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Chris (Babson) Devlin / GigaModel
 
Name: Global Economy
Description: Economic analysis starts with the global economy.
Author: Chris (Babson) Devlin
 
Economic Analysis  
 
1. Importance Very important   The health of the global economy is very important when considering your investments. The stronger the global economy, the more likely your investments will do well. All economies go through cycles, and understanding the cycle of the global economy is key. The global economy may be in a 12 year upsurge, or a 4 year decline. Knowing those cycles will help you make better investment decisions.
2. Wisdom Important   If the global economy is doing well, then stocks will be a good investment. If the global economy is not doing well, then it will be more difficult to find good stock investments. When the global economy starts to do better, it is a great time to invest in stocks that will rebound and become healthy as the economy improves.
3. Knowledge Important   If the global economy is growing more than 1.5% a year, that is a very good signal and a great opportunity to own stocks. If the global economy is growing between 0.5% and 1.5% a year, it is more prudent to hold more cash or bonds. If the global economy is growing less than 0.5% or is shrinking (negative growth), it is more prudent to have the majority of your holdings in cash or bonds.
4. Current Assessment Fair   The global economy is in a protracted recession or period of very low growth (less than 0.5%). The US growth rate is slowing. Many countries have stimulated their economies with government spending, but the lack of spending by consumers and businesses, and the need for governments to become more financially prudent and spend less, is slowing growth. The Japan earthquake, tsunami and nuclear disaster have significantly weakened the third largest economy in the world, and will have a negative, worldwide ripple effect. Unrest in the Middle East will cause economic hardship and reduced GDP for multiple countries, and higher oil prices that will detract from economic growth worldwide.
5. Future Assessment Bad   The large stimulus by the United States. China, and others, will spur demand and enable a recovery from the greatest recession since the 1930's. The future direction is "fair" and not "good" because of the overwhelming magnitude of the recovery will not be easily overcome. Unemployment will remain high, housing in the US will remain problematic, and thus US consumer spending, which powers the world economy, will be lacking, increasing the risk of a "double dip" recession. The earthquake, tsunami and nuclear meltdown in Japan has negatively affected the third largest economy in the world. Further downward pressure comes from the higher oil prices caused by unrest in the Middle East. However, the overall outlook is fair.
 
 
Future Assessment Probabilities, Reasons and Explanations
 
   Possible Outcome Probability Value Reasons and Explanations
1. Awesome   10% >6% Global GDP climbs above 5% because all the major economies of the world have growth rates above 5%.
2. Good   10% >4% Global GDP climbs above 3% because China, the US, Germany and the UK have growth rates above 3%.
3. Fair   60% >1% Global GDP climbs above 0% because China, the US, Germany and the UK have growth rates above 1%. Japan's economy has been shattered by the earthquake, tsunami, and nuclear disaster. Unrest in the Middle East has pushed up oil prices and caused multiple Mideast economies to slow down.
4. Bad   10% >-1% Global GDP falls below 0% but stays above -3% because China, the US, Germany and the UK have growth rates below 0% but above -3%.
5. Terrible   10% <-1% Global GDP climbs sinks below -3% because China, the US, Germany and the UK have growth rates less than -3%.
 
 
Key Performance Indicators


Key Performance Indicator Importance   Current Assessment   Future Assessment  
1. Gross Domestic Product (GDP)   Important   Good   Fair
2. Inflation Rate   Important   Fair   Good
3. Unemployment   Important   Fair   Fair
4. Interest Rates   Important   Good   Fair
5. Consumer Durable Goods   Important   Fair   Fair
6. Personal Income   Neutral   Bad   Fair
7. Saving and Investment   Not important   Fair   Terrible
8. Total Economy - Current Account   Insignificant   Fair   Fair
 
 
Linked Entities


Sub-Economy / Geography Importance   Current Assessment   Future Assessment  
1. North America Economy   Very important   Fair   Bad
2. South America Economy   Important   Fair   Awesome
3. Asian Economy   Very important   Awesome   Fair
4. African Economy   Neutral   Fair   Good
5. Australian Economy   Important   Good   Good
6. European Economy   Important   Good   Good


Industry Importance   Current Assessment   Future Assessment  
1. Global - Basic Industries      
2. Global - Capital Goods      
3. Global - Commodities      
4. Global - Consumer Durables      
5. Global - Consumer Non-Durables      
6. Global - Consumer Services      
7. Global - Energy      
8. Global - Finance      
9. Global - Health Care      
10. Global - Miscellaneous      
11. Global - Public Utilities      
12. Global - Technology      
13. Global - Transportation      
14. Global - Mutual Funds   Very important   Fair   Good
15. Global - ETFs      
16. Global - Collectibles   Very important   Fair   Fair
17. Global - Alternatives   Neutral   Fair   Good
 
Associated Information
 
Global GDP pie chart by country
 
2010 Global GDP Forecast
 
 
 
President Barack Obama comments on Global Ecomomy - October 2009
 
 
 
China defies Global Economic Trend
 
 
 
Services, etc as % of GDP (world)
 
 
 
Google - PublicData - World Services
 
 
 
Google - PublicData - World Services % GDP with G8 countries
 
 
 
 
Hyperlinks to relevant information
 
2010 Global GDP Forecast
America Samoa GDP 2008 and 2009 - May 31, 2011
Guam GDP - June 10, 2010



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