Dark clouds on the horizon
Given these developments out of China and Europe, stocks may indeed have gotten ahead of themselves.
Are China and Europe worried about overheating already? This rally's been based on the two pillars of Europe and China getting better, along with the U.S. muddling along in a way that's neither good enough to get revenue going nor bad enough to cause tightening.
But last night the Chinese let the money-market rate jump while at the same time the European Central Bank said it would offer some much more difficult bank stress tests.
I understand both moves. The Chinese economy's gotten hot again, and the Communist Party wants a long, sustained increase in gross domestic product, not one brought along by speculation. The European banks were, frankly, never fixed. If you look at their ratios vs. those of the U.S., they are pretty insanely undercapitalized. That's particularly true of the Italian banks, all of which would have been shuttered by former Treasury Secretary Tim Geithner a long time ago if they'd been U.S. banks. If Europe does a real test, there would have to be an awful amount of equity raised -- and the markets, which have been red-hot, could stumble.
Plus, if you are a European businessperson, you have to be aghast at the strength of the euro. Not only is the currency not going lower every day, but it now feels as if the euro is becoming the world's reserve currency. That's courtesy the rejectionists in the U.S. Congress, who were willing to throw away our nation's full faith and credit rather than just try to win a national election or take over Congress themselves.
I still do not think anyone in Washington is really aware of the damage the rejectionists have done. You know why? Because people are still acting as if it was "everyone's fault," and not just those who were willing to walk away from our obligations. Remember, I favor pushing back Social Security and putting through real cuts in Medicare, including negotiated drug benefits, and I favor lower taxes to jumpstart growth, and I favor less regulation. That's because, as a small businessman, I know how insane it is out there. We have outcomes management numbers for medical care that we don't even use. There is so much out-of-control spending by the government in Medicare that it is ridiculous.
But that's what needs to be attacked -- not our lenders. Now, because the rejectionists suggested to our lenders that we might default, the money flowing into the euro is pretty breathtaking.
If Europe slows down, the recovery in China will slow down -- hence why the metals are having a harder time after a nice little run. Europe comprises 25 percent of the Chinese export market, and they turned out to be much more joined at the hip than we'd thought. If China can't export its way to growth, and if the Chinese banks are going to tighten credit and the European banks are going to be forced to retain more capital, you can see a world where stocks have indeed gotten ahead of themselves. You could even see a world that is calling the tune in the U.S.'s own bond market, and that could be one more reason why our rates went down yesterday.
All in all, we aren't doing well enough in this country to lose China or Europe.
Ironically, on the night when Spain at last came out of recession -- on a night when, at last, companies were revising up their iron and copper forecasts because of China -- we got the first dark clouds on the horizon from the overseas leg of this magnificent rally.
Random musings: Boeing (BA) has expanding margins in huge super-cycle. Caterpillar (CAT) still can't get it right. I like the comparison between the Corning (GLW) deal and the Verizon (VZ) deal -- can you believe where Verizon is? I still believe in Apple's (AAPL) tablet strategy and the stock has upside. Taking side of the father in the Netflix (NFLX) dispute. Lumber Liquidators (LL) is absurdly good.
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Too bad the US wasted S.S. and medicare tax revenue on W.W. II , Korean War, Vietnam War, Iraq War I, Iraq War II, Afganistan War, Libyian War and the war on terror.
Social Security would have an extra $8 trillion and medicare would have an extra $4 trillion in their war chests.
Imagine this, a newly manufactured crisis to manipulate share prices. These issues have been obvious for quite some time, but POS media need something to stay relevant. I'm done reading this garbage.
Reject the "Rejectionistas" come November 2014!
Thats it in the nutshell.. Dis-employ the old guard
as well, and that includes Pelosi, Boehner, et al.
Force Congress to listen to us. Yank their cords,
people. They may have the Industries' incessant
money-stream to wade in, but they will always
require our lifeline-vote to keep them from drowning.
Nuff said...off to Farmers Market, then chores.
OH and PS to chatr....While I like what you said
last week about 'nuking down' the computer
in order to effect a 're-start', I must advise...there
is a better way; it includes reworking each sub-
system to remove the contaminants (viral items)
each time until the entire system has been
rehabilitated. IT IS Possible, for the like minded
who wish to use patience and skill in the re-set
since some of us prefer to keep the good stuff
while evicting the terminal toxins.
Did Sebelius set the president up to look bad or is she throwing herself under the bus for him now. Its got to be one or the other folks. If she stood around and watched him speak about how wonderful it was when she knew it was broke....... then it's A ....... If he really knew then it's B
Maybe she was afraid to say anything......... maybe she was hoping for Devine intervention.
Jim Cramer touts himself as a small business owner? I guess he just expands the definition of small business owner to include people making millions and millions of dollars a year with trust funds and huge retirement accounts. Of course he favors screwing everyone on Social Security INSURANCE. Even if it is solvents and the bank funding the overspending in the US government right now.
This from the guy who didn't know the financial crisis was upon us? I was kicked over and over again for calling the financial failure years in advance and I only had 2 courses in Economics at Columbia. It was obvious that when the stock gurus and banks run financial policy it can only end in disaster. It is the fox watching the chicken coup and they are still at it. The stimulus that was to go to roads and infrastructure has instead gone to bailing out Wall Street and big business.
And the depression goes on because Bernanke's ridiculous policy did not work during the Great Depression and it does not work now. Bernanke said early on that the reason that stimulus didn't work for the Great Depression was that they did not stimulate enough. And now 6 years later there is no change and no end in sight. Obviously Bernanke is a foolish historian who decided to repeat the past and expect a different outcome.
Why not let capitalism work and just stop manipulating the country. If GM needed to be bought out of bankruptcy then let it. Remove all rules from Insurance and all protections from the health care industry and watch prices fall and the crisis end. Open medical schools to have a greater supply of doctors and dentists and watch health care costs come back to earth. Stop paying public college teachers $250,000 a year for 8 months work and watch education costs drop.
The problem is not because the public overuses services but rather the lack of capable health care providers. The health care industry killer 112, 000 patients last year with medical mistakes. Obviously doctors are not very good at their job. Why aren't they held accountable? Why didn't anyone go to prison for their part in the financial meltdown?
Yes Vineyard, may get his wish....Die BofA Die.
And no, I'm not going to post # 100.
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