Why I have faith in a mild slowdown
Forecasts should always be taken with a grain of salt.
"Global growth as a whole is projected to slow a tad to 4.9 percent next year from an estimated 5.1 percent this year, the International Monetary Fund predicts."
Sounds pretty spunky to me, especially given a cooling of the US economy.
Why are economists so positive? China is growing 10% and India is not far behind at 9%. Then there are the liberated economies of Eastern Europe. Not only have free-market reforms brought strong, sustainable growth, but the internet is driving massive global economic efficiencies.
I've been thinking a lot about how the global economy has changed so much since the last economic downturn in 2001. See, until 2001, the internet was mainly a US phenomenon in the businessplace. A defining element in a downturn is when production capacity exceeds demand (caused by either slackening demand or overcapacity from investment in manufacturing capacity). Either way, we see a lot of factory unused and it happens suddenly. Who can forget the dot.com crash that surprised network equipment makers because their customers swore to a demand that didn't materialize.
This time, the internet has gone global. That makes the economy more in step when we talk about inventories and manufacturing supplies. It removes a lot of the volatility caused by excess. While a US downturn will hurt India and China, the pain will be less than it has been in the past. That in turn moderates the pain and keeps things moving forward instead of grinding to a halt.
Stronger global efficiencies coupled with economic growth as economies enter the age of capitalism - this is a recipe for growth that offsets the slowdown of the more mature economies.
It also means that there will continue to be strong demand for the products that drive economic growth, like networking, and for the luxury items that accompany better standards of living.
That is why I remain bullish on global oriented stocks.
"Global growth as a whole is projected to slow a tad to 4.9 percent next year from an estimated 5.1 percent this year, the International Monetary Fund predicts."
Sounds pretty spunky to me, especially given a cooling of the US economy.
Why are economists so positive? China is growing 10% and India is not far behind at 9%. Then there are the liberated economies of Eastern Europe. Not only have free-market reforms brought strong, sustainable growth, but the internet is driving massive global economic efficiencies.
I've been thinking a lot about how the global economy has changed so much since the last economic downturn in 2001. See, until 2001, the internet was mainly a US phenomenon in the businessplace. A defining element in a downturn is when production capacity exceeds demand (caused by either slackening demand or overcapacity from investment in manufacturing capacity). Either way, we see a lot of factory unused and it happens suddenly. Who can forget the dot.com crash that surprised network equipment makers because their customers swore to a demand that didn't materialize.
This time, the internet has gone global. That makes the economy more in step when we talk about inventories and manufacturing supplies. It removes a lot of the volatility caused by excess. While a US downturn will hurt India and China, the pain will be less than it has been in the past. That in turn moderates the pain and keeps things moving forward instead of grinding to a halt.
Stronger global efficiencies coupled with economic growth as economies enter the age of capitalism - this is a recipe for growth that offsets the slowdown of the more mature economies.
It also means that there will continue to be strong demand for the products that drive economic growth, like networking, and for the luxury items that accompany better standards of living.
That is why I remain bullish on global oriented stocks.
posted by Andrew at
9:50 PM
2 Comments:
Happy New Year LR investors..
LR % returns for the year please..I made 19% gains in 2006..Hopefully we all will do great in 2007 as well.
hi Andrew, hope you are recovering from whatever was happening in your life. Anxiously waiting for updates / stock analysis on your blog.
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