Tuesday, July 21, 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


SuperBull Club: RBC Ups Morgan Stanley, Says Bull Market to Continue 6 Years; Sobering Alternative View from GMO

Posted: 21 Jul 2015 01:42 PM PDT

SuperBull Club

RBC Capital Markets chief U.S. market strategist Jonathan Golub joined the SuperBull Club today. Golub says Years Left to Go in S&P 500 Bull Market.
The U.S. economy's slow recovery may extend another six years, potentially doubling the duration of the bull market in equities, according to RBC Capital Markets chief U.S. market strategist Jonathan Golub.

Bull markets tend to continue until an economic cycle runs out, usually after about seven years, Golub said in an interview with Bob Moon on Bloomberg Radio. Given the pace of the current economic expansion, he said the cycle could last 12 years or longer, providing investors with reason to continue buying stocks.

"We're going to see a lot more upside to the stock market," Golub said. "This is going to go on for long enough that many Americans are going to be able to participate in the run higher."

The Standard & Poor's 500 Index has more than tripled during the current bull run, which at 76 months is the second longest in the past 60 years.

He forecasts the benchmark index will end the year at 2,325, the fourth-most bullish forecast in a Bloomberg survey of 21 strategists.
Upping Morgan Stanley's 5-Year Prediction

Gulub upped the forecast of Adam Parker, Morgan Stanley's chief U.S. equity strategist.

On Monday, Parker stated his belief: Another 5 Years to Bull Market.

I commented "The bulls are attempting to outdo each other as often happens at or near market tops. But who's to say this is a top? Why stop with a 5-year rally? Why not 10 or 20 years? Why not forever? There's plenty of room for more optimism, and this bull market won't end until we see every ounce of it."

It seems fitting that it took only one day for RBC to up the forecast of Morgan Stanley. Surely, someone can outdo six more years.

SuperBulls, it's time to strut your stuff.

Sobering Alternative View from GMO

In contrast, to the SuperBulls, I present the 7-Year Real Return Forecast of GMO.



*The chart represents real return forecasts for several asset classes and not for any GMO fund or strategy. These forecasts are forward‐looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance. Forward‐looking statements speak only as of the date they are made, and GMO assumes no duty to and does not undertake to update forward‐looking statements. Forward‐looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forward-looking statements. U.S. inflation is assumed to mean revert to long‐term inflation of 2.2% over 15 years.

Rain on the SuperBull Party

Note that GMO expects negative real returns in US stocks, on average, for a full seven years.

I hate to ruin a SuperBull party with forecasts that have been historically among the best in the world, but so be it.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Total Gridlock: 25,000 French Farmers Face Bankruptcy, Block Roads, Dump manure, Rotting Vegetables

Posted: 21 Jul 2015 11:10 AM PDT

25,000 French Farmers Face Bankruptcy

In France, no matter how inefficient the business, the proposed solution is typically higher prices rather than to let weak businesses go under.

And so it is again. Hollande's remedy for farmers facing bankruptcy is not to preach against overproduction, inefficiencies, or the inane trade embargo with Russia, but rather to encourage shops to raise prices.


Prices went up, but farmers are upset that middlemen took most of the cut. In response Angry French farmers protest low meat prices with manure, road blocks.
French livestock farmers, furious at falling prices for dairy and meat, used farm vehicles to block access to the tourist hotspot Mont Saint-Michel and two towns in Lower Normandy Monday in a bid to push officials to address the crisis.

French Agriculture Minister Stéphane Le Foll described the situation as an "agricultural crisis", stating on Saturday that one in ten of all French livestock farmers (some 25,000 farms), are now facing bankruptcy.

A large protest began Sunday in Lower Normandy, and grew in momentum Monday, with protests spreading across the region and to neighbouring Brittany.

Almost 300 tractors and farm vehicles, including skips filled with manure, blocked access Monday to the cities of Caen and Lisieux, both located in Lower Normandy. Protestors also blocked access to Mont Saint-Michel, one of the most-visited tourist sites in France.

Some protesting farmers in Caen targeted supermarkets, who they accuse of keeping prices low, and left buckets of manure in front of other businesses in the meat production sector, including a slaughterhouse, a distribution company and a meat-processing plant, who they also believe are part of the problem.

Le Foll offered to meet with the Norman farmers on Thursday in Paris after examining a report on the prices of agricultural products but the angry livestock farmers declined the invitation, saying that they are waiting for the minister to come to them.

There are numerous factors behind the low prices of French meat. Supermarkets want to keep prices low and French farmers are facing increased competition from foreign producers, who have lower production costs.

On June 17, retailers and representatives from the food industry agreed to raise the price of meat and dairy so they could pay more to hard-up livestock farmers, enabling them to cover their ever-increasing production costs. However, farmers say they haven't benefited from the price hikes.

Attendees at the June meeting agreed that a kilo of beef would be revalued by 5 cents a week, yet only 7 cents have been gained in an entire month.

Is buying 'Made in France' the answer?

Two days ago, French President François Hollande launched an appeal to supermarkets to "offer consumers quality, and offer farmers a [good] price." He also announced a new "made in France" label for meat and called on French citizens to do their bit by buying French products.

On July 20, French Prime Minister Manuel Valls called for "dialogue" between the actors and said that he felt for the farmers.

"We understand the anger and distress of the livestock farmers. They must know that the government will stand side-by-side with them as we seek a solution."

For their part, these angry farmers say they will continue to block traffic and leave buckets of manure on factory doorsteps until someone pays attention.
Total Gridlock

Agriland reports French farmers block roads as '25,000 face bankruptcy'.
French farmers have caused total gridlock in northwestern France in recent days, by blocking the roads with their tractors and machinery in protest against the low prices they are receiving for their produce.

These protests are not a new occurrence in France, in November last year farmers staged what they called a 'Grand Mobilisation' protesting across the country due to poor prices for their produce.

Organised by the French Farmers Union (FNSEA) and the Young Farmers Union (YA), last year the day saw tonnes upon tonnes of manure and rotting vegetables dumped on French streets.

French farmers have been holding protests for weeks, including a national "night of distress" earlier this month.

More manure was dumped outside French supermarkets, tyres were set on fire and roads were blocked.
The four-point solution to this madness is surprisingly simple.

 Easy Solution

  1. Lift the embargo on Russia that is hurting France as much or more than it is Russia.
  2. Let small, inefficient French farms go bankrupt.
  3. Fine farmers dumping manure and blocking streets.
  4. Charge farmers cleanup costs.

The problem would vanish in a week were France to adopt common-sense measures.


Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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