the Great Turnround is coming
Paul is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I hate to be a spoiler to the prophets of doom regarding the state of the economy. I have always believed that all that is needed is for the consumers, the PEOPLE, to be given purchasing power and they will fix the economy themselves as they have always done in past centuries. Of course you can’t just base your beliefs on guesswork. You have to rely on your own knowledge of economic conditions or someone else gives you a boost or fortifies what you believe. In this case, Wealth Daily has fortified mine and I hope it fortifies you as well.
In a 2012 Report, the company looks at 8 determiners to inform readers about the state of the economy and points out that it is far from being bleak. On the contrary, it is very much vibrant and is making a comeback. The report looks at the following:
1. The time factor.
The report points out that ‘time heals all wounds’. The financial crisis has run its course and earnings have been on the rise since 2009. S&P 500 is cited as a glaring example: Cumulative earnings of the Index revealed $543.2 billion in 2009, $792.8 billion in 2010, and is expected to earn $910.3billion in 2011. Amazingly, it is poised to earn a total of $1.04 trillion in 2012. What does this tell us? The business cycle has completed its turn and is kicking back in. Stock prices are down.
2. Profits are at their highest.
Corporations are raking in more profits now than when they were at their peak in 2006. For example, profits are up by 15%, fuelled by the collective increase in S&P 500 earnings during Q3 2012. Without financials, they are even better.
3. Expansion is in, contraction is out.
Though the expansion is moderate when compared to pre - 2008 levels, it is nevertheless an expansion and not a contraction towards depression as the doom and gloom advocates have maintained. Real GDP has moved towards Q4 2007 levels. Data on consumption, spending, and home investment are pointing to a GDP growth of 3.3%, indicating that the US is gaining strength while Europe stagnates. These are very strong indicators to contradict any claim for a double-dip into recession.
4. Jobs are increasing.
With profits and economic expansion undergoing a positive trend, there is every reason to believe that employment will soon follow. John Herrmann of State Streets Global Markets, says there is good reason to be optimistic. He says the number of employees in the private sector will increase by 160,000 per month for the rest of 2011 and will increase by 200,000 per month during the first 4 months of 2012. Even if these predictions fail to hit their maximum level the situation is a reason to be optimistic about 2013.
5. Housing can’t go any lower.
Another slow indicator, housing slowly started to move from its lowest level in 2012, due to a resurgence in housing demand and the lowest interest rate ever. Wealth Daily had released a forecast for a drop in housing of 30% 6 years earlier and actually reached a bottom level of 35% nationwide. Housing is expected to experience a rebound in 2012.
6. Consumers are buying.
Consumers are buying at 4.5% above the pre-recession peak and this situation is expected to rise with the continued economical expanding, housing at rock bottom and about to rebound, together with the comeback of employment. Auto and durable goods purchases are expected to increase as consumers are succeeding in paying off loans with a low level of 3.15% of delinquency loan repayments. .
7. Availability of money to strengthen .
Money will soon be in abundance again to augment consumers’ purchasing power. The banks are full of cash from the recent Federal injections of money to banks and as they approve loans to their customers, more purchasing power will be added to customer wallets. The trend be slow and will only take effect with time.
8. That makes stocks cheap.
As the indicators pick up pace, the value of stocks will be undervalued simply because while stock value hinge on profits they don’t normally rise with them, so it takes time for stock value to reflect the actual state of the economy. For example, the S&P 500 earned $56.88 in 2009, $83.18 in 2010 and was expected to reflect a value of $95.46 in 2011. Furthermore, it is expected to reach $104.95 in 2012. Discounting the more technical financial parlance, the indicators point to a healthy economic status in 2012. What does this mean for me and your?
Simply this……… Hello 2013 and happy investing!
Training myself on how to become a good investor