Research Zeitgeist: A Week of Extremes
The last week was one of extremes. On a positive note, five straight days of rising stock prices, driven primarily by optimism over President-elect Obama’s confidence-building announcements of his economic team led by Timothy Geithner, Larry Summers and Paul Volcker, coupled with strong signals of a moderate course on foreign policy issues through expected nominations of Hillary Clinton, Robert Gates and James Jones to key posts.
The wisdom of keeping Gates in place as Defense Secretary was underscored by the horror in Mumbai, which served as a worrisome reminder of the unpredictability and disruptive potential of terrorist attacks both to political and financial stability.
Back to the positive, the outgoing administration’s latest measures to resolve the credit crisis were generally well received, but the smorgasbord of government interventions is racking up a massive liability and looks increasingly ad hoc, piecemeal and reactive. Perhaps this is part of the reason Obama’s measured approach to everything is reassuring to the markets.
Visitors to Research Recap appear concerned that the crisis is far from over: our most popular posts this week focused on growing problems with credit card and not-quite-prime mortgage loans: Moody’s US Credit Card Performance Indicators Continue to Weaken highlighted the increase in delinquencies and chargeoffs in credit-card debt, while CreditSights warned that the “Dramatic Rise” in Alt-A Loan Delinquencies May Continue. The International Monetary Fund’s paper confirming the all-too-apparent interconnectedness of the financial world also was popular. The paper found that a Major Bank Failure Could Spur Losses of Over $1,500 Billion.
More gloomy news was featured in Moody’s Expects 20-30% Decline in Commercial Real Estate and Capgemini’s Oil Price Decline Bad News for Future Supplies. A glimmer of home came from a popular MIT paper Cap-and-Trade Can Cut Emissions Without Major Economic Hit.
Research Recap Quote of the Week:
Everything Obama is doing with his appointments is signaling continuity in U.S. policy.- Stratfor
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