“I can’t think about that right now. If I do, I’ll go crazy. I’ll think about that tomorrow.” – Chancellor Merkel
Actually, that quote is from Scarlett O’Hara in Gone With The Wind, but it may as well apply to the EU leaders who announced yesterday that the much-heralded summit meeting this weekend would be delayed until ‘no later than’ next Wednesday. The cited reason is that there are still some issues to be worked through before “final agreement” can be reached. I don’t know about you, but that sounds like the NBA labor dispute. If they knew when they were going to reach a final agreement, then they would have reached an agreement. Methinks this is more an admission that the issues aren’t so easily brushed aside as the early-week rumors of a resolution suggested. The good news is that this means we don’t have to trade down into the weekend and then up on Monday (or up into the weekend and then down on Monday) on the basis of expectations set and dashed.
Europe is still hogging the headlines. The Philly Fed index was great, printing +8.7 versus -9.4 expected (-17.5 last month), on strength in New Orders and Shipments. The Number of Employees subindex, curiously, declined. This has been a wild year for Philly Fed. In March it reached a 27-year high at 43.4; in August it reached a 3-year low at -30.7. Remember that this is a relative-strength indicator: respondents describe how conditions are relative to the prior month. The huge swings show great instability in the rate of growth, due to everything from tsunamis and nuclear meltdowns to Middle Eastern riots to large-scale government intervention. I wonder if the significance of Philly Fed right now is less about its level and more about its volatility. It must be hard to make long-term investment decisions in a business when conditions are changing so violently from one month to the next. Click to enlarge:
Philly Fed has not given much insight recently, but I wonder if the volatility implies something about visibility?
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