Fantastic Article here. Shephanie Pomboy of MacroMavens was quoted extensively in this week "Up and Down Wall Street" column by Alan Abelson.
(You can get a free preview if you register)
It shows in detail how higher debt around the world, coming due in 2010 and 2011 could quickly derail the recovery. If the debt matures during a time of developing risk aversion as the realization that the economic growth we’ve experienced is not sustainable (a good probability in my view), watch out because things can get ugly very quickly. Many banks around the world have the same problems as the US banks, the problem exists in a global scale.
My hunch is that this could be the achilles heal to “the Emerging Market Consumer pulling the globe out of recession” thesis. These problems will cause a global financial crisis once again and they will not be able to provide the credit growth that most analysts have factored into their growth predictions for emerging markets.
And finally a couple of Charts.
Please observe this quick education guide to seasonal effects at the end of the year and beginning of next.
Thus far…the three indices are below…
S&P (Resistance Line is from High on 12/4) — Gain of Approx 0.66%
Dow (Resistance Line is from High on 12/4) — Gain of Approx 0.20%
Nasdaq (Resistance Line from High on 12/16 ) Has faired the best with an Approx Gain of 2.90%. At least this is positive and could portray more confidence in the global economy. For December it was up over 6%. Great way to end the year.
And lets include the sector that should be leading us out in my view, the financials. They should begin to increase credit for our economy to sustain this recovery.
Without the financials, can the rally continue? I don’t think so. (Resistance Line is from High on 10/14, more than 2 months ago) . If the bulls want their thesis in 2010, this needs change, thus far it hasn’t.
So far the so called Santa Rally hasn’t been stellar for a majority of the major indices and financials have been underperforming since mid October.
Caution is warranted.
Have a safe and happy holiday.