Just as the high in the housing industry from the home buying tax credit wears off, Congress is back with another injection with both parties bringing the drugs. It doesn’t matter if it makes economic sense or not, the temporary high feels so good and who cares what the long term implications are. Mark McGwire and Jose Canseco would be proud, as would Pablo Escobar, may he rest in peace. Also, the Japanese politicians from the 1990’s aren’t feeling so lonely anymore and in fact I think there is a huge autographed picture of the Japanese LDP party in the Congressional cafeteria. My point is, by not letting the economy heal on its own and quickly delever will only prolong the agony and kick the can further down the road as the bills will have to get paid anyway.
The euro is rebounding after 4 days of declines after German unemployment unexpectedly fell for a 4th straight month in Oct and the unemployment rate fell to 8.1%, .2% less than expected and at the lowest level since March. Also, Euro region economic confidence rose to the highest since Sept ’08 and was almost 2 pts above forecasts and a retail sales index in the region rose back to 50. New Zealand didn’t follow the RBA and kept rates unchanged at 2.5% while Russia cut its benchmark rate by 50 bps to 9.5%. Q3 GDP in the US is expected to be 3.2% annualized, the first positive reading since Q2 ’08. While the report card can be seen as old news as the economy is already 1/3 of the way thru Q4, it will give us a staring point from which Q4 GDP began. Initial Jobless Claims are expected to total 525k, down 6k from last week.