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mistermiranga (< 20)

GDP Thoughts

Recs

3

May 27, 2009 – Comments (6) | RELATED TICKERS: IMO

We have been through a lot lately and I feel odd being a bear for so long. Have I just missed the sweet-spot of this V-shaped recovery?

We all make assumptions that are based on projections but some of the bulls talk a lot about GDP and how we should soon see an uptick. Rather then post on someone else's space and have someone take it personal...Here is my opinion: 

The reduction of household debt will make it difficult to prop up GDP going forward as has been the case for 10+ years. As stocks and real estate pushed to historic levels so did the accumlation of debt... and GDP followed. So we are entering new territory and to assume that we are going to start building, buying and consuming the same as before can be as dangerous as betting on red when one becomes too comfortable with the thesis. 

Interest rates will rise, consumption will fall and the gov;t can only make up the difference for so long. And while I think the situation is being handled as well as possible given the circumstances, the time will come shortly where investors will start to see the side effects of our much needed medicine.

Long term I am optimistic about this country and our ability to drag ourselves out of this mess but I think it will take more time then any of us will be happy with. Whether my shorts or your longs win in the short term might seem very insignificant in a couple of years. I hope not but fear so...

6 Comments – Post Your Own

#1) On May 27, 2009 at 1:13 AM, awallejr (81.52) wrote:

I agree.  I doubt we will see major GDP growth for awhile.  But on the other hand I don't see the same rate of loss as we saw last 2 Quarters either.  I don't mind a flat GDP rate if it means no more serious contraction.  Too many keep predicting another crash is coming and argue the market is over valued.  Yet when pressed about actual GDP predictions, all you get are vague responses.

Bottom line, do you think GDP will continue to contract near last 2 quarters?  Do you think GDP will bottom out and slowly rise? Market tries to predict future economic activity, and that basically means predicting GDP.

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#2) On May 27, 2009 at 1:37 AM, ozzfan1317 (< 20) wrote:

Our GDP will struggle and we likely wont see much growth if any for a couple of years but after massive over cunsumption that isnt such a bad thing.

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#3) On May 27, 2009 at 5:54 PM, mistermiranga (< 20) wrote:

I don't think GDP will contract at the same pace but I think the time frame of the bottoming process will be troubling for growth oriented companies.

At least with a crash we would typically get a bounce off the floor...perhaps we spend months grinding along the bottom and setting new lows on a regular basis?

the only consistency among bulls and bears is that we would both prefer to get to the magic number tomorrow...punch the ticket and move on to the next goal.

How would you feel if we were trading at SPX 893 in one year? That would be alot of crafty trading to make a buck for either side...

Just putting it out there.    

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#4) On May 27, 2009 at 6:30 PM, awallejr (81.52) wrote:

I actually wouldn't mind since I am dividend heavy in investments.

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#5) On May 28, 2009 at 12:04 AM, mistermiranga (< 20) wrote:

Do you think your investments will still be paying those dividends if we are still grinding it out with "less bad" results over the next 12 mos? 

My guess on GDP and SPX is as good as yours...I just think we haven't fully adjusted our perspective and are leaning too much on the past to project the future. Many things we have come to count on just won't be there any longer. We will adapt and rise above it but not before we fully unwind...

 

 

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#6) On May 28, 2009 at 12:18 AM, awallejr (81.52) wrote:

Yes I do.  I think people are undervaluing T and VZ, for example.  The cell phone really is where the growth will continue.  I feel good about my energy picks too.  LINE, for example, has hedged its position years out off last year's prices.

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