I am in the midst of preparing a forecast for the next five to ten years for the United States economy, and by extension the world because of the intertwining effects of the dollar reserve currency and US consumption in the global economy. And of course the US position as the world’s sole superpower.
Before I do that, I thought it might be useful to see a recap of my last five year forecast, to set the playing field as it were, as a sort of an introduction. The next forecast will be similar in format and style, but may be a little more complex, because the US, and the world, are at a critical crossroads in history.
The greatest struggle in writing this sort of thing is to keep it brief, to prevent it expanding into a lengthy treatise that examines too many particulars, too many possibilities. Forecasters often succumb to the temptation to throw out many specific predictions and possibilities, in the hopes of ‘hits’ that will be remembered, with misses forgotten, without giving sufficient weight to the probabilities. In addition, clarity and consciences are always the challenge in writing non-fiction regarding complex subjects.
Please keep in mind that this forecast was published on my old website at the beginning of 2005, when optimism was running high, the maestro was still on his throne, black swans still an uncommon topic, and the US was in a fresh bull market in stocks with a growing housing bubble that very few would admit, and many would vehemently deny. This forecast is being written in darker hours, when some of the horsemen have already been unleashed.
I have edited out extraneous contemporary detail, and most of the charts which are dated, except for one. I edited out some grammatical errors and awkward phrasing. The timeframe has been ‘compartmentalized’ to five years, from a more open-ended original, because at the time I wrote in 2005 I did not imagine I would still be at this blogging effort five years later. I have also renumbered the footnotes and eliminated several for the sake of simplicity and relevance.
In case you missed it, Federal Reserve Chairman Ben Bernanke was on Capitol Hill this morning making his case in regards to the Bank of America – Merrill Lynch deal. The Chairman stated in unequivocal terms that he did not pressure anyone. Rather, he stated that he cautioned Ken Lewis about the prudence of invoking a MAC clause and doubted whether Lewis could be successful in extracting himself from the deal (I agree that the MAC clause was not going to help BofA).
Whether Bernanke is justified in his defense is irrelevant at this juncture. What is relevant, however, is that the Bank of America – Merrill Lynch deal has become a central episode for political recriminations and posturing. As I said two weeks ago:
My take here is that the Bank of America case has become very political – and that means the blame game is going to be played. Someone — Bernanke, Lewis, Thain or Paulson — is going to take the fall. The knives are out.
Indeed, the knives are out and it is looking increasingly likely that Bernanke will be the scapegoat. Below is a Bloomberg News video with Rep. Edolphus Towns (D-NY), Chairman of the House Oversight Committee. If you listen to what Towns is saying, it does not look very good for Ben Bernanke.
Here’s a conspiracy theory for you. As I am not much of a conspiracy theorist, I ill keep this one pretty simple. Here’s the chain of events.
Back in late September when the world was falling apart, Ben Bernanke, Tim Geithner and Hank Paulson were all desperate to keep things from unravelling. As a result, they were pleased that Ken Lewis and Bank of America were willing to pony up massive $44 billion to take over Merrill Lynch. They might even have encouraged the deal (i.e. we will smooth the way. There will be no FTC hurdles. We will soft peddle investigation into Countrywide mortgage fraud, etc)
The problem, of course, was that Merrill Lynch was a bottomless pit of…
Until now, the terrible trail of dead bankers has been only among US and European financial executives. However, as Caixin reports, the increasing pressures on the Chinese banking system appear to have take their first toll. Li Jianhua, director of China's Banking Regulatory Commission (CBRC), died this morning due to a "sudden heart attack" - he was less than 49 years old. Li was among the main drafters on new "caveat emptor" market-based rules on China's shadowy banking system and recently said in an interview that "now is not only a time to control risk, but to transform the trust industry.. if it's ...
The six-day rally in the S&P 500, the longest since early September, came to a halt with a modest 0.22% decline at the close. Today's trading took place within the second narrowest intraday range of the year, a mere 0.31% -- slightly wider than the 0.29% on March 5th. The popular financial press blames today's loss on some pre-open earnings disappointments and a surprisingly weak New Home Sales report (see the interesting analysis of the latter by New Deal Democrat). Even more surprising was the market's indifference to the bad numbers. Today's market mentality was probably more focused expectations of Apple's quarterly earnings after the close, which has triggered a surge in futures as I type this.
Bunge Limited (BG) is the world’s largest processor of soybeans. It is also a major producer of vegetable oils, fertilizer, sugar and bioenergy.
When commodities got hot in 2007-08, Bunge’s EPS shot up and the stock followed, rising 185% in 19 months.
The Great Recession took its toll on operations, dropping EPS to a low of $2.22 in 2009. Since then profits have recovered. They ranged from $4.62 - $5.90 in the latest three years. 2014 appears poised for a large increase. Consensus views from multiple sources see BG earning $7.04 - $7.10 this year and then $7.83 - $7.94 in 2015.
Shares in Las Vegas Sands Corp. (Ticker: LVS) are up sharply today, gaining as much as 5.7% to touch $80.12 and the highest level since April 4th, mirroring gains in shares of resort casino operator Wynn Resorts Ltd. (Ticker: WYNN). The move in Wynn shares appears, at least in part, to follow a big increase in target price from analysts at CLSA who upped their target on the ‘buy’ rated stock to $350 from $250 a share. CLSA also has a ‘buy’ rating on Las Vegas Sands with a $100 price target according to a note from reporter, Janet Freund, on Bloomberg. Both companies are scheduled to report first-quarter earnings after the closing bell on Thursday.
Yesterday, the market continued its winning ways for the fifth consecutive day. The S&P 500 closed within 1% of its all-time high, and the DJI was even closer to its all-time high. Healthcare, Energy and Technology led the sectors while Financials, Telecom, and Utilities finished slightly in the red. All three sectors in the red are typically flight-to-safety stocks, so despite lower than average volume, the market appears poised to make new highs.
Mid-cap Growth led the style/caps last week, up 2.87%, and Small-cap Growth trailed, up 2.22%. This week will bring well over 100 S&P 500 stocks reporting their March quarter earn...
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[Facebook] The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process.
The authorisation from Ireland’s central bank to become an “e-money” institution would allow ...
I just wanted to be sure you saw this. There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.
If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.
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Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.
And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference. Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014? The Biotech ETF beat the S&P by better than 3 points.
As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...
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