”

• Japan Said to View U.S. as Yen Intervention Obstacle (BB). “Japan views probable U.S. opposition to currency intervention as an obstacle to selling the yen, according to three Japanese government officials.”

• BOJ Holds Emergency Meeting as Yen Threatens Growth (BB). “The Bank of Japan held an emergency board meeting… as the yen’s surge to a 15-year high forces policy makers to find ways to support the nation’s slowing expansion.”

• Japan Battles Soaring Yen (WSJ). “Japan’s central bank agreed at an emergency monetary-policy meeting Monday morning to take new steps to rein in the soaring yen and pump up the slumping economy, in the latest sign of currency worries rippling around the world.”

• Japan Policy Tinkering Leaves ’Huge’ Risk to Growth (BB). “Although Japan’s economy will unlikely go into a recession, it may stay in a lull through the first half of next year,” said Hiroaki Muto… “Japan needs to cross fingers and rely on overseas demand.”

• BOJ ‘Too Little, Too Late’, Former Board Member Says (BB). “The Bank of Japan’s decision to expand a bank-loan program was “too little and too late” as a means of halting the yen’s advance, said former central bank policy board member Nobuyuki Nakahara.”

• Japan Plans New Steps to Curb Yen (NYT). “Japan promised a host of measures on Monday in a bid to ignite its faltering economy and temper a punishingly strong yen.”

• New Dissent in Japan Is Loudly Anti-Foreign (NYT). “Since first appearing last year, their protests have been directed at not only Japan’s half million ethnic Koreans, but also Chinese and other Asian workers, Christian churchgoers and even Westerners in Halloween costumes.”

• EU austerity policies risk civil war in Greece, warns top German economist (Telegraph). “Greece’s austerity measures cannot prevent default and will lead to a breakdown of the political order if continued for long, a leading German economist has warned.”

• Greece 5 Year CDS Approachs All Times Highs (TPC). “As Greece bonds weaken and spreads widen, the cost of insuring Greek sovereign debt against default is steadily increasing.”

• Mixed Data Underlines Two-Speed Recovery in Europe (NYT). “Economists said the persistently flat euro zone unemployment rate of 10 percent, near a 12-year high despite strong growth in the second quarter, masked diverging trends in the single currency area.”

• As nationalism rises, will the European Union fall? (WaPo) “The European Union is dying — not a dramatic or sudden death, but one so slow and steady that we may look across the Atlantic one day soon and realize that the project of European integration that we’ve taken for granted over the past half-century is no more.”

• Germany’s rebound is no cause for cheer (FT). “Germany’s economic strength is likely to be persistent, toxic and quite possibly self-defeating in the long-run.”

• UK: Ever Shrinking Pension Payouts (Mail). “Millions approaching retirement could be devastated by the worst pension payouts since records began…”

• Spain Homeowners Face Squeeze as Mortgage Rates Rise (BB). “Spanish homeowners will face higher mortgage repayments after the benchmark rate for loans last month posted its first annual gain since October 2008.”

• Obama Declares an End to Combat Mission in Iraq (NYT). “President Obama  declared an end on Tuesday to the seven-year American combat mission in Iraq, saying that the United States has met its responsibility to that country and that it is now time to turn to pressing problems at home.”

• UK and France to Share Aircraft Carriers (Sun). “Britain and France are preparing to reveal unprecedented plans to share the use of their aircraft carriers in a controversial step to maintain military power in an era of cost-cutting.”

• Probe Circles Globe to Find Dirty Money (WSJ). “A black-market financial investigation spreading from Iran to Sudan, London and Cuba began in a cluttered fifth-floor cubicle in an old-school district attorney’s office in Manhattan featuring dark corridors and frosted glass.”

• U.S. to Use Drones on Entire U.S.-Mexico Border (BB). “The U.S. will begin patrolling the entire U.S.-Mexico border with unmanned aircraft this week, Homeland Security Secretary Janet Napolitano said…”

• Alleged Drug Kingpin Is Arrested in Mexico (WSJ). “Mexican police said Monday they had captured Edgar Valdez Villareal, an American-born alleged drug lord nicknamed “La Barbie,” giving the government of Felipe Calderón a much-needed win in its escalating war against the country’s powerful drug lords.”

• Violence casts shadow on Mexican businesses (FT). “Foreign investors in Mexico have shown no visible signs of flinching… Not so much the locals, it would appear.”

