Markets had another strong week, with the Dow up 2.5%, the S%P 2.3%, and the NASDAQ 2.6%.  Earnings reports continued to be strong, with Ebay, Carefusion, and Norfolk Southern all posting impressive numbers.   Consumer sentiment fell in early November, according to a preliminary report released Friday. Mounting unemployment may be to blame, as consumers do not view the recovery as imminent as bullish economists.

We are somewhat disappointed by the status of the TARP stimulus money.  Particularly, banks took their stimulus money and did not loan it out, preferring instead to shore up their own capital.  We see an abundance of new loans in China, where steel output has reached 660 million tons compared to the U.S.’  50.7 million tons.  China is clearly using their stimulus money for infrastructure development.  The loans were made by banks in China not because of an appetite for risk; rather, the government “encouraged” them to make funds available.  While the result is good- significant rebound in manufacturing- we do not advocate any move towards a command economy.  The excess reserves in U.S. banks may not have provided the same jumpstart as China’s loans, but they stand ready to be lent against to support the system in a recovery.

Next week, inflation is big, with both the CPI and PPI being reported. Also released will be retail sales and housing starts.  Hopefully, the latter two will paint a brighter picture of the recovery, and will help turn some consumers around.