Business vs Government

As I took a week in the desert (family vaca in Arizona) to ponder the markets and its future direction I became more confident that corporate America and many businesses around the world were well positioned for global economic growth but fearful that governments and central banks will screw it all up. The road to hell is paved with good intentions someone said someday. The gig of profligate fiscal spending and extraordinary easy monetary policy without consequence is up. As a result, the cost of capital is going higher, as the risk free rate (not so risk free anymore) goes up and risk premiums on everything else follows. In the short term, the tug of war between business and government (level of interest of rates) will intensify with the market action of late, both in stocks and commodities, telling us that for now business will overcome. An aside, the CFTC said euro net shorts rose to a fresh record high.

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