The Nobel Peace Prize was awarded this weekend to the European Union (EU) for the stabilizing role it has played in a continent that was wracked by war for most of the last century. The prize was also explicitly awarded as a warning for what could happen if the EU were to abandon the unifying process amid the current turmoil.

I have been doing some detailed review work on the economy, both historically and going forward, for my presentation at Commonwealth’s upcoming National Conference. As part of that, I put together a chart that I thought was worth sharing as we move closer to the election. The blue line is business uncertainty, and the red line is the U-6 unemployment series. Note how changes in the blue line lead changes in the red line.

I have been getting some feedback that, although people like the blog, there is a sense that it is pessimistic. To which I can only say, pessimistic? Me?

Looking at today’s news, there really isn’t a lot that’s new. Election. China/Japan. Europe, Europe, Europe. Nothing we have not already talked about—a lot. So I am going to go back to yesterday to look at what I think may be a big story going forward.

When a major financial paper has not one, not two, but three stories on a particular topic, you have to assume it’s probably a big deal. The Financial Times had three stories on Walmart and American Express’s launch of a new product intended to take on the banks. The product is a separately branded, prepaid card that can be used as a debit card wherever AmEx is accepted. According to the stories, the card is aimed at lower-income households that are tired of or unwilling to pay the fees charged by most banks. Walmart wants to replace the bank for its customers.

I am very proud to announce that five members of the Commonwealth Investment Research team have once again been named All-Star analysts by Financial Advisor and Private Wealth magazines. This is an honor for the whole team, as well as for Commonwealth. Eight firms had analysts named: six firms each had one analyst honored, one had three analysts, and one firm—that’s us—had five individual All-Stars! We are very fortunate to have such a wide and deeply talented team.

Read the full story.

The reason the posts are late today is that I was sitting on a panel at a conference, discussing the role of gatekeepers in the industry. For those who don’t know, a research department at a broker/dealer typically reviews myriad products and provides opinions on them for the broker/dealer’s advisors. Investment products that are considered “very good,” based on the research department’s analysis, may end up being recommended. As such, we analysts are considered the gatekeepers that product sponsors would like to have on their side. At the very least, they’d like to avoid getting a negative review.

Much of the discussion at the conference centered on the opportunities that exist for product sponsors to create new products to better serve advisors and clients, which is all to the good. We love to see new and innovative products. Other discussion was less edifying, though; it had to do with how companies can essentially get in with products that are, at best, about the same as every other product out there.

The slowing global economy was the big story this morning. It was front-page news in the Financial Times (FT) and the Wall Street Journal (WSJ), with “IMF cuts global growth forecasts” and “Global Recession Risk Rises,” respectively. Although it didn’t make the New York Times (NYT) front page, it did make the front of the business section, with “IMF Lowers Its Forecast for Global Growth.”

The short version is that Europe continues to tank, China continues to slow, and the U.S. is at risk because of political uncertainty. The IMF is projecting continued though slower global growth, but that depends on a few criteria: Europe implementing the sovereign bond purchase program successfully and navigating its multiple other problems, China achieving a soft landing, and the U.S. not going over the fiscal cliff. A hefty set of assumptions.

Looking at the stories for the past three days, I see several that hit the protectionism meme from a couple of different directions. The first, “China’s ‘New Left’ Gets Louder” from the weekend Wall Street Journal (WSJ), does not initially appear to be a protectionist piece; it deals with the resurgence of Maoist thought in China, in opposition to the current policies that have created, per the story, inequality and social unrest. What suggests protectionism is the inward focus on the Chinese economic model based on international trade, as well as the presence of the New Left at anti-Japanese rallies. The consensus for free trade has come under threat in the West, as I have written before, but there are also other threats arising that come from the left and from exporting countries. When a trend becomes this broad, it can’t be shut down easily by one country or even a group of countries.

Not that most countries, particularly the U.S., are exactly trying to stop the protectionist trend. Another article from the weekend WSJ worth noting, “Parched in the West, but Shipping Water to China Bale by Bale,” talks about how alfalfa is sold to China in the context of a water shortage. Protectionism justified by resource shortages—you will definitely be hearing this again, and not just from the U.S. See also the weekend Financial Times (FT) story “Chinese tourists steer clear of Japan.” As I have been discussing for a while, this is (already) a trade war if we are lucky and a shooting war if we’re not. Another U.S. protectionist story hit the front page of the WSJ with “China Tech Giant Under Fire” and page 2 of the FT with “US businesses urged to shun Huawei over security fears.” Protectionism under the guise of national security is another story to watch for in the future, with technology as the leading edge.

The big story over the weekend was the surprising drop in the unemployment rate to 7.8 percent, which is the lowest it has been during the Obama presidency. Employment growth remained slow, at 114,000 jobs, but the big story there was that the previous two months were revised upward to much better levels than had been initially estimated. The papers had different focuses, as expected. The Financial Times (FT) cut to the chase with “Obama boosted by US jobs figures” and “Jobs report better than expected but labour growth still slow.” The Wall Street Journal (WSJ) led with “Hiring Notches Modest Gains,” followed by “Jobless See Little Improvement in Outlook” (p. A2). The New York Times (NYT) took the opposite tack, with “Jobless Rate Sinks to 7.8%, Its Lowest for Obama’s Term.” Nice to see when the papers wear their hearts on their sleeves.

Surprisingly, the drop in the unemployment rate led to charges, most visibly by Jack Welch, that the government had cooked the numbers. The NYT addressed that directly with “Jobs Report: Cooked or Correct” (p. A17) and “Taming Volatile Data for Jobs Reports” (p. B1); the articles concluded that the numbers were legitimately volatile, not cooked, and explained how the numbers are derived. Apparently, the last time charges like this were widely aired was during the Nixon presidency—an indicator of how wide the political divide is now.

I talked in the previous post on Europe about how the departure of a significant country could lead to the demise of the eurozone. Significant would obviously mean Germany, but also France, Italy, Spain, and, arguably, the Netherlands. These are the five largest economies in the eurozone, which together comprise more than 80 percent of the total economy. To break it down a bit further, Germany is 28 percent of the eurozone economy, France is 22 percent, Italy is 16 percent, Spain is 11 percent, and the Netherlands is 6 percent. Everything else amounts to 4 percent or less—in most cases, much less.

What is striking about this list is that only two of the big five are in good condition, fiscally speaking: Germany and the Netherlands. Combined, they account for 34 percent, or a bit more than a third of the total. All figures are as of 2011, as reported by Eurostat, and obtained from Wikipedia.com.