The eerie economic as well as political correlations/similarities to the period of the 1930's continues to gain momentum. Continuing high levels of joblessness, ineffective government spending programs, increasing federal entitlements, constitutionally questionable legislation…for those of us that are history fans it almost looks like 'play it again Sam'!
I guess only time will tell if we are truly smarter than our ancestors (like everyone seems to think!) and we can return to a thriving economic scenario in the short term. Although at this point the odds don't seem to favor that outcome. And I hope that we will not have to have another WWII to shake us out of our doldrums!
prb
From: S&Y PSG Morning Market Update for Wednesday March 31st
…the housing market, although showing signs of life, has yet to surprise anyone with its strength. Similarly, even with gains in the past few months, the US labor market is still very weak, jobs creation is anemic and most analysts do not expect the unemployment rate to decline appreciably over the next few years. In addition, inflation is virtually nonexistent. This suggests that economic growth will remain weak for some time, and rates/yields should not experience
undue upward pressure. Finally, the Fed will almost be forced to remain on the sidelines as long as unemployment remains so high.
Earlier today, Wednesday March 31, ADP reported its payroll change for March. The report showed an unexpected decline of -23,000 in ADP processed payrolls; i.e. job cuts. (The ADP data covers 365,000 of ADP’s non-farm clients
and represents approximately 24 million workers.) The market consensus had projected a rise of +40,000 in the March ADP data, so today’s report was a bit of a surprise. Presumably, US companies are still reluctant to start hiring until they have a higher degree of confidence in the sustainability of the US economic recovery, and can count on an appreciable rise in final demand.
The unexpected decline in the ADP payrolls creates nervousness in the markets on the eve of the Labor Department’s employment report scheduled for Friday (4/2) morning. Although the historical correlation between the ADP report and the “official” non-farm payroll report is not very strong, there is a general sense that if ADP payrolls are falling, perhaps the market expectation of payroll gains on Friday are overly optimistic. At the moment, the consensus estimate for March non-farm payrolls is for an increase of +184,000. If the consensus prediction is correct, it would be the first increase over +150,000 in monthly payrolls since March of 2007.
Wednesday, March 31, 2010
Wednesday, March 3, 2010
Wednesday March 3, 2010
Opportunity ahead….but how do we get there?
The fiscally responsible unraveling of the leverage that our economy has built up at all levels (city, county, state, federal, individual) as well as the world in general, will be the cornerstone of what may lie ahead… appropriate deleveraging while controlling inflation should be the goal. But as we continue to see our country does not seem to have the fiscal discipline to walk that path – we don’t even want to crawl on to it! We are so adverse to the ‘perceived’ level of pain that most assuredly must occur we continue to undermine what needs to be accomplished. And from the government’s perspective (at all levels) spending money is power and who wants to give that up…for the ‘greater good’ is today NOT tomorrow or so it appears the thought process has become!
The dam is leaking and the gum is running out! An uncharted and historic level of spending by our governmental bodies comes with a price – and who is willing to pay that price! As the cartoon character, Wimpy, from Popeye so brilliantly stated “I will gladly pay you Tuesday for a hamburger today” – was he a politician! Well, after we have eaten all of our hamburgers Tuesday is coming and there is a price that will have to be paid!
prb
Date: Wednesday, 3 Mar 2010
From: "Stone & Youngberg Portfolio Strategy Group"
- Yesterday's (2/3) Treasury market started out the day weaker and prices were under pressure until early afternoon when bids picked up and prices rose. The market shrugged off the progress reportedly made in resolving the Greek debt crisis, which should normally reverse the flight to quality, cause the dollar to weaken and Treasury prices to fall.
