Farrell: Parade Day and Agreeing With Abby Cohen

This will be a shorter note today. My hometown is going to have its annual Fireman's Parade. Local school groups and fire departments (mostly volunteers) and such proudly gather at one end of Katonah and march a few hundred yards to the other end.

To make it last for more than a few minutes most of them run back and do it over again. Order and formation are very abstract ideas for this which is one of the things that makes it so special. Small town America at its best and only a one hour train ride from New York City.

I will leave work early today and our granddaughter, Lola Jane, and I will be taking the train up together. We never missed it when our kids were little and she shouldn't miss it now. She will be a City kid and far more comfortable riding the subway when she is older than walking in the woods: unless we show her the rural side.

And not just the rural side but the down-home, simple things that have been part of American life since its inception. Come by next year. It'll take you back for a moment to a far simpler time and place. Pop the streamers and eat the snacks and remember. It's good for the soul.

Weekly mortgage applications decreased 12% last week. The purchase index (as opposed to refinancings) fell by 5.7%. The four-week moving average for the purchase index is now 31% below the month-ago four-week moving average. This is also the fifth week in a row this index has fallen and is now at its lowest level since 1997.

The expiration of the home-buyer tax credit has clearly had an effect and it looks like future home sales, both existing home and new home, will be weak for awhile. This, despite the fact that the 30-year fixed rate mortgage, is about 4.8% and has been below 5% for five consecutive weeks.

Ben Bernanke testified before the House Budget Committee on Wednesday, and he either said or implied interest rates will be near zero for quite some time (I figure until late 2011); the recovery will continue at a moderate pace; the employment rate will be reduced slowly; and inflation will remain subdued.

All of this assumes that private final demand will pick up sufficiently to offset the impact of fading fiscal stimulus (my interpretation). My feeling that GDP growth in the second half of 2010 will be moderate (about 2%) remains unchanged.

There was good news in the wholesale inventory report. Wholesale inventories increased 0.4% last month, and that was the fourth straight monthly gain. Wholesale sales rose for the 13th consecutive month by 0.7%. The hope is a steady rise in demand will prompt businesses to step up orders and restock depleted inventories. That would consequently give a boost to factories, prompting them to increase hiring.

Renowned strategist, Abby Joseph Cohen, of Goldman Sachs was quoted on the news ticker, that she expects no double-dip recession for the United States, but growth to slow in the second half of 2010. That has been our thesis at SOLEIL for quite some time. She added that with the recession over, equities, in general, should do well, and that the Federal Reserve will wait as long as possible before raising interest rates.

Added to those favorable comments, were statements from GE, Navistar, Applied Materials, and Texas Instruments that business looks a bit better. The Fed released its Beige Bookat 2pm on Wednesday, and the headline is that the economy has improved in all 12 districts. But since I am cutting out early today to play with Lola Jane, a more detailed look will have to wait until tomorrow.

China reported exports grew 50% last month from a year earlier, and that new loans in May were higher than estimated. That's good news for China's recovery and should dispel some of the concerns that have been kicking around lately about the possibility of a very sharp slowdown in the Chinese economy. The rest of the world wasn't quite so happy. Germany's public sector workers called for mass demonstrations to protest the government's plans for drastic cuts in social spending.

This is the first sign of an organized backlash against the austerity package announced by Angela Merkel. Opposition leaders are upset at what they call the "social injustice" of the program. It is estimated that 37% of the program will hit social spending, and only 7% will affect banks and the financial sector. This is not a good time to appear to be favoring banks.

Tens of thousands of civil servants across Spain joined in a protest over public sector pay cuts. The organizers called for the resignation of Prime Minister Zapatero. In the latest news from Greece, the Greek prime minister is travelling to Libya for talks with Gaddafi (an international dirt bag) on possible investments in Greece.

This move smacks of some degree of desperation as Athens struggles to overcome its fiscal crisis. And Hungary continues its 'Danube shuffle' to try to get out of the spotlight after drastically mismanaging its public pronouncements about its fiscal condition. The prime minister is now insisting, "In the current situation, the state has a serious responsibility to defend the budget balance." There's nothing like having your currency fall off of a cliff to give a government some religion.

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