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%.

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