The US turned in a fairly robust quarter in Q1 2010, with real GDP growth meeting expectations at 3.2% annualized. This comes on the back of a very robust annualized 5.6% growth in the previous quarter. This is the best growth two-quarter growth we have seen since 2003.
However, when one digs deeper, it is obvious this growth is unsustainable because it is predicated on a reduction in savings rates and a releveraging of the household sector. As a result, I expect weak GDP growth in the second half of 2010.
The problem with the BEA reported numbers is the composition of GDP growth. The BEA says in its data release:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 3.2 percent in the first quarter of 2010, (that is, from the fourth quarter to the first quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 5.6 percent.
The Bureau emphasized that the first-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The "second" estimate for the first quarter, based on more complete data, will be released on May 27, 2010.
The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, and nonresidential fixed investment that were partly offset by decreases in state and local government spending and in residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP in the first quarter primarily reflected decelerations in private inventory investment and in exports, a downturn in residential fixed investment, and a larger decrease in state and local government spending that were partly offset by an acceleration in PCE and a deceleration in imports.
So the gain in GDP was due to consumption, while GDP decelerated from Q4 2009 due to inventory, exports, residential investment, and state and local government spending.
Translation: These numbers are entirely dependent on an increase in consumer spending. Everything else is becoming a drag on…
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
What the New York Fed attempted to pull off this past Monday with its full-day conference for the execs of wayward Wall Street banks was a public relations stunt to switch the national debate from its culture to Wall Street’s culture. Styled as a “Workshop on Reforming Culture and Behavior in the Financial Services Industry,” the event came less than a month after ProPublica and public radio’s “This American Life” released ...
In last weekend's update, only one the eight indexes on my watchlist posted a weekly gain. This weekend's numbers have reversed. Seven indexes closed the week with a gain and there were some substantial ones at that. Japan's Nikkei erased the previous week's -5.02% plunge with a 5.22% surge. The S&P 500 finished second with a 4.12% advance. China's Shanghai Composite was the sole loser, down 1.66%.
In fact, the Shanghai Composite remains the only index on the watch list in bear territory -- the traditional designation for a 20% decline from an interim high. The index is down 33.68% from its August 2009 peak. See the table inset (lower right) in the chart below.
If you're following Valeant's proposed takeover (or merger) of Allergan and the lawsuit by Allergan against Valeant and notorious hedge fund manager William Ackman, for insider trading this is a must-read article.
Linette Lopez describes the roles played by key Wall Street hedge fund owners--Jim Chanos, John Paulson, and Mason Morfit, a major shareholder in Valeant. Linette goes through the con...
There is lots of action in Southwest Airlines Co. November expiry call options today ahead of the air carrier’s third-quarter earnings report prior to the opening bell on Thursday. Among the large block trades initiated throughout the trading session, there appears to be at least one options market participant establishing a call spread in far out of the money options. It looks like the trader purchased a 4,000-lot Nov 37/39 call spread at a net premium of $0.40 apiece. The trade makes money if shares in Southwest rally 9.0% over the current price of $34.32 to exceed the effective breakeven point at $37.40, with maximum potential profits of $1.60 per contract available in the event that shares jump more than 13% to $39.00 by expiration. In September, the stock tou...
Last week brought even more stock market weakness and volatility as the selloff became self-perpetuating, with nobody mid-day on Wednesday wanting to be the last guy left holding equities. Hedge funds and other weak holders exacerbated the situation. But the extreme volatility and panic selling finally led some bulls (along with many corporate insiders) to summon a little backbone and buy into weakness, and the market finished the week on a high note, with continued momentum likely into the first part of this week.
Despite concerns about global economic growth and a persistent lack of inflation, especially given all the global quantitative easing, fundamentals for U.S. stocks still look good, and I believe this overdue correction ultimately will shape up to be a great buying opportunity -- i.e., th...
Now that bitcoin has subsided from speculative bubble to functioning currency (see the price chart below), it’s safe for non-speculators to explore the whole “cryptocurrency” thing. So…is bitcoin or one of its growing list of competitors a useful addition to the average person’s array of bank accounts and credit cards — or is it a replacement for most of those things? And how does one make this transition?
With his usual excellent timing, London-based financial writer/actor/stand-up comic Dominic Frisby has just released Bitcoin: The Future of Money? in which he explains all this in terms most readers will have no tr...
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
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