The Financial Landscape: U.S. Has an Economic Spilt Personality

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Let The Good Times Roll?: Profits Thrive In Weak Recovery, declared The Wall Street Journal in a front-page headline Monday: "While the U.S. economy staggers through one of its slowest recoveries since the Great Depression, American companies are poised to report strong earnings for the second quarter -- exposing a dichotomy between corporate performance and the overall health of the economy." Although the recession officially ended two years ago, economic indicators like unemployment, bank lending, and home prices still look grim. Corporate earnings, on the other hand, are shaping up quite handsomely -- the total profits of S&P 500 companies "are projected to rise 13.6% from a year ago for the second corner," the Journal reports. Reasons given for this state of affairs include "demand from emerging markets" and, more irksomely, "cost cutting during the recession," which "helped improve productivity and profitability."

Still, the corporate party may not last. The article ends on an ominous note, speaking of "dark clouds ... already on the horizon," such as rising raw material prices and continuing efforts by Americans to reduce their debt loads and keep down spending.

Or Hard Times All Over?:
On that note, The New York Times completely contradicts the Journal's projections, arguing that "a string of second-quarter corporate earnings announcements due over the next few weeks could confirm that companies are beginning to have a harder time":
Higher gas prices are soaking up already weak consumer spending, banks are struggling and labor costs may be starting to pick up, squeezing business's profit margins meaningfully for the first time.
The Times hints at consequent trouble ahead for the stock market, that other bright spot in an otherwise dim economic universe. Yet the article acknowledges conflicting predictions, quoting an equity strategist at JPMorgan (JPM) as saying, "We are going to get good news out of the corporate sector and markets can move higher," and noting last week's 5.4% rise in the Dow, which was "one of its strongest weeks in two years."

S&P Puts a Speed Bump on Road to Greek Solution:
One troubling development in favor of the Times' thesis was announced on Monday -- namely the news that the credit ratings agency Standard & Poor's would consider a rollover of Greek government debt owned by French and German banks to be a selective default. Such a rollover is a key component of the leading plan to restructure Greece's obligations, forwarded by France (a "self-serving plan" on the part of the Gauls, according to Patrick Jenkins in the Financial Times). S&P's announcement darkens the outlook for a quick and favorable end to the crisis. Earlier expectations that matters were moving toward resolution had lifted the market. S&P has been especially hard on Greece -- both Moody's and Fitch give the country's sovereign debt a slightly higher rating.

The FT presents a raft of eurozone-related news: Finance ministers will meet in Paris on Wednesday "to consider a sweetened rollover plan which will ease [the] burden on Greece;" several German economists and a legislator are challenging the constitutionality of the European rescue policy in the country's highest court; and renewed jitters over Greece have irritated world markets, sending the euro down 0.5% and lifting the dollar and 10-year Treasury yields. (Finland, too, is beginning to balk at eurozone policy: Citing Reuters, the FT reports "that it wants guarantees against participation in any new bailouts in the bloc and wants to see investors share more of the burden.")


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221 Comments

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Morris Cantonitis

Overdue For a Correction
That is.
Not our markets.
It’s the wall alley pigletts & Red Plague dUE for a CORRECTION and correctional facility;
and like no facility on this EARth
Yes Indeed.
Pursuit of EVIL Man in 2011, 201x, 201 & u will c what it brings u.
Storms RIP thru America.
EVIL begets EVIL in 2011, 201x, 201
What is an insider?
Werare333 and weareinsiders.
Yes. A pre press, pre printed release details wall alley & Red Plague PIGG daarck path.
U r on WANTED posters in Christ Kingdom baaaad piglets.
Satan conjures THE WORLD and Puts parts IN Place and takes Bounties ON ALL that CALL.

July 08 2011 at 9:36 PM Report abuse rate up rate down Reply
Patricia

spelling error

July 07 2011 at 2:39 PM Report abuse rate up rate down Reply
thefotoguy2009

If Odumba goes I bet the country would start to get better but you can't put a democrap in the oval office it needs to be someone who understands business because politicians have no freakin clue how to run anything except run it into the ground

July 06 2011 at 6:37 PM Report abuse rate up rate down Reply
peteycat915

Is having an ECONOMIC SPILT PERSONALITY anything like crying over SPLIT MILK?

July 06 2011 at 4:31 PM Report abuse -1 rate up rate down Reply
spike

Captialisms bible has only one commandment:Maximise profits ,minimise labor cost and patriotism be damned

July 06 2011 at 4:12 PM Report abuse -1 rate up rate down Reply
1 reply to spike's comment
bggdg

Actually, buyers of labor seek to minimize labor costs, while sellers of labor seek to maximize labor costs. This is sort of like buyers of milk (or any other product) seeking to minimize milk costs, while sellers of milk (or any other product) seek to maximize milk costs. In none of these cases does patriotism enter the equation.

July 06 2011 at 4:47 PM Report abuse -2 rate up rate down Reply
John

Really? A "spilt" personality...who writes and checks this crap?

July 06 2011 at 4:09 PM Report abuse -1 rate up rate down Reply
fUK U

People that work for a living and earn their own money always have a very different take on things than the Democrats.

July 06 2011 at 4:03 PM Report abuse rate up rate down Reply
Welcome Vic!

Most of these companies are international with old American sounding names. They go where the money is. While our pop stars do concerts for a dictator in Libia , General Motors builds and sells more cars in China than they do in the US, General Electric is the main exporter from Taiwan and ships to markets that are doing better than the US. The wealthy and the corporations have no loyalty to the US and if you have products in the US that cater to the wealthy, you can't go wrong because they're getting richer by the day.

July 06 2011 at 3:59 PM Report abuse -2 rate up rate down Reply
B INSANE OBOZO

barry has split the country... the worst i've ever seen

July 06 2011 at 3:56 PM Report abuse rate up rate down Reply
Ol Bob

"The recession officially ended two years ago". Get real. Reich Minister Goebbels would love that one, but most Americans aren't as gullible as the Germans during WWII. With the government spouting whoppers like that, It's no wonder the people are fed up with the politicians.

July 06 2011 at 3:50 PM Report abuse -1 rate up rate down Reply