Sunday, January 16, 2011

2011 Head Winds

The list below is truly mind boggling of issues facing the US and global economy.  The Bernanke put is so powerful in the mind of investors that the list below is ignored.  It is truly astonishing.  The Fed in many ways reminds me of a trader with so much risk on that freezes and cannot manage the risk.  They add to their losing position in hopes that leverage will help reverse the losses.  They go all in, not based on conviction but on fear.  The Fed appears to be at a point where their balance sheet (is it really their balance sheet by the way) cannot be reversed.  GOD forbid money velocity comes to the  economy with this size monetary base.    Enjoy the list.  

Sovereign debt expanding to Portugal, Spain.

Austerity will be a drag on global GDP.

Rising food prices and interest rates will reduce consumer spending.

Rising input costs will either reduce corporate margins or if able to pass along will reduce consumer spending further.

Possibility that Irish bank runs increase and move to other PIIGS.

Municipal debt markets are freezing up resulting in both less supply and higher rates.

Municipal cutbacks will drag employment down further and be a drag on US GDP.

Investor sentiment is at historic highs and has been for an extended period of time.

China is slowing its economy which has been a large driver of global growth.

China like other countries (Tunisia for example) are faced with revolt of their population with rising inflation and lower available food.

Treasury yields are at a dangerous juncture.  They could reverse and move down or they could continue moving up.  The implications to US debt service are very real and very dangerous.

Pending debt ceiling will be reached soon.  Political posturing will create more uncertainty.

The Fed is under pressure to limit further QE upon the completion of the current program.

US housing has entered a double dip and price has actually been accelerating to the downside.

US banking sector is still mired in non conforming assets and focused on risk management versus credit creation which will drag GDP growth.

Unemployment continues to be at levels that cannot match population growth.

20% of Americans are employed part time.

State pensions are massively unfunded and reaching a point where the can cannot be kicked further down the road.

State revenues are falling as foreclosures are expanded and the foreclosure process slowed.

Corporate insiders continue to sell at vastly higher levels than buying.

Domestic equity funds continue to see net outflows.


1 comment:

  1. No problem. A rising stock market will fix them all. At least, that's what Ben's hoping.