Leading Economist Analyses Euro Debt Crisis

The swap lines that have been set up between central banks are positive,according to C.Fred Bergsten,Director of the Peterson Institute for International Economics.They show that the Federal Reserve and the Europeans are in communication.The European banks are in need of more capitalisation.This kind of thing buys time.
The European Central Bank has indicated it's not gonna let someone go belly-up,making a Lehman mistake.The Europeans have created this European Financial Stability Fund,which is an embryonic European Treasury.It's something like the U.S. Troubled Asset Relief Program.On the financial support side,I think they're moving in the right direction.
The strong Europeans deserve criticism.The strong Northern Europeans need to take expansionary measures.The Germans have an overwhelming interest in preserving the euro and the European Union.They are the ones who have the heft to make things happen.
The Europeans need to get on a clear path toward fiscal unification to go along with monetary union.In the mean time,the ECB needs to lend to governments and banks to keep the financial system afloat.A two-track strategy is needed,Dr.Bergsten believes.
C.Fred Bergsten has been Director of the Peterson Institute since its founding in 1981.Before that,he was Assistant Secretary of the Treasury for International Affairs from 1977-81 under President Jimmy Carter.

It’s the Jobs, Stupid! Part VI - TCW Asset Management - September 6, 2011

It’s the Jobs, Stupid! Part VI - TCW Asset Management - September 6, 2011

Assessing A Possible Greek Default

The consequences of a Greek default are being gauged by thought leaders in world financial capitals.Komal Sri-Kumar,Chief Global Strategist at TCW,says that,if Europe crashes,you're looking at the banking system being under very severe strain.As long as that is unknown,I think you're looking at a bit of trouble here.
Moody's,the ratings agency,downgraded the creditworthiness of two of France's three largest banks,Societe Generale and Credit Agricole,because of their exposure to Greek debt.The third bank,BNP Paribas,escaped the demotion.
You cannot just have Greece defaulting and everybody else doing fine.Greece defaulting will cause a series of defaults.If that happens,the impact on the U.S. economy and market will come from the financial system.It's gonna be even more difficult to get a mortgage in the U.S. because the Federal Housing Finance Agency is suing the big banks.
Dr.Kumar has said he believes we are already in a recession.He's staying with high grade fixed income for the next 2-3 months;after that,it's defensive stocks.
TCW,the Trust Company of the West,offers institutions and individuals a broad range of investment strategies.Since 1971,it has been committed to serving its clients through fundamental research and superior customer service.

Newsletter Publisher Sceptical of Euro Fund

Mark J. Grant,publisher of the "Out of the Box" newsletter,which is read daily by some 5,500 financial institutions,is sceptical of efforts to resolve the European debt crisis.It's a solvency issue for the banks,Mr.Grant said.They have 4.1 trillion dollars of debt to roll over.The response has been that we don't need to recapitalise the banks.
The European Financial Stability Fund,or EFSF,is a convoluted effort.It is virtually impossible to come up with any solution.There is not money enough to support this effort.There is not enough available to bail out Italy and Spain.
The markets are all interconnected at the international bank level.Any blow-up in Europe could have a substantial impact on the U.S. banking system.The European Union and China are manipulating the currency market,Mr.Grant believes.
Mark J. Grant is Managing Director of Corporate Syndicate and Structured Products at Southwest Securities.He has also written a highly regarded book,"Out of the Box and Onto Wall Street."

The Outlook for Chinese Equities

The global growth slowdown is much on the minds of financial analysts in Asia.HSBC says a fall in demand is already affecting countries in the region.China,India and South Korea are export-driven.China Daily said the European debt crisis will affect China's real economy.
Nonetheless,the major brackets are doing well,according to John Tang,a China strategist at UBS.I don't think we are gonna see earnings affected very much.If we still see 8-9% growth,bank earnings won't be much affected.The outlook for the index is actually quite good.
The Japanese yen or bond are not an option,and the euro is even worse.The U.S. dollar will still be a must have.
Real estate is the most upbeat sector.Earnings are very robust;valuation has been quite low.It is the number one consumer sector in China.Look past the short political headwinds.I don't think we should be trading at that low level,Mr.Tang observed.

Shortfall of Rare Earth Elements Persists

Molycorp is the sole producer of rare earth oxides in the Western Hemisphere.The Mountain Pass,California company has reached profitability,and CEO Mark Smith indicates that the condition out of China is driving his company.The supply side is not nearly strong enough to meet the demand both in and outside of China.
We're seeing not just price realisation,but a volume increase as well.We see the demand continuing to climb very rapidly.China cannot produce enough for their own in country needs.
A 30-35,000 ton supply of rare earth is needed per year.Molycorp puts out 5-6,000 tons for its customers.We are fully funded to close the Sumitomo deal,under which Sumitomo Corporation of Japan will provide Molycorp with financing in exchange for a seven year supply of rare earth products.We certainly would like to enter into contracts.
We have to stay focused on our 781 million dollar expansion project.It is the number one priority for every employee in the company.We have to bring that project in on time and within budget.That's what people invested in Molycorp for.
We don't foresee any let up in demand for rare earth elements,Mark Smith noted.The oxides,considered critical by industries such as aerospace and defence,are utilised in diverse applications such as lasers;computer memory;aerospace components;magnets;batteries;and PET Scan detectors,as well as X-ray components.
Molycorp(MCP)

Analysing The Current Financial Problem

Komal Sri-Kumar,Chief Global Strategist at TCW,thinks the fundamental problem is you have an excess of debt in the world.The Federal Reserve left open the possibility of QE3,or more quantitative easing.It's something to be worried about this late in a recovery.
If we don't do any structural reforms,I can't see any improvement.We need to have free trade agreements;a more flexible labor market.I think we are in a recession now and into Q4.
We are looking into defensive areas.We like energy;information technology.Stay away from European equities and fixed income.The corporations have something like two trillion of cash.The money is kept mostly outside the U.S.,away from higher taxes.
I considered QE2 alchemy.You need incentives,getting workers to work and increase productivity.You cannot get anything else out of monetary policy.Many companies are firing domestic workers as they hire them abroad,because it is more efficient,Mr.Sri-Kumar noted.
TCW,the Trust Company of the West,offers institutional and individual investors a wide array of U.S. Equity,U.S. Fixed Income,Alternative and International strategies.It is committed to fundamental research and superior customer service.Based in Los Angeles,TCW was founded in 1971.