mongombolo's - deep penetrations - wednesday, page-5

No doubt much doom and gloom today - but is it overdone? I haven't read anywhere the underlying cause...

"The latest data showed Americans cut spending by the most in nearly two years and saved at a faster rate during June, a pair of signs that underscored the economy's lack of vigour..."

"Last week brought news that the world?s biggest economy barely grew in the first half of the year..."

Ever since the Japan earthquake we've been battered by bad news. Tsunami, European debt woes, and lately the US debt ceiling.

My theory is that the US consumer in June shut their wallets because all of this news piling on them, especially at the end the debt ceiling debate. I've read some really stupid things about the consequences of not passing it, and the consumer has reacted with caution. Business has also responded by being cautious, reducing inventories, not hiring, and so on.

In Europe, the German economy (amongst others) benefits from a low Euro, as it makes it's exports cheap.

A weak first half for this year - I said this in May (ha! then I said it was "soft" and got my quote in BD's roundup). However, I see no reason the US economy won't pick up in the second half, especially helped by the lower US dollar.

In Europe I see Ireland and Portugal eventually getting out of trouble, with Spain and Italy no real problems. Greece, however, appears terminal and will continue to trouble. So I am less certain about Europe, but I think the big economies like Germany will do very well out of the lower Euro, and that may be enough.

Low dollar & low Euro - this means commodities will remain high, and that will be good for Australian stocks. Asia will slow slightly but continue to supply US and Europe.

Recession? No - the lowest figures will be the first half of 2011, and are behind us. 3Q will be better but still low, 4Q higher. I don't see a real climb out until early next year, which implies a stockmarket rally starting November.

Still a glass half-full...