GNP, M&A, EBITDA, P/E, NASDAQ, Econo-thread Part 10

[Colon™]

Dan,
”I guess the trade gap could have had an impact on the US in the late 80s, but what of Europe in the late 90s? Europe had a trade surplus with the US, IIRC.”

Maybe, but the US economy wasn’t in the doldrums (perceived or real) so there wasn't as much of a temptation to search for scapegoats stealing economic growth and jobs.

BTW you were talking about psychological impact right?

[DanS]

Yeh, I'm talking psychology, but we may have got our wires crossed. I was thinking about the US perception of Japan in the 80s, European perception of US in the 90s. You brought in the Japanese perception of China. Right?

[Colon™]

Mmm I’m not sure whether you can compare European sentiments towards the US with those of the US during the 80’s.

Anyway, I was previously trying to explain that trade balances seem to have a much bigger impact on public psyche than the size of imports and exports as a ratio of GDP, which is why I brought in the example of Japan and China.

[DanS]

This is nuts. Kasriel is predicting real GDP growth of 4% in 02Q1 and the 01Q4 numbers were again revised upward.

http://www.northerntrust.com/library/econ_research/daily/us/020328.html

What the hell is going on here?

Colon: Again, a counter example to that is Europe's "fear" of the US during the late 90s, when it had a trade surplus with the US overall. That's why I dismissed the trade balance as a predominate factor, even though by all rights it should have an effect. My thesis is that somehow people forget their exports, while they see manifestations of increased imports all of the time.

[pchang]

Anectdotal business evidence

Based upon what I have seen:

Q4 2001 was indeed a blockbuster quarter. It does not surprise me at all that the numbers are being revised upwards.

Q1 2002 will be a bad quarter. Economists like extrapolating based upon 1 or 2 points. Sometimes it works, most of the time it doesn't. This is one fo the times where it won't. The economist are in for a big surprise.

[Colon™]

Dan, again, I'm not so sure as you seem to be that European sentiments towards US are comparable to American sentiments towards Japan. For one, few if any at all claimed that US was stealing European jobs and that American corporations were gobbling up European industry (if anything it was the other way around).

There has been anxiety about a widening gap, but I think that the tales of gloom and doom were more popular amongst EU officials and analysts than amongst the wider population. Don’t forget the past few years have been good for us too.

[Colon™]

Regarding GDP growth in the first half of this year, it’s very well possible that this is just an inventory cycle which implies that the recession will “resume” in the second half. It isn’t unusual to have a very strong rebound of growth during a recession because depleted stock are refilled, but as the economy is still sick fundamentally, the rebound is short-lived.
It's also possible this is really the end of the recession, but even thenthis could very well be a temporary burst, followed by sluggish growth.

[TCO]

BLABLAGDPBLABLAGDPBLABLAHEDONICBLABLA.

Since Derek is not here, I must spam the thread in this manner...

USA! USA! USA!

[Roland]

Originally posted by DanS
This is nuts. Kasriel is predicting real GDP growth of 4% in 02Q1 and the 01Q4 numbers were again revised upward.

Well 1 % or even 1.5 % q-to-q growth isn't that spectacular on an inventory reversal (and some very mild weather). The big question is final demand. So far we've had the bloated inventories thrown at a debt-crazy consumer. Now, maybe companies would like to make some profits again ? Biggest question is whether we've seen the terminal blowout of the housing bubble yet....

It's indeed fascinating. A year ago, I'd have put the US' chances of being the next japan at maybe 5 %. Now I'd say 20 %, given all the hard work of uncle Alan in that direction....

[pchang]

The next Japan

There is no next Japan. While we like to lump things together for easy categorization, there are always significant differences which make each case unique. Trying to draw broad parallels almost always leads to faulty analysis.

[Roland]

"Japan" = "economy suffering from lasting bubble-popping-hangover"

Whether you call it liquidity trap or unliquidated malinvestment is a secondary issue.

[Colon™]

Pchang, I agree that each bubble has unique aspects which requires different responses from the actors and I think those responses determine largely how heavy the hangover will be. However, I also believe that the broad lines are similar, easy credit, disproportional asset inflation, plunging savings rate, escalating debts and then the bursting of the bubble and the aftermath, seldom of much joy.

[DanS]

As I've pointed out before, a bubble affects different asset classes differently. I think we're talking about a residential real estate bubble, no?

If so, then we have good examples of how a bust plays out. California had a real estate bubble popped some time ago. It wasn't pretty, but I don't think it was catastrophic.

edit: I also note that there were decades of appreciation in California before the bust. There's quite a lot of time to work out this stuff.

[pchang]

Hmmm

I think Roland is saying there is a bubble in every asset class in the US, even Apolyton posters.

As for RE, didn't someone once say "They aren't making land anymmore" in response to investing in property?

[DanS]

Looked at another way, there has always been an oversupply in the land market. Just look at Canada!