Noise and Signal in the Economy

Lately, there have been crazy swings in the stock market caused by technical glitches (perhaps), and possibly fears of default on sovereign debt by Greece... and fears of the spread of this "contagion" to the weaker economies in Europe: Portugal, Spain, Italy and Ireland. While I admit the prospect of a lapse back into recession by the European Economic Union is spooky, one shouldn't immediately reach for the panic button.

1. Flight to safety of US bond market will keep bond prices high and yields low... meaning, we can keep financing our own debt at reasonable interest. Consequently, long term interest rates on mortgages should stay lower even after the government pull-out of the mortgage market.
2. This will provide positive feedback to the (slowly) recovering US real estate and construction industries.
3. Stronger dollar means your money will go a further.
   
4. "It's the jobs, stupid!" (I'm paraphrasing Bill Clinton's campaign manager's mantra during his last re-election bid.) US jobs data continue to improve. Check it out.
5. Improving jobs numbers will reinforce economic recovery as consumers make a bigger come-back and demand increases. US auto sales were up 20% in April.
   
6. Increased demand will reinforce jobs.
7. Asian economies are doing well, which is good for US exports, because most exports are to Asia, not Europe. According to the Wall Street Journal, GM's China sales rose 41% in April.
   

Sure, gold is up around $1,200 an ounce. Banks are still shoring up their balance sheets and capital reserves and being stingy with loans to certain sectors (ahem! truck loans!) This too shall pass. The fundamentals, if not strong, are at least improving. I'm cautiously optimistic that the meaningful data are in jobs and housing and retail sales data, not in stock market gyrations.

What are the effects of the economy on car hauling?

Ford economist Emily Kolinski Morris said the recent growth in U.S. gross domestic product—it rose 3.2% in the first quarter—is supporting a recovery in car sales. Ford is forecasting that 2010 sales industrywide will rise to 11.5 million to 12.5 million vehicles, up considerably from last year's 10.4 million. "I would be very surprised to see the sales pace tail off," she said in a separate conference call. -- Wall Street Journal: May 4, 2010