CHARTS OF THE WEEK: See How Four Asian Cities Monopolized Global Trade In 15 Short Years

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chart of the day, smartphone apps, oct 2010

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  • See How Four Asian Cities Monopolized Global Trade In 15 Short Years
  • Housing Is Now Clearly Double Dipping
  • Here’s How Bonds Got To Be Ridiculously Expensive Compared To Stocks
  • This Is The Emerging Market Bond Bubble
  • This Is The Relationship That Determines The Crucial Dollar-Yen Exchange Rate

See How Four Asian Cities Monopolized Global Trade In 15 Short Years

Here's a fantastic graphic produced by Transport Trackers, the Hong Kong-based research and advisory firm headed by my old boss Charles de Trenck.

It shows how global containerized trade has become dominated by just four Asian cities, three of which are in China, with the fourth being Singapore.

Each consecutive coloured outline shown below represents one year, and the farther out you go on the web, the larger the trade volume for the city. So for example, Singapore's containerized trade volume in 2008 was nearly 30 million TEUs (20-foot box equivalent units), as shown by the thick orange line. It shrunk back to about 25 million TEUs in 2009, as shown by the dotted green line.

The point is that just back in 1994/1995, trade was far more balanced between top port cities, as you can make out from the innermost coloured outlines above.

Then over 15 years, the chart just blows-out to the upper right corner, as container trade for Singapore, Shanghai, Hong Kong, and Shenzen become a larger and larger share of the total.

To put things in perspective with the largest U.S. ports, which aren't even shown on the chart above because they're too small, the port of Los Angeles and Long Beach in California handled a combined 11.8 million TEUs in 2009.

This barely breaks past the second-innermost ring on the web chart above and it's not that much higher than that of Qingdao, a Chinese city most people have probably never heard of.

(Via Transport Trackers)

Housing Is Now Clearly Double Dipping

Momentum for housing has stalled. Home prices decline sequentially in 15 out of 20 markets according to the just-released Case-Shiller numbers.

The double dip in housing has arrived. And this is just August, prior to the foreclosure-gate mess.

Here's How Bonds Got To Be Ridiculously Expensive Compared To Stocks

Jeremy Grantham said in his latest quarterly letter that bonds are now overvalued relative to stocks. He generally prefers U.S. quality companies over bonds. Here's a potential reason why markets have reached this point.

Despite the recent stock market rally, whereby September was the best month in seven decades, U.S. domestic stock funds are still bleeding investor assets.

Latest fund flow data from the Investment Company Institute (ICI) shows how U.S. stock funds' flows have continued to be negative, even during the first two weeks of October, as they have been for most of the year. Fund flows for U.S. equity funds were net-negative in 2008, 2009, and now have been the same for 2010 thus far.

Below we show the cumulative effect of this, since the beginning of 2008. Cumulative fund flows over the period equaled -$245.8 billion based on ICI data, as shown in red.

Meanwhile, fund flows into bond funds have continued to be positive this year. Cumulative flows for bond funds since the beginning fo 2008 have equaled +$632.15 billion, as shown in grey.

So despite any sense in the market right now that investors are starting to get too bullish, ICI data at least paints a different picture -- Investors as a whole continue to pare back their equity mutual funds and deploy additional money into bond funds. More of the same pessimism towards stocks and love for bonds.

Just note that the data below doesn't include ETFs, where fund flows for U.S. domestic stock ETFs went positive recently. So maybe we'll soon see the fund flows go positive in a meaningful way for domestic stock mutual funds, but it doesn't appear to have happened yet.

This Is The Emerging Market Bond Bubble

This chart doesn't need much explanation. It's the amount of assets held by emerging market bond funds.

As Bank of America put it in a presentation on quantitative easing and the hunt for yield, this is one of the 'Unintended Consequences' of QE. It's a stark visualisation of the mad dash to lend money to anyone that will pay you one iota of yield.

Presenting, the emerging market bond bubble. Hope your hunt for extra yield goes better than every other time folks have pursued the same strategy. (Big thanks to @dutch_book for the chart)

This Is The Relationship That Determines The Crucial Dollar-Yen Exchange Rate

The dollar-yen exchange rate (USD/JPY) may be the most-followed currency pairs there is.

So what's the real determiner of where it goes?

Readers Ravi Bharadwaj and David Boudreau sent us this, which plots the historical rate against the spread between US 10-year bonds and 10-year Japanese government bonds.

Not surprisingly, when the US 10-year yields more, the value of the dollar goes up. Obviously it's not an iron-clad relationship (there's plenty of swinging around the mid-point), but the trend is pretty clear.

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