2011Sep12 Going, Going...

"Nowadays, people know the price of everything and the value of nothing,"  -- Oscar Wilde.

Jobs:  

The government was trying to be the employer of last resort just as it was trying to be the consumer of last resort. The biggest problem with both of these initiatives is that they require an infinite supply of money. We clearly do not have that. As the government begins to get it's spending under control, mostly because of reduced revenues, the first thing to go is employees. This is a painful but necessary step on the road to recovery. It is part of getting the government out of the way.

Greece Banking: 

The economic crisis in Greece is morphing into a banking crisis. Greek bank deposits have declined for seven consecutive months dropping by €1 billion euros in July. It is very clear that no matter what the government does with sovereign tax collections, spending cuts and stop gap liquidity boosts, as long as the deposits outflow continues, nothing else matters.  It is very difficult to orchestrate a recovery when all of the capital is fleeing the country. The big worry for U.S. banks is that this begins to spread first to other European countries and then eventually it comes here to a bank near you.

Markets:

As regular readers know, we love ETF's. They are the primary means we use to build our portfolios. Exchange Traded Funds are very transparent, cost effective, and focused investment vehicles. It would appear that the rest of the investment world is catching on. 70 billion shares changed hands last month, an 86% increase from the previous month. In August, ETF trading accounted for 29% of all the US exchange volume. This level of activity adds much needed liquidity to the ETF market and makes using them much easier and cost effective.