Merry Christmas!
Ben Bernanke wasn’t kidding yesterday. We do still have “some way to go” before we know the recovery’s going to stick.
What we’re seeing today is the same thing we saw when Dubai World blew up the front pages over Thanksgiving; that the global economy is still feeling the after-effects of the credit crisis, and the ugly fallout can be seen across the globe, from small businesses in America to the Middle East to the very cradle of democracy.
Despite the meteoric rise this year in the major stock indexes like the DJIA and S&P 500, which comprise the biggest and bluest of the blue-chip companies, everybody knows small businesses are going to have to be a big part of any recovery in the United States.
So while it’s not having a big impact in the markets, this morning’s sentiment report from the National Federation of Independent Business is worth noting. The NFIB’s November survey shows its optimism index at 88.3, the lowest level since July and down from September’s 89.1.
“Owner optimism remains stuck at recession levels,” the group said. “The proximate cause is very weak consumer spending, better than a year ago, but that was pretty bad.”
Given the importance of small business to economic growth, “the downtick is troubling,” Ian Lyngen at CRT Capital says. Survey says small-business owners worried about very weak consumer spending and as a result, inventory investment plans are at very low levels. Plans to hire -3%, another negative sign for labor market as small business accounts for about 60% of job created.
Meanwhile, Greece is sending ripples through the EU, or rather S&P is. The ratings agency put Greece’s sovereign debt on credit watch, and hinted the nation could be in for a downgrade over its debt and budget problems. International bankers are huddled with government officials trying to craft a solution, rioters are out in the streets, and the country’s Eurozone partners, particularly Germany, have suddenly gone a bit silent over the business of pledging to support the Greeks.
Moving on to the Dubai story, Moody’s downgraded a number of Dubai corporations, sending another ripple out from that splash. Oh, and Moody’s gave the major economies got a warning, too, saying the US and Great Britain may test the boundaries of their AAA sovereign ratings due to deteriorating public finances.
There’s an old saying, a very old saying, beware Greeks bearing gifts, a reference to the story of the Trojan horse trick the Greeks used during the Trojan War to get inside the gates of Troy and destroy the city. After Rome became the preeminent power in the ancient world, the saying was amended, and became beware Romans bearing gifts. After this crisis has passed, maybe it’ll get amended again.
To something like, oh, I dunno, beware bankers bearing gifts.
(Madeleine Lim contributed to this post.)
