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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (7777)	6/10/2004 2:07:21 PM
From: Perspective	Read Replies (4) \| Respond to of 116555

Anybody got any good data on typical durable goods spending cycles? Seems like yet another hole in the bullish argument. With this cycle extended as long and far as it is, the repercussions of its end should be pretty substantial. And to say otherwise is to break out that dangerous phrase we heard so much in 1999: "It's different this time..." BC <The recent growth excesses of the American consumer and the Chinese producer have both been driven by spending on durable goods. Durable goods consumption is now greater than 10% of US GDP ? an all-time high and well in excess of the pre-equity-bubble share of around 7% in 1995. Half way around the world, Chinese fixed investment has risen to more than 40% of that nation?s GDP. Over the long sweep of history, durable goods spending cycles have followed a very predictable pattern. Such spending is ?lumpy? ? it involves the accumulation of long-lived assets such as cars and trucks (America) and property, plant, equipment, and infrastructure (China). When these cycles go to excess, spending typically borrows from outlays that would have occurred in the future. The payback from what economists call the ?stock adjustment effect? -- the tendency of durables goods to gravitate toward a long-term optimal, or equilibrium, stock -- is a time-honored feature of the business cycle.>