Equity Investors - Read 'Recovery?'

Equity Investors - Read 'Recovery?', Additions to SRP.com Company Universe

Equity Investors - Read 'Recovery?'

An article this morning titled 'Dave's Top 10 Reasons to Fade the Recovery (It's Not a Business Cycle!)' yet again lists reasons why the 'recovery' may not really be a recovery after all - or if it is, why it may not persist as a 'recovery' going forward.  The article begins with the statement: "This is NOT a business cycle: this is a one-time reversal of twenty years of inflation of the household balance sheet. An aging (U.S.) population needs a 10% savings rate (at least) to meet minimum funding requirements for the biggest retirement wave in US history (comparable to Japan's retirement wave during the "lost decade" of the 1990s). With 17% effective unemployment, many Americans are dis-saving, after a $6 trillion shock to home equity".  This makes sense to me, as do many of the following reasons stated in the article - most of which I have commented on, sometimes more than once, in the past few months.  Here they are:

·           there is no recovery at all in Europe.  My comment:  As best I know, this statement generally is a fair one;

·           China won't collapse, but ... can't be the locomotive for world growth.  My comment:  I agree with this in the context of 'developed country growth'.  Readers know I see China as continuing to use its U.S.$ holdings to cherry-pick resource and other assets it deems strategic to it.  I believe China is, and will, act in China's near and long-term best interest - and will be cooperative with the U.S. and other developed countries only to extent it needs to be to further that 'best interest'.  I see this simply as 'human nature', and do think negatively toward China in that context;

·           Greece and its prospective rescuers in the European Community are at loggerheads over conditions for EC help.  My comment:  I think Greece will be helped in some fashion for the greater near-term good of the Euro countries and Great Britian.  I think what the end game for those countries is anybody's guess.  I particularly don't like the tone of the articles I have read in the past few days coming out of the United Kingdom;

·           (U.S. Individual) State fiscal crises continue to worsen. My comment:  I have talked about this in recent prior e-mails.  I think this is potentially a huge issue since, unlike the U.S. Federal Government, individual U.S. States do not own their own 'printing presses'.  I think all fiscal problems in individual states ultimately will have to be borne in some fashion by the already (my view) debt overburdened U.S. Federal Government.  Of course, the ultimate source of revenue for the U.S. Federal Government is the corporate and individual U.S. taxpayers.  I think what I see as a 'vicious U.S. economic circular problem' (influenced in my view enormously by U.S. loss of manufacturing jobs and unemployment rates that at best I think will stagnate) becomes - like a building hurricane - ever more violent and unpredictable;

·           U.S. Commercial real estate is nowhere near bottom.  My comment:  Intuitively, as someone who has owned commercial real estate, and has advised substantial Canadian commercial real estate holders, I think this has to be correct - although I see it as a somewhat secondary problem at this point;

·           U.S. Regional banks continue to fail.  My comment:  I commented on this in an e-mail earlier this week.  Again, while I think this is important as a negative economic sign, from my perspective these bank closings currently take a backseat to what I see as other more pressing issues.  I see U.S. Bank Failures as 'a result', not 'a cause', of the current U.S. economic malaise;

·           U.S. Bank credit continues to shrink, falling at an unprecedented 5% annual decline rate.  My comment:  I have not verified this statistic, but if it is even generally correct I say this gives cause for serious concern as it would be negative to both corporate growth and consumer spending - without both of which U.S. jobs will not come back in a meaningful way, the U.S. governments revenues (at Federal, State and Municipal levels) will continue to drop, U.S Federal and State deficits will continue to increase, etc., etc. - all fueling the wind speed and uncertainties related to the aforementioned hurricane;

·           what U.S. bank credit is available is funding the US Treasury deficit in the mother of all crowdings-out, replacing commercial loans on banks' balance sheets.  My comment:  Again, I haven't verified this statistic, but if true its circularity has to be negative to U.S. economic recovery;

·           U.S. industrial production has bounced of the bottom, but manufacturing is only 15% of US employment.  My comment:  Again, if true, this continues for me - based on my belief that on a comparative basis manufacturing jobs add more lasting value than do service jobs - to reinforce my view that U.S. meaningful recover is more myth than reality; and,

·           U.S. employment won't come back, and (yesterday's) U.S. consumer confidence number (unexpectedly down) are "one more nail in the coffin of exaggerated hopes for a cyclical recovery".  My comment:  I think the important points here are (1) can the U.S. recover its manufacturing jobs - my own belief is that it can't in a meaningful way, and certainly can't in the short term, and (2) will U.S. consumer confidence return - I think it can't in a meaningful way given what I see as a clear 'Chicken/Egg' issue with the current (and I think prospective) U.S. unemployment numbers.

I suggest you read the referenced article by clicking here.  The article includes graphs that support some of its quoted statistics, and also has an extensive section on 'Lost Manufacturing Jobs', and what has in part replaced them.

Additions to StockResearchPortal Company Universe