The Global Economy: Drunk on Debt
- November 9, 2016
- Posted by: marlenedubois
- Category: CPR Training
One of the games my son enjoyed when he was a little younger was completing connect-the-dots drawings.
the item was always a pleasure to watch as he filled in those seemingly random series of ink spots splattered across a sheet of paper. Connecting them point by point, the eye at first struggles to find a pattern.
in addition to then, as more in addition to more points were connected, at last a delightful little smile crossed his face. the item was the “aha” moment by a child’s perspective, as the hidden image slowly revealed itself.
the item’s not a bad way to think of investing either, come to think of the item. Each day we’re bombarded by a series of data points – news, economic reports in addition to blather by the Federal Reserve. We struggle to see the pattern.
These days, in which pattern says we’re approaching an important juncture for investors in addition to the global economy…
What caught my eye lately were the gains in cyclical stocks in Europe in addition to elsewhere around the globe.
The Economy: Changing of the Seasons
Europe will be supposed to be wracked by doubt in addition to fractious anxiety over negative interest rates, Brexit, terror attacks, weak banks in addition to (gasp) worries about fresh-baked croissants “dying out” as France’s breakfast pastry of choice.
So amid all the bad news, where do investors get off buying the shares of companies most sensitive to an upswing in Europe’s economy?
We connected one of those dots concerning Spain. Imports are on the rebound, gasoline demand will be on the rise in addition to so are the number of border crossings by freight-hauling trucks into the rest of the EU.
As Jeff pointed out, Spain will be not “the poster child of economic perfection.” however then again, “the economy doesn’t have to be great to be an investment opportunity.”
Could the rest of the earth’s markets soon follow a similar path?
As Bloomberg recently noted, companies in addition to nations in which depend on a rising global economic tide are feeling the love by investors This specific summer, such as:
- Japan’s Toyota: +20%
- Germany’s SAP (enterprise software): +21% (in addition to fresh all-time highs)
- ABB, the big Swiss-based multinational in which’s all about automation in addition to robotics: +14%
- iShares MSCI Brazil: +32%
- iShares MSCI South Korea: +16%
fresh Central Bank Prescription
What’s changed? The fears in addition to worries over the global economy are still there, however central bankers’ attitudes are changing. Austerity will be out. Spending… lots in addition to lots of spending (in addition to borrowing – in addition to spending some more)… will be the fresh prescriptive for the earth’s economic ills. (Never mind whether the item works or not.)
So what does in which mean for us? Well, in case the item doesn’t work (or the item works all too well using a revival of rapid cost inflation), the item’s nice to have some gold for the long run… as we’ve long advocated.
the item also likely means lots of government projects within the way of infrastructure. in which’s going to create some tremendous investing opportunities as the item comes to pass. The gains we’ve seen in cyclicals will be just the start.
in addition to, ultimately, the item means we’re going to see some of the money – currently pushing the U.S. stock market to fresh all-time highs – “leak out” in search of cheaper asset prices in Europe in addition to emerging markets.
Will in which “leak” be a trickle or a gusher? in which depends on how quickly the rest of the earth’s investors connect the dots.