Fitting for today, here’s par of David Rosenberg’s Breakfast With Dave note:
WHAT ME WORRY?
The fact that Harry Reid could not come close to moving the sweeping financial
bill through the Senate (57-42 roll call was short of the 60 needed to close off
the debate) is a shot across the bow for the financials, especially since many
Democrats want more regulation in the banking sector (and a more afoot to
reinstate Glass Steagall). Sanctions against Iran are now gaining momentum.
The situation in Bangkok is going from bad to worse. There is growing
realisation that the IMF-EU package will not be sufficient – folks, half the time
when the IMF is involved, default ensues in any event. (And when EU countries
that will also need a bailout at some point are bailing out countries that need a
bailout now … well, enough said.) Of course, we still have Dubai World
(remember that one?) still working out its $23.5 billion restructuring program
and the Chinese stock market is behaving as though a visible transition is about
to take place from white-hot economic towards something noticeably cooler.
Moreover, the fact that the transports have corrected nearly 10% even with oil
prices breaking down is a signpost of what is going to happen to the U.S. economy
in coming quarters and few investors are braced for an abrupt slowdown (not least
of which the folks at the Wall Street Journal – see Slow and Steady Wins the
Economic Race on page C1 of the WSJ). It may be worth noting that Dow
Transports are down 9% from the highs while industrials are off 7% – with oil
prices sliding nearly 20%. There is valuable information here, my friends.
And, if you want to see how the big “hedgies” are convinced we are in the throes
of an “upward side of a V-shaped recovery”, go straight to Is the Fed Missing
Early Signs of Recovery? (page C1 of the WSJ). What a joke. Jobless claims are
back north of 470k, which is consistent with job declines (though one must
respect the assumptions the BLS uses to show a 290k gain as it managed to do
in April) and we are heading on the right-hand side of the “V”. Sure thing.