Tuesday, April 21, 2009
Thursday, April 16, 2009
Jack McHugh goes on to look for answer to famous question - Is recovery just around the corner?
Sometimes I am ashamed of how pessimistic I have become. But nothing tells me that we are closer to situations when fundamentals are sorted out. I think the bottom here is fixed - its way below from here for US markets. A slower descent implies longer time to see the bottom. Implies more pain - and slower recovery.
With current healthcare situation and age demographics as they are - I see US consumers going towards 15% saving rate as sustainable rate going forward. Under strong dollar regime it means income de-growth and therefore sustainable consumption will be a long long way below current levels. In a weak dollar regime, it would mean, higher inflation sharper fall and concentrated impact of consumption dip - with a possible under-shooting below sustainable consumption level. On a discounted basis these both will be equal impact in all likelyhood.
What this implies is that sustainable world consumption should see a 1.5 the dip seen at US (roughly). So the only way to recovery is when jobs seem safe and incomes stop falling. Note this is just the average - so we will see a dip below this to about 2X US consumption loss. So stock markets should reach corresponding levels.
Tuesday, April 07, 2009
Monday, April 06, 2009
- Despite everything US and European GDP will have to fall structurally.
- We are looking at structural global GDP contraction - but unevenly spread.
- Solve household balance sheet problem - solve the crisis.
- Global realignment of production and consumption center is evident.
- Unstable political storms are coming - watching Af-Pak closely.
- Increasingly worried about China - hoping sense prevails.
- Increasingly confident of two-engine approach to economy. Wealth creation engine (entrepreneurship) and wealth distribution engine ( domestic consumption & resulting jobs)
- India looks strangely best positioned - thanks to the fact that its government's hands are tied!