CIO Vantage Point;
Economic Outlook
September 06, 2012 Posted by:
Joe Morgan, CFA
Top Eight
- Increasing political involvement by the Fed could threaten its existence. Mitt Romney has already said he would replace Bernanke and given the Fed's foray into "unconventional" activity attempting to help the economy, the politicization of the Fed is increasing. Bernanke needs to publicly convey the limitations placed on the Fedinstead of implying they are omnipotent regarding the economy. Half of the equation lies in Congress, but if Bernanke does not relent, he will soon be one of the 5 million jobless since 2008. Mitt Romney has already said he would replace Bernanke and given the Fed's foray into "unconventional" activity attempting to help the economy, the politicization of the Fed is increasing.
- American auto makers have strong showing in August. Chrysler sales rose 14 percent last month, while Ford and GM also experienced sales increases north of ten percent. All increases were well north of analyst estimates and accompanied increased foreign auto sales as well. While auto sales can be quite volatile, it is encouraging to see domestic sales trending upward over the last 36 months. They are not likely to lead a breakout in the economy, but do offset some of the negative news seen elsewhere.
- ECB bond-buying program announced. ECB President Mario Draghi outlined yet another bond-buying program titled "Outright Monetary Transactions" or OMT. This will allow the central bank to buy up to 3-year maturities of sovereign nations who have applied for a bailout and are complying with requested terms. For more, see this week's feature article above.
- U.S. manufacturing shrank for third straight month with little signs of future strength. The ISM index fell to 49.6, its lowest level since July (any measure below 50 indicates contraction). In addition to the headline figure, new orders dropped to 47.1 and production fell to 47.2. There were also challenges seen in the employment as well as inventory indices. Making matters worse, the prices paid measure rose from 39.5 to 54.0 reflecting a rebound in oil and other commodity inputs. This report helps move the Fed towards more (useless) QE.
- Moody's warns EU of potential downgrade. The ratings firm warned that the union's AAA rating could move downward if its most credit-worthy states, primarily Germany and France, continue to experience deterioration. This should be no surprise.
Five items seem like plenty for this shortened week.
Key Indices
Source: Bloomberg
Looking Ahead
- Tomorrow brings the employment reports with Bloomberg survey expectations of +130,000 jobs and a stable unemployment rate at 8.3 percent. Such figures argue in favor of more QE, but perhaps not at next week's FOMC meeting.
- The economic calendar is busy next week, with the most important releases on retail sales and consumer prices on Friday.
- Earnings releases include:
- Monday: Peregrine Pharmaceuticals, Palo Alto Networks
- S1s filed this week include Intercept Pharmaceuticals.
- There are no innovation sector IPOs scheduled for next week.
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Thoughts from Joe - September 6, 2012September 06, 2012 Posted by: Joe Morgan, CFATop EightIncreasing political involvement by the Fed could threaten its existence. Mitt Romney has already said he would replace Bernanke and given the Fed's foray into "unconventional" activity attempting to help the economy, the politicization of the Fed is increasing. Bernanke needs to publicly convey the limitations placed on the Fedinstead of implying they are omnipotent regarding the economy. Half of the equation lies in Congress, but if Bernanke does not relent, he will soon be one of the 5 million jobless since 2008. Mitt Romney has already said he would replace Bernanke and given the Fed's foray into "unconventional" activity attempting to help the economy, the politicization of the Fed is increasing.American auto makers have strong showing in August. Chrysler sales rose 14 percent last month, while Ford and GM also experienced sales increases north of ten percent. All increases were well north of analyst estimates and accompanied increased foreign auto sales as well. While auto sales can be quite volatile, it is encouraging to see domestic sales trending upward over the last 36 months. They are not likely to lead a breakout in...
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