More on Chinese growth….the key take away is that China is achieving this with a per capita income that’s less than 1/3rd that of the U.S. per capital income. Less than 1/3rd!
By the numbers…
According to CIA Factbook: China’s per capita GDP is $3,619 (based on official exchange rate GDP vs GDP purchasing power parity) of $4.81 trillion total GDP (2009 est.)
According to CIA Factbook: United States per capita GDP is $46,513 (based on official exchange rate GDP vs GDP purchasing power parity) of $14.43 trillion GDP (2009 est.)
When China achieves per capita GDP of…
$8,000, the country’s GDP will be $10.64 trillion
$10,000, the country’s GDP will be $13.30 trillion
$12,000, the country’s GDP will be $15.96 trillion
At 8% GDP growth, China will surpass the (current) U.S. economy by 2025…and China will accomplish this with a per capita GDP of only $10,900. (based on official exchange rate GDP vs GDP purchasing power parity)
When China is able to increase per-capita GDP to $15,504 (1/3 of the current US per capita GDP), its economy will be $20.622 trillion. (based on official exchange rate GDP vs GDP purchasing power parity)
Two years ago I delivered a presentation to a stunned Money Show crowd in which I projected that China would overtake Japan as the world’s second largest economy within 2 years. Most economists were reluctant to speculate on five at the time. I also stated that the Red Dragon will overtake the U.S. as early as 2020.
Now the former is official…and the latter is right on schedule. http://finance.yahoo.com/news/China-overtakes-Japan-as-No2-rb-1097741380.html?x=0&sec=topStories&pos=6&asset=&ccode=
Ignore this trend at your own financial peril.
According to the NY Times, all 34,000 Goldman employees have been directed to clean up their language. The warning, by the way, was a verbal one which strikes me as somehow very ironic.
Anyway…my guess is this is a public relations play aimed at removing anything that could give opposing lawyers or the investing public court of public opinion the idea that their traders are a bunch of notoriously foulmouthed punks out for their own interests at the expense of f-ing clients when the fit hits the shan.
Wonder what the company is going to do about abbreviations?
I was asked recently to flesh out some of my views by a TV producer trying to “fit” me into his program:
Politics – I am generally apolitical. With very few exceptions, the system, is filled with a bunch of self-serving ideological numb nuts who are more interested in saving their own jobs and getting re-elected than in dealing with the very serious, very real issues at hand that are wrecking this country. What we are facing – pick a “what” – is not a Republican issue nor a Democratic one…”it” is one requiring a concerted and united approach.
Taxes – tax increases and rebates rob the American people of their future. Except for the extreme short term, they don’t work. Rather than lumping the greatest tax increases we’ve ever seen onto an already hurting America, why not spend responsibly in the first place. Imagine the “stimulus” to the America people if the government simply said you get a year tax free??!!
Regulation – Wall Street’s only innovation in 100 years is regulation avoidance. Congress and our leaders need not focus on descriptions, but on functions. And, while we’re at it, we could easily use the regulations we already have on the books. Too big to fail…antitrust laws are already on the books. Derivatives…how about reporting assets on sheet and requiring insured party interest instead of allowing policies that provide an incentive to burn your neighbor’s house down. Trading against your clients…what happened to no commingling and fiduciary responsibility.
I could go on but the thing is we already have plenty of laws. We just need to enforce them. Wall Street is hopelessly stacked against the average investor which is why now more than ever they need the insights we provide and not from Wall Street which has played the biggest game of liar’s poker the world’s ever seen…and unbelievably won again.
Our so-called free markets have failed and are now manipulated by the government at almost every turn. Some argue that’s why we need more regulation. Bull…I think it’s ample evidence that we need less. Any government that’s big enough to give you what you want is big enough to take it away, too. We have lost sight of the fact that private companies and individuals create wealth. Governments are tasked with providing protections associated with life, liberty and the pursuit of all who threaten it.
Deficit spending – does not work, has never worked and will never work. Baaaaaad idea which will have catastrophic results for America that are going to be dealt with for generations to come. I just wrote a huge piece on this and I’ll share it with you shortly.
