Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Santa Will Bring A Worldwide Recovery in 2010

December 3, 2009

 

World leaders, politicians, investors, workers, and even economists have all made their list, and checked it twice.  We all want the same thing!   We want an economic recovery that allows job growth and sustained economic growth worldwide.  Now it’s Santa’s job to figure out who has been naughty and nice and to decide who will get what they want and who will get coal in their stocking. 

Experts are constantly opining as to whether the recovery will continue and if it does what shape it will take.  These calls usually are focused on the U.S. GDP as a proxy for “the recovery”.  Many experts also believe that the “fast world” can’t continue growing if the “slow world” goes back down the chute.  The frame of reference continues to be U.S. centric and out toward the rest of the world.  Luckily, Santa flies above all of this in his sled;   he has a truly global view.

Everyone knows that China and India’s governments have been more successful at spending their way back into growth than the U.S. has been.   Chinese government sponsored think tanks expect more than 10% GDP growth during the fourth quarter.  Indian GDP grew 7.9% during the third quarter and is expected to expand faster in the fourth quarter excluding the impact of any agricultural weather related shortfalls. 

About a year ago, I heard one of the most expert and long standing Chinese economy experts domiciled in the U.S.  discuss the worldwide recession.  He made the statement that,  “the emerging world is growing very quickly, and has considerably stronger fundamentals than the U.S. and Europe, but the numbers are such that they can’t possibly pull us out of a recession.”

I agree with this assessment, but luckily Santa isn’t  confronted with using only emerging market largesse, and the power of his reindeer,  to pull the U.S. and Europe out of recession.  His elves have conjured up a powerful inventory cycle back at the North Pole and they have created a self-sustaining momentum by feeding their inventory cycle machine with better than expected profits.  Germany and France came out of recession a quarter earlier than the U.S. Japan  also emerged from recession in the second quarter at a 2.7% GDP growth rate and  expanded to a totally unexpected level of growth of 4.8% in the third quarter. 

 

 

 

Corporate business spending is bringing the U.S. out of recession to join the “fast world” in a recovery for 2010.  Santa may think we’ve been naughty, but enough of us must be nice to warrant the gift of a continued business cycle recovery.  

  • We are at inventories levels that need to be rebuilt. 
  • We are seeing demand for housing at bargain prices. 
  • We are seeing substantial world demand strength for semiconductors.   

In fact we have a significant manufacturing recovery underway worldwide and this will undoubtedly lead to growth in employment next year.  Everyone worries about final demand without acknowledging that employing people strengthens demand. 

Santa knows that people will be buying presents and putting them under their trees this Christmas season.  It doesn’t matter whether they spend a little less this year than last year in the United States.  The really big present isn’t under the tree.   The self-sustaining recovery that’s occurring worldwide being brought to us by Santa will make Christmas 2010 better than the one we have this year. 

Fred Fraenkel

Vice Chairman and

Chairman of Investment Policy

Beacon Trust Company

 

Copyright (c) BEACON TRUST COMPANY  2009. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. This report  is  issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold a company’s stock. Predictions, forecasts, estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained are proprietary to Beacon Trust Company. and constitute valuable intellectual property. No material from this report may be used or otherwise disseminated in any form to any person or entity, without the explicit written consent of Beacon Trust Company.  All unauthorized reproduction or other use of material from Beacon Trust Company shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Beacon Trust Company expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Beacon Trust Company reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.