Week In Review

How did events this week support or amend our anchor, that of surprising vigor ahead, especially in payrolls and discretionary spending?

Well, it’s been fun folks. Obama quit his attack on the rich, triggering the F word from one of his fellow Dems. In fact, these loonies should have praised the guy. The tax bill, as it is this pm is not much. We get a two year break but are nailed with a $57 bln, 13 month extension of unemployment benefits that’s not paid for. So not much here to support our anchor, won’t hurt much either, perhaps a wash.

Real sector data was encouraging. Consumer Sentiment rose to its best level since June. Sentiment fell sharply in July, but has now regained all of that decline. Exports rose 3.2% for Sep and are now 15.9% above their year ago level. Jobless claims dropped by 17M for the week ended Nov/27. After being little changed for most of the year, claims for benefits have broken to the downside past 5 weeks. All of this data supports our constructive view.

The Fed continues to disappoint with this QE II business. We don’t need any more liquidity. The charge, from us and others, that the Fed is merely an extension of the administration continues to gain support.

And Nobel laureate Joseph Stiglitz reckons US banks will simply put the $ offshore, investing in so-called emerging credits, driving up these currencies, triggering all sorts of mayhem, including asset bubbles. May be. A Wild card? Stiglitz knows more about these things than we do.

But this week’s rout in the bond markets (yields spiking, prices dropping) may be the investment world’s way of issuing an inflation warning. Much more of that and we’ll have to moderate our view. Balance sheets, especially housing will not be happy campers.

Finally, and of course key - momentum continues to build in Washington to repair damage done earlier by BO, his making a bad economic situation much worse. Nov/2 was about stopping the destruction. Next year is about rebuilding. We’ll start with the health heist. The future costs of this statist president’s social agenda are no longer a given. This has greatly cheered employer and consumer alike.


Robert Craven