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  • The governor of the Bank of Spain on Sunday issued a bleak assessment of the economic crisis, warning that the world faced a "total" financial meltdown unseen since the Great Depression.

    "The lack of confidence is total," Miguel Angel Fernandez Ordonez said in an        interview with Spain’s El Pais daily.

    "The inter-bank (lending) market is not functioning and this is generating vicious cycles: consumers are not consuming, businessmen are not taking on workers, investors are not investing and the banks are not lending.

    "There is an almost total paralysis from which no-one is escaping," he said, adding that any recovery — penciled in by optimists for the end of 2009 and the start of 2010 — could be delayed if confidence is not restored. (

Key Reports (WSJ):
7:45 a.m. ICSC Chain Store Sales Index For Dec 20: Previous: +0.6%.
8:30 a.m. 3Q Final GDP: Expected: -0.6%. Previous: -0.5%.
8:30 a.m. 3Q Revised Corporate Profits: Previous: -3.0%.
8:55 a.m. Redbook Retail Sales Index For Dec 20: Previous: -0.7%.
9:55 a.m. Dec Reuters/U Mich Sentiment Index: Expected: 59.1. Previous: 55.3.
10:00 a.m. Nov Existing Home Sales: Expected: -1%. Previous: -3.1%.
10:00 a.m. Nov New Home Sales: Expected: -3%. Previous: -5.3%.
10:00 a.m. Nov Richmond Fed Mfg Survey: Previous: -38.
5:00 p.m. ABC/Wash Post Consumer Conf For Dec 20: Previous: 51.


"Do not be afraid, for behold, I bring you good tidings of great joy which will be to all people. For there is born to you this day in the city of David a Savior, who is Christ the Lord. And this will be the sign to you: You will find a Babe wrapped in swaddling cloths, lying in a manger. “
And suddenly there was with the Angel a multitude of heavenly host praising God and saying: “Glory to God in the highest, and on earth peace, good will toward men!”

                               Luke 2: 10-14

FX Trading – The Economics of Christmas
A lot can be argued to the point that the true meaning of Christmas is slowly slipping by us; because many people instead focus on seemingly more-important facets of this gift-giving holiday, or so it goes.

There are plenty of people out there venting their frustrations and pointing fingers on this topic. So I’ll leave you to go find those sermons elsewhere – in fact I encourage it. But rather than lecture you on why the real reason for Christmas has fallen by the wayside, let’s just talk about the consumption dynamic prevalent most notably during the Christmas season.

It starts the day after Thanksgiving. We know it as Black Friday. Consumers flock to stores in the wee hours of the morning in search of the best deals. You can’t blame them for being thrifty, but is it worth the (what must be miserable) experience?

My wife and I were picking up a few Christmas presents in Wal-Mart about a week and a half ago – at a time somewhere between the rush of early-bird bargain shoppers and last-minute desperation shoppers. Still, the aisles were absolutely packed with shoppers, despite the fact that everyone is so concerned about looming recession. (U.S. Economy Contracted 0.5% Last Quarter as Year-Old Recession Deepened from Bloomberg this morning.)

The sales figures following Black Friday were presented to be fairly optimistic, considering the circumstances. But when 2008 is finally in the books, will the numbers show us anything to be optimistic about? Unfortunately it doesn’t seem likely.

Jack and I have mentioned a couple of times recently (here, here and here) this importance: the US possesses the largest consumer force in the world. And it’s not consuming at anywhere near the breakneck pace the globe has come to expect. That’s gone and thrown global prosperity into a tizzy.

Demand has disappeared, and we know what that’s done. The price of crude oil has fallen by $100 per barrel in mere months, for example. And especially for export-centric economies, the consumer slowdown is hitting hard … and the pain will be lasting.

With a major change in demand follows a major change in supply. Adjustments in this side of the equation will need to be made, and soon. And when we think about this side of the equation, we think China.

As has been emphasized during the recent boom period, China has become, and still is becoming, a major influence in the global economy. Going forward this will not change. But while it influenced global growth on the way up, it can too influence global growth on the way down.

That’s where we sit today. The US consumer is off his game, and won’t be getting it back anytime soon. As we see it, stemming from this consumption drop-off, the coming months are going to reveal greater disappointment for China’s economy, and we don’t think it’s priced in yet. And that’s going to impact the globe in a big way.

It can be argued, that when all this is said and done, China will emerge in an even more influential position than where it stood before this global financial mess. But before it’s time to consider that potential, there’s a whole lot that needs to be hashed out before China is cruising down the road to recovery.

Jolly Old St. Nicolas is a generous man, but the economics of Christmas may not be so good to China this year. There’s a good chance there will be far fewer ‘Made in China’ presents under the tree. Perhaps, though, this will help us to revert to what’s most important this season and allow us to truly enjoy our time reining in the New Year.

Merry Christmas and a Happy New Year from Black Swan Capital!