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Home2009 Market Review
Posted by Larry Doyle on January 2nd, 2010 11:34 AM |
Time.
More than any period of the last thirty years, I think it is imperative to view the global economy and market prospects with a longer time horizon. Those in Washington and on Wall Street have never displayed the discipline nor the inclination to truly take this approach. I strongly encourage those reading Sense on Cents to view your personal situation and that of our global economy and market with a longer time horizon. Why?
I personally believe our global economy remains in the relatively early stages of a significant fundamental shift. Recall that the shadow banking system provided 40-45% of the credit to our domestic economy. That shadow banking system remains a mere shadow of itself. Pardon the pun.
Try as he might, Uncle Sam can not fill that credit void forever. Credit demand and credit supply remain overwhelmed by the mountain of debts at the federal, municipal, and personal levels. The bad debt embedded in toxic assets on Wall Street also remains. While selected segments of our private market can and will grow, the economy as a whole remains constrained by the aforementioned debts. The price to service these debts (that is, the prevailing level of interest rates) will likely move higher.
Can we experience a confluence of higher interest rates along with a general decline in wages and prices, that is the core of deflation? That double whammy scares the hell out of Fed Chair Ben Bernanke. These questions and prospects will not be answered anytime real soon. They will take time.
What is an individual to do? Continue to pay down debt and be disciplined in maintaining a diversified investment portfolio. On that note, let’s look back at 2009 so we can most effectively look forward to 2010 and navigate the economic landscape.
The figures I provide are year-end 2009 relative to year-end 2008, and the returns for the year. (more…)
Missed Opportunity
Posted by Larry Doyle on April 21st, 2009 7:52 PM |
Yesterday I asked, Is The Stimulus “Stimulating?” Today, Bloomberg reports how Caterpillar Says U.S. Stimulus ‘Missed Opportunity‘. Specifically, the bulldozer manufacturer described the Stimulus Package as “disappointing and less effective than measures approved by China.”
“The infrastructure portion of the stimulus package was disappointing in that it was less aggressive than other countries and missed an opportunity to correct past underinvestment in U.S. infrastructure.”
In my piece, I highlighted how the Stimulus Package was more a promotion of the Democratic agenda rushed through Congress without a full and proper review. Without targeted spending on immediate areas of need and benefit, our economy suffers while our deficit worsens. While the Democratic leadership railroaded the Stimulus legislation through Congress, which country did enact targeted fiscal stimulus? China.
The Chinese economy is benefitting from their stimulus while many workers in our country suffer. While President Obama visited Caterpillar in February to push the Stimulus Package, I do not get the sense that he would be invited back now. Caterpillar’s CFO said:
“We think China has it right,” Chief Financial Officer Dave Burritt said in an interview. “The majority of their package is on infrastructure spending. We are seeing life there. We are seeing the turnaround. We would like to see a more robust infrastructure package in the United States.”
I would qualify that statement as a courteous indictment of the political process in our country. Caterpillar is not the only company benefitting from the Chinese stimulus. Additionally,
United Technologies Corp., Eaton Corp., and Dupont Co. are among other U.S. industrial companies that said they have seen results from China’s plan. This week all three reported first- quarter sales declines ranging from 12 percent to 20 percent.
United Technologies’ fire and security division “is seeing some benefits from the stimulus already in terms of the dollars which are flowing through to infrastructure,” Akhil Johri, the head of investor relations, said today. The Hartford, Connecticut-based company is the maker of Otis elevators, Carrier air-conditioners and Pratt & Whitney engines.
At Wilmington, Delaware-based DuPont, the third-biggest U.S. chemical maker, “electronics customers are reporting some benefit from the China stimulus package,” CEO Ellen Kullman told analysts on a call today.
Eaton CEO Sandy Cutler, on a conference call yesterday, described China as “the first market where we can really string things through to government stimulus activity.”
Caterpillar predicted the U.S. recession in October 2007, two months before it officially began, and said today it expects the world economy to decline about 1.3 percent this year.
Missed opportunities do not necessarily always present themselves again.
LD