• Signs in Arizona warn of smuggler dangers (WT). “The federal government has posted signs along a major interstate highway in Arizona, more than 100 miles north of the U.S.-Mexico border, warning travelers the area is unsafe because of drug and alien smugglers, and a local sheriff says Mexican drug cartels now control some parts of the state.”

• Nervous Afghans pull money from Kabul Bank, raising fears (WaPo). “With Afghans clamoring to pull their cash from their nation’s biggest bank, the United States risks a politically perilous decision…”

• Depositors Panic Over Bank Crisis in Afghanistan (NYT). “He predicted a “revolution” in the country’s financial system unless the Afghan government and the United States moved quickly to help stabilize the bank.”

• 7.1 Earthquake Hits New Zealand (NYT). “Authorities declared a state of emergency after a major earthquake hit New Zealand’s  second biggest city early on Saturday, bringing down power lines, ripping up roads and wrecking building facades, but authorities reported no deaths.”

• 21,000 people evacuated as Indonesian volcano continues to spew ash for miles around (Mail). “Towering clouds of ash are being spewed out of Mount Sinabung in North Sumatra and thousands of villagers living on its slopes have been forced to head to emergency shelters, mosques and churches.”

• Kentucky farmer’s corn pops in the field (WKYT). “”The picture that was sent look like a bunch of popped corn, it’s yellow. It’s not white popcorn looking but corn literally did pop in the field. It was that hot…”

• Low temperatures tie records at LAX, Oceanside (LAT). “Record low temperatures for the date were tied Wednesday at Los Angeles International Airport and Oceanside in San Diego County.”

• Best Jon Stewart Clip Ever? (DailyShow) “Gretchen Carlson dumbs herself down to connect with an audience who sees intellect as an elitist flaw.”

• Drunk baboons plague Cape Town’s exclusive suburbs (Telegraph). “The sun is setting over South Africa’s oldest vineyard and the last of the wine-tasting tourists are climbing onto their buses. But one large family group has no intention of leaving – and there is little the management can do about it.”

• Iran media call French first lady ‘prostitute’ (Yahoo). “Iran’s hardline media have called French first lady Carla Bruni a “prostitute” after she expressed strong support for an Iranian woman facing death by stoning for adultery.”

• Drink up! Heavy Drinkers Outlive Nondrinkers, Study Finds (Yahoo). “One of the most contentious issues in the vast literature about alcohol consumption has been the consistent finding that those who don’t drink actually tend to die sooner than those who do.”

• Bedbugs: They Crawl, They Bite, They Baffle Scientists (NYT). “Don’t be too quick to dismiss the common bedbug as merely a pestiferous six-legged blood-sucker.”

• Bedbugs Infest Google’s New York Office (WSJ). “Bedbugs continued their summer-long invasion of New York businesses by taking over a small portion of Google’s posh Manhattan office.”

• Only in Japan, Real Men Go to a Hotel With Virtual Girlfriends (WSJ). “The men are real. The girls are cartoon characters on a screen. The trips are actual, can be expensive and aim to re-create the virtual weekend outing featured in the game…”

• Grand slam wham bam! Spectator brawl interrupted play at U.S. Open (Mail). “The second round match was halted in the eighth game of the first set after the brawl kicked off – apparently when a female spectator and her father took exception to another fan’s swearing.”

• ‘Duke Nukem Forever’ Will Finally Be Released (WSJ). “…a video game synonymous with never being released, is finally being released.”

• How the Jersey Shore’s ‘Situation’ Makes Millions (WSCS). “The show’s character Mike “The Situation” Sorrentino is estimated to make over $5 million this year.”

• Mass Extinctions Change the Rules of Evolution (Wired). “A reinterpretation of the fossil record suggests a new answer to one of evolution’s existential questions: whether global mass extinctions are just short-term diversions in life’s preordained course, or send life careening down wholly new paths.”

• Deep-fried beer invented in Texas (Telegraph). “The beer is placed inside a pocket of salty, pretzel-like dough and then dunked in oil at 375 degrees for about 20 seconds, a short enough time for the confection to remain alcoholic.”

• Afghanistan’s dirty little secret (SFGate). “Too often, soldiers on patrol passed an older man walking hand-in-hand with a pretty young boy. Their behavior suggested he was not the boy’s father.”

• Police kill Discovery building gunman (MSNBC). “He identified himself as James J. Lee and said, “I have a gun and I have a bomb. … I have several bombs strapped to my body ready to go off.”