Wednesday, November 30, 2011

Wash, Rinse, Repeat

We continue to oscillate between Europe is saved and Europe is broke.  Today feels like a Europe is broken day after details started to emerge around their latest funding efforts.  I'm not convinced anything will change in the near-term but I've been surprised by monster bailouts in the past so we'll see if the pattern changes.

What is particularly disconcerting is the impact that all of these sovereign debt issues are having on real companies.  From yesterday's Washington Post "there are signs that manufacturing in Europe is imploding — new industrial orders plunged 6.4 percent in September — and it’s unlikely that the U.S. can escape the downward drag."  This dovetails with reports from Germany, France and Spain that seem to indicate businesses are really tightening their belts.

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S&P cut the ratings on 37 banks last night after applying new ratings criteria to the banks.  This has cast a pretty dark cloud over an already weak sector.  Take note of Bank of America which is now struggling to keep it's head above $5 a share.  The current price is roughly 15% below where the Warren Buffett made his latest investment which is interesting to watch.

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Another interesting data point came from Corning which indicated that while consumers still seem to be buying LCDs the price points have fallen so far it's increasingly difficult to make money.  Thus, their customers are cutting back on glass orders which led Corning to idle ~25% of total capacity.

And people wonder why the economy is sluggish.  You can't have $200 LCDs AND jobs --- you get to have one or the other :(

Cheers!

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