A number of indicators are heading south as we approach the election. This past week has been particularly rough, and this Monday is not offering relief...
In fact, the Euro is now worth more than US$1.25. Or, put another way, the dollar fell below 0.80 € cents. That's the first time that's happened in several months, when I last wrote a diary about this.
An article by Adam Abelson, Truth Will Out published in that commie-pinko rag, Barron's, has this to say about our situation:
THE STOCK MARKET, which started out October in fine fettle, ran out of steam in the final two sessions last week. The culprit was a splash of reality in the form of the remorsefully upward push of crude, blasting through the $50-a-barrel barrier like a knife through butter, and the dismal employment numbers.
To take the last first, the disappointing job report initially set off the familiar tug of war between concern for what it signaled for the economy (slower going ahead) and for what it signaled for the Fed (change the wording in the next monetary policy statement to "very measured" from "measured"). Investors sighed and made the sensible decision that the economy was a lot more important than the Fed.
In truth, whatever the Fed says, it might have to act the monetary meanie. For as MacroMavens' Stephanie Pomboy points out, with China increasingly recycling the flood of dollars it gets from sending us the product of its factories into commodities instead of our securities and Japan cutting down sharply on its purchase of Treasuries, Greenspan & Co. may have no choice but to keep nudging up interest rates, if only to keep the dollar afloat.
China's decision to abandon attempts to cool off its overheated economy before the job was half-done is reflected in the resumption of the global bull market in commodities, notably the spurt in copper and aluminum as well as oil. In the fullness of time, that is likely to mean a hard landing for the Sino economy, even a very hard landing, a very unpleasant prospect for the Chinese and everyone else. Meanwhile, for us in particular, it significantly enhances the likelihood of stagflation, which is the economic version of being up a creek without a paddle.
...
A poll of the high-powered CEOs who make up its membership by the Business Council lends sharp emphasis to their extraordinary caution. Some 70% of these corporate movers and shakers forecast growth next year of between zero and 2%. That speaks for itself, and what it says is pretty chilling.
The key news here is the lower pruchase rate of US securities (debt). Given the deficit, Treasury auctions are more frequent and the market is shrinking. Hence, the interest rate the US pays will rise and this will pull other rates up as a consequence.
This has all been in the works for some time, and I had written about it previously. The question was (and is) the timing. There was a lull for a few months, but oil prices seem to be forcing the issue now. The result is a DOW below 10,000, and unlikely to recover by November 2 unless oil prices collapse, something nobody is predicting but is not out of the question since commodities are very hard to predict. Finnacially minded voters will take note of the situation, particularly the DOW.
If November meets us with a Dow around 9,500, oil at $58, and a Euro at $1.27, it will not be good news for bush. On the other hand, it won't be good news for the rest of us or for Kerry: the forces in motion have enormous momentum and 2005 will be a difficult year regardless of who occupies the White House.