All Quiet on the Economic Front

It was a surprisingly quiet week, given that it was the final week in the 1st quarter of 2008.  Typically, markets tend to be quite fidgety as fund managers and investors shift their cash around to make their balance sheets look nice.  However, we saw a decline in volatility across both stock and fixed-income markets with very few earth-shaking events.

 February’s existing home sales numbers came in 2.9% better than January’s read, implying to some that we may be nearing a bottom in the housing market.  I personally doubt it.

 Consumer confidence, a great indicator of future spending and economic activity, reached a 35 year low last week.  The decaying of consumer wealth coupled with a stagnating job market is really driv­ing many to tighten their financial belts and start shifting their focus to savings.  This unfortunately does not bode well for an already slowing economy.

 Secretary of the Treasury Henry Paulson gave a strongly-worded speech today proposing a massive overhaul of our country’s financial systems.  He cited the need for greater regulation at every stage of investment origination and securitization.  He also blamed the excess complexity of financial instru­ments today for their role in creating this economic downward spiral.  Sadly, in an election year it is very difficult to totally revamp a backbone system within our economy with massive bureaucratic up­heaval.  It was a gutsy move, no doubt, but it will most likely have little to no impact on the near-term.

 One of the more controversial proposals within the speech was to provide the Fed’s regulatory author­ity with a more pervasive jurisdiction known as a “roving oversight role”.  Basically, any business in this country that remotely had an opportunity to disrupt the overall economy would now have to an­swer to the Fed.  This suggestion reminds me a lot of Communism: great in theory, terrible in practice.  Having one body wield that much power over a bunch of businesses it may or may not understand seems to be a very silly idea.  We’ll see if it catches.

 Lehman Bros., a major investment bank, is in the process of raising 3 billion in capital in order to quell and fears that they may be experiencing a liquidity crunch.  Quite possibly nothing to be concerned about, but it may be indicative of problems on the horizon.

 That’s about all you need to know for last week.  It seems like a scant amount of news, I know.  But it’s nice to have a breather once in a while.

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