Macro
What’s a few Trillion Dollars between friends? It’s Christmas!
The Fed kept base rates at 0.25% (of course) but people were more interested in the rhetoric. Bloomberg headline states “Fed Keeps ‘Extended Period’ Pledge, Sees Improvement”, which begs the question. If they see improvement in the economy, why are they pledging to keep monetary policy extremely accommodative for an extended period?
Poor old Chris Martenson, he’s been rolling around in agony at the state of our government debt problem and our seemingly unstoppable deficits. His last piece he shows a nice picture of how the public debt picture has been evolving over the course of a month. Say the last month, November.
Source: ChrisMartenson.com
Hmmm… does that look like a deficit “in control” to you? That’s just one month… oh and by the way, those large numbers are called “Trillions”!
I quote (emphasis mine):
The bottom line is that a crisis rooted in debt cannot be solved with more debt. Jim Rogers put it very well recently when he said, “Papering over the problem is not going to solve America’s problem. The idea you can solve a problem of too much debt and too much consumption with more consumption and more debt defies belief. I cannot believe that grownups would stand there and say that.”
It will be an interesting election cycle, and I am mindful of the idea that there could be some significant upsets at the polls if the current leadership does not appreciate the extent to which we “get it” and wish to see our nation put back on a safe and sound path towards sustainable and true prosperity.
So I will keep a close eye on how the debt-ceiling debates and outcome are managed. If it turns out to be yet another “in the dark of night” act that gets passed by an embarrassed group of legislators at a moment designed to shield it from public view, then I will take that into consideration when casting my vote.
Don’t worry Chris, as Reuters report today; The House agreed to raise the debt limit to only 12.4 Trillion Dollars. Phffaa!! That’s pittance, pocket change, a drop in the ocean. What are you, Scrooge? Let the filth have their boondoggles and pork-barrels. Heck, why not make it a cool $13 Trillion while we’re at it? Keep your trap shut, Humbug, it’s Christmas, we’ll think about funding it next year – or perhaps even next generation.
While we’re on Chris Martenson (I actually really like his work – I’m of course joking about him being a Scrooge), I found his little hairdresser story embedded in “adjustable rate nation” quite sweet:
In early 2004, I was warning people as loudly as I could about a future housing crisis. No, I am neither an economist nor an all-knowing seer of the future. I am simply able to spot when something does not make sense and trust that things have a way of working themselves out over time.
It did not make sense to me that a hair stylist in Las Vegas should be able to amass a portfolio of 19 homes that were all being rented for less than their mortgage payments, if they were even being rented at all (this is a true anecdote).
Why was this an obviously broken story that had to end in tears? Because it simply did not make any economic sense. It even defied common sense. After all, if it were possible for everyone to get rich through the miracle of rising asset prices with no value creation, then clever people in the Roman Empire would have figured it out 1500 years ago, and your native tongue would be Latin.
The economic mistake for the hairstylist was in overlooking the fact that cash flows in have to exceed cash flows out, or eventually bankruptcy results. Clearly, things are a bit different for a government with a printing press over the short haul, but over the long haul, the story is the same. It’s not possible to continually live beyond one’s means forever.
If you’d like an optical perception on how our economy looks from the point of view of adjustable rate mortgages, you might just want to glance at this graph, courtesy of Agora Financial.
Source: AgoraFinancial.com
Hmmm… we’d better have some serious growth and inflation back in the economy by mid 2010 otherwise this consumer strike ain’t going away.
Macro Data to Watch:
- Hong Kong Jobs Numbers
- Swedish Jobs Numbers
- US Jobs Numbers
Markets
You have to feel for passengers of BA, some of the poor blighters will not get back for Christmas, meanwhile on the other side of the World the two US juggernauts American Airlines and Delta fight over potential ownership of Japan Airlines. The five year stock price of JAL tells a story, not a very good on at that (see below).
Source: Bloomberg
Japanese Bank stocks went to the moon yesterday: SMFG up 14% and Mizuho up 16%! On news that they won’t have to reach new capital requirements for another 10 years… aahhh, phew… that’s given a bit of breathing space. No wonder the stock price spiked.
Deutsche Bank set itself an ambitious target for earnings for 2011 and the stock spiked 5.5%. Perhaps we should all do that?
Global Stocks to Watch:
- Everything I said above – so financials and airlines;
- Earnings – yup it’s coming up to that time again:
- Nike “we-still-stand-by-Tiger-despite-the-fact-he-was-caught-with-George-Michael-a-goat-and-a-pair-of-handcuffs-in-a-public-toilet” Inc reports earnings today.
- Accenture “Tiger-who?” Plc also reports today, ironically.
- Fedex
- Oracle
- General Mills
- Research In Motion
No comments:
Post a Comment