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Generational Dynamics Web Log for 2-Jul-2010
2-Jul-10 News -- New terrorist attack in Lahore, Pakistan

Web Log - July, 2010

2-Jul-10 News -- New terrorist attack in Lahore, Pakistan

Deflationary spiral spreads across Asia

Terrorist attack kills 40 in Sufi shrine in Lahore, Pakistan


Pakistan <font size=-2>(Source: CIA Fact Book)</font>
Pakistan (Source: CIA Fact Book)

On Thursday night, the Sufi shrine in Lahore is always packed with worshippers. That was the moment that three successive suicide attacks killed 40 people, according to Dawn.

It's a familiar story. On May 29, terrorists killed 80 people at an Ahmadi shrine in Lahore. Ahmadiyya is a small Shia Muslim sect that's censured by Sunni Muslim extremists. (See "29-May-10 News -- Terrorist attacks create carnage in Pakistan and India.")

Sufism is an offshoot of Sunni Islam, but it's considered by extremists to be an apostasy.

Pakistan's Daily Times reports that the attack was following by massive protests and violence by people protesting the lack of security in Lahore.

This attack comes a few days after Pakistani security agencies seized 20,000 kg of explosives in Lahore, as well as anti-aircraft guns, rocket-propelled grenades, small arms, ammunition and suicide vests. Asia Times

It's likely that the perpetrators of Thursday's attack were from the terrorist group Lashkar-e-Taiba (LeT). This group is also probably implicated in the recent violence in Kashmir, according to India Times.

Deflationary spiral spreads across Asia

Manufacturing growth in China, South Korea and Australia slowed in June, indicating the economic rebound has peaked in a region that has led the global recovery according to Bloomberg. Export related indexes in India, Taiwan and Indonesia also slowed or fell.

This is significant because it strikes at the heart of one of the fantasy scenarios of analysts who say that stocks will keep rising forever.

The concept behind the scenario is that this is "the Asian century," when economic growth in Asia will overtake the West. More than that, growth of Asian countries will provide the "engine" that will lead America and Europe to recovery out of the global economic crisis.

The article quotes a Singapore expert as saying, "The fastest phase of the recovery process is probably behind us and the uncertainty for the second half continues to rise on the back of the European crisis. The global environment is moderating."

An article in the Telegraph quotes David Bloom, currency chief at HSBC: "Double-dip is back in the lexicon. Everybody hoped that China's huge fiscal package would keep global growth going long enough for the West to recover, but it does not look like that is happening. China is now slowing but the US housing market is falling off a cliff. It's cataclysmic. In Japan the data is turning nasty, and fiscal tightening is just starting in Europe and the UK, so everybody is asking where the growth is going to come from."

As we've been reporting for the last month, the effects of last year's global stimulus and bailout programs appears to be wearing off, and we're resuming the downward spiral in trade and transportation that occurred at the end of 2008.

This plunge is consistent with trends predicted by Generational Dynamics. As I've said many times, from the point of view of Generational Dynamics, the situation hasn't changed. The stock market has been historically overpriced by substantial amounts since 1995, and by the Law of Mean Reversion, will have to fall sharply and stay down there for a comparable length of time (15 years). This is a mathematical certainty. (See "How to compute the 'real value' of the stock market.")

Vancouver's huge housing bubble may be close to bursting

Average home sale is over $1 million (Canadian), while some real estate brokers have made over a million dollars this year.

Canada was supposed to have been clever enough to avoid the real estate bubble that's been part of the financial crisis in the United States, but now it's beginning to appear that the 2010 Winter Olympics in Vancouver seduced the Canadian people into being not so clever after all.

According to Garth Turner, a financial writer and former member of Parliament, Canada is going all the way down the road the U.S. took. "My basic view," he says, "is that we have a Canadian version of the U.S. real estate bubble. Not exactly the same, but close enough. We've relaxed lending standards, we have high unemployment, and we've reached a point of unsustainability in the housing market. I see real estate values falling shockingly."

A web site reader has sent me the link to an online game called Crack Shack or Mansion? It shows you a picture of an actual home in Vancover, and asks you to guess whether it's a crack shack or a million dollar mansion. I tried it out and got most of them wrong.

Additional links

If Russia cannot help to stem further ethnic violence in the former Soviet state of Kyrgyzstan, then the Russians will lose credibility throughout the former Soviet republics. Moscow Times

Israel and Turkey have been holding (no longer) secret talks in Brussels on how to repair their damaged relationship. Reuters

Those Israeli plans to demolish 22 Palestinian homes in East Jerusalem to make way for a park and shopping center are causing additional tensions and protests. Washington Post

In California, ATM cards used for welfare payments are being used at strip clubs. More than $12,000 in welfare funds has been dispensed to ATMs in places like Samís Hofbrau, Seventh Veil and Star Strip. LA Times. This news comes just two weeks after it was revealed that California's welfare recipients are using their ATM cards at gambling casinos. LA Times

The Massachusetts "Big Dig" was a $15 billion, 20 year highway project to rebuild Boston's central artery and underwater tunnels. When first envisioned in the 1980s, it was to cost $3 billion. Part of the overrun was $400 million in financial losses due to the collapse of an interest rate swaps deal engineered by the Swiss bank UBS. Bloomberg

Superstar financial reporter Andrew Ross Sorkin says that a new "Great Crash" is coming -- sooner than we think. NY Times

For Boomers: Nine technologies to ease the pain of getting old. Forbes

Why women find vampires hot. CNN

Shopping is bad for men's health. Daily Mail

(Comments: For reader comments, questions and discussion, see the 2-Jul-10 News -- New terrorist attack in Lahore, Pakistan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (2-Jul-2010) Permanent Link
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