Another day without front-page crisis news—a good thing. The New York Times (NYT) did not have any economic or financial articles of note in the front section, while the lead articles in the Wall Street Journal (WSJ) had the Fed weighing more stimulus—old news. The Financial Times (FT) noted the yield record for U.S. Treasury sales—1.459 percent for the 10-year, the lowest ever. Kind of surprising this did not make either the WSJ or NYT.
The economic slowdown implied by record-low U.S. Treasury yields was consistent with the stories deeper in the papers. The NYT led the business section with the pending year-end fiscal cliff and the effect on the economy of related business uncertainty; reported to have gone up by more than half since April, business uncertainty could knock up to 0.5 percent off of growth this year. The effect of the disquiet over the lifting of the debt ceiling last year was given as an example of how uncertainty can postpone business decisions, including hiring. The NYT also had an article on how the Fed is divided over additional stimulus, creating even more uncertainty.
The FT and WSJ both hit on the bankruptcy of San Bernardino, California, and slowing growth in Brazil and China. The bankruptcy was reported to be the third in California in the past couple of weeks and was said to be due to labor and pension costs, symptomatic of many cities in California. Slowing growth in Brazil and China was detailed, with slowing consumer spending in Brazil driving a rate cut there and stress in the Chinese job market and high-end consumer spending cutting growth in that country.
The FT and WSJ both also covered the expanding LIBOR scandal. The FT detailed the effects of LIBOR on U.S. loans, with approximately 900,000 loans for $275 billion affected, while the WSJ talked about how the Fed is now looking to document its LIBOR action. This has moved from the front pages to the back—but keep an eye on it, as I expect it will be moving back to the front at some point. This is a big deal.
Sorry for the delay in posting this—I was in transit back from our Commonwealth Live! road shows in Seattle and Los Angeles, which were terrific.