Beaches...

Whose beach is it?
As the weekend passed, the world remembered the D-Day landings where Obama seemed to snub the rather bemused French President, preferring to visit the Louvre alone with his family rather than share table with the hyperactive and camera-hugging Sarko. Not sure who should be more embarrassed though, with the battling Gordon Brown unfortunately proving that the UK leadership is indeed head-over-heels with the US leadership by misnaming the world-renowned D-Day landing site of Omaha Beach, instead anointing it “Obama Beach” – I know, they all used to compare Tony Blair to a poodle when dealing with the US and Bush, but Gordon has already taken it upon himself to dedicate sites to the still fresh-in-the-oval-office President. He could have waited until Obama at least hit this first 200 days, no?

Following the speech in Egypt and the call for a new beginning across the Islamic world in its relationship with the US, Lebanon’s elections have gone the way of the pro-Western block. The Hariri clan and his followers come through with a greater majority than before, paving the way for what one would hope is a measured period of peace and (tourism) enhanced prosperity. The majority block that they have gained will lead to a stronger setting of policy and hopefully less cause for political stagnation, but questions still remain over the demand of a veto by Hizbullah, and the next week or so will prove crucial in the setting-up of the unity government, with a careful and watchful eye on the intervening and (in the past troublesome) influential international powers. One would think however, that after all the talk of democratic elections and promises to “commit to the will of the people” so highly voiced by HIzbullah, any attempt to reject the validity of the vote now would smack of hypocrisy and threaten a severe negative backlash.

Markets – steam….ru..’ning…ou..
A lot of the weekend press, including a much-publicised interview by the incumbent Nobel Economist, Paul Krugman, trying to understand whether or not this rally still has legs and if the job-market in the US has indeed begun to bottom-out with the non-farm numbers on Friday. The rise across global markets has of course been more than impressive and surprised many with its longevity, but some signs of a loss-of-steam as we head into the customary lull-of-summer now beginning to manifest.
Most markets are slightly off today, with Asia roughly off between 1.5%-3%, the only major stand-out performers there Vietnam (again, and now returning 60% YTD!) and the strangely totally uncorrelated Japan markets (NKY +1%). Europe has sold-off across the board, -1.5% avg.
The unexpected (downward) market reaction following the better than consensus non-farm payroll numbers in the US last Friday continuing at the start of the new week, with a deceleration in commodity prices as the US$ returns to some form of strength versus GBP (+1%) and Euro (+1.5%). Gold has fallen back below the $950/brl level, in conjunction with the dip in Oil back to $67 after making the charge to $70/brl and falling short as some downward pressure exerted itself with expiring contract.
A slightly worrying dip in the Baltic Dry Index on Friday and today, bringing the 6-wk run to a halt – this did not help with talk of all the “smart” money already starting to come out of those markets that have seen a return to form through a re-discovery of risk appetite.
US futures are trading lower at present and accelerating in their fall ahead of the open (DJIA -80pts, S&P -8.8pts) , with little help from talk of stagflation possibly haunting the US in the latter part of the year with the continued fall in Treasury yields, and lack of domestic recovery.

Recovery…military style
A few of the more negative and doomsday-loving pundits out there have consistently predicted the only proper end to the economic recession will come on the back of another (God forbid) war. The US has been in three wars in the last seven years, and certainly seems intent on continuing the “war on terror” in Afghanistan and other “rogue” areas. The more depressingly darkly pessimistic out there are pointing to the last depression in the 30s, and citing the Second World War as the real point of recovery. They argue that the “New Deal” FDR put into place on his ascension to office was not able to take its full effect and hence cannot be argued to have been the silver bullet. Rather, the extra effort in manufacturing and domestic spending through the building and sustaining of the ultimately victorious war machine was the global economic saviour, they argue. US’s dominance following the end-of-the-war (as much of Europe and Asia re-built itself) cited as an indication of the economy returning to full-strength and putting the depression-era behind it.
An international peace institute that monitors military budgets has pointed out that global military spending rose 4% in 2008 to a record $1,5trn – that’s a 45% increase since 1999. Much of the spending has of course come from the US (58% of global spending) and the several wars that were launched during the Bush years. In a worrying trend, China has accelerated its spending, tripling the amount over the last decade. Russian has also once more focused on expanding (also tripling spend in the last decade) its arsenal after years of neglect
The numbers alone are equal to much of what is being funnelled through to the economic system as part of the global effort to stimulate economies out of recession. Worse than that, if you believe much of the conspiratorial writings out there, there is a distinct possibility that the number of “peace keeping” missions and other such “battles against terror” will continue to be forged as we get deeper and deeper into a longer lasting recession, verging on the edge of a global depression. The recent rally of emerging markets and the Decoupling v.2 story are faint glimmers of hope that a de-linking from the predicted continued demise of the US economy may occur, but if things don’t get better soon, GM’s bankruptcy and other corporate failures won’t be our biggest problem by a long margin.