As the Cyprus banks reopened this week the damage has already been done. The banking system is made up of a tremendous number of rules and regulations but it comes down to confidence. If you are not confident that your money is safe you take steps to try and make it safe.
That describes the depositors in Cyprus. They are lacking confidence when the ECB and IMF along with the EU agree to take depositors money to solve the banking industry’s problem. Even when that decision was reversed the damage was already done.
Think in terms of the bank run during the Great Depression here in the U.S. The banks closed and struggled for years thus causing a collapse in the economy. FDIC insurance is there to give people confidence in putting money into the banks and the banks in turn loan it out to oil the machinery of the economy.
The EU and its cohorts short circuited confidence and it will spread to other EU countries. That means the EU will likely slip deeper into recession as depositors take money out and the banks that worry about depositors doing just that hold on to the cash by not lending. The trickle down result is less economic activity.
The lesson here is, if you want a strong economy do not mess with people’s hard earned money! PERIOD!
Today’s Stocks and Topics: (SIX) Six Flags Entertainment Corp., (GIS) General Mills Inc., Jobs Numbers, Retirement Savings, Taxes, (HD) Home Depot Inc., (LULU) Lululemon Athletica Inc., I-R-A, (TAL) TAL International Group Inc., Investing in the Market.
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A spike in jobless claims puts an end to the week over week of improvement, giving us the impression that the job market is finally gaining traction at a level that will put the unemployed back to work soon. Claims rose to 357,000 from 339,000. Still 357,000 new claims is not a bad number after months of well over 400,000 during the recession and after the recovery. Next week the jobs report is suggesting 200,000 new jobs were created in March. Let’s hope for more but it is doubtful.
A final revision of the 4th quarter GDP number came in at an increase to .4% from .1% from the first revision. As a reminder, when first reported it was a negative number back in January. Still the hope was for a .6% increase.
It is hard to decipher the meaning of the massive amount of statistics released every week and most of the data is backward looking. Therefore, does it help us in determining where the economy is going thus where the stock market is headed.? We concentrate on leading economic indicators and inside the Durable Goods report this week there was a hint of a better economy. However, the Jobless claims report, at least for this week, took that hint away somewhat.
That economy is still going to struggle but it is still growing.