MetaClip: Watch out!

 

Metaclip, April – May 2007: All the articles in the Economy category, clipped by Trend Monitor 2.0 from Clipmarks , are suggesting that the global economy is teetering on the brink of a serious, perhaps un-precedented reversal. Consumers and corporates are up to their eyes in debt, and hedge funds are described as nearing the exploding point. The US housing market is deflating faster than ever before, while the stock market is described as a “Dead Man Walking”.

Consumers: Consumers are portayed as “taking a break” on spending as major US retailers reported April sales which were described as “the worst on record”.

Housing: With home sales estimated by the US National Association of Realtors to have suffered their biggest drop in nearly two decades, Robert Shiller, the Yale Economist who predicted the Internet bubble, is cited in ‘The Financial Times’ warning of a housing bubble “to match the Internet bubble”. He says UK and Spanish house prices are twice as over valued as in the US.

Trade: The US trade deficit is reported reaching a six month high on May 11, while China’s trade surplus is said to have doubled in March continuing a two year accelerating trend with its main trading partners, the US and Europe.

Markets: Companies are reported re-purchasing shares in un-precedented numbers boosting sharing prices, but setting the stage for “coming tsunami” of equity supply. The cost of borrowing is expected to increase, which will add to “the swollen ranks of lowly-rated firms that are up to their necks in debt” which will have to sell shares — as well as various other assets — as a matter of survival, often regardless of price. Meanwhile, Warren Buffet calls the $1.6 trillion hedge fund industry with its fast trades in and out of assets “a fool’s game”. On May 5 ‘The Daily Reckoning’ suggests “Practically every one of them is walking around with dynamite taped to its belt”.

Debt: According to the Bank of England, a “surge” in cheap corporate lending and looser credit standards is an increasing danger to the global financial system. ‘The Financial Times’ quotes Larry Fink, the chief executive of BlackRock, the $1,000bn-plus fund management group, saying “lending to highly indebted companies was becoming lax in ways similar to those that have undermined the US subprime mortgage market, making the leveraged loan market tomorrow’s problem”.