Prior to this week’s G20 meeting analysts are reported as saying more than ‘ritual support’ for open markets may be needed to steady a ‘teetering economy’, and to avoid a ‘damaging retreat to protectionism’ – see article. Some economists are reported as saying that without a concerted strategy for a revival, a rash of go-it-alone stimulus packages and industry bailouts could lead to trade wars. The World Bank is reported as saying that 17 of the G20 countries – including most of the major powers – have resorted to protectionist measures since declaring their opposition to such action during a November conference in Washington.

I have been saying on this blog for some time that countries will invoke ‘protectionist measures’ in circumstances where they believe they must do that to protect the well-being of their citizens. It will surprise me if things turn out otherwise. Simply put, I think that like individual people, in the end countries ‘have to do what they have to do’ to survive in the first instance, and enhance and protect as best they can the lifestyles of their citizens in the second instance. I think it naïve to think otherwise, and look forward with interest to what is said at, and develops out of, the upcoming G20 conference. I think that following the conference proceedings closely is critically important in the current economic environment.

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I love reading headlines – and then comparing them to the content that follows. This morning an article proclaims ‘Global stocks set for best month in over 6 years’ and then quotes % increases in world stock market indexes. The article reports that the MSCI World index strengthened 0.6% and was on course to record its biggest monthly rise since October 2002. But the global stock index is still down more than 12% in Q1 2009 after losing 22.7% in Q4 2008.

The only reason I made this brief post is to once again suggest readers not focus on % changes in this environment, but to focus on absolute numbers. Percentage changes can make things appear much better than they really are when the base from which the percentage is measured has deteriorated significantly in a short period of time. Accordingly, I suggest you read percentage change statistics with caution – and always consider changes (up or down) in the context of absolutes.

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Please help me by commenting on this post if you have a rational answer as to why the U.S.$ is stronger today in the face of The White House’s apparent position vis a vis Chrysler and GM – see my post earlier this morning. An article in the last few minutes titled ‘Gold falls as stronger dollar reduces metal’s appeal’ suggests that gold’s appeal as an investment alternative was reduced today as the U.S.$ rose on currency exchange markets “as investors fled equity markets amid renewed fears over the auto sector”.

I have great trouble following the logic. I would have thought – setting gold and its pricing aside – how the failure of either Chrysler or GM could be other than negative for the U.S.$. I have concluded that the people who write about these things must think in terms of ‘hour to hour’, may not know who Warren Buffett is, and certainly don’t understand his investment philosophy.

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World stock markets dropped significantly overnight, with the decline being attributed to G20 meeting pessimism, global banking sector news, and renewed U.S. auto industry concerns – see article. European markets (France, Germany and London) were off between 2% – 4%, while overnight Asian markets (Hong Kong, Japan) were both off by about 4.5%. The reasons given for this were:

• skepticism by many European participants in the G20 meeting that begins Thursday that the meeting will result in a coordinated incremental financial stimulus has been reported;

• the CEO’s of both Bank of America and JP Morgan Chase are reported to have said business conditions had become more difficult since they reported being profitable for January and February. Concurrently Spain announced it was bailing out Caja Castilla-La Mancha (its first bank rescue in 16 years), and there were reports UBS is terminating another 8,000 jobs;

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Possibly Related Posts:

• More On Greece!
• Christine Lagarde – Listen Between the Lines!
• World Leaders – Greek Emotion?
• Roubini at Davos!
• The Baltic Dry Index!