Whether it's due to bad weather in New York or bad news across the globe, Matt Nesto and I came into this taping with lousy moods and deepening concerns. Hey, I'd love to tell you otherwise, but this is Dos Hombres; we call it how we see it.
For Nesto's part, he's eyeballing the snowballing European debt crisis and its impact on the US. Spain and Italy are now bubbling to the surface, joining the ever-troubled Greek economy in making the EU appear shakier by the week. Citing contrarian Jim Grant, who has recently changed his bullish stance and is now liking cash, Nesto mentions that there are two ways for a nation or economic body to deal with a slowdown: head-on or by dragging the pain out as long as possible.
At the end of the day, it's a band-aid removal method. The band-aid has to come off at some point; it can either be torn off quickly or peeled off hair by hair. The U.S. has typically drawn out the pain as long as possible. This is regarded as a "good" thing, decreasing the "ouch" at any given moment. Alas, the pain can't be put off forever. The U.S. and the rest of the world are eventually going to have to address the fact that we sort of duct-taped the economy back together after the financial crisis. From where Nesto and Grant are sitting, what we're about to experience (here and in Europe) is going to hurt.
Normally I love to take the other side of the Big Bear to my right. Not today, Breakout viewers. I went all the way to the other side of the globe in China and didn't like what I saw. We've been harping on the increasingly suspect Chinese global growth story for a while now on Breakout, bringing Vitaliy Katsenelson, Dan Dicker and others to discuss the alleged "ghost towns" being built by the Chinese government to attempt to sustain "growth."
Dennis Gartman, in his must-read newsletter, noted today that recent Chinese imports of oil and natural gas each came in below 2 percent. Not too horrible until one considers that the stated Chinese economic growth rate is north of 9 percent. Commodity prices are weakening world-wide and Chinese imports are increasingly being called into question. Meanwhile. the U.S. Dollar is atypically strong (another frequent Breakout topic).
Folks, if the U.S. economy, with all its obvious flaws, is the safest harbor in the world, then it's not a great time to be flooding into equities. I barely believe U.S. data in regard to inflation or unemployment. In terms of the Chinese, there's ample evidence to call into question whether the country's long-vaunted growth rate is all it's cracked up to be.
Add it up and it's a nice time to be sitting at or near the sidelines as opposed to buying this, our latest dip in stocks. If you find that message a downer, hey, at least we've all got a long weekend on the horizon!
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