Wednesday, April 23, 2008

A Bad Sign for the U.S. Economy

We haven't blogged much on the U.S. economy recently. That's mainly because there is nothing truly new to say. There is a financial hurricane churning offshore. It will be a bad hurricane, but like all storms, it will pass, leaving behind devastation and a playing field open to new competitors. The "experts" choose to ignore this hurricane. Fine by me.

The current working hypothesis is that after a series of radical moves by the Fed and the banksters, that confidence has temporarily been restored. I am hoping for a muddle-through scenario or even a significant rally in the DJIA to carry us into early summer. Then I expect some serious trouble as the Q2 numbers come in and the ugly deterioration of bank and investment firm balance sheets comes to light and we then get a very steep plunge in equity prices.

The following story does nothing to shake my fear of a medium-term problem:

UPS: "Dramatic slowing in the U.S. economy"
from Calculated Risk
...UPS's first quarter results illustrate the dramatic slowing in the U.S. economy. At our investor conference on March 12th, we told you that volume growth in January had been up 3%. But in the six weeks prior to the conference, it had been negative. We also said if these trends persisted through March, we would not achieve the earnings guidance we had provided for the quarter. [The] trends did continue. Many have become sharply more negative in the last two months. ... The great unknowns are the severity and the duration of the current economic slowdown. Many of our customers have tightened their belts resulting in a shift away from our premium air products to ground shipments...

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