Headwinds
Summer now begins its long decline. The world will after this week kick the sand out of its sandals and come back to confront the problems that everybody has known about all summer but has either put off or tried to ignore while folks are at the beach, cruising on a lake or just hanging out at home. Here is just a sample of what faces us this fall.
Europe's debt problem will enter a new phase with elections in the Netherlands, Germany's Constitutional Court's ruling on the legality of the Eurozone bailout fund on September 12th, Greece doing everything in can to pry more money out of the EU while avoiding paying back what it owes as well as continued economic problems in Italy and Spain which will probably send them hat in hand to the ECB.
China's economy is a mess and is in a slowdown of its own. China's economic numbers are notoriously unreliable so the situation there is probably worse than we can currently see.
An explosion and subsequent fire one of Venezuela's major refineries is likely to put upward pressure on US energy prices this fall. Potential refinery disruptions from hurricane Isaac could also add to the problems depending on the severity of the storm.
In the US the markets will begin to focus on the so called "fiscal cliff", the popular shorthand term used to describe the choices the Government will face after the election regarding fiscal policy and tax increases into 2013, specifically the scheduled ending of the Bush tax cuts and certain draconian budget cuts. It is estimated that if these measures were enacted in full that the economy could face a recession next year. Unemployment remains stubbornly high and will likely be a major factor in the Presidential debates and the elections this fall. I think that the major trump card Republican nominee Romney has will be when he looks into the camera at some point and asks the American people are they better off today than they were four years ago. For most people the answer will be no. The election is shaping up to be close and has the potential to have a similar outcome to the 2000 race that wasn't decided until after the Supreme Court ruled in the case of Bush v. Gore on December 12th. In case you were wondering, the stock market lost about 8% between the election in 2000 and the Supreme Court's ruling on the 12th.
Speaking of the stock market....stocks have risen about 10% since their lows in early June. Market gurus have hated equities almost all year while stocks have risen nearly 12%. Stock valuations that were cheap in the spring {and are not overvalued yet by our work} have entered a more neutral realm as they near the lower end of what we think is their valuation cone for 2012. We will discuss the implications of this and our thoughts for the rest of the year starting tomorrow.
Europe's debt problem will enter a new phase with elections in the Netherlands, Germany's Constitutional Court's ruling on the legality of the Eurozone bailout fund on September 12th, Greece doing everything in can to pry more money out of the EU while avoiding paying back what it owes as well as continued economic problems in Italy and Spain which will probably send them hat in hand to the ECB.
China's economy is a mess and is in a slowdown of its own. China's economic numbers are notoriously unreliable so the situation there is probably worse than we can currently see.
An explosion and subsequent fire one of Venezuela's major refineries is likely to put upward pressure on US energy prices this fall. Potential refinery disruptions from hurricane Isaac could also add to the problems depending on the severity of the storm.
In the US the markets will begin to focus on the so called "fiscal cliff", the popular shorthand term used to describe the choices the Government will face after the election regarding fiscal policy and tax increases into 2013, specifically the scheduled ending of the Bush tax cuts and certain draconian budget cuts. It is estimated that if these measures were enacted in full that the economy could face a recession next year. Unemployment remains stubbornly high and will likely be a major factor in the Presidential debates and the elections this fall. I think that the major trump card Republican nominee Romney has will be when he looks into the camera at some point and asks the American people are they better off today than they were four years ago. For most people the answer will be no. The election is shaping up to be close and has the potential to have a similar outcome to the 2000 race that wasn't decided until after the Supreme Court ruled in the case of Bush v. Gore on December 12th. In case you were wondering, the stock market lost about 8% between the election in 2000 and the Supreme Court's ruling on the 12th.
Speaking of the stock market....stocks have risen about 10% since their lows in early June. Market gurus have hated equities almost all year while stocks have risen nearly 12%. Stock valuations that were cheap in the spring {and are not overvalued yet by our work} have entered a more neutral realm as they near the lower end of what we think is their valuation cone for 2012. We will discuss the implications of this and our thoughts for the rest of the year starting tomorrow.
posted by CR English at 8:25 AM
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