Career News 24/7: This Trend Trumps Fed Tightening, Surging Commodities, And Softer Sales

Wednesday, May 4, 2011

This Trend Trumps Fed Tightening, Surging Commodities, And Softer Sales

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Wednesday, May 4, 2011


	This Trend Trumps Fed Tightening, Surging Commodities, And Softer Sales Are you concerned, like everyone else in the world is, by the central bank tightening cycle and the impact of surging commodities? Relax. Citi's Tobias Levkovitch argues that there's a much bigger, bullish force wending its way through the economy. Concerns about QE2 ending, higher energy prices and some moderation in ISM new orders miss the durability point. While the investment community may get distracted by the end of the Fed’s $600 billion in bond purchases this June, not to mention plausible softening in ISM new order figures from current elevated levels, the costs of corporate capital is far more crucial for determining capital spending programs as the return of investment capital is weighted against its cost. Indeed, worries with respect to higher gasoline prices undermining consumption should be offset by more jobs as a result of the eased lending standards. Thus, as the credit environment progresses more favorably, so should the decision making to generate returns. The chart itself is the inverse of banks tightening vs. non-farm payrolls. As long as banks continue to ease, jobs should keep being created. Read »

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