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

Quote from Ivanovich:

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?
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My argument is that Americans spent too much, saved too little in the past, causing defaults. An increase in savings now is a good thing to get consumers back on their feet.

As long as savings don't increase TOO MUCH. There is certainly a point where the economy will be crippled if savings rates increase too much. What is too much? Who knows, but hopefully it doesn't happen.
 
Quote from ASusilovic:

That's why GS is expecting S&P 1070.00 by years end, because market has "priced in" already "sluggish growth". LOL !
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If you ACTUALLY look at the numbers lately, there has been a stabilization in the manufacturing sector even with this RECORD BREAKING LIQUIDATION in Inventories of $141 Billion. This is very bullish and will lead to a larger "snap-back" in the Economy for the second half of 2009 in my opinion.

By the way, GS isn't the only broker that has been bullish. In fact, Barclays, Merrill, etc. turned bullish a lot sooner than GS did.
 
Quote from Landis82:

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.
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As I mentioned in another thread here, I perceive the fall in the total amount of commercial paper outstanding as a positive development.

There have been shifts on both the supply and demand sides of the CP mkt, which, in my view, should be overall healthy for the system as a whole.
 
It took Japanese corporations around 18 years to salvage their balance sheets. They did so at the expense of the Japanese government which went on a borrowing speed and catapulted national debt to GDP to something like 170%.

Interestingly, Japanese corporations now have some of the most healthy balance sheets since the 80s.

I see something similar happening in the US and Europe, maybe not the same proportions. But consumers (savings rate) and corporations (cost cutting, downsizing) will ideally be healing their balance sheets, paying off debt slowly over time while the government does what it can to keep GDP from plummeting while simultaneously increasing national debt over time. In this process we see private liabilities gradually shifted over to the national level, just like in Japan.

Just my 2c.
 
Category Q2 Q1 Q4 Q3 Q2
GDP -1.0% -6.4% -5.4% -2.7% 1.5%
Inventories (change) -$41.1B -$113.9B -$37.4B -$29.7B -$37.1B
Final Sales -0.2% -4.1% -4.7% -2.9% 2.7%
PCE -1.2% 0.6% -3.1% -3.5% 0.1%
Nonresidential Inv. -8.9% -39.2% -19.5% -6.1% 1.4%
Structures -8.9% -43.6% -7.2% -0.1% 14.5%
Equipment & Software -9.0% -36.4% -25.9% -9.4% -5.0%
Residential Inv. -29.3% -38.2% -23.2% -15.9% -15.8%
Net Exports -$347.8B -$378.5B -$590.5B -$757.5B -$738.7B
Export -7.0% -29.9% -19.5% -3.6% 12.1%
Imports -15.1% -36.4% -16.7% -2.2% -5.0%
Government 5.6% -2.6% 1.2% 4.8% 3.6%
GDP Price Index 0.2% 1.9% 0.0% 4.1% 2.0%


http://www.briefing.com/Investor/Public/Calendars/EconomicReleases/gdp.htm

The ony positive item is government spending. Government is buying a better economy. :eek:
 
Quote from Kassz007:

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.
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C+I gives one a clearer picture of the health of the economy. That's the point that I'm making, extract G from the picture and you get to peer inside the realm of private consumption and investment, which is far more telling than Cash for Clunkers expenditures.
 
Quote from circadian:

C+I gives one a clearer picture of the health of the economy. That's the point that I'm making, extract G from the picture and you get to peer inside the realm of private consumption and investment, which is far more telling than Cash for Clunkers expenditures.
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True. The US economy ex-government propup is what will define things like when the recession will be declared over(They look at income less transfers) and what the fed/white house will do.
Cristina Romer had an economist.com article saying how fiscal/monetary stimulus withdraw could lead to a 1937 event. Fed people are also aware of this. I dont think you US tax payers need to be worried about tax hikes for now, when the Bush cuts expire another they will almost surely provide other types of cuts/stimulus, so on net it might be a wash
Bernanke is urging them to avoid net hikes
 
Quote from Daal:

True. The US economy ex-government propup is what will define things like when the recession will be declared over(They look at income less transfers) and what the fed/white house will do.
Cristina Romer had an economist.com article saying how fiscal/monetary stimulus withdraw could lead to a 1937 event. Fed people are also aware of this. I dont think you US tax payers need to be worried about tax hikes for now, when the Bush cuts expire another they will almost surely provide other types of cuts/stimulus, so on net it might be a wash
Bernanke is urging them to avoid net hikes
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Agreed 100%

Romer is keenly aware of what happened during the Great Depression and how the government responded. It's what she built her career on.
 
Quote from circadian:

C+I gives one a clearer picture of the health of the economy. That's the point that I'm making, extract G from the picture and you get to peer inside the realm of private consumption and investment, which is far more telling than Cash for Clunkers expenditures.
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Yes this is true. But if G is increased until C+I recover (as is happening now), then it alleviates the pressure. This risk is if G continues to increase without a recovery in C+I which remains to be seen.
 
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