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A Magic Pudding?Brian Bloom Twelve month trailing earnings (GAAP adjusted) now yield a P/E ratio on the Standard & Poor Industrial Index of 137.08X (Source: DecisionPoint.com ) Presumably, those who are piling into the market now are expecting earnings across the board to bottom out and rise strongly from here.  But world demand for oil does not reflect the expectation of a major economic bounce. In particular, demand for oil from OECD countries is expected to fall further in 2010 Quote: "World oil demand is expected to turn positive in 2010. After two consecutive years of negative growth, global demand next year is projected to show a moderate increase of 0.5 mb/d. Non-OECD countries are seen making up the bulk of the increase, growing by 0.8 mb/d. China is projected to increase by 0.3 mb/d, up from only minor growth this year. The OECD region is forecast to see a continued contraction of 0.3 mb/d, following a decline of 1.8 mb/d this year. The US consumption is expected to rebound by 0.2 mb/d after a sharp decline of 0.7 mb/d this year. "The pace of the global economic recovery continues to be the main risk for the outlook for next year. For the current year, the world oil demand growth forecast remains unchanged at -1.6 mb/d." Quote: "World economic growth in 2010 is forecast at 2.3%, representing a recovery from the 1.4% contraction expected in 2009. In the OECD, growth is expected to remain anemic at 0.7%, below the pace seen after previous recessions, reflecting the depth and complexity of the current downturn. With a 1.2% growth forecast, the US will outperform Japan (+0.9%) and the Euro-zone (-0.4%), with the latter seen to remain mired in recession well into 2010. Risks remain predominantly on the downside, despite the recent improved sentiment in forward-looking financial and commodity markets. In the US, stretched households will require time to readjust their balance sheets, amidst rising unemployment and sharply diminished wealth, implying modest growth in consumer spending. Japan and Germany are seeking to rebalance their economies away from an overdependence on export-led growth. Continued Euro-zone banking sector problems may limit credit next year." Source: OPEC [pdf] Author comments:
Conclusion As long as financially oriented professionals are able to influence public policy, the focus of "solutions" will remain financially oriented. It appears that the entire system will need to break before a change in orientation towards wealth generation will be possible. The core questions now are: Will the system break? Author's Note I have voted with my feet because I do not believe in "Magic Puddings". My expectation is that the system will break and that the timing will be before December 2012 - which is one reason my wife and I are now living in a town with a population of 1300. It is two hours up the coast from Sydney and this still gives us access to the "Big Smoke", when/if we want it. Having said this, I am convinced that there are solutions and that a new system will emerge - one that is not predicated on wallpapering over the cracks in the walls of society, but rather on shoring up the foundations of society; perhaps even laying new foundations. In my view, those who want to survive and prosper in the years ahead should focus on the foundations. At bedrock, the foundations on which human civilization has been built are "energy", and "rules of ethical behaviour". We have allowed this foundation to crumble and I believe what we are witnessing in the world today (economic, social and environmental breakdown) are the consequences. We need to turn the page. We need to move "Beyond Neanderthal" Brian Bloom
Beyond Neanderthal Via the medium of its light hearted storyline, it examines how the world has gotten itself into the horrific quagmire of economic and social problems with which we are now faced - and puts forward one possible course of action on which we might embark to dig ourselves out. It may be ordered over the internet via www.beyondneanderthal.com. Or purchased from Amazon. 321gold Ltd |