- The proximate cause of the market's firm tone was a rather pessimistic assessment of economic conditions in the latest Fed Beige book. Across the board, economic indicators were pointing to an anemic at best economic recovery; "consumer spending remained sluggish...dismal holiday spending season...conditions weakened for agricultural producers...drops in business loan demand...continued tight credit availability." Given where we are in the business cycle, roughly eight months since the presumed end of the recession (July 1), this Beige Book paints a bleak picture of the supposed recovery phase we are now in.
- Earlier today, Wednesday March 3, ADP reported their February payrolls had dropped by -20,000. This was in line with expectations and represents improvement from the January payroll drop of -60,000. Although the ADP data is prone to sometimes appreciable revisions, it is nonetheless viewed as providing insight into the Bureau of Labor Statistics national unemployment data released two days hence on Friday.
- The Treasury market is weaker this morning (3/3) across the curve. Prices are fading today partially as a consequence of a pull back from the rally in Treasuries over the past week. In addition, the soon to be resolved Greek crisis has served to reverse the flight to quality. The 30 year long bond is down -¼ of a point and the yield is 4.58%. The 10 year UST is also off -¼ of a point and the yield is now 3.63%. By way of perspective, one week ago on Wednesday Feb. 24, the 10 year was yielding 3.69%. The short end of the market is slightly weaker the 2 year UST is yielding 0.80%.
The fiscally responsible unraveling of the leverage that our economy has built up at all levels (city, county, state, federal, individual) as well as the world in general, will be the cornerstone of what may lie ahead… appropriate deleveraging while controlling inflation should be the goal. But as we continue to see our country does not seem to have the fiscal discipline to walk that path – we don’t even want to crawl on to it! We are so adverse to the ‘perceived’ level of pain that most assuredly must occur we continue to undermine what needs to be accomplished. And from the government’s perspective (at all levels) spending money is power and who wants to give that up…for the ‘greater good’ is today NOT tomorrow or so it appears the thought process has become!
The dam is leaking and the gum is running out! An uncharted and historic level of spending by our governmental bodies comes with a price – and who is willing to pay that price! As the cartoon character, Wimpy, from Popeye so brilliantly stated “I will gladly pay you Tuesday for a hamburger today” – was he a politician! Well, after we have eaten all of our hamburgers Tuesday is coming and there is a price that will have to be paid!
prb
Date: Wednesday, 3 Mar 2010
From: "Stone & Youngberg Portfolio Strategy Group"
- Yesterday's (2/3) Treasury market started out the day weaker and prices were under pressure until early afternoon when bids picked up and prices rose. The market shrugged off the progress reportedly made in resolving the Greek debt crisis, which should normally reverse the flight to quality, cause the dollar to weaken and Treasury prices to fall.
- The proximate cause of the market's firm tone was a rather pessimistic assessment of economic conditions in the latest Fed Beige book. Across the board, economic indicators were pointing to an anemic at best economic recovery; "consumer spending remained sluggish...dismal holiday spending season...conditions weakened for agricultural producers...drops in business loan demand...continued tight credit availability." Given where we are in the business cycle, roughly eight months since the presumed end of the recession (July 1), this Beige Book paints a bleak picture of the supposed recovery phase we are now in.
- Earlier today, Wednesday March 3, ADP reported their February payrolls had dropped by -20,000. This was in line with expectations and represents improvement from the January payroll drop of -60,000. Although the ADP data is prone to sometimes appreciable revisions, it is nonetheless viewed as providing insight into the Bureau of Labor Statistics national unemployment data released two days hence on Friday.
- The Treasury market is weaker this morning (3/3) across the curve. Prices are fading today partially as a consequence of a pull back from the rally in Treasuries over the past week. In addition, the soon to be resolved Greek crisis has served to reverse the flight to quality. The 30 year long bond is down -¼ of a point and the yield is 4.58%. The 10 year UST is also off -¼ of a point and the yield is now 3.63%. By way of perspective, one week ago on Wednesday Feb. 24, the 10 year was yielding 3.69%. The short end of the market is slightly weaker the 2 year UST is yielding 0.80%.
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