With the beginning of the new year….the name of the game is to monitor economic data.

The fallout from the unscrupulous lending activities and sub-prime issues that have come to plague the liquidity of financial activities began back in the last summer of 2007.  At the time, the fallout was limited to reverberations in the financial markets (e.g. Stocks and Fixed Income) and many were scratching their heads given that economic data was depicting continued growth.  As the Doc advised at the time however, the economic fallout from these issues would begin to surface some time down the road.  Well that time is now, and the key to determining the true fallout from the financial hocus pocus of the past will revolve around economic data releases. 

Case in point was the astonishingly weak employment report that was released last Friday.   Early rumors seemed to favor a strong showing of job growth; however the numbers were simply shocking on the weak side.  In fact, this shouldn’t have been a surprise from a hind sight perspective, as more and more indicators were depicting lower than expected results.

Remember, the problem is not just the value of SIVs and CDOs but the stifling lack of borrowing and lending activity in the marketplace given the result of enhanced risk and uncertainty over the health of balance sheets.  Another major reason of course, is the deflation of the housing bubble that has hit the pockets of US consumers.  2007 was one of the first years in a decade without an asset bubble that provided consumers with excess disposable income to spend.  2008 should reveal the results of this.  Goldi Locks ???  Hey, anybody out there with this nonsense anymore.