Every day these days, I try to find something other than the U.S debt-ceiling debate inside this market-oriented head of mine. This is a difficult task as a preponderance of the news sources I seek out every day are focused on this topic. As well, to be honest, I am right on the cusp of pulling the trigger to go to cash, so I have to pay close attention. I don’t want to do it because I believe if Congress strikes a deal, the “relief” rally will be powerful, if not short. It could be short because even if Congress strikes a deal, a credit downgrade might come regardless if the deal made is not credible enough to address the U.S. debt. Okay. Enough! I need to break away from this pressing topic, so how about we go all the way to Asia, just for the necessary break …
China has ordered companies that have issued bonds to submit any asset restructuring plans to bond holders for approval, sources said, as Beijing steps up its efforts to rein in the risks from a mounting pile of local government debt. It addresses what appeared was becoming a strategy of some provincial and city governments as they start to face challenges in repaying debt they took on to pay for infrastructure and other projects.
I guess it is true. No matter where you go, you are there, at least it seems so in this moment. So, China is also having debt issues. When you read deeper, those issues are bigger than we know here in the Western world. All the focus has been on Europe and the U.S. recently, but the fact is that Asia is integral to the global economy, so, as investors and traders, we need to watch it all. This debt situation in China is one to watch. And speaking of Asia …
Lackluster lending activity in Japan’s earthquake-ravaged economy and a shrinking retail investment business capped earnings of the country’s top banks and brokerages in the fiscal first quarter, raising pressure on them to take more risks and find revenue sources overseas.
Many economists, as well as most of the members of the Federal Reserve, are pointing to stronger economic growth in the second half. The reasons are many, but one stated reason is Japan’s economic return to health after the calamitous disaster in March. Reading the excerpt above and the article from which it came, one has to be wary about Japan’s recovery, especially if the financial sector of Japan is encouraged to take on more risk. If I am not mistaken, the reason the global economy is where it is today is that the global financial sector took on too much risk, took too many gambles.
And so here I am, back at home, looking at the debt-ceiling debate and thinking, one big part of the reason the U.S. debt has climbed so fast since 2007 is the collapse of the global financial structure. I am thinking, maybe the smartest folks in the room are missing it again, just as they did in 2008. I am thinking Greece, Italy, Spain, Portugal, Ireland, China, Japan, the U.S. … I am thinking how connected the global economy is. I am thinking that the global finances are so intertwined that like stacked dominoes, if one goes so goes the rest. On top of all that, I am thinking global consumer confidence is threatened as the bad news just keep on coming. Now, I am thinking really hard …
Trade in the day – Invest in your life …
