The politics of the economic reform in Spain clearly remind me of the politics of economic reform in the U.S. Perhaps it is reasonable, then, to draw the conclusion that politics in Spain and the U.S. is no longer the art of compromise; it is the battle of ideologies.
The PSOE Socialist Party has said that they will appeal the Government’s labour reforms before the Constitutional Court if the legislation is not modified in Congress.
Let’s hope this is not true for the upcoming EU conference, as it relates to keeping the “resolution” to the debt crisis on track …
Many elements have plagued the market in recent years, the most recent being the financial issues in Europe. Another has been the U.S. economy and the unwillingness of businesses to invest some of the almost $1-2 trillion of cash on the books. The lack of investment back into business (other than into infrastructure) has been one big reason unemployment has remained so high for so long. Given the recent better than normal news on unemployment and given the steadily improving economic indicators for the U.S. economy, the desire to hold onto cash could be changing to a need to spend. According a new report from Reuters news, it appears businesses are investing in business again.
Two-and-a-half years after the official end of the recession, businesses are starting to invest cash again, prompting bankers to hope they might start borrowing, too. “Companies are going to continue to increase productivity and generate cash,” which they can use to build inventory, said Laura Whitley, commercial banking head at Bank of America Corp. “I do not necessarily see them borrowing.”
Federal Reserve data backs up what Bank of America is seeing, and it might be bad for the bank loan business right now, but in time, the hoarded cash will run out.
Meanwhile, companies continue to take in cash profits from their operations that they can invest instead of borrowing. U.S. businesses have piled up a record $1.6 trillion in bank deposits and money market funds, according to Federal Reserve data.
When that happens, banks will begin replacing the loss of revenue from the loss of proprietary trading with a revenue stream based on lending. That will be good for everyone, but in the meantime, businesses are beginning to spend the cash, and this is good for the market as well.
As to Europe, and the Eurozone in particular, the situation there is far from settled, but it appears investors now have some faith it will be settled, and the settlement will mean an upside to European markets. Again according to Reuters,
U.S. fund managers who successfully called the bottom of the home credit market in 2008 are starting to put money back into Europe in a sign of returning confidence in the euro zone.
For those who agree the glass is half-full, it might not be a bad idea to follow the money, especially the big money, and it hardly gets bigger than the totality of U.S. investment funds. Start looking for and nibbling at opportunities in the economic state some pundits suggested almost two years ago is doomed.
Trade in the day – Invest in your life …
