Thoughts From Joe – September 27, 2012September 27, 2012 Posted by: Joe Morgan, CFA
The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates.
NOTE: TFJ will be taking some time off to relax in preparation for an excitable end of the year including: The election, the "fiscal cliff," and a possible visit from Santa Claus to help drive consumer spending!
The IMF wants Europe to take losses on bailouts. The International Monetary Fund, whose stated goals include currency stabilization, has been an integral part of the bailouts to date. Its funding comes from both euro and non-euro countries. A bailout, by definition, should include losses. If no one ever takes a loss, aren’t we just shuffling paper?
China’s stimulus sends yuan close to 5-month high. The current plan to accelerate infrastructure spending should support economic data in the short run. The Chinese government reported that bank loans grew 30 percent in August which also helped boost the currency. In the long run, producers (China) need consumers (Europe, America) to regain health.
Germans are more worried about inflation than teenage drug problems. Cultural and experiential differences abound in this world, but this one is most important when thinking about the euro. Germans seem to equate “inflation” with social unrest and the potential for another Hitler. The ECB is doing “whatever it takes” to save the euro – including manufacturing them as fast as they can. These two views will not co-exist.
Oops. GDP was actually 0.4 percent slower in the second quarter. Economic growth has been much slower this year than previously thought. Revisions occurred across the board but primarily came from lower inventories which may set the stage for a bounce-back in the third quarter. Investors often complain of the quality of economic data coming from China and elsewhere, but the quality here is not that great either. The more important issue is where we go from here and with a...Read More