The Inscrutable East: Up? Down? Sideways?

The official Chinese manufacturing index rose from 50.4 in April to 50.8 in May.  To stimulate the economy, bank reserve requirements have been reduced.  Meanwhile, housing prices dropped from April to May, or so they say. China is still targeting 7.5% growth in 2014. Can they make it happen?  Doesn’t the market expect/fear worse? (FT Mon p4)

Spain's government proposed to lower the top corporate tax rate to 25%. Are trade wars becoming tax wars?

Even though Pres. Obama might not approve because of the subversive ideas it would give to US companies. . . Spain is planning to cut the top corporate tax rate from 30% to 25% to stimulate the economy. The government believe they must do this to be internationally competitive.  (FT, Mon p3)

The allies have our backs, just like in 1944.

This week’s D-Day celebrations on the beaches in France will, of course, include our then ally Russia, despite the anti-Russia sanctions about which the remaining allies are united.  But the FT senses some cracks in the alliance:  "European officials, however, suggest there is a difference of views about the nature of the separatists in eastern Ukraine, with the US tending to see unrest as being instigated by Moscow, while some in Europe believe the rebellion to be more organic."  Besides, Europe needs the gas and we don’t.

China and the Revenge of the Sith.

Robot Wars? Last year China bought 36,560 robots, up 60% from 2012, replacing Japan as the world’s biggest buyer of automatons. Japan bought 26,015 and the US, in third position, 23,679.  This was according to an FT article on page one on Monday. 

Problem solved bionically? I was reminded of the above today, when the FT (p6) discussed Japan’s declining workforce.  Last year Japan’s population declined by about 200,000 (0.17%), so we can estimate that the workforce dropped by 120,000.  But if the new robots work three shifts plus the weekends, a robot might be the equivalent of four human workers.  This means the Japan’s workforce was basically flat on a robot-adjusted basis, and soon it may be growing.

LOL. . . WUT? . . . OMG! . . .

In this week’s Bloomberg BusinessWeek (5/12, p12),  Michael Metcalf, head of “cross - asset strategies” (what’s that?) at State Street Global Markets in "Printing Money To Help The Poor" suggests pulling poor countries out of poverty by governments issuing zero coupon perpetual bonds purchased by their central banks and giving the money to poor people in the third world.  After all, U.S., U.K., and Japan have issued $3.7 trillion without any problem, he points out.  This idea came to him when his five-year-old daughter, not having any money to give to a homeless man, simply drew a picture of a $5 bill.

Are the Germans and the French cuddling up to the Russians behind our backs, or are they just playing FTSE?

The NYT reports, “Recently, Mr. Hollande joined Chancellor Angela Merkel of Germany on a phone call with Mr. Putin. . . Mr. Hollande’s scheduled meeting with the Russian president now constitutes the French president’s most prominent diplomatic foray into the Ukrainian crisis since it began. It follows France’s announcement that it would honor a deal worth 1.2 billion euros, or $1.6 billion, to deliver two Mistral-class warships to Russia even after its land grab in Ukraine, a decision that displeased France’s Western allies.”

And we ask ourselves why the banks aren’t lending, or “the beatings will continue until morale improves.”

CEO Moynihan of Bank of America said at a conference yesterday that they have just one big legal settlement left: one with the Department of Justice, which is estimated to be around $10 billion.  “We’ve got a myriad of cases that we’ll work through, but of the big stuff, that’s really the one that’s left out there,” said Moynihan. To date, Bank of America has paid about $60 billion in settlements and legal fees relating to the crisis, mainly from the shenanigans at Countrywide prior to its acquisition.  At the end of 2006, total shareholders' equity was $135 billion. (Charlotte Observer)