No One is Buying the Good Economic Forecasts

Stocks started to the upside today before falling back a modest amount–the Dog Days of Summer are here for sure.  Add into this the absolute lack of positive news anywhere there simply is no reason for equities to move higher.  It seems to us that the European economies are the biggest problem right now.  Virtually all of the European economies have remained very ‘sick’ excepting England and Germany–and this could change as we stare down colder weather in the months ahead.  Energy is the new worry of the day for Europe as their reliance on Russian oil, natural gas and coal is pondered–Europe imports 70% of their oil, 50% of natural gas and 44% of coal and 50% of this comes from Russia.  Is there any chance that Putin won’t use the leverage inherent in this fact as winter arrives?  We think not.  There are few other good alternatives to Russian energy as infrastructure is not in place to import these volumes via tankers etc.  Additionally forecasters (for what they know) are lowering GDP forecasts for Germany as new santions take place against the Russians.

Interest rates in the U.S. are drifting down again as no one buys the good economy story (certainly on a global scale) and global tensions continue. For years the U.S. could ‘go it alone’, economically speaking, but that hasn’t been the case for many years now.  Why all of the sudden does anyone believe that we can ‘go it alone’ now?  

Corporate profits just released were OK, but that is about it.  The main upside earnings surprises were in companies like LinkedIn, Facebook and Twitter–‘old’  company earnings in firms such as General Electric were tepid at best.  We will carefully watch consumer spending this week as it is a key driver to our economy–Gallup reported an improved consumer spending number this morning and we will see if these are confirmed as the week goes by and more statistics are released.