Tuesday, December 13, 2011

Low volume grind

Markets have been spinning their wheels this week in the wake of the "big bailout" last week.  A bunch of factors are probably contributing to the current malaise.

1) Confidence is fading fast that this deal can ever receive full acceptance in the EU.

2) The uncertainty has really caused a spike in the US dollar relative to Euro and other currencies.

This last point is particularly important to watch.  It now takes just $1.30 to buy 1 Euro which is the best exchange for the dollar in nearly a year.   The dollar has only been stronger on 2 occasions in the past 3 years.  This will mean lower gas/oil prices as the dollar strengthens (yeah!) but it could make it more difficult for US companies looking to sell in Europe (see Intel's comments yesterday about European demand falling off a cliff in the past few weeks).

Photo of the day:

This is the view from inside a "fake" Disneyland style resort that was being built in China about ten years ago when construction suddenly stopped.

Chart of the day:
While you'll hear lots of breathless debate over taxes in the coming year note this chart which shows the top US tax bracket over the past 30 years and the actual effective tax rate paid by the highest 1% of earners.

Note that while the top statutory rate bounces around the effective rate has remained fairly stable.  The 1% should thank their friendly neighborhood tax professional for achieving this lofty goal :)

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