The market opened with the bulls in charge, offering more of the same up and down that is the market these days. Opening on the upside was a bit surprising, though, since Cypress is still a financial mess. Russia turned down the plea from the Cypriot government to lend it money and the largest Cypriot bank told the government to accept the EU conditions for a bailout and move on. It looks like no way out for Cypress – accept the bank deposit tax or collapse as a country.
It is likely the outcome will be a smaller or non-existent tax on the little guys and those who can most afford it will pick up most of the tab. Sure, those depositors with large accounts will be angry, but by the time the banks open again for business, the tax will be collected. So, does it make sense for them to pull all their money after the fact, which is now the big worry?
Hard to say what angry people will do, but no matter what they do, the tiny country with an economy no larger than that of Kansas has had its fifteen minutes of inglorious fame on the world stage. The market as of today seems to have lost interest in the latest “fear du jour.”
Now does anyone else find it ironic that Greece, whose fame on the word stage has lasted way longer than fifteen minutes, is stepping up to help out financially, even if it serves its own interest?
- Greece has agreed on a deal for the takeover of local units of stricken Cypriot banks.
Putting Cypress aside (for good?), the financial punditry has focused on the earnings reports of Oracle and FedEx as reasons for the market drop yesterday. Throw in Caterpillar and you have, “OMG, the sky is falling, the sky is falling.” All the Chicken Littles out there conveniently forget each of those reports is explainable in context (and thus not big deals contextually) and the plethora of economic data coming out these days points to economic momentum. Me? Sure, I would like to see the global biggies do better, but I am assuaged when I see a consumer-based international biggy top earnings expectations.
- Nike Inc. said Thursday its third-quarter net income rose 55 percent as the athletic gear maker’s resurgence in North America and easing material costs helped offset continued weakness in China.
I like it even more when the explanation for Nike’s earnings success points to the US consumer spending discretionary dollars as a big help in overcoming weakness in the global economy.
- Like most global companies, Nike Inc. has been dealing with Europe’s fluctuating economy and a slowdown in growth in China. Nike has been working to reduce its inventory in China and reworking its offerings there to adapt to the changing tastes of Chinese consumers. It also has been focusing on growth in North America, selling off less profitable brands like Umbro to focus on core brands like Nike.
Shifting gears, I received a question from a reader that, once again, suggests the wild-eyed wanderers are still working hard to convince us our market fate is sealed with doom.
- I was listening to a financial advisor on Sunday (this man has been the #1 advisor on the Forbes list for 3 years in a row with over 100 billion under management) talking about the Fed and the money pumping . He said that the Fed may never stop purchasing and we may not have to borrow from China in the future. Is that possible and where does the Fed get the money from?
First off, just because folks manage other peoples’ money in large doses speak, it does not mean they are smarter than anyone else with a brain oriented toward the financial world. I can’t tell you (literally) how many big-money managers have been dead wrong regarding the Fed policies (hyperinflation is coming), the US debt (will grow not shrink), the US economy, the global economy, and the market (will collapse) in the last four years.
As to the Fed pumping money into the US economy in perpetuity, I suppose anything is possible, but that scenario seems improbable to a large degree. How would that work? After, say, ten years, the Fed books would be so imbalanced, the US economy would collapse under the weight of hyperinflation. Maybe ten years is the “forever” your successful money manager suggests.
Speaking of the Fed’s books, that is where the money comes from – nowhere. It is all “on the books,” made up, on paper, a sleight of hand. This, of course, is the danger that your big-money manager is pointing to, but his hyperbole makes his clarion call worthless. The reality is that Chairman Bernanke is a thoughtful economist and a keen student of US financial history. I have faith that the uncharted course he is pursuing will, in the end, produce the desired results and that the Fed will exit gracefully from the imbalance on the books. If I am right, all is good. If I am wrong, well, the doomsayers win. My point is that no one knows, so those who predict need to pull their lips together and start whistling rather than talking so much.
Trade in the day; Invest in your life …
