Saturday, May 17, 2008

Model update May 1 2008

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.



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.


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...


This Global Historical probability model is intended for information only and under no circumstances should items be considered as recommendations to purchase or sell investments.
Any statements contained herein that are not based on historical fact are forward-looking statements. Any forward-looking statements represent the Investment advisor’s best judgment as of the present date as to what may occur in the future. However, forward-looking statements are subject to many risks, uncertainties and assumptions, and are based on the Investment advisor’s present opinions and views. For this reason, the actual outcome of the events or results predicted may differ materially from what is expressed. Furthermore, this investment advisor’s views, opinions or assumptions may subsequently change based on previously unknown information, or for other reasons. The Investment advisor assumes no obligation to update any forward-looking information contained herein. The reader is cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements.

These are my own views, please enjoy these insights