Alex_G

Finding the New Normal in Investment Returns

I really think that the US is heading for a European style economy, which includes higher taxes, higher base unemployment and most of the gains in employment coming from the Govt sector.

Very little of the stimulus is "investment", just keeping people afloat.

The Facts About GDP and a U.S. Recovery

The 2 things the obama admin is not doing are spending stimulus dollars on:
1) infrastructure that will provide economic benefit and

2) energy initiatives that will REDUCE the out-flow of money to foreign energy companies (if you take out oil purchases, our trade deficit is nearly 0) and INCREASE payments to domestic energy companies. Jobs and revenue here instead of overseas.

Revenue Growth: The Market's Next Catalyst

With all due respect, you didn't answer my question. Show me the metrics and structure for increased, sustained, demand.

BTW, the high yield market is a better indicator of economic activity, and while it has come back from Armageddon levels, it is still telling us that we are in a recessionary environment and future growth of 0-1%.


On Aug 26 10:51 AM Terence Chan wrote:

> Alex,
>
> thanks for your comment. I do agree with your points. I'm not saying
> it's a v-shaped recovery for the US... there will be a lot of headwinds.
> the consumer won't recover that easily. but you're seeing a lot
> of data starting to bottom like auto sales and housing starts. yes
> it will be choppy recovery, but the stock markets are forward looking
> and by the time you get all the data confirming that consumer spending
> has recovered, etc, bull markets are usually close to a year old.
> who knows where it will come from, more stimulus or simply people
> just getting "tired" of this recession. remember, savings rates
> are up and there are a lot of cash in the sidelines. the exact number
> is 25% are still in money market funds. i still think it will be
> a wall of worry for the us markets, but for the emerging markets
> I believe it's a secular bull. maybe this external demand will fuel
> manufacturing activity in the States. the reason why a lot of money
> managers and investors have been left behind in this rally because
> they wait for the tangible data to come out... but the market never
> waits... :)

Revenue Growth: The Market's Next Catalyst

Terence,

The charts and statistics you use are all over the internet and not new. What you don't tell us is where, specifically you see the rise in demand (don't say pent up) coming from.

Current spending is fueled by Govt stimulus, and can't be maintained in perpetuity. It needs to be replaced by other sectors. Tell us which these are and were the spending power is going to come from.

I await your reply.

Grab Your Shorts, The Correction Has Begun

Current equity bear, added in march, been taking money off the table the last 2 weeks, went all in w/ leverage in distressed debt starting in April, have taken the leverage off the debt but have kept the profits invested. So, yes, we have made a boatload this year.

The consumer is dead for 3-10 years, depending on if we become Japan or Japan light. The people that think the consumer will spend as they have the last 10 years just don't understand the metrics.

Alex


On Aug 19 07:09 PM Rick Urban wrote:

> All I can do is to ask you bears out here: DID YOU MAKE MONEY THIS
> YEAR? The way you view the world, I doubt it. The growth will come
> where it always comes from. Consumer! It may take some time, but
> it'll come. I don't understand why it is so hard to comprehend.
>
> Yes, perhaps we pilots are all the same, however being a pilot or
> an investor requires among other things discipline, taking calculated
> risk, homework, planning and fear control.☺
>

Are Investors Too Bullish?

According to BAC, homeowners spent 30% of home appreciation between '02 and '06, adding 200 basis points to GDP. Add the increased savings rate, and the consumer can only be counted on providing 62-64% of GDP. Will corporate investment and exports step up? Will the Govt raise taxes and permanently fill the gap, thus retarding real growth?

Temporary spending measures tend to become permanent, so my guess is that we gravitate toward the Govt option. 1-2% growth could be the norm unless we step up immigration.


On Aug 10 02:57 PM Mad Hedge Fund Trader wrote:

> By miles. Welcome to the square root shaped recovery. That is the
> likely shape of the recovery curve we can expect over the coming
> years. If you back out what I call the “2000’s fluff” of excess car
> production, liar loans, using the home ATM for serial, annual refinancings,
> excess consumption, unneeded home construction to account for the
> new frugality, US GDP growth drops by 1%. Chop off another 1% for
> deleveraging in all its forms, including lower leverage ratios, the
> end of the collaterized debt markets and credit default swaps, ultra
> high junk yields, bond ratings for sale, and the new conservatism
> of CFO’s and auditors. That leaves you with a 1% growth rate that
> Japan has seen for the last 20 years. That means falling standard
> of livings, an unemployment rate permanently stuck at German style
> double digits, endemic deflation, a collapsing dollar, a comatose
> real estate market and moribund stock markets. Where are the 37 million
> jobs going to come from that American needs over the next decade?
> If your kid is going to graduate from college soon, or cash out from
> the army, he better start learning Mandarin.
>
> 3% Average US GDP growth rate 2002-2007
> -1% Bank deleveraging
> -1% 2000’s fluff-liar loans, excess home construction, excess car
> production
> -1% real GDP growth 2010-2020

The Consumer Recovery Will Take Time

The savings rate for the most prolific spenders (baby boomers) is going through the roof as they need to replace the savings they have lost in the asset meltdown. No home equity and lower credit card limits will also take it's toll. Anyone who thinks the consumer will take us out of this is just dreaming.

Look for the consumer to be 60-63% of a lower GDP going forward, which will also hurt emerging markets that make a living exporting to the US and EU.

Inflation Concerns Are Premature

The global number is important to your thesis because the lower utilization worldwide, the lower value added margin they can charge, means lower cost, all things being equal.


On Jun 08 01:14 PM Value Interrogator wrote:

> In this article I was limiting the inflation discussion to the US.
> So I'm not sure of the exact global number. I know that Japan's
> utilization percentage is well below their normal levels. From
> the bits and pieces I've read over the last couple months, its probably
> safe to say that capacity utilization in most countries is well below
> normal levels.
>
> On Jun 08 12:18 PM Alex_G wrote:

Inflation Concerns Are Premature

To the author:

Any idea what the global capacity utilization number is at this point?