The US Equity market in less than two years, as measured by the S&P500, has doubled from its post crisis March 2009 low. Volatility has sunk. US Unemployment remains high. The Fed is fueling a speculative boom with the riches accumulating to the few. US Labor struggling to get back to a decent or any work and the geopolitics paint a complete opposite picture to the market euphoria. All the while clouds in the global geopolitical sphere continue to gather pace. While in the west we measure progress many times by the rise or fall of the markets alone on a daily basis – For the people of Egypt the long struggle for jobs, social justice has only begun. On Feb 13th, the military council abolished the constitution… timetable to nowhere is all we can see… as the military positions to further consolidate its stranglehold on the people. Unrest potential is building in the Arab world. From the lands north of Sahara- Northern Africa. From the Nile to the Euphrates. From the Mediterranean to Mesopotamia. The two ‘I’s, Israel-Iran, eyeing each other and global players are taking positions. China has a new world status and it could test its newly found powers, all the while weaknesses are building into its own economic system that risk world destabilization. Change in the status quo in the middle east and elsewhere where pressures have been building for some time now can have seismic implications for growth of the world economy. Rather growth stalling at best with uncertainty keeping long term investment plans at bay and hungry jobless populations or democratically starved plutocratic nations citizens pressuring for reforms. Global aggregate demand on the government side is pressured to collapse as spending at current intervals is unsustainable. The pace of implementation of structural reforms is slow and major structural reforms measures are still to be taken. Will the Fed stimulus policies continue to keep the economy from faltering? We take the view that the higher you are the greater the fall and the highs we are now are not compatible with the struggle to put bread on the table for most families. Even in the most affluent of Nations. Ours. The Baltic index has closed at near quarter century lows. Ship oversupply? Yes. Australia flood impact? Yes. Trade used to be the life blood of world economy. Now it is finance. Speculative flows of money looking for a quick domicile for short term gain. Capital has always ruled the world but money movements of such intensity is a relatively new phenomenon that our econometric models do not have much historic data to go by. All is so synchronized now around the world. The supply of funding for excess speculative building abundant from the central authorities. Yet Trade the heart pulse of human global endevours and interactions since time in antiquity- trade- global trade- is telling us otherwise. Something is happening. Something big. The amount of trade is clearly going down as things look up in government, central banks and brokerage house reports. The Greek ships have been taking much to China but lately they come back many times empty. Yet the forward looking equity markets of our Western World…measures of progress in the eyes of many.. vain quests of financial engineering yet once more.. have been marching higher. Fundamental and technical traders follow the same momentum of a rising tide on stimulative action not structural reform. This is not healthy. The system has yet to cleanse itself. Something has to give…..
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