GDP growth better than expected. Who says this rally is not deserved?

[Covertibility]

Right, government doesn't manipulate or put false data out there; easiest case in point, the Birth/Death model. Who wants to explain the gains in the financial activities and construction areas that showed up in that report over the past 2 years?

Is there a Lost and Found area somewhere in the universe to find M3 ?

 

[Kassz007]

Quote from ByLoSellHi:

Slashing of inventories has more to do with retailers failing to replenish stock of goods in store than anything else, no?

How is increased savings rate bullish?

Consumer spending continued to trend down, unemployment continues to rise...

Inventory slashing could be failing to replenish stock. Failing to replenish stock could be because of higher sales or lower production. Anybody know the latest production numbers off hand?

Increased savings = less default. Reversing the trend of spend more than you have. I think it's bullish to a point. Too much savings is of course bad for the economy but I don't think we're there yet.

Unemployment will continue to rise for some time. The economy will be in positive growth before unemployment ceases to rise due to it being a lagging indicator. Why would companies hire before they know business is improving?

 

[Kassz007]

Quote from wartrace:

A decrease of 1% from last months decrease of 6.4% is an improvement? Four straight quarters of decline in the GDP is an improvement?

I am an unfortunate product of public schools so bear with me. I always thought "improvement" would be indicated by a change in direction towards positive territory. If the GDP number had been +.01% or better I would agree that it is improving. A continued DECLINE at a slower pace does not mean there is an improvement, does it? It just means it is getting worse at a slower pace.

I do realize that "worse but better than it could have been" is the new "better" but technically it is not improving yet.

The GDP has shrunk 15.5% from this time last year. Only massive government intervention has kept it from sinking further. There is a limit to government funds (hopefully).

Yes...-1% is an improvement over -6.4% in my books...

The point you are missing here is the TREND. It is getting worse at a slower pace, but assuming the trend continues, we will be in positive territory before long.

 

[Kassz007]

Quote from circadian:

Exactly. GDP = C+I+G

G is propping up these numbers, and this quarter's numbers will be revised downward, as they have been every quarter for the last year. The government is spending like it's going out of style, and we still can't print a positive quarter. Answer to this problem = further increase in government spending. This will only insure economic problems for the coming decade.

Yes. GDP = C+I+G. So why are you trying to evaluate GDP as C+I?

Government spends to increase G while C and I are low. Once C and I increase, government decreases G. It's not a fool proof theory, but the logic makes sense.

If government didn't spend, GDP would in larger negative territory, and the same people complaining about government spending would be crying for the government to do something.

 

[Landis82]

Quote from Kassz007:

Yes...-1% is an improvement over -6.4% in my books...

The point you are missing here is the TREND. It is getting worse at a slower pace, but assuming the trend continues, we will be in positive territory before long.

Exactly.
And the market is already discounting the eventual turn into positive territory. That's what markets do.

 

[Ivanovich]

Quote from ByLoSellHi:

Slashing of inventories has more to do with retailers failing to replenish stock of goods in store than anything else, no?

How is increased savings rate bullish?

Landis, I'm with BLSH here. Can you explain how an increased savings rate like this is bullish to a market depending on that consumer to spend spend spend in the future?

 

[ASusilovic]

Quote from Landis82:

Exactly.
And the market is already discounting the eventual turn into positive territory. That's what markets do.

That's why GS is expecting S&P 1070.00 by years end, because market has "priced in" already "sluggish growth". LOL !

 

[Kassz007]

Quote from Covertibility:

Right, government doesn't manipulate or put false data out there; easiest case in point, the Birth/Death model. Who wants to explain the gains in the financial activities and construction areas that showed up in that report over the past 2 years?

Is there a Lost and Found area somewhere in the universe to find M3 ?

I'm not denying the fact government sometimes manipulates data, but too many bears use it as an excuse to discredit any good news. Bears should consider the fact that just maybe, the economy IS improving! Of course I could be wrong, by all means it has happened before. But that would also mean all of the governments around the world that are seeing improvement are also wrong, IMF is wrong, etc. Again, wouldn't be the first time these people are wrong, but odds are against it.

 

[Landis82]

Quote from Anaconda:

The businesses can't get credit to even acquire new inventory.

Excellent point.

This was certainly true as of the end of June, where the CP market shriveled to $1.15 trillion outstanding - - - the lowest since November of 2000.

However, it is possible that the CP market is not being used as much by corporate CFO's in lieu of longer term financing.

http://econompicdata.blogspot.com/2009/06/commercial-paper-market-is-dying.html

Ugly chart for sure.

 

[Kassz007]

Quote from Landis82:

Exactly.
And the market is already discounting the eventual turn into positive territory. That's what markets do.

Absolutely correct. As soon as the market realized the entire financial system wasn't going to collapse and bring down the economy with it, it began to go up, discounting a recovery at some point in the future.