The SEC changed an important rule in the newly passed financial overhaul bill signed Wednesday. Credit ratings agencies are no longer required to signoff for the sale of certainly newly issued bonds backed by consumer debt as they have in the past.
And get the reason why…according to a story on Yahoo, the SEC fears that the financial consequences of the new financial reform bill makes it easier for investors to sue them if ratings prove inaccurate.
Apparently it’s okay for the SEC to let consumers get screwed by dodgy debtors while selectively changing rules to cover their own asteroids.
What happened to being the consumer’s watchdog?
Unbelievable.
http://news.yahoo.com/s/ap/20100722/ap_on_bi_ge/us_financial_overhaul_credit_agencies
Buried in the 2315 pages of the Financial Reform Bill is this little tidbit authorizing our leaders to work their “magic” on individual consumers (just in case $12.1 trillion is not enough):
Section 1205, LOW-COST ALTERNATIVES TO SMALL DOLLAR LOANS
(a) GRANTS AUTHORIZED.—The Secretary is authorized to establish multiyear demonstration programs by means of grants, cooperative agreements, financial agency agreements, and similar contracts or undertakings, with eligible entities to provide low-cost, small loans to consumers that will provide alternatives to more costly small dollar loans.
Badda bing baby…sign up now and you too can get a payday loan from the United States government. Only one thing I want to know…what’s the vig?
Low rates, low loan demand and low economic growth. There’s nothing to pull me in.
Generally speaking even though the big boys continue to generate profits through “trading” absent a growing loan book all they’re left with is a pile of cash to invest…at bargain basement yields.
Better hope they don’t go creating derivatives that offer higher “returns” which is what they did last time the yield curve got compressed like this and the pressure to perform grew.
I was asked on Fox this morning whether I thought the host, Stuart Varney of Varney & Co, had been too negative lately. After some good natured ribbing, I got down to brass tacks. No – I don’t think he and the Company are being too negative. The recovery hasn’t met expectations and the profits we are seeing this morning are the result of more expense cutting not top line growth. Not only that, but top line growth looks soft.
Don’t expect anything to change until we see real growth on both the top & bottom lines. But do use the smack down to acquire global companies which offer built in diversification to hedge against a still weak U.S. with stronger growth in other areas…like Asia and in particular China – bubble or not.
Some 75% of reporting companies have beaten expectations by an average 30.2% so far…and the markets have not responded. I think that’s due to three things:
1) Traders are simply not seeing the mojo they need to commit more capital. Overall, they’re not selling it’s just that they’re not buying generally speaking which is a practice referred to as “walking away from the bid.” When they do this, the sellers must simply keep lowering prices.
2) Last week saw three big misses in the economic world including the University of Michigan’s Consumer Sentiment figures, the Philly Fed, and the Empire State Manufacturing numbers. This points to more stagnant conditions ahead than Washington in all its infinite wisdom wants to acknowledge.
3) Even though some 75% of companies reporting already are hitting good numbers, top line sales growth looks soft which means that the bulk of profits are still being derived from bottom line expense cutting. In other words, even though Q2 numbers generally exceed expectations with growth that is, on average, up 30.2% according to Thompson Reuters data, what this tells us is that signs of future growth are not necessarily strong.
Therefore, barring some massive upside buy in on heavier volume, I’m left with one conclusion: prepare for rougher sailing into 2011.
The SEC fined Goldman a record $550 million and expects a job well done pat on the back for having made the mighty firm genuflect to regulators. Noted SEC Robert Khuzami, head of the SEC’s enforcement division, “this settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing.”
Who is he kidding??!!
As part of the settlement, Goldman neither admitted guilt nor wrong doing. More to the point, last year the firm made $13.4 billion thank you very much so this is a mere 4.1% penalty and nothing more than the cost of doing business.
How about something serious like jail time or permanently baring anyone involved in the fraud from ever dealing in securities or financial products, or being employed by any company that deals in securities or financial products?
Yeesh…
