Tuesday, May 03, 2011

Which Way Out Of Recession Is Up To Bond Market

Which way do we go from here?  Read on to find out. 

The good news is that the number of idle container ships is at its lowest level since just before the recession hit.  That's a global figure indicating a healthy world economy with plenty of consumer spending pushing orders for finished goods.  The U.S. shares in the good news with steadily rising factory orders and NAFTA cross-border trade way up in February

The bad news is that diesel prices keep climbing.  That's not good for trucking within NAFTA if carriers can't pass on fuel surcharges (yeah, YRCW, I mean you).  More disturbing is that the U.S. wants to play chicken with the international bond market by seeing how long it can delay raising its debt limit.  One of these days, Asian central banks are going to call that bluff.  I won't go long Treasuries again until after that momentous occasion. 

The good news up front is due to ultra-low interest rates and more consumer spending enabled by foreclosure delays.  Neither of those forces are sustainable after the bond market takes a hike from Treasury purchases. 

Full disclosure:  Still no position in YRCW.