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S&P/TSX +23.80 (12,577.28)
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U.S. Profit Growth and GDP, U.S. Banks, China Growth - StockReserchPortal.com
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January 18, 2010
U.S. Profit Growth and GDP, U.S. Banks,
and China Growth
U.S. Profit Growth and GDP
In an article today titled 'Can both the economists and strategists be right?'
David Rosenberg, formerly of Merrill Lynch (New York) - now with Gluskin Sheff (Toronto)
- is reported as saying that most economic forecasters see 2010 U.S. nominal GDP
growth of 4% while strategists see a an average 36% corporate earnings growth -
this in circumstances where Rosenberg's research group thinks that historically
every 1% of nominal U.S. GDP growth typically has generated 2.5% of corporate earnings
growth.
If Rosenberg's research is meaningful, and history repeats itself in 2010, it seems
to me (and apparently to Rosenberg) that there is a clear disconnect between the
aforementioned nominal GDP growth and the corporate earnings growth seen by 'strategists'.
I think this is an article well worth reading, and recommend readers do that by
clicking here.
U.S. Banks
A second article this morning says U.S. Federal
Deposit Insurance Corporation ('FDIC') Head Sheila Bair is a recognized non-partian,
and that she has said a (U.S.) currency crisis is imminent. The article reports
that "Last week in testimony before the Financial Crisis Inquiry Commission,
Ms. Bair lit up the room by blaming the credit crisis, and a potential currency
crisis on the banking regulatory systems". Ms. Blair apparently continued by saying
"the regulations have created a "Shadow Banking" system outside the reach of federal
authorities". The article also says "In reporting completed by CNBC, The New
York Times, and Independence News, the FDIC admits to over 500 banks currently on
the imminent failure list, and says (without naming a source) the unofficial number
is closer to 2000".
The article quotes a FDIC representative as saying "Using FDIC funding for system
wide support will ultimately re-create the credit crisis", and "We do not have the
ability to cover the losses of all FDIC endangered banks". The article then
says that if this results in an economic 'no win' situation the U.S. Fed will have
to choose among:
· borrowing trillions to cover the losses;
· printing money; or,
· default.
The article also reports 'Sources at the FDIC ' say "unless there is a 'holistic
(read all-encompassing) approach' to banking regulation, systemic banking losses
should be felt in the next "6 to 10 months" with the real crisis arriving just in
time for the November U.S. elections.
Assuming the article 'has it right', this strikes me as 'scary stuff' that is well
worth monitoring for 'realism' on an ongoing basis as one plans one's investment
strategy over the next few months. I certainly intend to do that as I plan
my own strategy, and will comment in an e-mail later this week if I find other reports
on the extent of possible near-term U.S. bank failures - the number of possible
near-term bank failures quoted in the referenced articles strike me on their face
as astonishing.
China Growth
Shortly after my e-mail (in part titled 'More on China') went out last Friday I
heard from Jeff Christian - founder of CPM Group, New York, and a leading world
'resource expert'. Jeff's comment on my e-mail content (reproduced here with
his permission) was:
"Interesting. Of course, it should be noted that Chinese
real GDP has not been at 6% or lower since 1990, since before the Chinese government
got serious about real economic reforms and de-regulation. Some estimates put it
at 6.5% for 2009, while others think it was above 8%. Final 2009 figures are not
in yet. So, yes, if Chinese real GDP fell below 6% on a sustained basis, it would
be bad for China and the world economy. You also could say that if the Soviet Union
was reconstituted and the US government restarted the Cold War, that also would
be bad for the world economy. The two events may be of equal probability of occurring
in the next many years."
I consider it a great compliment that Jeff takes the time out of his busy day to
read what I have to say.
Notes to Readers
This email and its content is in no
way to be interpreted as an endorsement of one or more of the companies mentioned
herein, a suggestion as to the future direction of the stock price of one or more
of them, or a suggestion or recommendation to buy or sell the shares of one or more
of them. Rather this email is simply a short overview commentary and tutorial
demonstrating the type of information available on StockResearchPortal.com and how
to access it.
The owners of Stock Research DD Inc. (the owner of StockResearchPortal.com and StockResearchPortalBlog.com)
or their families, entities in which they have ownership interests, and officers,
directors, employees, agents, partners, affiliates and partners of Stock Research
DD Inc. may beneficially own securities and participate in Private Placements of
companies referenced in this E-mail. The fact that one or more companies are
referenced or discussed in this E-mail should not be construed as an endorsement
or investment recommendation with respect to those companies or their securities.
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