VIOLENCE

In the markets the business of the future is to be dangerous. For example, we don’t have a clue regarding short term fluctuations in the most watched of indicators - the stock market. World wide that market has been just a tad violent. Some of this is due to the inevitable second guessing of the rescue, that if not impotent it is at the very least lacking in horsepower. We did not anticipate this crisis, find it all too easy to criticize those who are trying to rectify it - simply shots from the cheap seats. Instead, we need to develop some notion of economic underpinnings, those anchors which will hold past the chaos and confusion. The rescue plan as sculpted last weekend is one of those; it is substantive. Economic ministers kept the secret. The choice was this: either come up with the money needed to allow them to nationalize the bulk of their banking systems by Monday or come up with the money needed to nationalize the bulk of all listed companies by the end of the week.

Yesterday’s reaction in the world equity markets was also triggered by a US Sep retail sales release that was over double the decline expected, and by the Fed’s dismal appraisal of near term economic conditions, both of these raising the notion of a recession (already baked in the cake, our view, and meaning two consecutive negative Qts). Other indicators included rocketing unemployment in the UK, slowing demand in China and signs that the highly levered economies of Easter Europe will need a bail out soon (Iceland acting perhaps as the canary). Finally, there is in the mix a whole myriad of factors that none of us can isolate. That does not stop the talking heads from telling an anxious audience exactly why we had a dive, knowing that the listeners will go home feeling (falsely) secure.

Robert Craven