Okay, so now the market is shooting for a fourth straight day of gains. It appears that an uptick in unemployment claims or a slowdown in consumer spending for August did little to rattle the market. Then again, why should it worry about something as silly as unemployment and consumer spending when the European debt crisis is still hanging around, a crisis that will be with us for a while, no doubt. At least for the moment, though, the market feels that some adults have stepped in and taken charge of the situation.
We have been concerned about the difficulties faced by the European economy for a long time and we have repeated our willingness to extend a helping hand and increase our investment …
Yes, those are the words of Wen Jiabo, the Chinese Premier. And, to that you can add the current “talk” that the other BRIC countries (Brazil, Russia, and India) will stand up and buy European debt as well. Oh, and add as well the ECB and the Fed announcing they will backstop European banks with dollars, if needed.
All in all, I believe the market is sensing what has been the underlying reality all along – the world economy is intertwined to the point that if one link breaks badly, the whole chain falls apart. Witness what happened in March when Japan suffered its catastrophe. Now, if the European Union were to fail, that would be a larger horse of a whole different color, to borrow a phrase. The EU has the largest GDP on the planet. Talk about too big to fail …
As always, amidst the flow of negativity, I look for the good news out there. Actually, it is not hard to find. Here are just two pieces …
- Gasoline inventories rose 1.94 million barrels to 210.8 million last week, the Energy Department said today. Stockpiles were forecast to fall 500,000 barrels. Gasoline shipments to the U.S. from Europe may drop 5 percent over the next two weeks as the end of the nation’s peak consumption period and rising stockpiles curb imports.
- Industrial production in the U.S. unexpectedly rose in August, signaling manufacturing will support the world’s largest economy. Output at factories, mines and utilities climbed 0.2 percent after a 0.9 percent gain in July, figures from the Federal Reserve showed today. Factory production, which makes up 75 percent of the total, advanced 0.5 percent.
August was tough month for the U.S. economy. Consumer confidence swooned from the avalanche of negativity surrounding the future of the U.S. regarding the debt. Hurricane Irene didn’t help much either. In fact, the last five months have been rough, but the above two pieces of data are signs that all is not lost, that the economy is treading water, not drowning. Given what the market has been telling us the last four days, I suspect, along with some alleviation about the European debt crisis, it too believes that all is not lost, that time and more money will eventually bring the problems under control and folks will start to feel better again.
Trade in the day – Invest in your life …
