Fundamentals just nothing to get excited about, crisis even in paradise
Posted on 12 July 2010 with 1 comment from readers
Thin trading in mid-summer has produced an odd mini-rally in stocks over the past few days. But there is nothing in the fundamentals about the global economy to support any optimism, and indeed it is mainly lacking.
China imported less copper and iron for the third month in a row, an obvious indication of a slowdown in this supposed economic powerhouse. We know from the Baltic Dry Index’s plummet that all is not well with global trade.
Optimistic rubbish
You also have to wonder on what planet the optimists are living when they say that the stock markets are somehow undervaluing a recovery. This is a specious line of argument, for it conveniently side-steps the need to show that any recovery, real or imagined is underway.
Just where is it? A rebound in US retail sales for five months? Just consumers doing a bit of belated inventory rebuilding. Where is the upturn in US housing, US auto sales, US employment? Today we ought to start hearing how the euro crisis has impacted first half profits for the US banks.
But then truly the European austerity program has not begun to bite. In the UK, for example, there is much talk of austerity and the need for massive public spending cuts but they have not started yet.
Can anybody really believe ECB President Jean Paul Trichet that this will be favorably recieved and promote confidence in business. Spot the lost orders is more like it and slash staff numbers and retrench.
Debt deflation
Then there is the whole business of a contracting global money supply and debt deleveraging. The credit that produced the above average growth of the 2000s is in short supply.
Here I am sat in The Seychelles and the taxi driver tells me about their IMF austerity program to aleviate their $900 million debt mountain, quite a problem for a country of just 87,000 inhabitants. True foreign investment in some nice new hotels is going ahead but the devaluation of the local currency has been painful and impacted demand for imports.
So you cannot even go to paradise and get away from the crisis. Still there are worse places to sit it out.
1 Comment posted by readers:
” One thing we have proven is that self regulation of Wall Street does not work.” David Komansky, former CEO of Merrill Lynch, to Maria Bartoromo on CNBC US TV at 3:37 p.m. Central Daylight Time, 12 July, 2010.
Don’t forget the sunscreen down there. You’re not in cloudy London anymore. Although you do need a little sun for vitamin D production. I had my face cut open for a week from skin cancer while waiting for some tissue growth. I had a nice piece of plastic over it. The reaction of spectators was interesting. Would you believe a hurricane delayed the sewing back together by a day. Thankfully, it was before Katrina. Today, you can’t tell that a 1.5 cm chunk was removed. Plastic surgeons are expensive (no socialized medicine here), but worth it.
As far as the stock market, I doubt it will tank before the US GDP figure comes out very near 0, or actually negative. That will take another 6 months. Then things could get ugly, but another recession this year is not guaranteed.
Now I’m off to look at the Sun with the solar telescope before it sets.