Comments on: Time for a ‘melt-up': the coming global boom http://blogs.reuters.com/anatole-kaletsky/2014/11/14/time-for-a-melt-up-the-coming-global-boom/ Sat, 03 Jan 2015 16:42:55 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: EJiang http://blogs.reuters.com/anatole-kaletsky/2014/11/14/time-for-a-melt-up-the-coming-global-boom/#comment-2488 Tue, 02 Dec 2014 05:35:52 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=1523#comment-2488 It is extremely unlikely that the “melt-up” described in this article will occur in the near future. First of all, the authors’ arguments for a structural bull market are highly debatable. The statement, “Most parts of the world economy are enjoying decent, if unspectacular, growth”, doesn’t concur with the latest data from major economies such as the European countries and Japan. Smaller economies with decent growth rates can account little for the health of global economy. In November, the manufacturing PMI is 50 in Germany and 48.4 in France. And Japan is confirmed to be in recession since Q2 2014. The argument that economic and financial policies are becoming more predictable is also easily refuted by the People’s Bank of China’s recent rate cut, which caught the world by surprise. It was also against the general speculation that the Bank of Japan earlier announced an expansion of its asset purchasing program, a “dramatic” move according to the author himself. Both actions were aimed to strengthen two economies that may be actually weaker than they seem. Another argument for a bull market is the low, “almost nonexistent” inflation rate, which by itself is a worrying sign of weak economic growth. The inflation rate is constantly below the inflation target in the United States and Japan, while deflation is threatening all of Europe. The pretty picture painted by the author doesn’t even remotely resemble the painful reality. The markets are recovering from previous shocks, but this upward trend is not strong enough to become an actual boom.

Fundamental weaknesses in the economies need to be addressed before we can confidently expect high growth rate and prosperous markets. In the article we saw one of those weaknesses in action with European Commission allowing Italy and France to run bigger budget deficits, against Germany’s preference for austerity. The economies are now plagued with excessive debts. Even the governments are operating with incredible amounts of debt. The public debt to GDP ratio is 92.2% in France and 132.6% in Italy, both significantly higher than Germany’s 76.9%. Germany has always been cautious and circumspect with certain economic policies, such as large scale asset purchasing programs and expansion of government debt. And this attitude could be well justified by the fact that Germany is still the leading economy in the Euro zone. If the German government can operate efficiently with less debt then why can’t the Italian and the French do just the same? In addition to the public debt, there is debt trouble in the private sector too. It can be best observed in China where the economy-wide debt to GDP ratio is now at 251%, which is 100 percentage points above its 2008 level. After the financial crisis PBOC issued trillions of Chinese Yuan to stimulate the economy. The easy money, along with the lack of regulations, allowed businesses the capability to borrow more than they should. Consequently, over leverage and bad debts become norms. The ratio of 251% is not so staggering when compared to the US’ 260%, the UK’s 277% or Japan’s 415%. The root cause to the heavily leveraged economy is that people prefer immediate, short-term growth instead of modest yet sustainable growth. And raising excessive debt is the best way to rush immediate growth. The financial crisis exposed not only the wrongdoings in the financial sector, but also the weaknesses in the economy. For now we must settle for the weak growth rate and try to reform the economy to ensure sustainable growth, and reach for high growth rate only when we are truly ready. Cleaning up over leverage and encouraging new businesses can be a good start.

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By: joshsoffer http://blogs.reuters.com/anatole-kaletsky/2014/11/14/time-for-a-melt-up-the-coming-global-boom/#comment-2441 Tue, 18 Nov 2014 07:44:18 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=1523#comment-2441 Anatole forgot one key fact about structural bull markets:they never begin with near-record S &P p/e’s. Multiples were dirt cheap as the 50’s and 60’s bull began, and were very low at the onset of the 80’s structural bull.By the time they reached today’s p/e levels in the mid 60’s and late 90’s, markets were facing the prospect of a decade and a half of no growth(1966-1982, 1999-2013). I think we can look forward to another structural bull market, but not before one of two things happens to re-normalize multiples:either we enter a mild bear market in 2015, or markets experience sub-par growth over the next 5 years.

