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Facing the reality: Inflation and no easy money
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The way I see it, things are going for worse for the credit markets.There is something sure : There won't be plenty of easy money around as it used to be....The easy money and credit game is over after inflation numbers and market is leaving that reality for couple of weeks.For this week, I think volatilitiliy will continue.The Fed injunction might calm the fears for a limited time.In 2008, I expect credit crisis to spread to emerging markets and the ones very vulnarable are the ones have huge account deficits.
Weak sales at malls and shopping centers over the weekend led the head of America's Research Group, a consumer marketing firm, to lower his holiday sales growth forecast to 1.8 percent from 2 percent.Ongoing concern about what's going on in the economy domestically and globally is putting a damper on what should otherwise be a year-end rally.
In the first money market operation of a joint central bank plan, the Federal Reserve will auction $20 billion later on Monday to inject more liquidity into credit markets. The bidding deadline is 1 p.m. EST.Third-quarter current account data is set for release at 8:30 a.m. along with the December reading of the Empire State Manufacturing survey.
The National Association of Home Builders reports on its housing market index at 1 p.m. EST.
On Friday, the Dow Jones industrial average .DJI fell 178.11 points, or 1.32 percent, to 13,339.85. The Standard & Poor's 500 Index .SPX lost 20.46 points, or 1.37 percent, to 1,467.95. The Nasdaq Composite Index declined 32.75 points, or 1.23 percent, to 2,635.74.
For this week, I expect investment banks results better than expected for Morgan Stanley and Bear Stears however I think Goldman will disappoint the investors on Tuesday.The bar is set too high even for Goldman.However if the market moodi s good on Trsday the results might look promising.I expect current account deficit to narrow and the volaitilit continue this week.
In a troubling juxtaposition, the rise in inflation is coming at a time when economic growth is slowing sharply under the weight of a steep slump in housing and a severe credit crunch.
We are in store for a period of very weak if not recessionary growth and uncomfortably high inflation.People are going to get hit with both a weaker job market and having to pay more to fill their gas tanks and buy groceries.
There were also big increases in the cost of clothing, airline tickets and prescription drugs.
The Labor Department said its closely watched Consumer Price Index rose 0.8 percent last month, the biggest one-month increase since a 1.2 percent surge in September 2005, when the country was hit by rising energy costs in the wake of Hurricane Katrina.
The 0.8 percent rise in consumer prices was worse than the 0.6 percent advance that economists had expected. With one month to go, inflation in 2007 is rising at an annual rate of 4.2 percent, far above the 2.5 percent increase in 2006.
The surge in inflation adds another risk to an economy that is already struggling under the weight of a meltdown in housing, a severe credit crunch and faltering consumer confidence.
The worry is that the jump in energy costs will leave consumers with less money to spend on other items, worsening the slowdown in economic growth that is already happening.
Former Federal Reserve Chairman Alan Greenspan told National Public Radio in an interview broadcast Friday that the odds of a recession are "clearly rising" with economic growth "getting close to stalled''. |
| Tarih
: 17.12.2007 |
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Copyright
© 2006 Mert TOKER All Rights Reserved. |
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