Archive - Aug 2010 - Blog entry

Markets in a Flash

· The USD seems to be regaining ground against the JPY after the currency pair showed the JPY rising.

· The GBP/USD is trading just below the 1.600 level, near to its 6 month highs. A break though this level may be significant.

· US equity futures are higher this morning indicating the equity markets will open higher at the bell.

The US is suffering from permanent unemployment at the current levels, much like Germany saw in the eighties and nineties. Just emerging from the near death experience of the century, companies will only hire a few temps which they can jettison with a mouse click. The drag from the states and municipalities is a long term structural issue that has only made a few halting baby steps towards solution. Managers don’t want to hire in front of a diminished long term GDP growth rate of 2%. There is nothing either political party can do about this but blame each other. A new interstate system, anyone?

It looks like private equity is emerging from the deep as investor confidence is returning, and there is increased interest in long-term asset classes. But the boom years are over, and only the strong will survive the coming shakeout in the PE industry.

The Trust Fund report to Congress suggests that US payrolls are about to skyrocket. That is the least likely outcome. The rose is off the rosy report.

Distillates demand, which tends to track economic output closely, is reflecting all the economic reports over the last two months--falling off a cliff.

A disappointing July jobs report came out Friday showing weak employment gains, further evidence that the economy is stalling out. What will the Fed do?

Friday was the 65th anniversary of the Hiroshima atomic bomb. A visit to the Atomic Bomb Victims Hospital. Futilely treating gamma rays and beta particles with mercurochrome and traditional Japanese folk remedies. No one could live there for 20,000 years. Every type of plant strangely flourished after the bomb, but men and women were left sterile. Where has the bomb taken us today?

Washington is now in the business of spreading rumors relating to Wall Street. Just another example of how D.C. is taking the fun out of the game.

Canada’s biggest multi-employer pension plan, with 130,000 active members, says thousands could soon face future benefit cuts of 15 to 50 per cent depending on negotiations with companies.

A fundamental investor's look at the macro picture and lodging earnings sees pretty much nothing but bad news. Apparently, the mainstream media doesn't take a fundamental investor's view. Retractions, anyone???

Markets in a Flash

· The JPY has started to look strong over the past few hours gaining against the USD and other currencies.

· The USD is also looking strong against other currencies, this may as investor buy the greenback before the US’s employment report.

· US equity futures have been fluctuating this morning but are currently posting slight gains ahead of the US session.

Mr. Geithner is either outright insane or a total liar. Neither of those are welcome realizations, though I doubt they are news to anyone with a working brain. However, for the sake of manners, I'll simply assume Mr Geithner is outright insane, in which case I am indeed, quite honored to be invited to his recovery... I only wish he'd mentioned the planet where it was taking place.

The outlook for the US, with its still miserable 3.9% savings rate, does not look great. Countries with low savings rates historically suffer from weak economies and poor stock markets, because of a shortage of available capital. China, India, and Turkey look much better. (SPX), (FXI), (TUR), (PIN)

It's been a long, hot summer for hedge funds and things aren't looking up. Why are so many hedge funds struggling?

While relatively low liquidity equity and commodity markets are attempting to signal a global recovery (and hence a more inflationary environment), the two most liquid and therefore most efficient financial markets (Treasury and FX) continue to invalidate the claims made by these markets ultimately portraying a much more accurate environment with significant deflationary headwinds.