Chillin' out till it needs to be funded
It is not like it looks. Most of you affected by the recession are unemployed by it or losing a home and till now the trillions spent did not matter to these constituencies. The republicans are around, so is the Tea party but they just want to do on their own while they let others free to do unto theirs..What it probably confuses you on is that equities continue to be bullish as the ace of recovery looked promising for over a year and just middle class tax cuts mean the US deficit is going to fall by 60% in 2013. Already the 2010 number is down because not all TARP money was used. The foreclosures and the new regulation would of course get started on now as the other bits and pieces are out of the way..What the recession meant and how it is going to pan out for US and the world are key to the 2011 story..
1. Housing starts remained subdued for two years as people looked askance for understanding the real situation on the ground and securitisation remained a furlough away from the US legal system. Thus even is August and September a 600k or closer number is enough to make bulls feel wanted.
2. Low inflation as household credit came down by two thirds of the 2007 levels ( Bernanke, Oct 15, Boston Fed) and consumer spending came to a standstill could not keep down retail sales, which keep a promising momentum for more than six months now, same store sales growing almost 2% this month and promising a gala in the holiday season iPad celebrated US consumers and the rebirth of technology as a user driven thing with Facebook and Twitter ‘farming’ a lot of social idle time.
3. A new benchmark establishing a minimum desirable inflation rate is being introduced in Fed policy implying a more than salutory attention to fears of deflation and a hope for increasing stimulus to spending with another tranche of purchase of assets likely to focus on the real securitisation assets from mortgages this time, both residential and commercial.
4. (Business Week) More than 760 companies had slashed dividend in 2009 but the number is down by more than 5 times to 135 this year even as companies that went into receivership in 2008/9 namely Lehman and GM are out making the right noises and rowing business and market share.
5. The Dow continues to tread higher as it hit 11000 after a long time but recovery in the US economy is ‘slow’ as mentioned above, especially because all the effort on stifling free spending to cut down the credit overhang has meant hellish business conditions for credit and investment banks alike as for the consumer on the road.
6. Unemployment worries as it remains in double digits and almost 5 million continue to live off social security dole while post census employment figures continue to shake the markets month after month and private sector refuses to focus on credit offtake to employ more people than required in these business conditions
7. The situation in Europe is what is grim but because of US’s preeminence and the lack of awareness of the continent’s situation ( only we hear a smart recovery in Greece and spain, Car sales are down almost 10-20% in most continental europe) and a focus on flailing China’s prospects have refused to give way
8. The US has taken baby steps to come out of Japan’s shadow as the next deflation candidate but remains confused as congressional elections and a leveraged baance sheet remain prominent stories for a grim 2010. But larger news of recovery is just around the corner as the bigger and better corporate results lead its relentless march back to the top. This year’s results can well translate into better employment figures in the next 12 months now that inflation is no longer a one way street and spending may be maintained without creating a credit bubble.
9. Fund flows are now bigger and chunkier as money welcomes new prospects with larger than ever oulays n infrastructure and private sponsored new business plays. Nothing remains dark about the Dark continent and Asia’s tigers, India and China and businesses have a defined path to beat the blues, make their mark and return cash to investors. India is a likely candidate already getting $22bn in cash inflows from portfolio investors and its weightages and that of emerging markets likely to go up by a factor of 2 in the global investment basket, a global case for American investors and businessmen