Dubai, Black Friday, The Economy, The Markets and more…

shoppingThe markets were rocked last week on the news coming from Dubai that they needed a 6 month moratorium on a big chunk of their debt. The biggest news about this is that it came as a huge surprise and sent the value of the debt crashing. It is not clear who holds all the exposure at this point but it will be a huge hit for sure. Financial stocks performed poorly as they should have. The real question behind it is who might be next? What other surprises are lurking in the shadows? If you have been reading this blog for a while you know that I think this credit crisis is far, far, far from over. The first wave of losses came primarily from exposure to residential mortgage product, but there will be much more coming from commercial mortgages and other assets. For more from the FT on the events in Dubai click here.

Thanksgiving shopping. Early reports are that sales over the weekend came in only slightly ahead of last year. “ShopperTrak, which measures the number of people going into about 50,000 stores, estimated that shoppers spent $10.7bn on the day after Thanksgiving, only 0.5 per cent up from last year. In 2008, ShopperTrak estimated that post-Thanksgiving Friday sales rose 3 per cent, although seasonal sales overall last year slumped.” ( as reported in the FT) With official unemployment above 10%, and all inclusive north of 15%, it is hard to imagine why we should see good strong numbers this season. I did my own due diligence this weekend and braved the malls and though it was busy, it was not crazy. People were definitely looking for deals and any store, with the exception of the Apple Store, where prices were full retail were empty. Sorry.. but it is likely going to be another disappointing year for retailers but I think the movement towards buying what we need is a good thing long term. In January 2008 I wrote “Sadly, there’s no short and easy fix to the longer-term problems created by excessive borrowing combined with rampant consumerism…..” (huffpo) and that is still true today. We cannot spend our way out of a problem created by too much spending.

The Role of the FED – Another must read from late last week was this oped written by Fed Chairman Ben Bernanke in the Washington Post. This is a big and important issue. Though there is lots of blame to push around as to who and what caused our current economic crisis, the FED has to be high on the list. Although I do believe in an independent yet accountable FED, one has to ask what is going to be different next time? With short term interest rates at zero for the forseeable future, one might ask if we are in fact planting the seeds for the next bubble. For more on the effects of zero rates read the latest from Bill Gross at Pimco. Click here

I have suggested many times that you subscribe to David Rosenburg’s newsletters but if you have not, do it now. ( formerly chief strategist at ML now at Gluskin Sheff) David is brilliant and he writes at a level of detail and insight that I can only dream of.

It should be an interesting week for the markets – keep those seatbelts fastened.

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