A dozen odd hedge fund traders had a dinner in New York last week, to discuss the possible decline in euro. Some Germans want Greece to sell some of its uninhabited islands; probably China would gladly pay hundred billion for half-a-dozen of them and even Russia may agree to swam them for some oil and gas. Such a deal can easily make the euro and the pound plunge to parity with the dollar in a jiffy; the question whether U.K. will be the next (after PIGS) is already being asked, though not yet being answered.

Exaggerated nightmares? Akio Toyoda bowed while apologizing to China last week; the week before, he didn’t think it necessary to bow while admitting lapses before the US Congress. Just imagine how things would move if 40% of world population (China+India) starts accounting for about 10-12% of world consumption, instead of 5-6%.

But there is really no need for hallucinations of this kind. CDS rates for Greek debt are actually declining, though it is becoming increasingly clear that several eurozone governments have been as financially innovative as Goldman Sachs or Bernard Madoff. Meanwhile, the primary industry of the world, finance, hopes to keep grinning ear-to-ear, year-to-year.

However, there are talks of a gold bubble ballooning to $2,000 or more before it dives back to wherever; George Soros has hiked his exposure to gold by over 150%.

US bank failures in 2010 have already reached 26, Fannie Mae and Freddie Mac are painstakingly identifying faulty mortgages deceptively palmed off to them by the likes of JPMorgan and Wells Fargo, and the number of 55+ unemployeds has exceeded two million because of what they are calling the Gray Ceiling. Consumer borrowing doesn’t seem to be declining in a meaningful way and Uncle Sam is preparing to launch a new design of $100 bills to counter counterfeiting.

US policy-makers seem to be as unsure of the road to nirvana as they were on the day Lehman happened. The administration wants an independent agency for consumer protection, Republicans want the Fed to shoulder this responsibility, and some want to limit TBTFs. Apparently, the Volcker Rule, announced with much fanfare, seems nowhere near getting written. May be the US is waiting for something drastic to happen somewhere else.

The focus, it seems, is still on finding supposedly more prudent ways of reselling loans, to be bought from the original lender who had sold and bought them back last year, after detachable CDSs are added to the package. The Prez wants to accord top priority to education while students in California are livid at the 30% fees hike announced recently. Dole receivers are selling checks two weeks in advance, at a discount of 15%; interest rate of over 400%.

China invested nearly four times the US in real estate in 2009 and recorded a trade surplus of $196 bn, though that isn’t preventing analysts from forecasting a financial crisis in a couple of years. Sovereign fund CIC has shifted course to buy more real economy assets in the US, such as stakes in Coke, AES and J&J, after having lost heavily in stakes it had bought in firms like Blackstone and Morgan Stanley. China has become the world’s second largest consumer of luxury goods, next only to Japan and the gap between rural and urban incomes is apparently still widening.

Sales of passenger cars are expected to decline 9% in Europe and 25% in Germany this year. Number of hotel room nights sold in EU-27 dropped 5% in 2009, to 1.5 bn while the decline in case of foreigners was 9.1%. ECB is considering doing sovereign ratings in-house and Icelanders have flatly refused to approve repayment of IceSave debt ($15,000 per capita).

In Japan, properties are being sold at prices below construction costs. Brazil expects FDI to leap 74% (to $45 bn) this year, Italy’s budget deficit almost doubled last year, and despite spending 4% of GDP on insurance, Chileans may not get more than half of what they lost in the quake last week. Rents in Singapore plunged 46% last quarter and the city state is offering a cluster of colonial bungalows to hedge funds at attractive rents; 140 already have operations there. Integrated resorts with Casinos are being promoted.

HSBC has discontinued consumer loans but had to make provisions for $26.5 bn in 2009, Warren Buffett has shut his credit card business and sold its bad debt at 55% of face value, and AIG’s Asian unit, having 23 mn live policies, is being bought by Prudential for $35 bn, and it has also sold its MetLife unit serving EU, LatAm and Japan for $15 bn.

Pfizer has bid $4 bn for generics firm Ratiopharm while WellPoint is buying back shares worth $3.5 bn. GE and Philips (diagnostic equipments) are expectantly looking at China’s plans to spend USD 41 bn on 31,000 new hospitals.

GM is fixing power steerings of 1.3 mn compacts. Boeing is trying hard to find buyers for its C-17 planes that can transport 60-ton tanks; the plant employs 5,000. Adidas sales dipped 4.5% last quarter as sales in China (of all places!) dipped, forcing closure of some stores. Van Heusen has reportedly offered $4 bn for Tommy Hilfiger.

Cow manure, considered one of the cheapest and most eco-friendly fuels for centuries, has suddenly become a source of pollution; some have suddenly realized that methane can be as damaging as carbon. Thousands of Australians posed naked in Sydney to celebrate Mardi Gras. US govt believes if it can cut salt consumption 10%, it can save $32 bn a year in healthcare costs. Russia has an estimated surplus of 10,000 tanks, some of which are lying abandoned in mountains. A Swedish pilot was arrested last week for having a fake license he had used for flying Boeing 737, and Canada is debating whether its national anthem should be altered to make it gender neutral; it talks of “thy sons,” forgetting daughters.

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