US Markets are closed but Asia keeps printing money and Spain sinks into oblivion

The Morning Call

10/30/12

The Market

           

    Technical

            As you know, the Market was closed yesterday and will be again today as a result of Hurricane Sandy.  Hence there is nothing to add to our prior comments.

    Fundamental

    

       Headlines

            Yesterday’s economic news was reasonably good: September personal income was up (in line) as was personal spending (better than expected); the PCE price index was up slightly (in line); finally, the Dallas Fed October manufacturing index was up (less than estimates).  These datapoints fit our forecast; so there is little to add.

            It is important to note that Hurricane Sandy is going to play merry hell with the data for the next couple of month or so.  Initially, the impact will be negative as businesses close, individuals are homebound and power will be lost in many locations.  Later, activity will surge and people and businesses catch up and clean up. 

To make it all the more confusing, these effects will have  a rolling impact, i.e. the weekly numbers will first reflect these changes followed by monthly indices and then quarterly measures.  Then they will start to overlap, i.e. next week’s reports on weekly data will be negative while the monthly stats will appear fine, etc; then the whole process will reverse as the shortest term indicators will rebound as the monthly numbers will still be impacted by the storm.

Bottom line: this all goes to say that this period of disruption and recovery is going to make it difficult to draw firm conclusions about the economy’s progress---and any inferences to the contrary should be taken lightly.

            Update on this quarter’s earnings and revenues ‘beat’ rate (short):
            http://www.bespokeinvest.com/thinkbig/2012/10/29/earnings-and-revenue-beat-rates.html

            Investors ignore the perils of low rates---the latest from Gary Shilling (medium):

            http://www.bloomberg.com/news/2012-10-28/bargain-addicted-investors-ignore-perils-of-low-rates.html

                Update on Europe (medium):

            http://www.bloomberg.com/news/2012-10-29/rajoy-faces-bailout-split-with-monti-at-madrid-meeting.html

Overnight, China and Japan keep the printing presses running a Mach 3 and Spain and Greece race to the bottom (medium):

            http://www.zerohedge.com/news/2012-10-30/american-markets-shut-second-day-china-and-japan-come-its-rescue

                Plan for Spanish bad bank emerges (medium):

            http://www.zerohedge.com/news/2012-10-29/spanish-bad-bank-emerges-confirms-spanish-real-estate-absolute-disaster

                The latest from John Hussman (medium):

            http://advisorperspectives.com/commentaries/hussman_102912.php