Archive - Feb 10, 2013

Typically, we humans will anchor on the most recent patterns - especially if they conform to our anchored inherently optimistic bias. It seems, once again, that just as in previous euphoric stages of equity market cycles, we are doing the same again. There are plenty of market movements that remove any hope for the 'who could have seen it coming?' herd: European stock and bond markets 'breaking' their positive contagion trends (core and periphery); US credit markets seeing very disturbing trends of selling pressure and technical outflows; and US equity valuations reaching multi-month highs in the face of declining earning, declining macro fundamentals, and declining GDP expectations. With US stocks at highs against a plunging US macro background and EU stocks slumping against a rising EU macro background, it appears good is bad and bad is good and while we do not know what catalyst stalls the can-kicking hope in the short-term, the longer the divergence from reality lasts, the bigger the fall to come.

Some interesting footnotes in a CBO report.

US society in a nutshell: Chris Dorner has been around for a week and has 222 million results on Google; the Federal Reserve has been around for one hundred years and has 187 million results.

U.S. exports and imports last year totaled $3.82 trillion, the U.S. Commerce Department said last week. China’s customs administration reported last month that the country’s total trade in 2012 amounted to $3.87 trillion. China had a $231.1 billion annual trade surplus while the U.S. had a trade deficit of $727.9 billion. For those who are still not aware of why this is such a big deal, it is essentially a turning point moment in global trade.  There is no doubt that China will now be inducted into the SDR, and that their importance as a trade and consumption center will quickly lead to a move away from the dollar.  To put it simply, the dollar is going to lose its world reserve status VERY soon.  Many will cheer this change as necessary progress towards a more “globally conscious” economic system.  However, it’s not that simple.  Total centralization is first and foremost the dream of idiots, and in any mutation (or amputation) there is always considerable pain involved.  The proponents of this “New World Order” (their words, not mine) seem to have placed the U.S. squarely in their crosshairs as the primary recipient of this fiscal pain.