Murder she wrote

Do you remember Angela Lansbury, the actress in “Murder she wrote”; I still remember watching her role in the murder-thriller-drama series till the very end till she unfolds the mystery. It consists of a very simple story - a murder. But the ‘who done it’ is the mystery.

Similarly, the focus or events surrounding the financial climate had unfolded. The US debt ceiling was the drama. The murder was the stock market. The “who done it” was the weak, global economic data – not the US drama!

Here is the drama. For weeks, the US debt ceiling was the main focus and center of attraction. August 2nd was the grand finale of the daily drama.

It all happened just nine days ago or 8 episodes away on July 22^nd 2011. (It is just like in the movies, it starts with the opening and screens back 8 days ago). The plot thickens with the US debt drama in focus. The Senate, the House with credit rating agencies as the main actors. The victim is the equity markets or risk-on!

Fast forward to last Friday, there was a series of bad, very bad economic data. Durable orders, Michigan sentiment and GDP came in weak- very weak. But this was overshadowed by the US drama. (Remember, I warned you in my previous post! The evidence was there. But, did you take this into account?)

On Monday, this week – US ISM and global manufacturing killed the Asian market rally. (Here, I enforced that the plot had diverted).

Yesterday, Personal spending (-0.2%) was lower than expected (+0.1%). The personal spending being lowered than expected was a no-brainer. Scroll back 4 weeks to July 8^th 2011. Nonfarm came in 18K versus 80K. Unemployment rose to 9.2% versus 9.1%.

Do you recall? This was a surprise. This data caught most, if not all, speculators with their pants down.

Do you see the link - Nonfarm, unemployment and Personal spending? Here’s the link if you still do not get it. With high unemployment, weak nonfarm payroll, this would only have one effect on Personal spending. Weak if not very weak Personal Spending.

If you had been following my post, I had already sent a warning, a signal. The market plot had changed. It is no longer the US debt ceiling. It is also not the US credit rating (not for now!). The plot had been diverted to global growth concerns via global economic data.

And the outcome of the Asian market at point of writing, 1240pm. Asian markets are generally weak with a loss ranging 1% to 2.75% (in South Korea). Similarly, the safe haven assets like Gold, Swiss Franc and Yen tells it all. The commodity currencies are down very badly. VIX is high. This is all about Inter market Analysis – Currencies, Commodities, Equities, Bonds, Economy, etc. Not just simple PER, book to value or valuations ratios.