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Edward Devlin / NASDAQ-NYSE-AMEX Model
 
Name: Global Economy
Description: The Global Economy is the root of economic analysis
Author: Chris Devlin
 
Economic Analysis  
 
1. Importance Neutral   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 Fair   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   0% >5% Global GDP climbs above 5% because all the major economies of the world have growth rates above 5%.
2. Good   10% >3% Global GDP climbs above 3% because China, the US, Germany and the UK have growth rates above 3%.
3. Fair   70% >0% 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   20% >-3% 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   0% <-3% 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)   Very important   Fair   Awesome
2. LIRA - Leading Indicator of Remodeling Activity   Very important   Fair   Good
3. Unemployment   Very important   Bad   Bad
4. Inflation Rate   Important   Awesome   Awesome
5. Interest Rates   Important   Awesome   Awesome
6. Saving and Investment   Important   Fair   Fair
7. Consumer Durable Goods   Neutral   Fair   Fair
8. Economic Cycle   Neutral   Fair   Good
9. Personal Income   Neutral   Fair   Fair
10. Total Economy - Current Account   Neutral   Fair   Fair
 
 
Linked Entities


Sub-Economy / Geography Importance   Current Assessment   Future Assessment  
1. North America Economy   Very important   Fair   Fair
 
Associated Information
 
Detailed Economic Cycle Description
 
Global Market Volatility
 
 
 
 
Hyperlinks to relevant information
 
Double dip recession
Ornstein Says Deficit Panel Holds Fate of Global Economy - Bloomber - 10 Aug 2011

 
 
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