Americans on ride of their lives

Not having a president-elect hasn't unduly worried the American public who, at this point, would probably prefer to keep the incumbent (and that's saying something), but it is slowly and inexorably wearing away at the US markets.

Although the Dow and the Nasdaq make periodic surges upwards, they have both come under pressure in the past few weeks, reducing the net worth of the American people as a result. The economy is slowing so you would expect to see that reflected in markets anyway, but the hard landing/soft landing debate is picking up steam again as credit conditions begin to tighten all over the State.

It is not only the more difficult areas of the economy that are struggling.

Obviously the dot.coms are practically no-go areas, with investors and venture capitalists shunning them with the same enthusiasm as they embraced them with this time last year. But, in a report by the Federal Reserve on credit, conditions have tightened for commercial and industrial loans generally.

I mentioned before that corporate bond spreads are a good indication of the buoyancy of the economy and those spreads are partially determined by the credit ratings that the companies receive from agencies such as Moody's Investor Services.

Both Moody's and Standard & Poor's have now reported that downgrades are exceeding upgrades. This is not what investors want to hear and puts pressure on those spreads. More and more companies are putting off issuing new bonds, while the bonds that are already in circulation continue to slide in value. Of course, many portfolio managers are beginning their annual year-end clean-out too, which does not help matters.

What is probably of greater concern to watchers of the US economy is the fact that higher grade corporates are not borrowing very much. If these blue-chip companies are not prepared to gear up for the year ahead it will have a knock-on effect on the previously ever-optimistic US economy, which will send ripples around the world and leave the Fed in a dilemma about interest rates.

Americans themselves, however, are still riding along on the wave of optimism despite the fact that the top job remains vacant, markets are down and the Nasdaq, source of so much joy to them last year, has turned around and bitten the hand that fed it.

The University of Michigan's consumer confidence index is high and forecasters are optimistic for a splurge in post-Thanksgiving retail sales.

Presumably the Americans are all out buying PlayStation2, which is the gift of choice for most children this year. (What do parents tell kids when Santa has been dispossessed of the item due to the paltry number that have been shipped to this State? Are the advertisements plastered on billboards and on TV just a waste of money since there's no stock available? Or does this whip everyone into a buying frenzy for something that'll probably be half the price this time next year?)

If the number of people trying to get in and out of the car parks in the city centre is anything to go buy, retail sales in Ireland will be strong for the holiday period too. Even though there has been a definite sense of slowdown in the economy as a whole - mainly as a result of some houses not managing to sell at their top price within two days of placing them on the market - nobody is panicking yet. However, the plethora of workers now looking for additional money to fund living in the new and expensive Irish economy increases all the time.

The taxi drivers' dispute filtered into the leafy suburbs when they converged on the Hollybrook Hotel last week and caused mayhem on the Howth Road. I was treated to the hitherto unimaginable sight of a fleet of taxis parked outside my front door. The fact that they weren't picking up any fares was neither here nor there, it was a once in a lifetime experience.

They were, of course, sharing space with the skip and the various forms of transport that belong to the builders. For those of you who have offered words of comfort (mainly to the cat, I have to say) while the work proceeds, thank you. Things have improved since my near nervous breakdown a couple of weeks ago and the windows did, finally, arrive. Although they weren't actually the right size. Still, these are minor inconveniences when placed in the context of a sledgehammer being taken to the bedroom wall. However, the cat is taking things almost in his stride again. The effect of the Valium has been to increase his appetite as well as making him decide that not everyone is out to get him, so he spends most of his time with his head in his food bowl while eyeing the foreman with slightly less suspicion than before.

The market still regards Wim Duisenberg with suspicion but maybe not everyone is out to get him either. One of my friends thinks that I have a thing about Wim, since I mention him so often, but only insofar as his actions have a direct bearing on my net worth. And since it is central bankers rather than politicians who affect our spending power, I take a keen interest in Wim's lifestyle choices for me.

Anyway, there was a benign reaction to his confidence regarding the euro zone's growth prospects for the future and his more vigorous than usual defence of the ECB's policy of intervention to support the currency. It is interesting, though, that the ECB's line has shifted from not being worried about the euro exchange rate to agreeing that it is a "cause for concern". The aim of the recent intervention, apparently, had been to give the markets something to think about and dispel the notion for currency traders that shorting the euro is a sure-fire thing.

The fact that the value of the currency is out of line with fundamentals is not in doubt. But then, neither is George W. Bush's conviction that he is the people's choice for president. Or Al Gore's belief that he truly won the race.