Monday morning, April 15, the market is greeted with the news that the Chinese economy grew at a paltry 7.7% in the first quarter (disappointing, as expectations were for an 8% gain). This humongous miss (3/10ths of one percent) sparked a major sell off in commodities (including gold) and today (4/17) the media has morphed that into worry about a global slowdown, even worse, deflation. Whew, that was quick, all on a miniscule miss in Chinese GDP.
Further cold water was thrown on when the DAX (Deutsche Borse AG Germany Stock Index) got slammed for a 2.34% loss (most of Europe followed suit), maybe on comments from two German finance types. Bundesbank President, Jens Weidmann, said that the European debt crisis might take as much as a decade to be resolved. Then German Finance Minister, Wolfgang Schaueble made comments raising doubts about Germany’s commitment to the Euro. Add to that a rumor that circulated about Germany possibly losing its AAA rating. While you are at it check this story out on a European depression.
Finally, we have the lingering effect of the Boston Marathon terror attack and recent alleged ricin-laced mailings to Washington D.C., including one to the office of the President. This is a “Trifecta”, the stuff that the much-anticipated corrections are made of. A couple of quick thoughts on the “Trifecta”:
- China: One-month’s data does not make a trend. The 3/10ths one percent miss was less that 5% of the 8% target number (a tough target to estimate to begin with). Even though, this miss has triggered a huge sell-off in commodities and concerns about a global slowdown.
- Germany: The DAX was down 2.34% on the opinions (not fait accomplis) of two (regardless of how learned they might be) German officials and the rumor of a downgrade on German sovereign debt (a rating downgrade potentially given by agencies who one might recall, provided little help during the 2008 bust in the U.S. and whose downgrades of U.S. Treasury debt caused them to rally).
- Terrorism (which continues to be the focus of the national media), as horrendous and disquieting as it is, is something we will have to get use to…unfortunately, a new fact of life.
So, you tell me, is the trifecta a reason to sell shares in well-run, well-financed U.S. businesses… businesses offering reasonable returns vs. ten-year treasuries?
Let me know what you think.
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