I have heard from a number of readers that they are concerned that my writing has become more sporadic. Unfortunately, I have been very busy with health issues. I came down with a case of bronchitis a few weeks ago and was under the weather again the past week. One of my son's also had health issues which kept me away from the computer. Another reason for my lack of writing is that there is not much new to report. Let's recap recent events.
Inflation: Inflation, as measured by CPI and PPI was relatively modest. Much of their increases were energy related. Tepid demand (once the replacement phenomenon and government stimulus run their courses) will pull against the inflationary effects of printing money and issuing government debt to keep inflation modest, at least initially.
Growth: Many pundits point to the stock market as a sign that the economy is about to take off. Many of us veterans look at the stock market and few much of the last six months' gains as a bounce back from the abyss in the first quarter of this year and cannot be sustained. Consumer demand has been weak, even with governments stimuli such as cash for clunkers. Stimulus should act like priming the economic pump. However, it is now the only factor keeping the economy above water at all. Fed Chairman Ben Bernanke, PIMCO's Bill Gross, Goldman Sachs and RBS all expect modest growth and tame inflation.
Value: The bond market appears to be fairly valued - rich. Safer names are already trading in the wide end of their historical spreads versus treasuries, possibly too tight considering the potential economic speed bumps which may lay ahead. Psst, the banks are not all that healthy. The stress tests and the movement of balance sheet equity from one bucket to another do not make banks any more healthy than they were before. It is all eye candy..
Until next time.
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