09 May 2008

Posted at 16:13h in The Friday Brief by
There remains at least one strong horse in theUSeconomy - exports. As the dollar falls in value relative to other currencies, American produced goods and services become more competitive in the global marketplace. Our trade deficits with creditor nations are shrinking dramatically. As a whole, our trade deficit is now 5% of GDP, down from a 7% peak. According to Credit Suisse it is only 3% when oil is excluded.

02 May 2008

Posted at 16:19h in The Friday Brief by
In our Brief two weeks ago we presented the possibility that the markets are sensing a comeback in the US economy. The Dow Jones Industrials are up 3.7% and the Nasdaq is up 4.7% from that point. Since their March lows the two indices are up 12.5% and 15.5% respectively. The bond markets and the currency markets are also moving in agreement as the dollar reached a five-week high yesterday and bond prices are trending down taking rates modestly higher.

18 Apr 2008

Posted at 16:22h in The Friday Brief by
For markets, the worst of the credit crisis may be over. Investors’ uncertainty over the size of financial institutions’ losses took stock prices below reasonable valuations as is typical when information is scarce. While the effects will last considerably longer for people directly impacted and for the economy as a whole, markets are indicating that knowledge is sufficiently filling the void. Citigroup, Merrill Lynch, JP Morgan, Washington Mutual, and Wachovia’s shares are all moving significantly higher after reporting huge losses due to credit write downs. The S&P is up 10% since its low on March 17th and the dollar rose the most against the euro in more than two weeks on Citigroup’s news. Perhaps investors are saying that the nearly $250 billion in financial losses reported so far represent the majority of the ultimate total.

14 Apr 2008

Posted at 16:05h in The Friday Brief by
Government to the rescue is becoming more widely accepted and even encouraged by Wall Street lately. The credit crisis hit another crescendo today as the nation’s fifth largest broker, Bear Stearns, obtained emergency funding from J.P. Morgan Chase and the New York Federal Reserve saying its cash position had “significantly deteriorated.” Traders in global currency markets are openly speculating that central banks will soon announce a concerted effort to support the value of the dollar. Earlier in the week central banks announced a concerted plan to buy troubled mortgages. On the heels of that news Ben Bernanke announced plans to lend up to $200 billion in Treasury securities in exchange for debt including private mortgage-backed securities that have slumped in value as homeowners defaulted on their payments.