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By: brotherkenny4 http://blogs.reuters.com/anatole-kaletsky/2014/11/14/time-for-a-melt-up-the-coming-global-boom/#comment-2439 Mon, 17 Nov 2014 16:50:18 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=1523#comment-2439 Perhaps more for the wealthy. The middleclass in the US is disappearing. Trickle down doesn’t work except if your the 2%, because it’s really a suck up system. That is, the wealthy suck up all the benefits of peoples labor.

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By: ekaneti http://blogs.reuters.com/anatole-kaletsky/2014/11/14/time-for-a-melt-up-the-coming-global-boom/#comment-2438 Mon, 17 Nov 2014 13:26:30 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=1523#comment-2438 “”Luckily, the policy paralysis in Europe and Japan has now been broken and that, in turn, means that the risk of these vital regions falling back into recession is smaller than a month ago.””

Not since the claim that the Titanic was unsinkable has there been a more inopportune statement.

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By: Leftcoastrocky http://blogs.reuters.com/anatole-kaletsky/2014/11/14/time-for-a-melt-up-the-coming-global-boom/#comment-2435 Sat, 15 Nov 2014 19:58:38 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=1523#comment-2435 With a weak economy. high unemployment and low interest rates, an austerity budget is the wrong approach, counterproductive, dangerous.

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By: varker007 http://blogs.reuters.com/anatole-kaletsky/2014/11/14/time-for-a-melt-up-the-coming-global-boom/#comment-2432 Sat, 15 Nov 2014 09:45:28 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=1523#comment-2432 This article is an absolute joke.

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By: Sewblon http://blogs.reuters.com/anatole-kaletsky/2014/11/14/time-for-a-melt-up-the-coming-global-boom/#comment-2431 Sat, 15 Nov 2014 06:02:34 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=1523#comment-2431 Why does greed give way to fear? Or the other way around? Why don’t people stay in a perpetual state of greed or a perpetual state of fear?

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By: Missinginaction http://blogs.reuters.com/anatole-kaletsky/2014/11/14/time-for-a-melt-up-the-coming-global-boom/#comment-2430 Sat, 15 Nov 2014 01:13:25 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=1523#comment-2430 How can economics possibly be this simple? I thought that the original QE was justified. Beyond that I’ve become a skeptic. Just keep creating liquidity and everything will be OK? That’s it? That’s the Holy Grail? Perhaps, but if true we’ve been wasting a lot of time and effort studying economics. All we need do is keep creating liquidity, keep printing.

The author mentions the October 1987 one day crash. After that eventful 22% down day the market recovered in large part due to corporations buying back shares that were thought to be undervalued. Thanks to central bank stimulus, today we have corporate interests borrowing cheaply in order to finance share buybacks at very high (record?) valuations. There is a big difference.

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By: Rakavic http://blogs.reuters.com/anatole-kaletsky/2014/11/14/time-for-a-melt-up-the-coming-global-boom/#comment-2428 Fri, 14 Nov 2014 20:18:55 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=1523#comment-2428 Do you really believe that?

Falling oil prices are about to lead to major lay-offs in the U.S. That stock market boom has already happened. We are well on our way to a major recession. Watch, the next 12 months are going to make 2008 look like a holiday.

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By: Robertla http://blogs.reuters.com/anatole-kaletsky/2014/11/14/time-for-a-melt-up-the-coming-global-boom/#comment-2427 Fri, 14 Nov 2014 19:27:17 +0000 http://blogs.reuters.com/anatole-kaletsky/?p=1523#comment-2427 ” Third, technology is continually advancing and innovation is creating new products, services and processes that stimulate both investment and consumer demand”

— more like reducing employment, creating excess capacity……

price deflation would stimulate demand……….the average person’s purchasing power has not improved

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