Asia This Day:Fed's Fisher in Sydney;China Services;Shanghai Golf

A top central banker,Richard W. Fisher,who is President of the Federal Reserve Bank of Dallas,has bitterly criticised the U.S. Government for the inept handling of the federal budget,thus hindering the Federal Reserve's efforts to help the economy recover.Mr.Fisher thus echoed the frustration of the American people with the recent government shutdown and sequestration.
I am not a proponent of increasing government spending without restraint,Fisher,whose father was born in the Australian state of Queensland,said in a Sydney speech to business economists.The excessively over-indebted US Government has been hog-tied,prevented from providing stimulus.It has thus provided a counter-cyclical,suppressive role.The inablity of our government to get its act together has countered the pro-cyclical role of the Federal Reserve.We have a government that hasn't been able to agree on a budget in 5 years;that has historically,under both Republican and Democrat presidents and Congresses,spent money and committed itself to fund long-term programs without devising revenue streams to cover current costs or fund future liabilities.
One could say that GDP would have risen at 3.2 percent had government expediture increased at the same rate as private expenditure.Or,more modestly,if government had just been held constant,instead of contracting,GDP would have grown at an annual rate of 2.6 percent.
Under these circumstances,it is no small wonder American businesses are not expanding and growing jobs at the pace we at the Fed would like to see.It is no small wonder that our economy is growing at a substandard pace compared to previous recoveries.It is no small wonder that the most expansive monetary policy the Fed Open Market Committee has ever engineered has been hampered from accomplishing what it set out to do,Mr Fisher complained.*
China's services sector grew the most in thirteen months in October,a report from the National Bureau of Statistics shows.The services PMI rose to 56.3 in October from 55.4 in September.*
Most Asian markets fell in early Monday trading,with Japan's Nikkei index down 0.88%,perhaps disconcerted by Mr.Fisher's remarks.*
In golf,American Dustin Johnson won the PGA Tour's World Golf Chmapionships-HSBC Champions in Shanghai in a memorable tussle with England's Ian Poulter and Graeme McDowell of Scotland.Johnson said it was the most important win of his career,given the field and the tournament.It was his eigth PGA Tour victory.He praised HSBC for their excellent work on the tournament.
Johnson,Poulter and McDowell spurred each other on with an exhibition of accurate ball-striking.China's WC Liang also played well,tying for fifteenth with his eleven under par 66.Poulter and McDowell will go on to the Turkish Open this week in the European Tour's Race to Dubai.

Crunching the Market:Barclays Capital

As liquidity,or various forms of government intervention,gets withdrawn from the market by central banks,there will be lower lows and lower highs.By the time we get to rate hikes,the process should be complete,in the view of Barry Knapp of Barclays Capital.The process started with Chinese tightening.A recovery starts with government stimulus,then moves on to inventory restocking,eventually resulting in hiring.
Barclays is selling cyclical stocks and buying defensives.Cyclicals are companies that rely on robust growth,such as industrials,energy and materials firms.Defensives are in areas that are less economically sensitive,such as consumer staples and health care.In the current case,however,industrials are just starting to recover.As a rule,during a period of adjustment to stimulus withdrawal,defensive stocks are likely to outperform.Many analysts expect the Federal Reserve to raise interest rates in the second half of the year,a major step in the transition process.

Health Uncle:Legislation Update

President Obama has signed a bill into law that extends health insurance to four million more children,for a total of 11 million.The State Children's Health Insurance Program,SCHIP,has been renewed for 4.5 years.The program covers children who are ineligible for Medicaid,yet whose parents cannot afford private insurance.The cost of the program is an estimated 33 billion dollars.An increase in tobacco taxes,including a 61-cent increase on each pack of cigarettes,for a total of 1.00 per pack in federal excise taxes,will fund the program.Meanwhile,Congress continues to consider the economic stimulus plan,which includes funding for digitizing medical records and extending health insurance for laid-off workers.Governor Jennifer Granholm of Michigan has issued an impassioned plea for Congress to act now.Each day the situation in Michigan gets worse,she said.Just yesterday,she learned of 4,000 more layoffs.We can amend the bill later,the governor cajoled.There are 40 billion dollars' worth of shovel-ready projects in Michigan,Governor Granholm contended,visibly concerned about the citizens she serves.