The E-Z continues to struggle as she finds the German shoe a tough fit. The Europe that the Kaiser lost in 1918 and Adolf destroyed in 1945 just fell to Merkel in 2011 without her ever firing a shot.
Still want that sophisticated medical care, the new Mercedes, the ultra-modern airport? Fine, then drop the daily siesta, the 9 pm dinner, retirement at 50, the 10 - 4 work day and stop cheating on your taxes. You want this stuff? Then start behaving like Germans.
Forget it. They won’t. Thus, clients to remain short the Euro to the US (or Canadian $), as described earlier.
Back in the US, debt markets continue to be distorted by those seeking sanctuary from E-Z turmoil.
Yet real sector developments continue to improve. For example, this week’s Claims print reflected an improving labor market. After averaging 459M per week in 2010, new claims have averaged 410M in 2011. Obviously the pace of layoffs has slowed. Next, continuing claims continue their 2-year long declining trend, as did the number of people collecting benefits under the federal extended and emergency programs, declining from the middle of 2010.
We are simply firing on more cylinders than the street expected, two or three months ago.
Clients were prepared for this reality.
As FI prices are artificially bloated, our insight better worked through FX or equity.
Robert Craven
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