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cbwang888 (25.39)

Q4 2009 GDP growth of 5.7% are mostly due to inventory investment



February 01, 2010 – Comments (3) | RELATED TICKERS: GDX , GLD , SLV



With 20%+ workforces out of jobs, how did US grew its GDP at 5.7%?


I found one good paragraph from a blog through googling:


"Inventories were the big story, contributing 3.39 points to growth, up from just a 0.69 points in the 3Q. Inventory investment is the lowest “quality" form of growth, since a big increase in one quarter is generally followed by declines in subsequent quarters. "



Overall, this is a much better than expected report. However, the numbers are very preliminary. In the 3Q, the first report came in very strong at 3.5%, and then was revised down twice to growth of just 2.2%. Before one gets too giddy about this report, remember that the numbers are subject to revision.

Most of the growth was low-quality inventory investment, which tends to be fleeting. Still, even if inventories are totally stripped out, this does represent an improvement to 2.31% growth from 1.51% growth in the 3Q and 0.72% growth in the 2Q.





It is time to cut down risky assets and seek safe haven.

Low interest rate is also here to stay so USD can't be relatively strong to other currencies for too long. Many debt-loaded coporate bonds (junk bonds) are bubbles. It's still not clear to me if US T-bonds are backed by its nuclear weapon or its printing machine (Fed).

I would keep adding more gold now as it is hovering around 1080 support level.




3 Comments – Post Your Own

#1) On February 01, 2010 at 2:05 AM, cbwang888 (25.39) wrote:

GDP report from BEA

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#2) On February 01, 2010 at 6:37 AM, TopAustrianFool (98.88) wrote:

Surprise... surprise.... The FED is maintaining low interest rate, eventually it would show up somewhere.  I believe that some of that inventory increase have to do with future expectation, namely inflation makes it seem like people have liquidity and are saving, therefore producers of durable good are reacting accordingly. 

Having $50k in gold is good idea in case we have currency collapse, but it is useless as a hedge against inflation. The best hedge against inflation is good stocks since they ride up with inflation and slide down with deflation.

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#3) On February 01, 2010 at 9:14 AM, cbwang888 (25.39) wrote:

My speculation:

In the long run, China has almost done their printing to match Fed. Now they are OK to have RMB go up against USD. Their buying power of commodities will stay steady. Once they've done buying up all needed commodities for the next 10 years they won't care much about trading with US and the western worlds. They want their influence aod dominant power over Pacific Asia.

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