Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.


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The China economic miracle of recent years has astounded global gurus. Economic policy makers and watchers inside and outside of China forecast its likely continuation. In the intertwined global economy, such sunny predictions about China also aim at boosting confidence regarding international economic growth prospects. Admittedly some Chinese indicators show display reasons for such optimism. And the Financial Times recently remarked “almost everyone agrees that there is little sign that the global economic crisis is about to have a Chinese third act to follow the US and eurozone, which starred in Acts One and Two.” (7/24/13, p6).

Unfortunately, the so-called “real”, “underlying”, and “overall” China economic scene nevertheless is relatively opaque and challenging to understand. Telling any story about the nation’s economy, whether bullish or bearish, requires caution, and audiences should listen to these viewpoints with some skepticism. Many Chinese statistical indicators arguably are difficult to assemble comprehensively as well as to interpret (whether by the Chinese government or outside experts). How accurate is official Chinese economic information? Political considerations perhaps influence the substance of some Chinese data reports.

Moreover, several other signs from or related to China suggest that China’s real GDP growth has tapered faster than many believe. Besides, it may taper a fair amount beneath generally predicted levels of over 7.5 percent. Like the United States and many other nations since the emergence of the worldwide economic disaster, China embarked upon and sustained highly accommodative monetary campaigns and huge deficit spending adventures. Might GDP expansion diminish if these policies (and related credit creation and leverage) are slowed or reversed? Even though China’s overall government debt as a percentage of GDP is less than that of the United States, much of Europe, and Japan, why should China entirely escape the debt challenges and related unpleasant consequences endured by these nations? In contrast to most conventional wisdom, China nowadays probably faces some significant systemic financial (economic) problems.

China’s embrace of debt and credit in recent years is a widespread cultural phenomenon.

If things were going wonderfully within the Chinese economic (and political) system, why would the nation’s leaders underscore territorial quarrels with other nations? Recall the recent squabbles with Japan over tiny islands (Daioyu) controlled by Japan.

What’s the bottom line? China apparently has generated a fair amount of its economic growth from easy money and massive deficit spending (credit, debt, and leverage). It consequently faces a significant challenge of maintaining its high GDP growth rates while tapering accommodative monetary and fiscal deficit policies. In addition, China confronts a modest yet apparently growing systemic problem (risk) tied into these accommodative monetary and fiscal programs and the related lending, leverage, and bad debt issues. Perhaps Chinese control over its economy (especially given that economy’s close connection with the global one) is much less than many claim. Looking forward, Chinese growth probably will taper more than most believe. In any event, one should not have blind faith in the continuation (repetition) of the recent extraordinary Chinese growth story.

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Another Marketplace Tapering Tale- the China Story (9-9-13)

FEDERAL RESERVE EXIT STRATEGIES © Leo Haviland February 21, 2013

Federal Reserve Board generals have underlined that they indeed possess an exit strategy for their ongoing extraordinary easing program. Such confident rhetoric regarding an escape plan indeed helps to boost the morale of many economic and political observers of marketplace battlefields. Didn’t its entrance strategy work? The Fed Funds rate has stayed near the ground floor since late 2008, United States Treasury yields have collapsed relative to their 2007 heights, and US equities (use the S+P 500 as a signpost) have soared from their March 2009 abyss.

Yet marketplace combatants should be wary of the Fed’s exit strategy design as well as its tactical implementation. It is not a detailed and finished blueprint. In actual practice, the exit strategy involves significant risk, and it probably will not be put into practice nearly as timely or smoothly as propaganda from the Fed leadership hints. How rapid, coherent, and helpful were the Fed’s policy viewpoints and actions in the early stages of the worldwide economic crisis? As the Fed’s marketplace entrance strategy and maneuvers were very remarkable and evolved over time, why should its exit plan and its application be any more “orderly”?

Yet why should the Fed’s exit strategy be without some significant pain to UST and stock owners? There’s at least a significant risk of notable wounds. After all, the rally in debt and equity prices assisted by the Fed’s massive marketplace easing generally enriched and thus pleased owners of American stocks and UST (and many other debt instruments). Besides, we know the noble Fed is not the only significant policy maker and fighter on the US (and international) economic battlefield. Thus its practical control over marketplace outcomes has significant limits.

To what extent is the Fed Chairman accurate? Is the Fed Chairman trying to minimize the role of the Fed in financing (money printing for) the deficit and to understate potential overall exit strategy issues?

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Federal Reserve Exit Strategies (2-21-13)