Thoughts From Joe - October 18, 2013October 18, 2013 Posted by: Joe Morgan, CFA
Top EightWashington agreed on a deal to extend the debt limit through February 7thand reopen the government through January 15th. The actual debt ceiling was not increased, it was simply suspended meaning there will be no uncertainty around the deadline for future negotiations. The stock market ended the week at an all time high counting on continued meddling by the Fed through QE at least until the debt ceiling issue is put to bed. Just a month ago, the Fed was seriously discussing a reduction in stimulus, but our elected officials have now backed them into the corner of providing more artificial juice. The difficulty of managing out of such stimulus is increasing each month.
Europe is considering making clear the extent of bank losses in the region. The European Central Bank will take a closer look at the banking industry next year and consensus expectations foresee huge losses by banks in the region. So, the strategy last year was for the ECB to promise to "do everything it takes" to keep the currency union together and now that markets have calmed, the true extent of the damage will be revealed. Dithering about loss acceptance is never good for the long-run health of economies....Read More