3 Random Observations About The Market Right Now

We’ve settled into the annual “will the EU blow-up the world” environment.  Additionally, the news has been lackluster, so from a writing perspective we’re in a bit of a holding pattern.  So, here are some random points:

1.) The Facebook IPO has been hysterical.  While I use FB sometimes, I’m still trying to figure out how they’re going to make money.  About the only service I see them offering long-term is being a glorified, “opt-in” direct mail list company.  And frankly, there are plenty of other firms that already do that cheaper.

2.) I still don’t see Greece leaving the EU, largely because (I think) the primary players will realise the incredible damage this will do long-term to the world economy.  Let’s play this out: Greece leaves, or says they’ll leave and starts to make preparations.  At this point, the creditors know they’re about to lose everything.  So, at minimum, Greece now can’t borrow money at all.  This, for a country that is already in the middle of a very deep recession, will lead to cataclysmic failure at the country level.  By failure, I mean rioting in the streets level of problems.  I think this is the best scenario we can hope for.  And that’s why I don’t think that will happen. 

3.) There’s an interesting dynamic occurring at the very macro level: the BRICs aren’t growing as fast as they used to.  India is mired in deeply entrenched political problems that have no easy solution; China is converting to a more consumer oriented economy; Russia has to change from a country who primarily exports oil to a country that encourages international investment (but may not make the change) and Brazil is getting hit by the overall world slowdown.  These countries led the world out of recession; but they can’t do that anymore.  While other countries are emerging as growth stories (Turkey, Poland, Singapore), they’re simply not large enough from an economy or population perspective to drive growth; collectively, their combined size might equal one BRIC, but not all four.  As such, the developed world has to make a move, and we’re just not equipped for that right now.

4.) The US economy is moving back into an extremely slow-growth profile.  The last two employment reports indicate companies are hiring, but just barely.  Initial unemployment claims are rising, but below the 400,000 level.  Retail sales are fair; the regional manufacturing reports are mixed; inflation is moderating.  Recession isn’t in the cards (yet), but we’re certainly not going to break any growth records.

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