The Banking and Strategy Initiative

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US Strikes again! A perfect recipe for fighting the recession demons

With a dull July and August, and the wild fluctuations in Philly and Empire state MFg indices, many of the banking and economics fraternity were discussing a US recession last month. Suddenly with a GDP growth of 2.5% the period of slow growth is no longer being confused with another summer of recession for US bears

The Chicago PMI reads a healthy 58.4 and no one should mind a mini down tick in manufacturing in the ISM numbers tomorrow. The September Chicago PMI came in at 60 and above led by growth in new orders at a resounding 65. However as orders crawled back to 61.3 in the October readings, the jury will still be out irrespective of the sales up tick in the Holiday season past thanks giving in a couple of weeks

2008-2009 Nissan Altima photographed in Rockvi...

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Retail sales have been healthy though below 5% for September(august)even as Nissan Altima grew in Cars over the trusted Toyota Camry to an equal 25k units, still dominated by the Ford F series trucks and the Dodge Rams with almost 50000 units a piece. Even as October Auto sales report a likely 1% down tick it’s almost 10% growth in over October 2010 at 1.05 million units. Nissan is expected to grow 20% and Chrysler 25% (on a small base) Auto sales are in fact maintaining a high 13 mln run rate now despite a subsdued sexports scenario and carmakers worried by the plunge in the weak Europe nos except at Daimler Honda and Toyota have seemingly returned to full production and increasing inventories this month esp at Honda

Productivity numbers will be higher later in the week but no real good news while scraping away the bad eggs in Jobless claims, ISM Services, till the Deficit and increasing Fisc catch up in the second week. All in all a good economic point to scratch a new vinyl for the bull run, except for the surprise from ADP employment and the FOMC around next Tuesday as also the wild fluctuations in Housing nos — starts, vacancies and prices..

Banks like Citi , JP Morgan and even the now recalcitrant BofA have also eased up charges on checkings accounts / debit cards as political pressure builds up on them after Durbin delivered a 22 cents per transaction limit instead of the $12 bln loss worth 12c cap on the same that was mooted.

Rakoff has a hold on SEC and Citi at this time which could snap the sector on a couple of days but likely not enough to break the resurgence in Financials shown on Friday. A bouyanyt Capital Market would certainly bring back good revenues to the US banks unable to capitalise on their returning to full health in a period of slow US growth even as competition across he pond struggles with restructuring and recapitalisation

China’s inflation has also peaked at 6% and may return a downward trend in the new year led by a fall in agricultural prices as the banking regulators get ready to unwind the restrictions that have still been unable to bring the GDP growth down below 9%

A lesser nos of working days in November and December mean that figures without seasonal adjustment aree likely to play hokey pokey with those trying to figure out the way in the short term so it being the start of a bull run in equities and fixed income certainly helps even if the fixed income markets are busy ceding interest to Europe

Leveraged Finance winding down however keeps the high yield market and the structured finance dependent corporate “treasuries” on edge without cash for the working ycle and despite a so called cash overhang of $700bln on corporate balance sheets




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