Sat Apr 28th, 2007 at 04:37:47 AM EST
A new high on the Dow Jones Index reminds us that economic growth continues in the US, and around the world. IMO there exists a bias amongst us here at ET, a bias leads to continuing predictions that the world economies, and in particular the US economy, is about to fall apart. My first diary at ET, October 15, 2005, Significant growth over the next 5 years was written to argue against scenarios that were being presented at ET, that argued that growth in the US and the world as a whole would be negative. I argued against that view, and argued that the world economies would in fact grow nicely.
It's likely that all economies can benefit from this growth. The US is best positioned in healthcare and technology, and should benefit significantly, and has been showing good growth the last several years. Asian growth will likely be the most explosive, due to their tremendous potential growth as a result of an underutilized population. Europe should certainly benefit, but growth numbers over the past several years place them third behind the US and Asia. European employees and industries may have to be flexible as Asia challenges entrenched European business positions. IMO, heavier percentage allocations to the US and Asia in terms of funds invested, may lead to better overall returns.
Not to pick on the ever gracious Jerome, but he did argue at that time for a no growth scenario, and even back then highlighted the housing market.
thanks for making a decent and argued case for bullishness.
I voted "no growth", but if you want a really pessismistic outlook dissinulated under savvy investment advice, have a look at:
I don't know them, but the kossack that pointed me to this doc+. wrote that they had an exceptional macro track record in the past. They are basically saying that interest rates will not increase because the recession will come before inflation makes it necessary.
So much for the kossack, as there has been no recession over the last 18 months and of course interest rates did continue to climb. However I imagine this "investment advice" column is continuing to be published and collecting fees from investors.
The Dow was 10287 when I wrote that diary on Oct 15, 2005. Almost a year later, Oct 7, 2006 I wrote a follow up diary as the Dow approached 12000, Dow Jones sets new all time high last week. Clearly the achievement of 12000 showed that the economy had not nose dived as predicted by Jerome and others. But, the economy was expected to slow from the rapid growth that it was one, as shown by the following comment:
-The American economy is slowing down this quarter, and likely next. That was necessary as inflation had been edging up, and the Fed responded with 17 straight interest rate hikes. There is some concern that they overdid it,,,,continuing with a couple of hike even after seeing data of the slowing economy. But concensus view seems to be there will be a soft landing, not a recession, and then return to strong growth. Good news for Europe and the world economy as well.
We should note that the economy has in fact slowed in the US, as predicted, in the 4th and 1rst quarter of '07--slowed, but to 1.3%, not negative, growth. We should note that the 13000 Dow shows an increase of 26.4% over the Dow of October 15, 2005-clearly different than the negative growth predictions of some. We should note that while I had projected that the major stock markets would all grow (US, Europe, and Asia-non Japan) that was in fact true, but while I predicted the order would be Asia, US, Europe,,,,the order has actually been Asia, Europe, US. We should further acknowledge that stock markets don't necessarily reflect the results of various economies around the world, but each of these economies grew nicely--with the order of growth being Asia-non-Japan, US, and Europe.
It's also worth noting that less developed economies have benefited dramatically over the last few decades, and that millions around the world are being pulled out of poverty. This was shown in a dramatic and very exciting manner by DEBUNKING MYTHS ABOUT THE THIRD WORLD-Hans Roslong in a very exciting presentation.
I certainly do not believe that one should plan one's life entirely around our financial rewards. satisfaction in fact comes from more spiritually and family grounded pursuits, imo. Yet meeting the basic economic needs of life is helpful for most of us. so I would just point out that on that economic dimension, those of us who have planned their lives around positive economic growth (as opposed to no growth) have done much better over the last several years, and acutally the last century, than those who have based their financial planning on the "no growth", "doom and gloom" scenarios that we sometimes see.