IMO, GDP is wildly overrated. Japan has had net positive GDP growth during the 1990's. Yet their economy was a joke. Record unemployment, record bankruptcies, deflation, banks wiped out, etc. It meant nothing. During the 1970's in the US, GDP was again net positive. But what does it mean? Was the decade that great. No. There can be periods of time when the correlation between GDP growth and stock market growth wildly diverge. GDP grew during 1966-1982. Yet, after inflation the market was crushed during this period. Now, we get "good news" that GDP grew at 7%. Yet total job creation is still the worst its been in the post war era (measuring total job creation after a recession; we are still several million jobs short at this point in the recovery relative to where we in past post recession periods).
Warning from ECB (European Central Bank): âunsustainableâ economic policies in the US and tactics of âartificially stimulating the economy by large budget deficits and inflationary monetary policyâ also warning of a âdisorderly adjustmentâ when the US decides to sort out its coffers. âThe crucial issue is whether the adjustment will be orderly or involve a large and disruptive change in key economic variables.".... also "The current level of the US current account deficit is in the longer run unsustainable and an adjustment will eventually occur, whether actively supported by macroeconomic policies or not,â and concerns about a turbulent economic shake-up..... http://www.eupolitix.com/EN/
The second quarter of this year the gdp was 3.7%( or close to it),and was 70% military spending.In the first week of June ,morgage rates hit their lows and refinancing went through the roof.The morgage refinance index peaked at 9900 and change.This unleashed an instant mountain of disposable income.Obviously, alot of it was spent in the most recent quarter,and hence you get 7.2%GDP.However, for most of the last month the morgage refinance index has been in the 2000-2300 range.Thats correct ,down 75 %+ since the june peak.The residual cash left from refi's and a very modest uptick in manufacturing to fill the store shelves for Xmas should take us through the rest of the year.The first quarter of next yearwill be as the forth quarter, fill the stores with the new years product .The economic numbers will have begun to weaken again, but the so called professionals will say we're still in recovery mode,becausethe numbers are better than expected.In the second quarter of next year ,490 billion goes on the books for the Iraq effort.It seems reasonable to conclude that GDP will excede 3.5% for that quarter based on the similar expenditure this year.Third 1/4 next year will require additional disposable income.Ready for interest rates to go lower?Stranger things have happened.So potentially the fed could drag this out for a couple years,and then some, with the major index's staying rangebound,more or less.See what a coumtry can do if they make their currency into monopoly money.
I've learned to trade better by completely ignoring the economic data and just looking at the charts and indicators. Otherwise, I have too many things to think about that may cause me to have a filtered view of the market (i.e., is it really good news or is it the "good news always comes out at the top" scenario?). I also believe that any administration, especially around election time, has an agenda to spin the data so I have no faith that the numbers have any use to me in trading.
PU-LEEEEEEZE!!! Who cares if the 7.2% isn't sustainable??? Relax. Even if GDP comes back down to 3.5%, the economy AND the financial markets can do very well. They have in the past, why not now? Chicken Little, Chicken Little . . . Give it a rest, man.
The GDP is a lagging indicator. Revenues of the S&P 1500 companies increased at 7% this quarter. This is what the market is looking at, not GDP!
from Monday's WSJ: More than half of the third-quarter's sharp growth was caused by families spending tax-cut checks, according to calculations by money-management group Bridgewater Associates in Westport, Conn. Without tax-cut checks, Bridgewater figures, the economy would have grown 3.4%.
I saw that. I am not sure I buy that analysis either... There is no question in my mind now. Jobs ARE picking up. That should make the next Employment number one that will propell the spoos to 1100. nitro