munKNEE.com Your Key to Making Money
Register to “Follow the munKNEE“ and automatically receive all articles posted
Without economic growth, and real economic growth at that, there can 
be no meaningful long-term economic recovery in the developed countries. Growth or lack thereof will have to be reflected in the financial markets over time. Currently, I continue to see a disconnect between where the financial markets are pricing things, and where I think they ought to be pricing things. Words: 784
So says Ian R. Campbell (www.EconomicStraightTalk.com) in edited excerpts from his original commentary (subscription restricted but used here with his kind permission) entitled Growth: The trillion dollar question.
The Economic Straight Talk Newsletter – Insights for Serious Traders and Investors, uses proprietary filtering technology and personal filtering, coupled with the expert input of Ian R. Campbell, to select highly relevant economic, financial market, and resources news – insightfully, quickly, and efficiently – to which is added commentary to help you make better investment decisions and save you time in the process.
This article is presented compliments of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Campbell goes on to say:
The importance of GDP growth to world and country-specific economic well-being cannot be over-emphasized. Even more importantly the recognition that GDP growth is stated in ‘nominal terms’ – that is, it has two components being ‘real growth’ and ‘inflationary growth’. At the heart of the matter is the long-term importance of the ‘real growth’ component of overall GDP growth.
Recently the World Bank, in the aftermath of a downgraded estimate of GDP growth by the Organization for Economic Co-operation and Development (OECD), is reported as having recently cuts its 2013 global growth forecast to 2.4%, and to only 1.3% in developed economies. The latter is likely to be less than what will be reported inflation – meaning that in real growth terms the World Bank likely is forecasting a decline in real growth in 2013 in the developed countries. This once again emphasizes the dependence on the developing countries for real economic growth – where the World Bank is now reported as forecasting 7.8% growth in Asia (net of Japan) in 2013.
See subscription details here.
Aside from the foregoing, an article this morning reports:
- consulting firm Accenture says the top 1,200 global companies need to find an incremental $5 trillion in growth each year to meet stock analysts’ (read ‘financial markets’) expectations. That is a very large number, considering the global GDP was reported at approximately $70 trillion in 2011 (source Wikipedia). Further, that growth will have to largely come – or so it currently seems – from the developing countries where business ideologies and reporting systems arguably impute a higher level of investment risk than one would like to think to be the case in developed countries;
- an annual PwC survey found only 36% of more than 1,300 CEOs worldwide were ‘very confident’ of revenue growth for their respective firms in 2013, down from 40% one year ago. It would be helpful to know what percentages would be reported if that CEO statistic was disclosed by country. One has to believe the % would be lower than 36% in the developed countries, and higher than 36% in the developing countries;
- beyond 2013, consensus forecasts call for economic growth to pick up, where recovery is said “could be spurred by rapid growth in shale oil and gas supplies”. As is increasingly being discussed in this Newsletter, I don’t believe that is something to be ‘taken to the bank’; and,
- mergers and acquisitions are said to one way for corporations to buy growth. But that is confusing. The question then has be ‘growth in revenues, or growth in earnings?’. Acquisitions certainly tend to create growth in earnings as a result of post-acquisition synergies related to saving of cost duplications when two companies come together. In an ideal world, acquisitions also result in synergistic growth, but synergistic growth typically is not as certain as are synergistic cost savings. This means to me that while business mergers and acquisitions may create revenue growth, that is not a ‘panacea happening’.
- are taking only a very short-term ‘trading view’ of things. I think they almost certainly are;
- are ‘efficient’, in the context of the ‘efficient market theory’ that simplistically theorizes that the financial markets are ‘all knowing’. It is entirely possible that current financial markets are highly efficient in the context of ‘immediately available news and information’ and trading (pursuant to trading algorithm activity), but inefficient (or less caring) in the context of long-term outcomes and investment; and
- have both short-term and long-term economic and company specific likely outcomes properly ‘priced in’ – which is to some large degree a different way of stating the previous point.
I have not seen anyone else make the points set out in the commentary in quite the same way, or as simply. Those who participate in the current financial markets should think hard about them…For that matter, so should everyone else.
*Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
Register HERE for Your Daily Intelligence Report Newsletter
It’s FREE
The “best of the best” financial, economic and investment articles
An “edited excerpts” format to provide brevity & clarity for a fast & easy read
Don’t waste time searching for informative articles. We do it for you!
Register HERE and automatically receive every article posted
“Follow Us” on twitter & “Like Us” on Facebook
Related Articles:
1. Nouriel Roubini: 5 Downside Risks to Global Economy Are Gathering Force
…[F]iscal austerity will envelop most advanced economies this year, rather than just the eurozone periphery and the United Kingdom. Indeed, austerity is spreading to the core of the eurozone, the United States, and other advanced economies (with the exception of Japan). Given synchronized fiscal retrenchment in most advanced economies, another year of mediocre growth could give way to outright contraction in some countries. Words: 780
2. 8 Key Dynamics Which Will Impact Us Over the Next 2-3 Years & Their Eventual Consequences
Risk is inevitably mispriced when unprecedented intervention suppresses risk [and, as such, the] policies that appear to have been successful for the past four years may continue to appear successful for a year or two longer but that very success comes at a steep, and as yet unpaid, price in suppressed systemic risk, cost, and consequence. [This article identifies 8] key dynamics that will continue to play out over the next two to three years [and an] understanding of the eventual consequence of such influential trends – that risk is inevitably mispriced when unprecedented intervention suppresses risk. Words: 1299
3. 5 Sound Reasons Investors Would Be Better Off On the Sidelines Than In the Market
New year festivities have continued on the stock market even as the Christmas trees have been put away. The “death of the fiscal cliff,” not horrible job numbers and supportive comments from Mario Draghi on the other side of the pond have led to bold and bullish behaviors over the last three weeks. While no one can predict the exact peak, here are five reasons you’re better off on the sidelines than in the market.
4. Current Market Overvaluation (from 33% – 51%!) Suggests Cautious Long-term Outlook
Based on the latest S&P 500 monthly data, [my analyses indicate that] the market is overvalued somewhere in the range of 33% to 51%, depending on which of 4 indicators I used. This is an increase over the previous month’s 31% to 48% range. [Let me explain the details.] Words: 475
5. Goldman Sachs’ Leading Indicators Signal Steep Market Crash Ahead
Goldman Sachs reports their Global Economic Indicators (GLI) show the world has re-entered a contraction and…is predicting a market crash worse than that of the early 90′s recession and one slightly less than the sell-off at the turn of the millennium. [Below are graphs to support their contentions.] Words: 250
6. Don’t Ignore This Fact: “Greedometer Gauge” Signals S&P 500 Drop to the 500s by July-August, 2013!
The S&P500 is likely to achieve a secular (long term) peak this month, then drop to the 500s by July-August 2013. This article explains why. Words: 180
7. The S&P 500 Continues to Rapidly Build Its “Domed House” As Projected
The broad stock market is on its way to building a “Domed House” and to challenge multi-year highs, or even all-time highs, in the process. Based on the forecast of my proprietary Long Wave Index, the broad market should be in a short-term bullish time-window until 1/17/2013. Words: 634; Charts: 2
8. These Charts Suggest a Possible +/-60% Decline in the S&P 500 by 2014
J.P. Morgan Asset Management has developed a chart showing the past two cycles in the S&P 500 highlighting peak and trough valuations. At face value it is very alarming as it suggests a potential decline of somewhere in the vicinity of 60% over the next year or two and concurs with previous innovative trend analyses included in this article. Charts: 4