Market Expectations, Viewing Europa

What is so confusing about the U.S. equity market is the way it sustains at historical levels, while the fundamentals support something less. From there one must look at different asset classes. In so doing, one must start to see the overbought perspective of oil. The liquid by itself has told of micro cycles in the U.S. economy. When its price increases, the American consumer retracts…and with the American consumer, 2/3 of the leading economy of the world retracts.

Current economic indicators have displayed month over month declines in new orders and backlogs in orders, together with shipping time, all associated with manufacturing. These numbers were supported by a decline of -1.00% in U.S. factory orders reported last week. The chain is catching up to itself and starting to reflect the more anecdotal of numbers, potentially revealing a statistical fact.

Time has also revealed strength in the U.S. economy.  We have seen increases month over month in demand in a major sector, namely autos, which expand other sectors. Such would explain GDP growth of 3%, but portend of Fed expectations of a lesser growth rate…If auto growth will not sustain at these rates, for the next year.

Confusing in this analysis is the combination of advancing auto sales, versus general retail sales in the U.S. Where autos and associated industries have enjoyed growth, industries reliant on other retail forms of growth are very competitive, such as grocery dollars, See, Target Corp.: Shop There, Invest There?  and Durable Goods, Finding Business Cycles along with Costco Results Show a Magnitude of Competition.

Data suggests a slowing of economic growth here in the U.S. Properly anticipated in view of the major governmental and banking unknown write-downs viewed through Europe’s recent Greek bond default. This development in Greek bonds and its potential ramification through the international system, shows how closely banking has become connected in today’s environment of commerce.

All people, business entities and governments, are today connected in what we once theoretically called the global economy, but today rises from the theoretic to reality

On March 19 a bond election will be held to see what price the CAC bonds will bring. From there the CDS parties will deduct that amount from their payment. With the auction of defaulted bonds, one needs to look at the ability of all counterparties paying the required sums. Should one counterparty fail, a domino effect of cascading failure could occur.

Because of the exceptional liquidity offered by the ECB and other world banks, together with the Fed’s offering of Reverse Repurchase Agreements, all should sustain. At least for now, and into the next year. We need to see some real business impetus for sustaining this purpose. That cause exists in the form of support of U.S. natural resources.  

For the next few weeks, business should be very alert to Greek consequences in that such propositions can tell so much of international liquidity. Essentially, injections of global liquidity provided in the past, along with propositions of future liquidity, should keep money flowing.