Okay, so how many of you thought there would be a run on the banks in Cypress this morning when they opened? How many of you thought the market would open down after Asia closed strongly in the red from “worries about the euro?” C’mon, raise your hands. Mine is up. Yup, stupid me. The only contagion going on was the flow of negativity from the breathless media.
- After months of calm in global markets, concerns about the future of the euro zone are back with a vengeance as fears grow that the turmoil in Cyprus could spread to other parts of the region and ultimately undo the single-currency block.
Yet, lo and behold, the market opened in the green and, so far, it has shown no sign of wanting to tank. In fact, as I write, the S&P 500 is sitting at a new all-time high, breaking through a barrier it has tried to break through five times before and failed. Why?
- European shares rebounded and the euro edged off a four-month low on Thursday after banks in Cyprus reopened to relative calm following the island’s hard-won bailout. There was no sign of the mass panic that Cypriots and investors had feared might be triggered when banks reopened after a forced closure of almost two weeks
I know I said yesterday I was shifting gears to experience a bit of a change, and I am, but it is hard, as the market is so affected by the daily flow of news, and, to be fair, the debt and serious economic issues in Europe are important to understanding the macro picture. Oh, and speaking of the current macro picture …
- Foreign capital continues to flow into the United States, a sign that investors who can choose to deploy their cash virtually anywhere feel the U.S. economy remains a strong bet.
And speaking of the longer-term US economic macro picture …
- Some analysts predict a strong manufacturing revival, as U.S. costs become more competitive and other factors make the United States an attractive place to build stuff once again. And the U.S. energy boom could be truly transformative, bringing cheaper fuel and many collateral benefits to consumers, manufacturers and other types of business.
No, I did not forget my desire to understand the Latin America picture better. I found a web site that puts up news from Latin America (http://en.mercopress.com) and my first pass through was quite informative.
- China and Brazil signed an agreement to do billions of dollars of trade in their local currencies, as the five-nation BRICS forum of emerging market powers work to lessen dependence on the US dollar and Euro.
Certainly, the US dollar and the euro are, and will remain for some time, the preeminent currencies of the world, but a global shift is in the making, but while that shift is happening, growth in the emerging economies will help fuel a global economic recovery, taking some pressure off Europe. Brazil is a major player in that group.
- In each of the past eight years, Latin American economic growth has outstripped that of Europe, and will do so again in 2013. The United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC) predicts the region’s economy will expand by 4% this year, while the Eurozone will grow by just 0.3%.
But all is not roses down there, and it might not be “stellar” yet, but looking at the problems there helps us understand the potential, and, specifically, how one might play the market here.
- Ford Motor forecasts a first- quarter loss of about $300 million for its South American operations because of currency exchange rates, inflation, and trade restrictions.
Trade agreements are on the way that will address the currency issues and trade restrictions and inflation is old news for Latin America. What is new, though, is the inflation experienced now is not the “hyper” inflation of old – corrupt governments printing money to stay in power. Today, it is the same inflation China is dealing with – too much growth too fast.
Still, the talk of the financial media is that the US market cannot keep its momentum, Europe’s debt issues are flaring up again, the banking systems in Spain and Italy are in trouble, and on and on. Latin America is so far away and that is kinda nice, actually.
Trade in the day; Invest in your life …
