The Independent Market Observer | Outlook. Opinion. Insight.

10/17/12 – Ad Astra per Aspera (To the Stars Through Adversity)

Written by Brad McMillan, CFA®, CFP® | Oct 17, 2012 2:28:57 PM

An interesting couple of days in the news. Yesterday, the lead story in the Financial Times (FT) was “Fears over US banks’ mortgage dominance,” which discussed how the banks are making too much money off the refinancing wave. I have to say, it is interesting to note the change that has occurred when we see this kind of article, as opposed to the ones that focus on failing banks. This follows earlier articles about higher-than-expected profit gains at J.P. Morgan and Wells Fargo and suggests that the U.S. financial system is actually getting to be in pretty good shape.

Now, for the aspera. The big news today is the surprise resignation of the CEO of Citicorp and his immediate replacement by another executive. The story made the front page of the major papers, as it should, because it’s a little strange. Supposedly, the board has been discontented for a while, and the CEO just decided to resign. Certainly possible, but it does not usually play out that way. This sort of suggests that there is something else going on, and if so, it should emerge shortly. Perhaps the U.S. financial system, at least as far as the large banks go, isn’t out of the woods yet.

The same kind of good news/bad news played out for the other meta-stories as well. Starting with Europe, today’s FT had “Momentum builds for aid to Madrid” and “Rifts emerge as Berlin puts fiscal union center stage” right next to each other on page 4, while yesterday’s Wall Street Journal (WSJ) had “Spain Outlines Bailout Path” right next to “Sparks Fly Over Portugal’s Tax Plan” on page A11. For China, we had “Price and money raise hopes for Chinese revival” in yesterday’s FT (p. 4) and “Signs of Recovery Buoy Chinese Exporters” in yesterday’s WSJ (p. B1) versus “In Reversal, Cash Leaks Out of China” on the front page of yesterday’s WSJ.

In the U.S., slow progress continues as well, with the industrial sector reporting an uptick in production and capacity utilization, both good signs, and housing construction ticking up 15 percent to the highest level in four years. The bad news is that the U.S. Postal Service continues its slow bankruptcy, per an article in today’s WSJ (p. A2), and corporate earnings continue to slow, per “IBM Revenue Drop May Signal Cuts by Firms,” also in today’s WSJ (p. B3).

Overall, lots of news but not a lot of real information here. The one story I particularly want to note is completely noneconomic. The New York Times has “New Planet in Neighborhood, Astronomically Speaking” (p. A3), about the recent report of a small rocky planet found around one of our nearest stellar neighbors, Alpha Centauri B. This planet is not in the habitable zone, but significantly raises the chances that similar planets will be found that are. The search for another Earth just made a big advance.

Ad astra per aspera!