Well, it’s Monday, so of course the discussion needs to include Greece. Yesterday the Greek Parliament voted 199-74 to accept the EU/IMF/ECB austerity program in exchange for another bailout. As I mentioned Friday, the cuts are pretty draconian and include a 22% cut in the minimum wage, cuts in government employees that will eventually total 150K, additional cuts to pension benefits, and presumably the enforcement of existing tax codes. I’d say the probability of the return of the drachma is 50/50.
While many market pundits are noting the similarities between the start of 2012 and the beginning of 2011, the economic data seems to be more positive than what we saw at this time last year. In early 2011 the economic data was marginally positive, and the market was being driven by QE2. This year the economic data is definitely more positive and we are seeing an improvement in the employment picture (which we didn’t have in 2011). What cannot be overlooked in the similarities are the ongoing budget issues in the US, the unsettled problems in Europe, and the European stimulus that is having a QE3 type effect.
Nuclear shutdowns in Japan after the Fukushima meltdown have resulted in a major ramp in natural gas consumption. Only three of the country’s 54 nuclear reactors are operating, resulting in a 27% jump in natural gas consumption in January. On another nuclear note, the US has approved the first new nuclear facility since the mid-1970’s, in Augusta, GA.
A CFTC report shows that net-long positions across 18 commodity futures and options has increased by 13% to the highest level since September. These are speculative bets by investors, not hedging positions. Most commodities are up this morning with the exception of natural gas, gold and steel, which is down on weaker than expected demand coming from China.
The President will be announcing his budget this afternoon, which is expected to include a record budget deficit of $1.4 trillion. That is quite a bit higher than the original White House estimates of an $850 billion budget deficit.
China’s Premier Wen Jiabao announced that the country will relax restrictions on foreign investment in an effort to attract foreign private capital to the energy, finance, social services, and transportation sectors.
Congratulations to Lance Armstrong, who finished second in his first Ironman distance triathlon in Panama. Lance was in the lead until the final mile of the run, when he was passed by Bevan Docherty.
Have a great day