On this day before American elections, a dramatic plunge in US factory activity has not upset the equities markets overmuch - not even the plunge in automobile sales, with GM down 45%, Ford down 30%, and Toyota North America down 23%. Also, Mercedes and Porsche are off 34% and 50%, respectively. (The story is still being updated so the GM, Mercedes, and Porche numbers which curently appear only in links to it may not be in the actual article. However, they are the published numbers.) Similarly, the record low manufacturing numbers in China is being taken with a degree of serenity, for the moment, in equities.
But shipping continues to fall, with the Baltic Dry Index sliding today down to 827. At this point, I am lead to understand that the index implies that there is literally zero profit in shipping - the spot price is essentially the operations cost without markup. I can't find cost numbers this low previously (tho' my data only goes back to 2000), and the index is either at or below the trough established after the terrorist attacks in 2001. Predictably, shipbuilding interests are taking it in the teeth.
Gordon Brown and Nicolas Sarkozy are calling for a new Bretton Woods-type currency arrangement. I'm not sure how a Bretton Woods 3 would work in the original BW model. Brad Setzer is thinking BW2 may fall apart in a bang, but not the way he and Dr. Roubini thought it would (with a dryup of foreign interest in US treasury debt), but maybe he should stick to his guns - Karl Denninger points out the beginnings of exactly that failure. However, the US dollar continues to climb back out of the pit it made last Thursday. LIBOR rates and TED spread remain, however, uncomfortably high - still well down from the 4.x TED numbers we were seeing a couple of weeks ago, but still in the 2.5 range - a number typically indicative of a major credit crisis and possible collapse.
Meanwhile, the Federal Reserve continues to miss its target rate by quite a bit, failing on Friday even more than the newtype "target" of "within 75 basis points." The actual effective funds rate is one-third to one-quarter of a percent, which puts it on a par with the Bank of Japan, and all they have left is a formal ZIRP before they're done. Mish talks about the "global race" to a true ZIRP, and the European Central Bank's abandonment of any inflation-fighting mandate.
It's been a while since I've mentioned it, but the CMBX, a measure of commercial real estate lending risk, has hit new levels of bad everywhere except AAA, and AAA is near its highs. After a period of recovery, the ABX indicies a measure of performance of housing CDOs, have been exploring new lows in AAA, A, and junk, while holding on to some extremely modest recovery in the the AA tranches. The New York Times has an article on the sorts of fraud endemic to the mortgage-loan industry in the last couple of years of the boom.
Finally, Ambrose Evans-Pritchard writes about the hard shift to old-school leftiness in Europe. He doesn't like it.