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Who 'Ya Gonna Believe?
Research for Online Investors

5/24/12

HSBC publishes their “Flash” PMI (Purchasing Manager’s Index) every month a couple of weeks before the Chinese government compiles their “official” PMI.  Almost every month it seems the HSBC number is worse than the government’s number.  HSBC’s China PMI number came out overnight at 48.7 for May, down from 49.3 in April.

HSBC’s PMI numbers have shown China’s manufacturing sector slowing their growth trajectory for the last eleven months.  The Chinese government numbers have shown the manufacturing sector to be in expansion for the last five months.

Who 'ya gonna believe?

I’ll go with HSBC.  We have covered the reasons HSBC numbers are generally lower than the government’s.  The government has access to the larger state-owned companies in their survey.  These companies have access to capital from government banks.

HSBC surveys smaller companies.  These smaller companies don’t have access to cheap government loans to capitalize on opportunities or survive downturns.  The government steers business to the largest companies, enhancing their profitability.   Europe is China’s largest export market.  The credit crisis in the eurozone has ripened into a recession and slowed China’s exports.  China is trying to transition to increasing domestic demand for their manufactured goods, but so far has been unable to replace the lost export shipments.

Keep your eye on China's economic numbers.  Europe in recession, U.S. slow growth; ok we can work through all that...but China slowing, that is a problem.

Shenanigans in Egypt’s elections are at full tilt as candidates spread rumors that other candidates are dropping out of the race.  Ahmed Shafiq is the former Air Force General, and was polling in first or second place.  He had shoes and stones thrown at him at a polling place yesterday when he left after voting.

The Muslim Brotherhood’s candidate, Mohammed Mursi, supporters were distributing meat, sugar, beans, lentils and oil to voters according to election monitors.  One of Shafiq’s supporters was arrested for handing out “walking around” money to voters.

Authorities prevented fifteen women from voting when they would not let inspectors verify their identity.  They would not lift their “niqab” (full face veil) for female inspectors to check their faces. No word on how deep their voices were.

Al-Jazeera published an exit poll showing Mursi garnering 25% of the vote followed by Sabahi at 22%, Fotouh at 21% and Moussa at 19%  That puts the Muslim Brotherhood in first place, the leftist candidate in second place, followed by a former MB member and the former diplomat.

U.S. Initial Jobless Claims remained static at 370,000 in the Department of Labor report this morning, but through the magic of revision you will probably hear they dropped from last week.  In what has become the “new” new way of calculating government statistics, last week number was revised up 2,000 so this week’s number could be classified as lower.

Continuing Claims were higher than expected, but were better than last week’s.  Surprised?  It might have something to do with people hitting their 99 weeks and disappearing from the roles.  Durable Goods Orders were up 0.2% in April, better than the contraction of 3.7% in March.  Core Durable Goods (excluding Airplanes) dropped 0.6%.  Economists expected growth of 0.9%.  March’s Durable Good’s numbers were revised up to -3.7% from the initial reported drop of -3.9%

The market looks lower today on disappointment the European Leaders dinner yesterday didn’t agree to spend money until everyone has a new car in the garage and the banks are stuffed with money.  That is evidently what the market wants, a little inflation and money chasing every asset.  This would reassure traders that stocks would continue to go up.

Here is the dirty little secret.  When all the arguing is done and Greece has voted, the ECB will prop up the eurozone banking system.  They will offer another round of the Long Term Refinancing Operation (LTRO), maybe only for a year rather than three years.  But you can bet the money will not dry up.  Maybe the ECB will just choose to expand their balance sheet buying sovereign debt in the secondary market to suppress interest rates.

Early this afternoon, an interesting piece of information hit the wires.  Google reports the term “Bank Run” has hit an all-time high in searches.  Areas that are experiencing high volume are Europe, China and Singapore.

Quote:
Those who take the most from the table, teach contentment.  Those for whom the taxes are destined, demand sacrifice. Those who eat their fill, speak to the hungry, of wonderful times to come. Those who lead the country into the abyss, call ruling difficult, for ordinary folk.---Bertolt Brecht (1898-1956) German dramatist, stage director, and poet

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