1. European Sovereign Debt? is a greater burden on the economies of Italy and France than the debt overhang in? the U.S. Italy has $2.46 trillion of debt to a $2 trillion GDP. As Vice President Biden puts it “We did our bailout. They’ve got to do their bailout.”? The posturing has been limited to letting nations borrow cheaply to add on more debt so as not to default.
2. The ramification? for the US? from Europe is? a reduction of 1% growth in US GDP– which means much less growth than might have been expected. This, in turn, puts added stress on valuations in our financial markets, where? multiples of earnings are expected to slide as investors run away from risk-on assets.
3. Continued pressure on the? earnings and book values of both European and US banks. This can be seen in the way bank shares have traded this year, with global banks getting pounded, and only regional banks with strong balance sheets being favored.
4. Continued? selling pressure on the prices of key commodities like oil, copper and iron ore due to expectd slowness i the global economy.
5.? The imbecility of extending the payroll tax deduction for only two more months– a horrendous sign of? political weakness with dire economic ramifications.
6. Residential housing market still mightily impaired and not expected to recover for another 3 years. Still many millions of homes where mortgage debt greater than the market value of the homes.
7. Antipathy individual investor for long term equity investing. Rise of the short-yterm investor such as hedge funds using leverage, requiring volatility, better informed than the public investor.
8. Expectation reduction $1.2 trillion from US budget over next 10 years. Can only mean less money in circulation, less income to invest, lower GDP, less economic growth rate. This is the reality being denied by most investors.
9. Overall theme of? deflation, deleveraging can only mean lower asset prices.
!10.? Chance of social unrest in China, upheaval that affects move to consumer economy,? and lack of lersadership from 10% of global economy.
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