Thursday, March 21, 2013

Many moving parts...

The news out of Cyprus remains very fluid but it sounds like the deposit tax for the most part is going to be off the table for most depositors.  The latest news sounds like there will be some sort of infusion of capital from Mother Russia which will give Russia access to natural resources in the country.  As others have put it, "It sounds like Russia just bought Cyprus".  Again, Cyprus is a bit player but the implications for the Euro and raising the concept of a deposit tax certainly got everyone's attention.

I follow a bunch of smart reporters in the Korean Peninsula that are really tuned into the rhetoric that comes from N. Korea.  While Matt Drudge will scream about Kim Jong Un's latest pronouncement they typically point to similar statements that put all of the headlines in perspective.  Well, some of that changed in the last 24 hours.  Many of these people seem to indicate that the S. Korean hack-a-thon (now alleged to have come from a Chinese IP, but any decent hacker would know how to fake the IP) and air raid sirens in N. Korea and N. Korea's open threat to hit US interests in the Pacific are all new levels of intensity.  I still presume that this is just a ploy for attention but it bears watching because the pattern has shifted.

Ben Bernanke gave the all clear again yesterday and that helped stabilize markets but many people that read beyond the headlines see a few red flags.

1) Copper - Copper has long been a leading indicator of global economic activity.  Admittedly, this trend can breakdown over time as new materials emerge but the correlation between stock prices and copper prices has historically been very strong.  Until recently when something has gone awry....

2) Caterpillar - "Caterpillar Inc. said Wednesday that global sales of its heavy equipment fell 13 percent for the three-month rolling period that ended in February, hurt by a steep drop in Asia Pacific demand."

3) Fedex - Saw global shipments tick up slightly but customers are choosing lower cost delivery options (truck vs. air).  This seems to indicate that customers are more cost conscious and may signal some rough times ahead.


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