Economic and Ecosystem Recap

The seemingly never-ending Eurozone sovereign debt and bank stability issue moved a step closer to resolution, and at the same time a step further away.  That’s been the history of this issue from the first, and it continues to cause concern for the global economy.

Ireland, in the most trouble after Greece, accepted IMF and EU help over the weekend, and that news was heartening to those who feared a sovereign default, bank failures, or both.  But at the same time the move likely rewarded speculators who’d been pressuring Irish bonds all along, and that may induce them to try the same tactic with Portugal and Spain.  That risk, combined with the classic “sell-on-the-news” Wall Street mindset, has weakened markets a bit as of this (Monday, November 22) morning.

There’s also some indication that China may be looking at its own policies, and anything China does sends ripples across the rest of the world’s markets since China is the hottest economy right now.  China has been taking some steps to curb inflation, and it has now seemed to signal that it might allow the Yuan to rise against the dollar and thus against other world currencies.  That would make global imports to China cheaper, helping other economies.  Thus, the markets at least are likely going to be whipsawed by the dual issue of currency; a weak Euro based on bank/sovereign debt issues and a stronger Yuan based on China policy.

Consumer research has now indicated that the average family in the US will spend about $75 more for the holidays, which would be good news for the economy in general and retailers in particular.  But even that won’t restore the good old days; the last time that spending per family was at or below the current level was in 2002.  Still, positive movement is better than the alternative, and stronger retail sales for the holiday season is critical in running down inventory levels and sustaining manufacturing growth.  Stores have generally pulled out all the stops, with longer hours, Thanksgiving opening, free shipping for online sales, and early discounts.  The general view in the retail industry is that this is essential in building holiday momentum.  Some retail experts believe that the notion of having early-season pricing at list and discounting as you get closer (or beyond) Christmas is self-defeating, and our model suggests that inducing earlier bargain shopping will increase spending by customers.

In the regulatory world, the FCC is said to be working behind the scenes to lobby for legislation on net neutrality, but in the most recent public comments on the topic, one of the commissioners was quite clearly promoting the notion that the FCC should act to reclassify broadband as a telecommunications service.  Whether there’s interest in legislation may well be moot since Congress has had little success in passing telecom legislation since 1996, and since the topic has become more complicated with the dispute between Fox and Cablevision.

In telecom, there are reports that NSN might consider an IPO to provide an exit for its somewhat-in-disagreement partners as an alternative to a restoration of their pact or a complicated private equity deal.  We’re not sure how this would fare given NSN’s market position; it’s not that the company isn’t large but that it seems stuck in neutral at best with respect to growth and market share.  We think NSN could be a powerhouse based on its objective assets, but like many of the Euro-giant firms it seems to have a problem with positioning itself in the new telecom market.  It’s not an easy place to be these days for sure.

Leave a Reply