Economy Archives - Page 119 of 133 - the patient investor

April 19, 2012

Not Exactly a Miracle, but U.S. Debt Levels Are Falling – Floyd Norris – NYTimes.com

Floyd Norris: To get some idea of what needs to be done now — and what the result will be — the McKinsey institute points to two incidents in the early 1990s that got little attention at the time in the United States. Those were the bursting of real estate bubbles in Sweden and Finland. Details differ, but in each country there were two distinct phases of deleveraging.

“In the first,” the McKinsey institute said in an analysis published early this year, “households, corporations and financial institutions reduce debt significantly over several years, while economic growth is negative or minimal and government debt rises.” That is certainly what has happened in the United States.

The second phase is the good part, the institute said. “Growth rebounds and government debt is reduced gradually over several years.”

In this country, the deleveraging process has some way to go, with many foreclosures still pending, but it is at least possible that economic growth is beginning to accelerate. It is clear that the United States has made a lot more progress in cutting consumer debt than has been made in either Britain or Spain, two other countries that suffered from falling real estate prices.

via Not Exactly a Miracle, but U.S. Debt Levels Are Falling – Floyd Norris – NYTimes.com.

Comment:~ Before we congratulate ourselves on escaping from the clutches of the Great Recession, let’s not forget that government debt is growing at an unsustainable rate of $1.2 trillion/year. That is likely to slow sharply after November elections, causing a “double-dip” contraction. The deleveraging process has only just begun.

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

April 18, 2012

End of the Age of Entitlement | Joe Hockey

THE END OF THE AGE OF ENTITLEMENT

JOE HOCKEY’S SPEECH TO THE INSTITUTE OF ECONOMIC AFFAIRS, LONDON

…Let me put it to you this way: The Age of Entitlement is over.

We should not take this as cause for despair. It is our market based economies which have forced this change on unwilling participants.

What we have seen is that the market is mandating policy changes that common sense and years of lectures from small government advocates have failed to achieve.

via The Age of Entitlement | Institute of Economic Affairs.

Hat tip to Houses and Holes

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

April 18, 2012

Sowing Seeds of the Next Major Crisis – WSJ News Hub

Francesco Guerrera: “Prolonged intervention by the authorities is creating fundamental distortions in the financial markets. They are in my view going to create the next crisis.”

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Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

April 17, 2012

John Mauldin: Hoisington Q1 Review and Outlook

John Mauldin: Lacy Hunt kicks things off with a bang in Hoisington’s Quarterly Review and Outlook, this week’s Outside the Box:

“The standard of living of the average American continues to fall.”

The reason, in a word: debt. Lacy explains what happens:
“Efforts by fiscal and monetary authorities to sustain growth by further debt accumulation may produce some short-term benefit. Sadly, these interludes fade quickly as the debt becomes more destabilizing. The net result of increased indebtedness then becomes the opposite of what policymakers intend when they promote economic growth by either borrowing funds for increased government expenditures or encourage consumers to borrow with artificial and temporary incentives.”

In other words, you can’t get to real, sustained growth of an economy by growing debt after a certain point — one that, sadly, we have already reached.

John Mauldin: Hoisington Q1 Review and Outlook.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

April 16, 2012

Europe’s Economic Suicide – NYTimes.com

Paul Krugman: If European leaders really wanted to save the euro they would be looking for an alternative course. And the shape of such an alternative is actually fairly clear. The Continent needs more expansionary monetary policies, in the form of a willingness — an announced willingness — on the part of the European Central Bank to accept somewhat higher inflation; it needs more expansionary fiscal policies, in the form of budgets in Germany that offset austerity in Spain and other troubled nations around the Continent’s periphery, rather than reinforcing it. Even with such policies, the peripheral nations would face years of hard times. But at least there would be some hope of recovery.

What we’re actually seeing, however, is complete inflexibility. In March, European leaders signed a fiscal pact that in effect locks in fiscal austerity as the response to any and all problems. Meanwhile, key officials at the central bank are making a point of emphasizing the bank’s willingness to raise rates at the slightest hint of higher inflation.

via Europe’s Economic Suicide – NYTimes.com.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

April 11, 2012

Robert Shiller: Financial capitalism "Taking over the world"

Yale professor Robert Shiller discusses his book “Finance and the Good Society”.

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Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

April 11, 2012

Fedex warns of economic slow-down

Bellwether transport stock Fedex completed a double top reversal, breaking through the neckline at $88. Bearish divergence on 13-week Twiggs Money Flow already warns of strong selling pressure. Follow-through below medium-term support at $85 would confirm a primary down-trend. A declining Fedex is associated with lower transport volumes and slowing activity in the broader economy.

Fedex

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

April 5, 2012

Australia's Surplus Dreams Are Just That – WSJ.com

Cynthia Koons: Not only were [Australian] exports down, but imports declined too. Imports of goods for consumption fell 7%, reflecting caution in Australian households. Capital goods imports fell by 5%, a number that should be a particular concern for policy makers: A slowdown in purchases of machinery and equipment could be an early sign that investment in Australia’s resources boom is weakening.

via Heard on the Street: Australia’s Surplus Dreams Are Just That – WSJ.com.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

March 27, 2012

Budget 2012: George Osborne averts a slow national rot – Telegraph Blogs

Ambrose Evans-Pritchard: The underlying ghastliness of the British predicament remains. [Government] Spending as a share of GDP has ratcheted up from 35pc at the end of the 1990s to the Brownian peak of 51.7pc in 2009 (Eurostat), an all-time high in peace-time. It came back slightly to 50.4pc in 2010.

This debacle happened over a decade when a string of countries were slimming down the Leviathan state. Germany and Holland are now leaner than Britain.

Eurostat’s total government spending as a share of GDP for 2010 (the latest available) shows:

France 56.6
Sweden 52.7
UK 50.4
Italy 50.3
Germany 47.9
Norway 45.8
Switzerland 34.2

The US, Japan, Canada, and Korea are all much lower, and China is much lower yet.

This state burden is the macro-economic killer. It is a far more relevant than the tax take as a share of the economy, since it includes borrowing (ie deferred taxation).

via Budget 2012: George Osborne averts a slow national rot – Telegraph Blogs.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

March 22, 2012

"The American Recovery" by Mohamed A El-Erian | Project Syndicate

the economy is not yet in a position to handle the 4-5%-of-GDP “fiscal cliff” that is approaching as all of the hard political decisions that were postponed come into view at the end of this year. The prospect of a disorderly fiscal contraction needs to give way to a more rationally designed approach that avoids undermining the fragile recovery. To accomplish that, the political class must avoid the bickering that almost sent America back into recession in 2011, and that raised major questions about the quality of the country’s economic governance.

…..America’s full recovery is not yet guaranteed. A mix of steadfastness, caution, and good luck is needed for that to happen. And when it does, the country will be in a better position to repay its massive hospital bill.

via "The American Recovery" by Mohamed A El-Erian | Project Syndicate.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.