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With the debt deal concluded, you might have expected global markets to have rallied. Instead, the Dow Jones industrial average closed down 266 points yesterday, or 2.2 percent. The reason? A growing consensus that a double-dip recession is imminent and that, as a result, stocks are in for tough times. You can’t argue with the market. If stocks fall, they fall. But the current outlook on equities may be based on faulty logic.
The markets have been sinking steadily, fed on a diet of weak economic data and debt ceiling deadlock (which, finally, appears to have been broken). Yet company after company has announced stellar earnings recently.
Largely overlooked throughout the debt drama is a robust trade in financial derivatives tied to the results of the debate — and they’re beginning to tell a story of their own.
As the tortuous debt ceiling debate continues, one aspect continues to bedevil the process: the staunch refusal of both President Obama and Senate Majority Leader Harry Reid to accept a short-term deal.
The only thing that matters for global markets over the coming days is whether a deal can be struck in Washington over the debt ceiling. But the U.S. government will not default on its debts even if a deal isn’t reached.
As Washington continues to skate perilously close to the economic abyss, 3,000 miles away in Cupertino, California, this week Apple released its results for the second quarter. To no one’s surprise but to almost universal amazement, Apple managed to sell more iPads (9.3 million) and iPhones (20.3 million) than ever before. Quarterly revenues of $28 [...]
On Friday, I posted a piece on the U.S. debt and how we are creating a false crisis given current interest rates and our ability to manage that. Judging from the responses, you would have thought I was penning a piece in defense of eugenics. But the heated reaction is typical of the current debate about debt.
Both parties appear to accept the logic that the United States is suffering from an unacceptably high level of government debt and that further debt will doom the U.S. to generations of decline. Judging by polling data, large swaths of the country agree. Nonetheless, that consensus is wrong.
It did pull out of its death swoon. But there’s a large gap between surviving and thriving, and while the industry may have achieved the former, it’s a long way from the latter.
Listening to an interview with an Iranian-American journalist about being detained in jails in Damascus and Tehran, I was struck by the contrast between the extremis of those experiences and the daily drumbeat of high emotions about money.
The jobs report was bad enough. But it’s hardly the only indication of continuing trouble for the U.S. economy. Released at the end of June, U.S. Bancorp’s annual survey of nearly 3,000 small businesses confirmed what many people already know: the recession that began in 2008 never ended for vast swaths of the U.S.
