Perversely, bad economic data is driving equity markets higher which at face value doesn't make much sense and yet in the shadow-world of trading it makes a 'whole-bunch' of sense..
I think it's safe to say that the developed world teeters on the precipice. Recalling last month's events that led to the market sell-off you'll remember Boehner vs Obama and the subsequent political impasse which led to the, now infamous, S&P-downgrade. Whether S&P got their sums right or wrong doesn't matter much. Apart from highlighting the structural inefficiencies in Europe and the US it settled the debate once and for all that too-big-to-fail as applied to even the most advanced countries / economies is a concept now, at last, consigned to history. IT'S A BIG WAKE-UP CALL. Whether the US goes into double-dip or not or even if, as some will claim, it hasn't emerged from the last recession is not important. What is important is the following:
I think it's safe to say that the developed world teeters on the precipice. Recalling last month's events that led to the market sell-off you'll remember Boehner vs Obama and the subsequent political impasse which led to the, now infamous, S&P-downgrade. Whether S&P got their sums right or wrong doesn't matter much. Apart from highlighting the structural inefficiencies in Europe and the US it settled the debate once and for all that too-big-to-fail as applied to even the most advanced countries / economies is a concept now, at last, consigned to history. IT'S A BIG WAKE-UP CALL. Whether the US goes into double-dip or not or even if, as some will claim, it hasn't emerged from the last recession is not important. What is important is the following:
- The world is bankrupt.
- Global leadership as evidenced in the US is fatally flawed.
- Reliance on emerging markets to sustain global growth is naive.
- Banking models are outrageous. Lending the same deposit-dollar 60 times or more is not sustainable..
- Wall St sold us rubbish and we swallowed it all hook, line & sinker.
Failing to address / redress the systemic problems means kicking the financial-can down the road. Even so, paradoxically, if the economic data gets any worse the FED will give us QE3 or some other form of stimulus, which: - kicks-the-can-down-the road but like QE2 will send markets higher. Like other junkies looking for a quick-fix with little or no regard for the long-term damage, so too the equity markets. It's the so-called Bernanke-put we crave. Damn the consequences!
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