Valuations- more overvalued, earnings are not keeping up with stock values so dividend yields are falling
Monetary policy- markets are tightening
Investment cycle-near the end of the cycle, commodities and inflation sensitive industries (the world has not falling into a recession yet)
Sentiment worsening for the public, improving for the markets, a negative (contrary indicator)
Growth prospects- the global economy has no prospects for growth, outside of the alternative energy field
Profit cycle- peaked rolling over.
ECRI-Negative
LEI-negative
Global OECD-negative, and for more countries they are rolling over. We are about at the same point at the end of 2000 in terms of the global slowdown.
Debt deflation model---
Debt Deflation---In his debt-deflation hypothesis, Fisher asserted that (nominal) over-indebtedness and deflation are the dominant forces that account for "great" depressions. Specifically, he argued that given nominally denominated debt contracts, a protracted fall in prices and nominal incomes substantially increased real debt burdens, led to debtor
Insolvency, lowered aggregate demand, thereby contributed to a continuing decline in the price level, and thus further increases in the real burden of debt.
House prices are accelerating to the downside, home prices around the world are peaking and more are rolling over.
Credit growth- slowing and decelerating
Wage growth- rolling over
Bank Lending- The markets are doing much of the tightening, and many global banks are raising lending standards. (Not what you want to do in a the global credit cycle)
Gas and food- I understand that many think that this is inflationary, but unless wage demand picks up around the world, it forces consumers in the industrialized world to curtail discretionary income. The other half of the world economy spend an inordinate amount of their incomes for the necessities of life, they can least afford higher gas and food prices.
Variables-
Oil and food prices are still rising negative for the economy and it forces discretionary spending will be curtailed.
Chinese Olympics- One of the four drivers for the Asian economies will be gone, after North America and Europe slow down consumption
US Election- negative for the markets if the Democratic Party wins (not a political view just that they will more than likely increase taxes)
Long Term
Kuznets cycle- down phase is spreading around the world
Demographics- the global baby boom will be moving away from Real Estate and spending.
Generational cycle- winter is upon us…
Summary, all the models point to a deceleration for the global economy, worsening profits and for a fundamental change in global consumer spending...
