Sunday, January 30, 2011

It's Better Than You Think

I continue to hear worrisome talk from business owners, including some CEBI members, about "all this debt", "weak dollar", "inflation", etc. Perhaps the consequence of reading articles in the popular press. What do real economists say? "It's better than you think."

That's the title of a recent video from Brian Wesbury, author of a 2009 book, It's Not As Bad As You Think. Worth a read, if you're interested in how Government economic policy (rather than actual "market forces") has boomed and busted the economy over recent years. I came across another fascinating piece of data in the form of an economic forecast from BOM Capital Markets:
Have a look at some specifics of their 2011-2012 forecast:
  • Real GDP Growth -- Healthy, in the mid-3% range. This is the "sweet spot" for US GDP growth
  • Business Investment Growth (a component of Real GDP) -- Double digits in 2011, moderating in 2012, but still leading the GDP growth rate overall
  • Inflation -- CPI -- Moderate, below 2% -- also well below historical averages of 3% to 3.5%
  • Interest Rates -- Rising, thankfully toward the end of 2012. Still below historical averages, continuing to promote investment in capital equipment and real estate.
  • Personal Income -- Approaching a 5% growth rate by Q4 2012
  • Unemployment? -- As you'd expect, declining every quarter. This is a job-creating climate.
Wow, this is an investor's dream come true if it plays out as forecast. BMO is not the only forecaster who sees it that way. Brian Wesbury's videos have continued to accurately forecast this recession and recovery. Have a look at "It's Better Than You Think."

The sky isn't falling any more. Investors on the sidelines or in "safe" investments such as bonds or bond funds should reconsider. The rising interest rates (inevitable, I believe) in this forecast are going to give longer-maturity bond investors some haircuts they'll remember for awhile.

Business owners are (or should be) hiring sales people, ramping up capacity and planning for more working capital as the business grows. Bump up those lines of credit -- money's still cheap and there's no point in using your own.

One final forecast -- A key driver of these GDP growth forecasts, I believe, is the extension of a stable federal tax code through the end of 2012. The Presidential election of 2012 will likely be in a fourth consecutive year of stock market growth, economic prosperity and falling unemployment. Obama will no doubt take credit for that, and no doubt be re-elected. Plan your support of Congressional elections accordingly. Dealing with the "re-expiration" of the current tax code may fall to the 2012 Lame Duck congress, and all bets are off for 2013's tax environment. Biden has "promised" tax increases for 2013. We'll see.

To forward this to a friend,  Click Here

Other CEBI Blog Articles...

Terry Weaver

Chief Executive Boards International

Chief Executive Boards International: Freedom for business owners & CEOs -- Less Work, More Money, More Freedom to enjoy it 

No comments:

Post a Comment

Comments to CEBI Blog articles are moderated to ensure member privacy and control spam. All comments except those deemed inappropriate should post within 24 hours.