GLOBAL ECONOMICS AND POLITICS
Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.
Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.
Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.
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Europe’s ongoing sovereign debt and banking crisis grasps many headlines and excites worldwide fear. America’s continuous federal fiscal fiasco and restless debates regarding it will continue to capture attention as election year 2012 beckons. Yet noteworthy debt, deficit, and funding issues lurk in other financial corners.
In America, state and local debt topics generally feature less prominently in marketplace and national media commentary. However, the federal story is not the whole story. State and local debt is substantial. Moreover, pension (and other benefit) funding obligations represent a huge challenge for many states and communities. It pays to focus on these matters alongside federal and household indebtedness, for it further highlights the status and policies of the 50 United States as a major debtor nation.
In America, in principle, each citizen “is king of its castle”. However, in a representative democracy, it should not be surprising that debt trends and levels for “individuals in general” substantially mirror those for the nation as a whole. As thriftiness can be popular, so can appetite for debt.
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State and Local Travels – US Non-Federal Debt Vistas (12-6-11)
The United States real estate marketplace, despite some improvement relative to winter 2008-09’s abyss, remains in mournful shape. During the ongoing terrible global economic crisis, nervous politicians, fearful central bankers, and enthusiastic real estate business promoters have devoted much effort and creativity in their quest to rescue the real estate arena. How should we characterize their overall performance to date? Despite their numerous at-bats and vigorous swings at the real estate debacle, the financial and political guardians have often struck out and their overall batting average remains low.
Perhaps the real estate scene will become brighter. After all, central bankers and politicians always have upcoming opportunities to step up to the plate. They will keep swinging and whacking at real estate problems. Nevertheless, the still-feeble US real estate world underlines the fragile foundation and structure of the economic revival fabricated by the Federal Reserve (and its overseas central bank teammates) and political crews. Despite some progress, the shattering damage of the international economic disaster that commenced in 2007 has not been substantially fixed. The economic crisis persists and will continue for several more innings. Though the worldwide economic advance that emerged in spring 2009 reflects repairs and is not entirely a house of cards, it’s not entirely built on solid ground. Money printing and deficit spending are not genuine (enduring) cures for economic problems.
The recent slowdown in the overall economic landscape will hinder the US real estate recovery. Therefore American real estate prices will remain relatively weak.
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Still Swamped – US Real Estate (10-11-11)
The level and trend of the Conference Board’s Consumer Confidence Index alongside this nosedive in the S+P 500 indicates that the US economy and the S+P 500 probably will slump further over the next several months. If so, then the worldwide economy will slow alongside America’s, as will many other equity arenas. Given the close links between the S+P 500 and overall commodity marketplace trends in recent years, commodity players should monitor the Consumer Confidence Index.
After the first quarter of 2009, both the S+P 500 and the Conference Board’s Consumer Confidence Index (“CCI”) rose sharply. The S+P 500’s race to its 5/2/11 peak at 1371 more than doubled its 3/6/09 low at 667. At this 5/2/11 altitude, it was about 87 percent of its 10/11/07 major high, and just 4.8pc beneath its final pre-crisis top at 1440 on 5/19/08.
The CCI’s February 2011 high at 72.0 indeed represents a steep ascent from its February 2009 25.3 valley. Yet it nevertheless fell well short of the 111.9 July 2007 top. Moreover, this winter 2011 CCI elevation was only modestly above the 61.4 level of March 2003- when the S+P 500 achieved a major low at 789 (3/12/03) miles underneath 2011’s various S+P 500 heights. In addition, since February 2011- when the S+P 500 made an initial top at 1344 on 2/18/11, the CCI has ebbed lower. It fell under 60 in June (57.6) and July (59.2) and tumbled to 44.5 in August.
However, given the sharp fall in the S+P 500 from its February, May, and July 2011 highs (8/9/11 low at 1101 is almost a twenty percent drop from 1371; 9/2/11 close about 1173), the S+P 500 and CCI now are confirming each other in a bearish path.
Note the S+P 500 plateau on 3/24/00 at 1553 was not far from the October 2007 summit (Dow Jones Industrial Average high 1/14/00 around 11,910). In contrast, the February 2011 Confidence Index level lurks far beneath (only 50 percent of) the 144.7 achieved in January 2000. This underscores the current weakness of consumer net worth and the related mournful consumer attitude.
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Consumer Confidence and US Stocks (9-6-11)
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