Friday, April 30, 2010

GDP analysis

Well, the GDP numbers are out and they were pretty much right inline with expectations. I really love how we can blame the calendar when things go against the "bullish" story but ignore it when it helps the story. Take Easter for example - when jobless claims jumped around Easter we blamed an early Easter. However, when consumer spending spikes in Q1 we fail to mention that Easter probably helped.

Residential investment fell 10.9% and that's considered a leading indicator so I'm troubled by that number. Equipment and software jumped another 13% but this was down from Q4's 19%+.

Again, I really dispute this claim when the best software guy I know offer up quotes like "I can't close a barn door right now". Someone is buying but I suspect that much of this is stimulus funding working it's magic. We've spent trillions trying to save the economy and ex-government spending there is an argument that the US economy is contracting at a rate north of 10% which would be depression-like levels. I don't think we feel it yet because the government is cushioning the blow. However, there is no appetite for added stimulus or increased spending in Washington right now and states are drastically cutting back, so that puts the "recovery" on shaky ground in my opinion.

Locally, you'll think I'm crazy b/c the malls will be packed every weekend but remember the Loonie is driving all of that foot traffic. It's like everything is 1/2 off in the US for Canadians and this should prove to be a positive surprise for local sales tax receipts. A Tim Horton's in Watertown would be mobbed 24/7.

However, keep in mind that the Canadian bubble is being blown with Chinese helium which might go away without notice overnight.

* Finally, the Greek story will continue over the weekend, but keep in mind the numbers coming out of Greece are scary. They don't need $30 billion, it's more like $120 billion+. The total debt and deficits of the PIIGS is almost $2 trillion. No one has the capacity for that kind of bailout. This won't end quickly.

Cheers!

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