Tuesday, June 29, 2010

No time like the present or 2022 if that works better

The often quoted Conference Board issued two huge pieces of “news” today. Their US Consumer Confidence Index plunged by a huge amount for last month and the Conference Board has revised their index of leading economic indicators in China down for April to near zero from the significant growth they had reported earlier. (they blamed a calculation error)

The nearly one hundred year old Conference Board is a non-profit research group whose members and funding come from the executives of 1500 of the world’s biggest corporations. Keep in mind these aren’t “real” numbers but an index that is supposed to divine the direction the “real” numbers are moving in. Is this insight or just propaganda intended to push everything in the direction these masters of the universe want it to go? Either way they do reflect what is happening. You can tell which way the sheep are going by just watching the dog.

Critics are pointing out that these China numbers are already four months old and China doesn’t seem to be doing that badly. How China will react is not yet known. They really don’t like to be pushed around and already resent pressure to adjust the value of their currency relative to the USD and may use this slight as an excuse to not cooperate. This could be a good thing for Conference Board members who have their interests at heart and not yours.

This news pushed world markets down sharply by as more than three percent in the US and four percent in Shanghai. It also drove down interest on US Treasury bonds as panicked investors are paying a premium to buy them. If this holds, it translates into lower home mortgage rates and lower interest on the trillions in US government debt. Of course nobody can get a mortgage so what does the rate matter?

If you had high hopes for the new Volcker Rule to crack down the gambling done by the big banks, not so fast. The banks will in theory be restricted to using only four percent of their cash to own hedge funds and such, starting 18 months after the law takes effect, but banks could be granted exemptions on divesting their current holdings until 2022. This will disguise the value of the worthless junk on their books until the current officers have retired to Jamaica. Of course that assumes the Volcker rule even becomes law and that we get can through the next 18 months after that because by then it will be start of President Palin‘s first term, so none of this probably matters anyway.