Daily Archives: August 1, 2012

Portrait of the American Consumer

In this post we take a look at the American consumer. The Consumer Metrics Institute states that the American consumer is currently responsible for 71% of GDP revealing the importance of understanding the consumer’s ability and propensity to spend. Leaving the employment market for another post, we examine the consumer’s income, savings, and debt profiles. We finish with a summary of the consumer’s health and its economic implications. We consider the American consumer to be a good proxy for the Canadian consumer in many respects.

Welcome to Dystopia!

We review Jeremy Grantham’s latest Quarterly Letter consisting of two parts, “Welcome to Dystopia!” and “When Bad Things Happen to Cheap Assets”. The part Welcome to Dystopia!, is an update to two earlier letters, Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever and Resource Limitations 2: Separating the Dangerous from the Merely Serious. In this essay, Jeremy focuses on the continuing global food crisis and what we might, and can, do to avert it. His colleague, Ben Inker follows with When Bad Things Happen to Cheap Assets, looking at investment implications.

The central theme of his paper he summarizes as

we indeed seem to be running out of cheap resources, and everywhere – even including China – the problem is underestimated. The consequences are that we continue to squander those lower-cost resources that remain and suffer from the large, unnecessary increase in the associated output of waste, particularly CO2 – which has already begun to have significant effects on our weather stability and, hence, our ability to grow enough food.

While we have refuted the CO2 argument as a significant aspect of global warming (What Is Your Carbon Foolprint?), we think much of the rest of his research retains some validity.

PMI Update: Dark Clouds and Risk of Rain On Our Parade

In June we reported in PMI PMS that most of the eurozone had contractionary readings (below 50) with Canada showing the greatest growth. With July data coming in we update the global picture. In short, things are getting worse pointing towards a global recession if we are not already there. Specific data follows:

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