Seeking Alpha
Friday, November 27 2009  |  12:57 EDT  | 
DJIA (DIA) S&P 500 (SPY)

Market Currents

Tuesday, May 26, 2009
5:14 PM TweetThis
  • Get used to sub-2% GDP growth, Pimco's El-Erian says. "We are transitioning to what we call at Pimco a new normal." Outspoken analyst David Rosenberg agrees: "This is going to be a new era of frugality. This isn't some flashy two- or three-quarter deal. This is a secular change in household attitudes."
Back to Today's Market Currents »

This news story has 9 comments:

  •  
    Take that forecast and read the article "The End Game Draws Nigh" by Horace Brock.
    May 26 05:20 PM | Link | Reply
  •  
    Sub 2% or sub -2%? As households retrench (too bad government does not seem to be able to do the same), reduce spending and start to save, might see a sub-2% for quite a while. Unemployment wosening points to further fear of future job loss for those still employed. Looks like we have a reverse wealth effect at work here.
    May 26 05:21 PM | Link | Reply
  •  
    Without mortgage equity withdrawal spending, growth in GDP was in the 1% to 2% range for much of the period leading up to the current recession. Now reduce this by a further point to allow the consumer to save and reduce consumption from 70% of GDP to 65% of GDP over, say, a five year period. Not robust.
    May 26 05:26 PM | Link | Reply
  •  
    Sure the confidence numbers are up. People feel better after they pay down the credit card, start to save and cut spending on things they don't need.

    It also means that spending is down, that more layoffs are on the way, more retail / office space is vacant, more loans go bad, more stocks are worth less. When the layoffs start hitting these people the numbers will go down again.
    May 26 06:21 PM | Link | Reply
  •  
    The new normal will be:

    Real GDP growth: 1-2%
    Nominal GDP growth: 4-6%
    Inflation: 3-4%
    Corporate profit growth: 5-7%
    Equity PE ratio: 13-15x (6.5% - 7.5% earnings yield)
    10-Year Treasuries: 4-5% ("risk-free" investment)

    Best investment class will be emerging markets equities and foreign currencies of commodity producing countries.



    On May 26 05:26 PM CautiousInvestor wrote:

    > Without mortgage equity withdrawal spending, growth in GDP was in
    > the 1% to 2% range for much of the period leading up to the current
    > recession. Now reduce this by a further point to allow the consumer
    > to save and reduce consumption from 70% of GDP to 65% of GDP over,
    > say, a five year period. Not robust.
    May 26 07:33 PM | Link | Reply
  •  
    ok, maybe for some u.s. people, things will get frugal.

    however here we are talking about the stock market, and things are not so bad for a large chunk of companies

    US is a small % of the world population

    world population is increasing: they need food, energy, and regrettably the hypnotic power of capitalism is still quite strong so they want also Coca cola, Nike and lots of US brands (I guess we should also thank Hollywood for this)
    May 26 07:58 PM | Link | Reply
  •  
    Don't believe anything from PIMCO. Greenspan is working for PIMCO and this crew intend to mislead the investors.
    May 26 08:50 PM | Link | Reply
  •  
    CautiousInvestor, you have to shave 2% off future growth, not one. One percent is lost from the end of home-equity financing and a SECOND percent is shaved off for making payments on those TRILLIONS of new debt.

    "Big picture", it will require more than 25% of GDP just to service the $57 TRILLION in public and private debt (which totally excludes the other $50 TRILLION in unfunded liabilities).


    On May 26 05:26 PM CautiousInvestor wrote:

    > Without mortgage equity withdrawal spending, growth in GDP was in
    > the 1% to 2% range for much of the period leading up to the current
    > recession. Now reduce this by a further point to allow the consumer
    > to save and reduce consumption from 70% of GDP to 65% of GDP over,
    > say, a five year period. Not robust.
    May 26 09:15 PM | Link | Reply
  •  
    With all of the losses in retirement account, 401k's, defined benefit plans, IRA's etc along with the loss of incomes, lower house prices, reduced credit card spending and underemployed consumers ... spending CAN NOT recover. Saving will increase a lot as well as retirees spending reductions. If you dont have the money in your paycheck or retirement account you cant spend it.

    It seems incalculable at this point. Logic however points to a very large drop in spending which will feed additional unemployment, bankruptcies, and higher taxes on those employed to continue the social programs that this administration will not cut back...Period!!

    Tax payer revolt, disenchantment and crime among other things seem to be the very threat that could put this recovery over the edge some time in the future.

    Add in the failing dollar and we have what I believe to be a major reset coming that could be the trigger to the rise of a third party that will eventually get America back on track but that's several years of misery away.
    May 26 09:44 PM | Link | Reply
Follow Market Currents on
Latest Articles
All latest articles »
Latest StockTalks
  • David White: X also near its top Bollinger Band at the end of the day Wednesday (after a rally from its bottom Bollinger Band). Likely to go down.
    1 minute ago
  • ACEMAN: NOBGF.PK continues to move up as supplier of raw material and agri-products to China. RBS & Strait Times support new price targets up 20%.
    3 minutes ago
  • David White: X slated to lose over $10/share in 2009. Current predictions for FY2010 are $.96. That puts FY2010 PE at about 45. Much too high.
    3 minutes ago
  • David White: Materials stocks that soared on optimism, without strong fundamentals such as X, may get hit hard by Dubai. X technically ready for pullback
    6 minutes ago
More StockTalks »

From our sponsors: