Nov

3

Observations for Monday

Filed in Daily Observations (For Everyone) | 2 Comments 

As we go to press, Asian markets are extending gains from last week.

Sex, Religion and … Politics

All eyes are on Tuesday’s election. What I find most interesting are the poll numbers juxtaposed to world opinion. With most of the planet pulling for regime change (in Britain and even Peru), it’s amazing to see that nearly half of U.S. voters will opt to preserve the status quo.

It just goes to show that democracy is not as easy as it looks. First, voting will likely be an all-day affair, testing people’s resolve and physical endurance. When they finally enter the voting booth, it still comes down to going with the devil you know or taking a leap of faith. And hope that your vote is counted.

I’ve read so many articles that it’s hard to keep going. The best three I found are listed below:

Stagflation vs. Stag-Deflation

Members have been debating the macro picture going forward. Will the U.S. (and perhaps world) government be able to monetize debts or are we heading toward Roubini’s stag-deflation scenario?

Some stories of interest are:

  • China’s manufacturing juggernaut feels pain of global slowdown
    The purchasing managers’ index produced by the CSLA brokerage from a survey of 400 manufacturers gave a reading of 45.2 for October, its lowest since it was created in 2004, and a full 2.5 points down on September. The overall output index stood at 43.4, down from 46.7. . . . It confirms the delayed but strong reaction in China to the credit crisis. Its financial system has held up, largely insulated by government controls on the currency and the banking system, but it is being badly hit by the collapse in consumer confidence in its key export markets.
  • Chill winds blow through China’s manufacturing heartland
    In the last year, chill winds have blown through the baking Pearl River Delta. Sixty-seven thousand small and medium-sized businesses in China collapsed in the first half of 2008, many in these manufacturing heartlands, says the national economic planning body. Toy firms have been particularly badly hit, thanks to safety scares and product recalls. Textile firms, with wafer-thin margins, are also reeling.
  • China’s Worst Nightmare: Unemployment
    According to estimates by the Dongguan City Association of Enterprises with Foreign Investment, 9,000 of the 45,000 factories in the cities of Guangzhou, Dongguan, and Shenzhen — the heart of China’s industrial south — are expected to close before the Chinese New Year in late January. That could mean up to 2.7 million workers facing unemployment, the association said. And they called that number “conservative.” . . . China, by its own admission, suffers tens of thousands of what the government describes as “mass incidents,” or protests involving large numbers of demonstrators, and the majority take place in the countryside. Should they begin to occur in the cities, “we would be witnessing the most severe challenge the Communist leadership has faced in many, many years,” says Beijing based scholar Russell Leigh Moses.

CNBC Asia featured RBS macro strategist Dominique Dwor-Frecaut overnight:

  • Impact of Slowing Growth [WATCH VIDEO]
    The prospect of slowing global growth is reflected in the commodities market, notes Dominique Dwor-Frecaut, macro strategist of Royal Bank of Scotland. She shares her outlook with CNBC’s Amanda Drury.
  • Markets Eye Rate Cuts [WATCH VIDEO]
    Stock markets rebound on hopes of interest rate cuts around the world. Dominique Dwor-Frecaut, macro strategist, Royal Bank of Scotland shares her outlook with CNBC’s Amanda Drury.

The Mamis High/Low Barometer

We take the 52-week new highs and new lows statistics for the S&P 500 index and plot the 10-day simple moving average of the net differential.


S&P 500: Mamis 10-day MA of Net New Highs/Lows

Mamis particularly liked to look at the big picture using statistics from the NYSE:


NYSE: Mamis 10-day MA of Net New Highs/Lows

Let’s take a look at the rest of our barometers to see what the market says for today.

Questions and Comments

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  1. Mike (via email) on November 3rd, 2008 2:54 PM

    Hi there T: I found that article by Frank Rich to be the most enlightened, but I think his focus was a bit too on the literal black and white. I’ve read a few articles containing the political supposition on how the race would be different if Obama looked just like his mom and I have to agree with the argument that it wouldn’t change much and would in fact weaken a lot of support as we in America are conditioned by Hollywood to love the story of the underdog who rises above and takes full advantage of the American dream.

    I spent too much time on fivethirtyeight.com last night so I couldn’t sleep and ended up reading all the blog entries I could stand after entering “McCain will win” into Google. The main insight I got from all that delusional rambling was the point that Frank Rich hints at - their hope stems from clinging to failed ideologies of the past. They justify their support with anything but emperical data. Instead of my usual lengthy diatribe, let’s just leave it at this - those remaining McCain cheerleaders and those still in the W 22% club are by no means quants.

    I don’t know if you heard, but we’re quite close to electing a comedian to the Senate here in Minnesota. Sure, I know it is unfair to label him as such, but he is one to which I can most identify so I have been volunteering there quite a bit. So I’ll have some fun insight into this whole deal after spending most of the day there tomorrow.

  2. Eric on November 3rd, 2008 4:37 PM

    My impression was that the “Stag-Inflation” cycle, caused a Decade of Stagnant growth, through Inflation and resulting Wage price Spirals.

    I’ve been Wracking my brain to try and figure out how Deflation could cause long term stagnation and result in some kind of feedback loop for the economy….Besides a standard Recessionary contraction.

    Mike, Al Franken did this ironic bit on the “me” decade of the 1970′’s. He suggested that the 1980’s should be labeled “The ‘Al Franken’ Decade”. It always makes me Smile when I hear him.

    http://snltranscripts.jt.org/79/79fupdate.phtml

 

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