November 21, 2011
If it’s Monday, then there must be a new government in Southern Europe. Over the weekend Spain became the third ailing country in the euro-zone to experience a change in government. The Popular Party captured 44.6% of the vote over the weekend, giving it a clear majority in the 350 seat Parliament. The troubles in Spain mirror those of Greece and Italy, with unemployment running at 21% and borrowing costs exploding. I’m not sure which way this all plays out, but hopefully our leaders in DC will take note, and at least for the sake of their job security actually stop campaigning and start governing.
Of course, as I finished that last sentence I realized the irony of my next comments, that markets are down hard this morning on reports that the Super Committee (BTW-where did that name come from? How about Super Incompetent Committee, Ship of Fools, or some other more descript designation?) efforts at achieving a bi-partisan deal are collapsing. Not that this should be a surprise to anyone given the way it was structured (uber-partisan) and how the default cuts (defense and discretionary cuts) were a better alternative for the Democrats than any negotiated settlement would have been. John Kerry, still pissed about losing to George Bush in 2004, said that the Bush tax cuts were the only reason a deal couldn't be reached. Unfortunately, the message being sent to the markets is that the only difference between the US and Greece is time. Sounds like we could use an adult in the room instead of hanging out in Hawaii planning his campaign.
Christmas is only 34 days away, and retailers are aggressively positioning themselves for the early shopping rush. Warm weather in the east is pressuring early holiday shopping, but this year there is an extra week between Thanksgiving and Christmas, which should help retailers and the overall Christmas spend. Surveys are showing consumer spending intentions are running flat to down for the season.
Chinese Premier Wen Jiabao cited recent changes to their policy on the yuan that have resulted in a 30% increase over the past year. He also said the country will try to improve the currency’s flexibility, “China will continue to closely monitor the yuan’s trading movements and will strengthen yuan’s trading flexibility in either direction.”
APAC markets were weak last night on concerns the about US sovereign debt issues. The Hang Seng fell 1.4%, Kospi 1%, Sensex 1.1%, and Nikkei 225 0.3%.
Bloomberg is reporting that US fund managers made their biggest cuts in bullish bets on commodities in two months. CFTC data showed a reduction in net-long positions across 18 futures/options by 10%.
What an amazing weekend of college football! Four top ten teams were upset, throwing the whole BCS upside down. Congratulations to the Galaxy, but don’t hold that trophy too tight because its moving to Chicago next year!
Have a great Monday
Ned
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