User 143167

Jeremy Grantham on Speculative Rallies, Fair Value and Overheating in China

The Chinese GDP numbers are for real, mostly. The problem is that GDP does not represent wealth formation. The way China builds up its GDP by fixed asset investment is to " build one road, destroy it, repair it, then destroy it again, and finally build it again". This will boost the GDP numbers, but not good in wealth formation.

A big portion of China's GDP are ineffective and just serve to create jobs. The alternative is to build a 100million army to employ all those jobless workers, but that will upset the western world. Therefore, 8% growth is a MINIMUM in China to keep unemployment from rising in the next decade, after that, Chinese population peaks and the economic growth will slow down naturally.

Global Investing: Get Past the Noise

Stocks like WMT, IBM and Intel have more cash flow from overseas, actually 50% of the earnings in S&P500 are from oversea sellings. With cash flow in a basket of currencies and the stock denominated in the $, a strengthening US$ will be negative to the value of US stocks. Every analysts who use DDM or DCF to value stocks know this.

Currency Impacts Are Huge When It Comes to Investment Returns

The author is totally missing the point.
Global US dollar returns were almost identical for a reason, no one can even change that. To think about a company in global business, it doesn't really matter where it is listed, its value in USD will be the same.
Based on that, we will keep seeing the investment returns the same in USD terms, therefore, with the rebounding dollar against Euro, the US index will be a loser compared to the index in Eurozone.