Recent economic data shows that many areas are improving. Jobs are slightly better, rail traffic is up indicating growth, retail sales were up 1.1% in Sept and Aug was revised higher. Economic indicators in Europe are also stronger. That said, there has been a lot of writing about the ECRI declaring we will enter a double-dip recession. This organization has an excellent track record of predicting recessions. There indicator went slightly negative recently so there is always change will will reverse. On the negative side, credit ratings of corporations and countries are getting cut which will make cost of money go higher. Even though the jobs front looks a little better, initial claims are still around 400k per week. Housing is still going nowhere even with the Fed operation Twist driving down longer rates. Consumer sentiment via the Michigan sentiment survey is at recession lows. Wonder how much of this is due to growing lack of faith in government being ineffective. Earnings season is off an running and it's not clear where things are coming in. One thing is certain, is earnings estimates were brought down a lot in the recent weeks leading up to Q3 earnings season which should make it easier for companies to beat estimates but it's concerning that estimates are coming down. Sounding like a broken record, but Europe still drives everything concerning the markets. It appears that Europe will come together for a bailout mechanism with all 17+ countries voting for it. The question becomes how much money will the Europeans need to print. I'm still in the camp that Greece must declare bankruptcy via restructuring of their sovereign debt. Some are predicting bond holders will take at least a 50% haircut. The big news on this front was the emergency funding of a Belgium bank called Dexia which held Greek debt. Dexia passed a "stress test" just a few months ago and here it is in trouble. All of the European major banks are getting their credit ratings cut. I'm still sitting out until there is more clarity. Any given event on any given day is causing the markets to react wildly.
Recent economic data shows that many areas are improving. Jobs are slightly better, rail traffic is up indicating growth, retail sales were up 1.1% in Sept and Aug was revised higher. Economic indicators in Europe are also stronger. That said, there has been a lot of writing about the ECRI declaring we will enter a double-dip recession. This organization has an excellent track record of predicting recessions. There indicator went slightly negative recently so there is always change will will reverse. On the negative side, credit ratings of corporations and countries are getting cut which will make cost of money go higher. Even though the jobs front looks a little better, initial claims are still around 400k per week. Housing is still going nowhere even with the Fed operation Twist driving down longer rates. Consumer sentiment via the Michigan sentiment survey is at recession lows. Wonder how much of this is due to growing lack of faith in government being ineffective. Earnings season is off an running and it's not clear where things are coming in. One thing is certain, is earnings estimates were brought down a lot in the recent weeks leading up to Q3 earnings season which should make it easier for companies to beat estimates but it's concerning that estimates are coming down. Sounding like a broken record, but Europe still drives everything concerning the markets. It appears that Europe will come together for a bailout mechanism with all 17+ countries voting for it. The question becomes how much money will the Europeans need to print. I'm still in the camp that Greece must declare bankruptcy via restructuring of their sovereign debt. Some are predicting bond holders will take at least a 50% haircut. The big news on this front was the emergency funding of a Belgium bank called Dexia which held Greek debt. Dexia passed a "stress test" just a few months ago and here it is in trouble. All of the European major banks are getting their credit ratings cut. I'm still sitting out until there is more clarity. Any given event on any given day is causing the markets to react wildly.
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