How we get our MOJO back?

Has the US consumer lost its' MOJO

The market continues to prove encouragingly resilient in the face of significant supply. We continue to believe the significant market low made back in mid March was the low point of this horrific bear market we've all experienced, and more importantly need not be retested.

First ,the total collapse of the credit markets which exacerbated the move down, have to a large part been restored. Credit, in the form of Inter-bank lending, Commercial Paper, Mortgages, Student Loans, SBA Lending etc., has begun flowing. The velocity with which money is flowing needs further improvement and plans to assist this point are to be implemented over the next 4 to 6 weeks (TALF to include Commercial Mortgages and PPIP to purchase "legacy" assets from banks). Much work still needs to be done and the real test will be when the Federal Reserve is able to extricate itself and allow the market to function independently.

Second, the overwhelming global response, has well, been, overwhelming. After finally recognizing this credit contagion was not solely a US problem, the monetary and policy response has been significant and we believe for the most part, will prove sufficient.

Third, and equally important, is resolve. Global leaders have recognized how intertwined our economies have become. The need to work collaboratively is imperative and understood. The decoupling theory that had gained acceptance in some corners, have largely been discounted and dismissed. Toto has pulled back the curtain and instead of exposing the little old man, (not Alan Greenspan or Chairman Bernanke) we're greeted with more of a mythical Hydra. The US must come to the realization while we still get to sit at the head of the table, there are many more chairs stationed at that table. We should welcome the additional players.

The "other" stress test. The stress laid upon the shoulders of the US consumer to drive the global economy is no longer realistic, possible or necessary. The US consumer along with large financial institutions, is de-leveraging himself. After years of gorging himself on vacation homes,new cars, plasma TVs and i-things, with cheap and available funds, the piper has come a callin'. One goal of expanding US global trade, aside from lowering our cost of goods and services, was to help create and foster other markets for our goods. Success! China and India, recognizing the currently fragile domestic economic status of their trade partners, have focused on bolstering domestic consumption. China continues to channel money through state controlled banks for infrastructure projects and prop up real estate markets. India has followed suit with interest rate cuts and IT tax cuts to support their services based economy. In these two countries alone, we are looking at a combined population of 2 billion+ with a working class of 700 million+. China's working class alone is expected to top 700 million by 2020. Working class wage earners are consumers. Success!

This is not to signal the death of the US consumer or to cede our crown or silence our snorting, far from it. The US consumer will be critical to a resumption to growth of the US and global economy. We still have the best workers in the world. A few notes that point to a healthier consumer lie in the tax cuts and tax refunds to start. Not to be forgotten is the benefit of lower prices at the gas pump also act as a tax cut of sorts. Lastly, mortgage refinancings are not only keeping folks in their homes, it allows consumers to keep more of their paychecks. While we are experiencing a spike in the US savings rate, as evidenced by recent retail sales numbers, US consumers just can't resist a sale. Snort!

What I am looking for over the next few days and weeks domestically, is a continuation of the improvement in home sales, mortgage banking applications and weekly unemployment claims. On the global stage, since I believe China and India will be keys to signs of growth or contraction is a focus on their respective PMI's (which incidentally both crossed over the 50 figure signaling an expanding economy) and commodity imports.

I may currently own or plan on owning FXI-I-shares China 25 Fund and IFN-The India Fund.