Showing posts with label European recession. Show all posts
Showing posts with label European recession. Show all posts

Friday, May 25, 2012

Is It 2008 Again, with Europe Instead of the U.S. Leading the Economic Way Downward?

People who have been following my trading, on which I last posted two days ago, know that I went bullish and then neutral-bearish on palladium, one of the precious metals, on the same day.  That was due to the failure of economically-sensitive risk assets to rise when oil fell on positive news out of Iran's discussion with the IAEA.  In any case, commodities promptly took a big tumble.

I am reading worse and worse news about China's economy, which is tied more closely to export demand from Europe than to the U.S.  I think that what's happening is that as in 2008, the sharpness of the European recession has taken business by surprise.  This has led to Chinese cancellation of all sorts of orders from exporters to China.  These categories are reported by mainstream sources such as Reuters and the Financial Times (of London) to range from iron ore and thermal coal to soft commodities.

This is beginning to smell more like 2008 than 2011. 

Now, I am an American.  The collapse in 2008 came as no surprise to me.  I had been in the majority of Americans who by the summer of 2007 felt the country was effectively in recession.  (The economists got around by the end of 2008 to dating the onset as being December 2007.  (What do they know LOL?))

Now, much of the rest of the world did not enter recession until mid-2008.

The U.S. might be in the situation of the rest of the world then.  Europe is confirmed to be, in the aggregate, in a deepening business recession.  Germany's not known to be in one yet, nor is France, but Italy, Spain, the U.K., etc. are, so that's good enough for me.  Not to mention Greece.

Remember, it did not take the famed Lehman moment for the rest of the world to begin to have a declining economic status.  That came sooner.  Lehman et al caused the virtual depression. 

Now, on a trading basis, strong charts such as the U.S. stock market and AAPL enter bear markets with lots of belief in the bull argument.  When the 150 and 200 day sma's are still moving up and the 50 day sma begins to curl down, as are the situations with AAPL and SPY, and then the actual price pierces the 50 day sma and spikes down, the most common response is for the bulls to push the price back to and usually slightly above the 50 day sma.  If a bear market is on the way, that proves to have been just the wrong thing to have done, and the downward cascade starts. 

That in a nutshell is my central tendency right now, if I may be allowed some Fedspeak.

In this scenario, U.S. interest rates will set new lows, incredible though today's rates already are.

We shall just have to see what the economic data shows, how governments, businesses, workers and consumers act, and how the financial markets act.  We continue moving farther and farther into Talebian financial Extremistan.

Very strange days, to say the least.  The world has never been here before.  Precedents continue to be set.  Maybe that gives the little guy a chance.  Perhaps no one knows the new rules of the game... at least no one who is talking.