Thursday, June 2, 2011

What goes up ....... must come down!

Not been the best few days in terms of economic data coming out of the States:

Consumer Confidence: pretty much non existant! Consumer confidence is now lower than at any point in recent history, including all of the previous disasters, financial crises and tragedies, including the 87 crash, the collapse of Lehman Brothers and 9/11. And dont forget the re-election campaign kicks off in earnest, with the USA full of unhappy and unconfident people! QE3 anyone?!!!

ADP Non farm employment: a downward revised figure of 177k for April was followed by a puny 38k for May, on expectations of 178k. A deceleration in employment, while disappointing, is not entirely surprising. In the first quarter, GDP grew at only a 1.8% rate and only about 2¼% over the last four quarters. This is below most economists’ estimate of the economy’s potential growth rate and normally would be associated with very weak growth of employment.

ISM Manufacturing: Lowest reading since September 2009, the first reading below 60 in 2011. Granted, 60 is the level at which the ISM typically peaks, but the worry is the sheer slide towards a reading of 50, below which is in contraction mode once more.

Downgrades: As expected, the "experts" are downgrading their view of the economy, with Goldman Sachs, Morgan Stanley as well as JP Morgan (TWICE IN ONE WEEK!) all downgrading the US economy.

Bank Stress Tests: Then we've had the news that the 2nd round of stress tests for European banks has been delayed because of "errors" and "unrealistic assumptions". How comforting! Especially since the whole point of the Stress test round 2 was to instill confidence in the European banks!!!

The stock market, and Fed, and just about everyone in between is seemingly caught in a catch 22 situation: QE3 is seemingly being priced in by stocks ...... however for QE3 to actually happen, stocks would have to fall approximately 15-20% from their current elevated levels!!!

-------------------------------------------------------------------------------------------------LEGAL DISCLAIMER: The views mentioned above are purely that of the author, and does not necessarily reflect the official view of Goldrock Capital or employees. Unless of course the aforementioned view was a phenomenally good call, with exquisite market timing, in which case Goldrock Capital reserves the right to all credit!!!!!

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