Futher from discussions on GDP 7 % GDP thread http://www.elitetrader.com/vb/showthread.php?s=&threadid=23965&perpage=6&pagenumber=1 Credit to this source : http://www.comstockfunds.com/index....entary&newsletterid=1042&menugroup=Home&aol=1 ***************************************** Not Like 1984 Comment From a Sophisticated Viewer The comparison of the current growth GDP rate to 1984 is a stretch at best. According to the Dismal Scientist, in 1984 real GDP grew at 7% for an entire year prior to the 1984 presidential election. The economy added 4 million jobs and the unemployment rate fell 3.6 percentage points from November 1982 to November 1984. This followed the severe double-dip recession of the early 1980s, which cleared the way for a vigorous recovery. Furthermore, in contrast to the current situation, the trade deficit was miniscule, the consumer savings rate was double the current level, and consumer debt as a percentage of GDP was far lower than it is today. Never before has the economy actually lost jobs this far into a recovery. In our view this recovery is unsustainable, and another slowdown is likely soon. In fact, Japan also had a spike up in its GDP in the first quarter of 1997 which was about the highest in twenty years, and right in the middle of their deflationary malaise (see chart attached). This information came from feedback from a loyal viewer from Belgium. This peak in GDP growth could be somewhat explained by a pending consumption tax the following quarter. Another release today was the Help Wanted Index, and at 37 it is lower today than it has been for decades (see attached chart). The index was as low as 35 this year and has shown very little rebound with the so-called recovery in the economy. This index should turn before employment growth starts, and it seems to be dead in the water. Which begs the question-- how can the economy be growing so fast with a continued loss of jobs? How fast does the economy have to grow before we start to generate jobs? You have to keep in mind that employment is not a lagging indicator, as the whole financial media would have you believe, but a coincident indicator. A regular reader of our website (and someone we have great respect for) is Albert Cox, former Chief Economist of Merrill Lynch in the seventies and eighties. He also served in both the Nixon and Reagan administrations. We just got this email from him on his latest thoughts on the economy, stock market, and housing market. With his permission we will quote him directly: âI expect the bear market to resume for a long list of reasons1) Consumer spending has been force-fed for 2 years and no more bullets left (2) no decline or even slowdown in consumer spending in 13 years--never happened before in business cycle history back to 1864 (3) debt ratios thru the roof everywhere--mortgage debt, installment debt, corporate debt, new upsurge in margin debt--as employment continues to sag; and employment is a coincident NOT a lagging economic indicator as the cheerleaders keep saying (4) massive budget deficits at all levels of government (5) huge trade deficit which is sinking the dollar and will trigger foreign selling (6) another frenzy of stock market speculation and the bubble will burst again on a wildly overvalued market (7) ditto for the bubble in home prices (8) heavy deflationary pressure from China and Mexico (goods) and India(services). I continue to believe that we are rather closely tracking Japan's experience of the past 13 years (Japan had huge rallies all along the way just as we're having now) and that we're still in the early stages of what will be a long secular economic and stock market decline. CHEERS We wholeheartedly agree with these comments!
Like Nixon said about his economic advisors - "They aren't always right but they are always sure." Predictions/analysis abound.