The key to global markets will be U.S. rates,humour me when I say REAL INTEREST RATES,not just interest rates. Real Interest rates= nominal interest rates- the current rate of inflation( which can be meaused in CPI or chain deflator). Current real interest rates are the highest since Jan 02, in the middle of the last economic downtrend.This means that due ti inflationary guages not declining as much as had been expected, the cost of capital is higher than most people realize. it also means that the FED's accomodative policy has been changed to restrictive, a high cost of capital restricts economic growth.It also means that the current slowdown should accelerate as cost of capital reduces incentive.This might not occur for a couple months as there is always pent up demand (albeit not that much) at the beginning of a new year, but if the acceleration of the slowdown is seen in the data as early as the beginning of FEb., we are headed down like a rock. The recent pullback in commoditys won't help inflationary pressure just yet, it will take awhile to sink in, also the services sector, the largest component of the economy has had pricing power since the 02 bottom and they still do.
I wrote on the other board about a month ago, that 10 states are already over there loan concentraion guidelines due to the RE bubble. Expect to see plenty of bankers doing the perp walk this year. If interest rates are going to be lowered this year,some cracking down is in order. (JMHO) CHUBBIE
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