Nov 23, 2011

Happy Thanksgiving!

November 23, 2011

Trying to keep track of what’s going on in Europe is like playing whack-a-mole. Every time one country’s issues seem to be addressed, problems in another country pop up. This morning a German Bund issuance wasn’t well received, and yields jumped as over 1/3 of the issue wasn’t sold. This has to make the rest of Europe nervous because above all else, the Germans are concerned about the Germans, and won’t tolerate unwieldy yields or inflation. France appears to be in the firing line of the investment community as the yield on their 10 year bonds spiked 18 basis points to 3.71% as a downgrade from Moody’s appears imminent.

The price of a traditional turkey dinner has jumped 12% from last year while travel costs are up 16%. In some states, such as New Jersey, things are even worse. In New Jersey, shelters that provide meals to the homeless have been reclassified as restaurants. Volunteers who used to bring in pre-cooked food (think chocolate chip cookies, etc), are no longer allowed to do so. All meals must be prepared on-site. Servers are no longer allowed to enter the kitchen area, and volunteers can no longer where their own aprons. One shelter estimated that their cost of operations jumped by $125K because of the new regulations.

A slew of economic reports came out today because of the holiday tomorrow and Friday. I have placed some of the more significant releases in the table below. Notice the unusual number of downward revisions.




Durable Goods Orders



-1.5% (revised from -0.8%

Durables ex-transports



0.6% (was 1.7%)

Cap Goods non def



0.9% (was 2.4%)

Personal Income




Personal spending



0.7% (was 0.6%)

Initial jobless claims



391K (was 388k)

Despite our treatment of the mighty dollar, it has been a beneficiary of the turmoil in Europe. The chart below, courtesy of Kimble Charting Solutions, shows the dollar beginning to break out. If it continues its trajectory, the risk off trade could become extremely profitable.

Federal Reserve Bank of NY President William Dudley admitted that the Federal Reserve routinely gives select analysts and investors access to advance indications of policy changes. While admitting that these nonpublic discussions might give the impression that the Fed gives well-connected investors an advantage over others, he defended the practice. Wow! Am I gullible. I thought only Congressman and Senators could trade on inside information without being prosecuted.

APAC markets were down hard last night after the HSBC Chinese manufacturing index fell to 48. This measure is a diffusion index, similar to our ISM, and a reading below 50 indicates contraction.

The FDIC reported that bank earnings in the US hit a four year high in the third quarter. Revenue growth is still a struggle for the banks as lending remains sluggish.

EU market commissioner Michael Barnier said that the EU is looking at separating retail banking and investment banking to reduce risk. Finally! Now if our regulators and elected officials would consider a similar approach to banking regulation, we could truly reduce the overall risk in the system.

While enjoying support from President Obama, despite being the one who has cozyed up to bankers and the 1% while verbally bashing them, Occupy Wall Street has been relatively quiet since being thrown out of the parks last week. Now it appears workers are fighting back. The picture below shows the response of two employed men responding to the OWS crowd.

I’m planning to watch football tomorrow, but anticipate I’ll be switching to CNBC Europe during the commercials. Should be fun.

Have a fabulous Thanksgiving.


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