Global Signs Everywhere That the Economy is at a ‘Tipping Point’
[As a result of] slowing economic growth around the world, stock markets are at the “tipping point” of a correction. Here are 15 global signs that supports that thesis. Words: 678
So says Bret Jensen (www.samstrategy.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com , has further edited ([ ]), abridged (…) and reformatted below 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. Jensen goes on to say:
- Consumer spending increased only .1% [in April from] a 2.2% contraction in the first quarter of 2011…
- Personal incomes were completely stagnant
- The housing market remains completely moribund [with sales] contracts for previously owned homes down 11.6% in April and…home prices were down 2.5% – the sharpest decline since 2008
- Consensus Quarter 2 GDP estimates have come down 30 basis points to 2.7% over the last thirty days. Given the end of QE2 at end of June and the curtailment of federal stimulus as well as the payroll tax holiday by the end of the year [it is] hard to see robust growth on the horizon
- Durable goods dropped in April at the fastest pace since October and
- The personal savings rate has decreased to just 4.9%.
- Chinese manufacturing is expanding at the slowest pace in 10 months
- Utilities are unable to pass on fuel increases to their customers causing several large cities to be without power 1 day in 3
- Coal plants (up to 25%) could go out of business in the next couple of years
- Annual growth of 8% is impossible due to structural elements according to Stratfor…[who] compares the current Chinese economy to a giant ponzi scheme.
- Further austerity measures for Greece have not been agreed upon with Greek leaders. Without these additional measures, the latest tranche of IMF loans is imperiled. The ECB has already stated it will not step in if the IMF fails to provide these loans. Given escalating protests, it is hard to see the Greek ruling coalition agreeing to further pain. This has the potential for triggering cascading events that could throw the credit and currency markets into chaos. Greek bonds are already pricing in a huge default risk.
- Spain’s unemployment is at 21%
- Protests are escalating across the indebted countries of Europe [and] the political will of the creditor countries, mainly Germany, make further largesse unlikely.
- Japan remains a basket case. The capital stock taken out by the earthquake and tsunami was twice that of the 1995 Kobe disaster. This does not take into consideration the power outages caused by the nuclear crisis at several reactors. Given [that] Japan is already over indebted, its policy choices are limited and it is hard to see it contributing to the world’s economy in any meaningful way in the near future.
- Global economic growth has been reduced to 4.3% from the 4.8% prediction made by Goldman Sachs in mid-April while UBS has reduced its forecast from 3.9% to 3.6%.
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These are worrying signs and I think we are due for a significant pullback over this summer. I would stick to stocks of multinationals that have pricing power and low valuations… [and] blue chips with good dividend yields… I would also have a good portion of funds in cash to take advantage of the coming selloff.
Be careful out there.
Further Articles Related to the Above:
- “U.S. Debt Default Risk is Up Dramatically YTD” http://www.munknee.com/2011/05/sovereign-debt-default-risk-has-risen-dramatically-in-u-s/
- ” Be Forewarned: Worldwide Systemic Financial Risk is Rising Rapidly – Again” http://www.munknee.com/2011/05/be-forewarned-worldwide-systemic-financial-risk-is-rising-rapidly-again/
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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