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August 18, 2010
Share ThisDuring every down day the markets battled back off the lows. The battle back was impressive. The tendency, wrongly, is to think that, at this time, the markets and the economy are linked ...they are not, the posters on the main boards have noticed that something is amiss, are complaining, repeatedly complaining, that, on bad news, the markets aren't dropping thru the floor ... like Ed's " ...old shack with a bad floor covering a shaft hundreds of feet deep. "
The USA economy is struggling along trying to find a firm footing. The global ecomomies are in the same boat. Lack of jobs, unemployment concerns, real estate concerns - both commercial and residential, forclosures, and even a near zero interest rate hasn't helped as banks have slacked off on lending and the double whammy ... comsumers reduced borrowing. Overall credit card debt has declined, more debt accounts, including housing, are current. The consumer is conservatively spending, shunning debt and credit, using cash or debit cards (that data pulled from transaction processors Visa (V) and Mastercard (MA) quarterly reports) ... so new gadgets like the iPad are still flying off the shelves. Even Wal-art increased its anticipated year over year numbers. Those are some of the links in the economy side of the calculations ... and note the markets aren't in there.
The links on the Market side of the calculations:
The market is also struggling along trying to find a firm footing. Yes, there are many of the same concerns: Lack of jobs, unemployment concerns, real estate concerns - both commercial and residential, forclosures, etc; but, ( there always seems to be a but, doesn't there? ) the near zero interest rate has helped the markets and the financials. The markets are aware the consumer is conservatively spending, shunning debt and credit, using cash or debit cards (that data pulled from transaction processors Visa (V) and Mastercard (MA) quarterly reports) ... so new gadgets like the iPad are still flying off the shelves. Even Wal-art increased its anticipated year over year numbers.
The Currency Carry Trade (CCT) is alive and well, a boon for CCT market participants, even while it slowly chokes the life out from the economies of the countries involved in the spreads, as the banks loan into the Currency Carry Trade with little risk, unless we count excessive leverage, instead of into the banks' local economies. Future analysis of Japan's stagnating economy, and low GDP numbers over the last 20 years, with high savings rates, conservative consumer spending, and the Japanese yen's role as the prime vehicle of the CCT, will serve notice of what other gov'ts, ( are you listening USA? ), must NOT allow.
And the markets are ever so briefly paying attention to the economy, and then blithly ignoring it, going about market business based on the profits to be made nanosecond to nanosecond, minute to minute, intraday of every trading day.