I Think I Can’t. I Think I Can’t.

The U.S. economy is becoming the little engine that couldn’t.

You, of course, remember the children’s story in which self-confidence and determination pull the little engine up and over a steep hill.  Unfortunately, after four years of struggling to gain momentum, even the little engine would likely become discouraged.

So it is with the American consumer.  The Consumer Confidence Index for June 2012 slipped for the fourth consecutive month for the first time since May 2008, dropping from 64.4 to 62.0 (63.0 was expected). read more

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Even Germany’s Credit Is Slipping

Greece.  Italy.  Spain.  Ireland.  Even France has experienced a wavering credit rating.  But Germany?

Germany has been Europe’s voice of reason, a financial pillar among a creaky, malfunctioning continent with the financial foundation of a sand castle.

We previously asked whether Germany would have the stamina to lift up the rest of Europe or be dragged down by its bailout-addicted brethren.

One sign that Germany is being sucked into the European sinkhole is that Egan Jones just downgraded Germany’s credit rating from AA- to A+.  Granted, Greece is unlikely to see anything near an A+ rating in our lifetime, but for Germany, it’s a stumble, if not a fall from grace. read more

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Healthcare For All – Like it Or Not

The U.S. Supreme Court’s decision to uphold the Constitutionality of Obamacare by a 5-4 vote will mean different things to different people.

Even its impact on healthcare companies will vary.  Health insurers will face pricing pressure, although those that benefit from Medicaid spending stand to benefit from increased funding.  However, the ruling limited the law’s plans to expand Medicaid, determining that the federal government cannot without a state’s entire Medicaid allotment if it fails to participate in Obamacare. read more

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The S&P 500 Comes Up Short

The S&P 500 fell more than 2% yesterday, recording its worst one-day drop since December.  Was it disappointment with The Fed?  A sudden realization that the market shouldn’t rise when the economy is sinking?  A “fat finger” computer glitch?

There were plenty of reasons for the fall – and collectively they do not bode well for the U.S. economy:

  •  The Philadelphia Fed Survey fell unexpectedly to -16.6 for June, registering its worst reading since August 2011.  New orders, shipments and average work hours were negative this month, suggesting an overall decline in manufacturing business.  The decline was the second in a row, as the reading was -5.8 in May.

The

HSBC China Manufacturing Purchasing Managers’ Index read more

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Pretzel Logic

When Fed Chairman Ben Bernanke said recently that he did not expect The Fed to initiate any additional monetary stimulus, apparently stock traders weren’t listening.

The recent run-up in stock prices was based on conjecture that The Fed would respond to the still-weak economy with major action – perhaps yet another round of quantitative easing.

Instead of announcing quantitative easing, though, the Fed announced the expansion of Operation Twist on Wednesday. Under Operation Twist, which is designed to lower long-term interest rates to stimulate borrowing and investment, the Fed has been selling $400 billion of short-term bonds and using the funds to buy longer-term securities. read more

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Bad News Boosts the Market

In the strange world of investment management, bad news is often good news.

That was the case last week, as the S&P 500 gained a hefty 3.7%, more than reversing its 3% loss from the previous week.

The market rose 2.3% on Wednesday alone – its largest single-session percentage gain so far this year – amid signs that the already tepid economic recovery is slowing further.

So why did the market rally?  Because traders speculated that the Federal Reserve will react to the slowing economy with additional stimulus. read more

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Compared To What?

The U.S. dollar is the strongest it’s been in a year-and-a-half.  Is this renewed strength a sign of American economic strength?

In a way – but it’s all relative.  The euro broke to a new low recently, and the dollar and the Japanese yen were both stronger, because of a flight to quality.

Japan, which is still recovering from last year’s earthquake and tsunami, has enormous debt, as does the U.S.  So if the dollar and yen are strengthening, it’s a sign that the euro is in deep, deep trouble. read more

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