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Economic and Financial Analysis

Discussion in 'Issues Around the World' started by ethics, Nov 21, 2002.

  1. ethics

    ethics Pomp-Dumpster Staff Member

    I get this in the email regularly and I have the copyright permissions to post
    this in my forum. Mickey Levy is a personal friend whom used to work with me and
    I trust his analysis much more than any Tom, Dick, or Harry on Wall Street.
    Enjoy. (for best viewing expand or maximize your browser)


    The economy is recovering from recession and real GDP is above its prior
    expansion peak, but in several key aspects, the economic recovery has been
    weaker than in prior cycles. Perhaps the mild contraction of real GDP in 2001
    set the stage for a moderate rebound, but other dimensions of recent performance
    have deviated from prior cyclical patterns. In particular, the sharp, sustained
    declines in stock valuations and expected rates of return-lower real interest
    rates-stand out uniquely, with significant implications. A comparison of recent
    economic performance with prior cycles suggests that while the recovery remains
    intact and sound underlying fundamentals continue to support healthy potential
    growth, the return to sustainable trend expansion following recession may take
    longer than normal. In summary:

    O Real GDP declined only modestly in 2001, but economic performance was uneven
    and in some respects the recession was severe: consumption continued to grow at
    a healthy, though diminished pace and housing activity remained strong, but
    business investment and profits fell sharply-in real terms and relative to GDP-
    and there was record-breaking inventory liquidation. Manufacturing industries
    were hard hit.

    O The economic recovery has experienced soft spots: consumption has sustained a
    relatively healthy pace and housing has remained firm, but the rebound in
    industrial production has been modest, business investment has lagged behind
    prior recoveries, and profits, while recently rising, remain well below their
    prior expansion peak.

    O Nominal GDP growth, which decelerated significantly during recession and
    reached its lowest year-over-year growth rate since 1Q61, has experienced a
    relatively anemic pickup. This constrained growth in product demand has forced
    further adjustments in production and limited pricing power.

    O Following relatively mild declines in employment during recession, payrolls
    have failed to rise materially during recovery, generally mirroring their
    delayed rebound from the 1990-1991 recession.

    O Sustained healthy gains in labor productivity have supported rising real wages
    and disposable income; combined with gradually decelerating employment cost
    increases, they have generated declining unit labor costs and helped business
    maintain margins. O The most unique aspect of this cycle has been in financial
    markets: the dramatic, sustained declines in stock valuations and real interest
    rates throughout the recession-recovery have been unprecedented (see Chart 1).
    These trends reflect sharply lower expected rates of return on investment.

    Full report in attachment. :)
     
  2. Coot

    Coot Passed Away January 7, 2010

    Thanks for posting the report...I'll be doing some reading tonight.
     
  3. ethics

    ethics Pomp-Dumpster Staff Member

    He is more right than wrong and if you want to know the true status of our economy, he is the man to read.
     
  4. Techie2000

    Techie2000 The crowd would sing:

    Interesting, Mike Moore makes the same point in his book Stupid White Men...
     
  5. Sierra Mike

    Sierra Mike The Dude Abides Staff Member

    There you go, business investment is lagging! Just what I said! The idiots think they can save their way out of a recession.

    SM
     
  6. ethics

    ethics Pomp-Dumpster Staff Member

    Yep, I recall you saying the same thing.

    What I love about Levy's reports is that they speak English, not only to the CNBC viewers (which showed his interview again, btw) but to us, the rest of the people who make or break the true economy.
     
  7. wafen

    wafen Member

    Ah, a subject I can sink my teeth in to. :)

    I haven't don't any economic analysis since my day trading days, but the stock valuations don't surprise me one bit.
    Until the physique of the investor is restored, we will not see a large rebound in stock valuations.
    I am actually surprised that it hasn't been far worse.
    It is hard for an economy to take a hit like what happened after the .com bubble burst and still stay afloat.
    Look at how long Japan's recovery has taken. Granted I think their bubble was larger than ours, but it shows that these things aren't easily over come.
     
  8. ethics

    ethics Pomp-Dumpster Staff Member

    Wafen, what I don't understand is how shortsighted the Stock Market is. I mean, it's been UP!?!? Look at today for example.

    Any ideas as to why no one is looking long term?
     
  9. wafen

    wafen Member

    Why do you think I stopped day trading?
    You can never guess the reasoning behind the short sightedness of people.
    I think the market was so good for so long that everyone believed it would never change.
    Now that it has, I can only venture that it has rocked what they saw as the norm to the point of not wanting to be a part of it.
    If they would just look at the valuations throughout history, they would get a better picture of what the market is all about.
     
  10. ethics

    ethics Pomp-Dumpster Staff Member

    Thanks for your input. There was another thread on economy that has some great answers on the economy as a whole. Was more in synch as to what you said above.
     
  11. wafen

    wafen Member

    Let's just hope people come to their senses and look at the big picture.
     
  12. ditch

    ditch Downunder Member

    I couldn't work out if that was good news or bad.
     
  13. ethics

    ethics Pomp-Dumpster Staff Member

    Best I can describe is "mixed news". There are some strong economic indicators but the recession has been a nag and will not go away quietly in to the night.

    I think Wafen's point stands as to why.
     
  14. wafen

    wafen Member

    Our economy is on sound ground, but until consumer and investor confidence comes around I don't expect much of a rebound.

    Btw, if there is a war all bets are off.
    If oil goes up a lot it could put us in the tanker.
     
  15. Coot

    Coot Passed Away January 7, 2010

    I don't know if that's an objective analysis...or maybe it's just not properly directed. Companies are making capital investments...they're just being very choosy about them and where they are directing them.

    My company is investing capital in equipment...unfortunately it is in equipment that doesn't foster growth, but rather serves to limit the bottom line...and said equipment is generally manufactured out of the U.S. The only people making any money on these types of investments are the wholesale houses and the contractors.

    I was just approached by one of the contractors I use to bid the engineering work on a job he's trying to get going for a commercial bakery (long ways from a steel mill;) )

    This is a big installation. The equipment is something they got a helluva deal on. One of their competitors went tits up...the equipment was sitting on the manufacturers floor and they got it for a song.

    What I see is manufacturers gearing up for growth, but they're doing it such that the pundits are seeing choppy seas rather than growth.

    United Airlines will probably go under in the next few months...further spooking the market. Nevermind the fact that there will be a number of companies both startups and established with better business models that will absorb the hardware and assets and move on.
     
  16. EMIG

    EMIG Yup

    Exactly! We can only hope the government won't use taxpayer dollars to keep that POS afloat.
     

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