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Friday, February 23, 2007

Not A Rosy Friday

I'm beginning to get nervous. Oil is way too high, another round of bad news continues to shove subprime lenders down, sooner or later people are going to tumble to the idea that there are more Coast Banks out there, commercial credit is dicey, see the comments on this Calculated Risk post that related to the servicer downgrades, and then I read this:
Margin debt on all stocks owned by clients of New York Stock Exchange member firms reached an all-time high of $285.6 billion in January, topping the previous record of $278.5 billion in March 2000, which was the month the Nasdaq Composite Index (.IXIC: Quote, Profile, Research) hit its all time high.

As Peter Dunay, investment strategist at Leeb Capital Management in New York, puts it: "It looks like people are borrowing to buy everything on margin."
Iran has absolutely no incentive to act sane, because it's going to cost Iran too much money. If they reduce the fear level, they lose money. Russia has a huge stake in keeping oil prices high. There are too many economic interests here militating against sanity.

My feeling is that the US economy is still far more relatively stable than most others. In other news, Japan's currency is dropping against the Euro.

Forget gold - watch the art auctions and sales. They are more telling.

Relative stability is an interesting topic. The German economy is a bit of a mess - rigid, overregulated and insular. But Germany needs no money from froeigners. Zippo.

The US economy looks glamorous, dynamic and open. But the magic elixir here is two billion dollars pumped into the country by foreign lenders - day in, day out.

Is America more stable than boring old Germany with its tough structural problems? Heck, no.
Germany's weakness is the Euro, and of course it has a structural problem with the remnants of East Germany. But those regions will redevelop and become a strength.
Read Roach on Germany at Morgan Stanley. He has a very high opinion of them versus Japan.

And when they turn the lights off in the US, they'll still be burning brightly in Deutschland.

The euro? Doesn't seem to be a problem. Just like the strong dollar was never a problem.

Of course, there may not be a dollar much longer. Hello, Argentina, America calling.
So don't buy gold? Don't buy art? I read in Business Week, art generally is over valued. The time to get in was three-four years ago. Not that I'm diversifying into art, mind you.

Lady at the bank said lots of re-fi's. No problems with defaults here (in the Woodlands, north of Houston), but she couldn't tell me about anywhere else.

Boring old Germany, 'eh? They'll kick our butt before it's all over. Invest in Siemans then?
No - I said watch art. It usually signals what is happening because it's a transportable currency/inflation hedge.
Germany is undergoing a manufacturing expansion. The VAT increase is weakening retail and is expected to slow growth at least for the first half this year and business sentiment has weakened. Total GDP is 5.6% of global compared to US being 30.6%.

German GDP grew by 2.7% last year, a roaring expansion compared to recent history. The VAT increase may limit that.

Germany is trying to deal with its non-competitive economy by charging more for social services. For example, college tuition is no longer free in some states, there is now a fee to see a doctor, and unemployment benefits have been weakened. Building may be starting to resurge, and exports have surged. Employment is rising.

The Airbus crisis may end with Germany getting to manufacture the smaller planes and France getting the larger ones.
-- MSN News headline

"So It Begins..."
-- Ambassador Kosh, Babylon-5
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