The Financials Review
For the week of August 1, 2011
By Frank LaMantia
A deal has been reached in Washington and it looks like a $2.1 trillion increase in the debt ceiling has been implemented. Also, a 10 year 1 trillion deficit reduction between defense and non-defense spending will help lower the overall deficit.
In December another vote about $1.5 trillion in cuts could occur. Typically, this causes downward pressure on interest rates which in turn could push bonds down as investors look for risk in the market.
HSBC will be cutting 30,000 jobs worldwide by 2013 and could sell up to 50% of its retail bank branches. The company has over 296,000 people worldwide but is still hiring in Brazil and Mexico because of their growth rate.
The big question is the debt ceiling a small fix or is it just a Band-Aid? This trader does not think the government can stop spending. The United States is known for its efforts in which they spend money to help other countries in need. Are they going to just say no when a dictator loses their mind? Are they going to say no when another tsunami or earthquake hits? The country might have to have cuts on every level of government and not just cherry pick the places where it might not hurt the most. Raising taxes on those that spend could just make things worse. The United States' rating can be cut even though a path has been built. Is the country's reputation tarnished?
Peabody and ArcelorMittal came with a hostile takeover bid of $4.7 billion for Macarthur Coal. Macarthur is taking the offer to shareholders and thinks it is an attractive offer. Do not overlook the U.S. Dollar Index which could make a comeback to the 76 level. Currently, it is up 0.03 to 73.77 and its 52 week high was 83.56 and reached its low on May 4 at 72.70.
***Chart courtesy Gecko Software
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