Sept 26. The Clinton-Trump Moment

–DB down another 6 % to new low as Merkel reportedly won’t support it with state money.  Turkey downgraded to junk.  There are several stories this morning about problems in China, mostly a re-hash of last week’s news.  For example, in an interview with the BBC Ken Rogoff said, “If you want to look at a part of the world that has a debt problem look at China. They’ve seen credit fueled growth and these things don’t go on forever.”  The point is that financial players are more intertwined than ever.  The ‘Lehman moment’ has been quoted a million times; it was eight years ago (in September) that Lehman filed for bankruptcy.  But it was fully 15 months prior to that when Bear Stearns told investors that two of their mortgage funds were nearly worthless.  And earlier in 2007 there were a couple of high profile bankruptcies by subprime lenders.  Of course, the S&P’s kept shaking off the bad news, making new highs in Q3 2007 before the crash. Thank goodness we have a new cycle of i-Phone 7s to pull the globe out of this malaise.

–The other thing that could conceivably rattle some nerves today is the Clinton Trump debate this evening.  No matter who wins, we’re going to see the federal deficit grow, and it will again be up to the federal government – whether through infrastructure spending or other means – to spur the economy.  State and local governments are already seeing reduced tax revenues and are therefore likely to undergo belt tightening.  The Rockefeller Institute report out this month has the following title: Weak Stock Market and Declines in Oil Prices Depressed State Tax Revenues; Declines in Q2 Raise a Yellow Flag for State Budgets.

Posted on September 26, 2016 at 5:20 am by alexmanzara · Permalink
In: Eurodollar Options

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