Trade and more
First the Treasury released the October tax/budget figures on Thursday afternoon. Not a pretty picture. Especially if you are bullish because jobless claims have fallen and expect job creation to be forthcoming. As we mentioned yesterday, that may be more of a survey issue, especially with the seasonal effect that the BLS uses for January. To the point though on the Treas figures: Tax receipts showed another decline, now down 22.2% y/y. The total receipts were the lowest that the Treasury received since May 2004. The months of Sept. & Oct. are "incoming" season for the Treasury due to tax extensions, when comparing this Sept/Oct to last year it was even worse at -30% y/y. So if you are wondering why the Federal gov't is advertising but isn't hiring this year, now you know why. Again, for how long do you want to be Long Euro at 1.50 if this type of data continues to roll in?
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Trade overview
The common perception is that a wider trade balance is negative for the US. Not so fast. The chart below clearly shows that as the US deficit has widened the Dow Jones has loved the globalization of our economy. Not highlighted, but as you can see there are self-sustaining corrections that have found support (2008 & towards 2004) as well. Conclusion: A wider deficit is normally a reflection of global growth and is good for equities.
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and when considering the US trade deficit ex Oil its not all that bad at the moment. Again, a reflection of the weak economy. A further contraction in the deficit would be a negative sign for global growth.
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German growth is expected to have picked-up in Q3 to +0.8% q/q. It would mark the 2nd straight quarter for growth in Germany but the last few years have seen the obvious contraction and its far from clear that 2010 will be a prosperous one for Germany. More details in a later report.
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You'll notice that even if U. Mich improves on Friday that it's still at levels last seen during the '91/'92 recession and the late '70s. Still a long way to go.
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