Ooops

We received two key US releases today, Claims and Dec Retail Sales.  We expected that both would cheer the market, Claims inside of expectations, Sales through expectations.  In fact, it was just the reverse. We’ll miss a few and missed these two in a major way.  Now, what if anything has changed?

Today’s results do not indicate a trend.

We have established consumer activity, jobs-related activity and manufacturing as desk anchors, meaning observers have underestimated those sectors and clients should take advantage of this fact.  Through Q4, with just an occasional miss here and there - nothing in a straight line - these held well.

We expect these will continue to hold through Q1.

Next, we have told clients to expect the US and Canada (thanks partly to US linkage and partly to an enlightened Harper administration) to move away from other developed credits, including  Germany.  We noted late October and through early November that German growth, Q4 and Q1, would disappoint, falling below forecasts.  That is working as planned.

We also noted in October that even given a E-Z solution, the new core capital requirement for banks would translate into a significant retardant, this region.  Recent evidence shows that it already has; banks are parking most of the ECB’s generosity right back with the ECB, as Euribor prints indicate. E-Z banks have no intention to either make loans or to raise capital, on the whole.  They intend instead to shrink their books.  Going without banks in the US would not be as crippling as it will be in the E-Z; US companies have many other venues to acquire funds; E-Z firms are without that flexibility.


Robert Craven