HI Jim P., >>Re:<<A 10% impact on the US?>>
I believe Morgan Stanley estimated in Dec. or Jan. that the affect of the SE Asian economic meltdown would affect US GDP by 0.5%. I can look it up if you require a URL. Apart from that, GDP in Q198 was 4.8% last I heard. So, if we are going to talk about the impact from this turmoil, it might be more accurately limited to either those businesses who derive significant income from SE Asia or those businesses who haven't a clue about currency hedging. If we limit our scope to those groups, then we have a small population which is affected by the SE Asian currency woes.
I think it is a generalization to say that generally Q1 EPS growth was dented because of the Asian problems. Using the same premises, the Q1 or Q2 EPS growth problems are not widespread, i.e. look at BBBY, BBY, HD, or any company which benefits from strong consumer spending.
You are correct that the reduced price of crude is still not a benefit for SE Asia since it is priced in dollars. But your statement about more currency collapse leading to market flooding of goods is inaccurate since S. Korea and Japan have done this for years and done it under their special government protectionism. If the market is flooded with certain products, and affects US manufacturers, don't you think it affects US Business because somebody didn't do minimal homework? For this reason, I think it is business specific and limited.
Finally, the latest reports indicate that consumer bankruptcy proceedings have declined. However, you are correct in that more people count their net value based on market gains so a significant market decline would probably put the brakes on the roaring consumer sentiment readings we've seen lately.
I guess the main message is that we can't even predict the weather with consistent accuracy so how on earth can we predict global economics with any certainty?
Regards,
Lee |
