Friday, August 9, 2013

Long-Term Real GDP Growth Prediction

If GDP continues to fall relative to disposable personal income like it has since we fell off the gold standard...

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And if real disposable personal income growth continues to fall long-term...

Click to enlarge.

Then here is my long-term real GDP growth prediction in one word or less.


If "ifs" and "buts" were candy and nuts then we'd all have a Merry Christmas. Oh, man. I just had to bring up Christmas. I hope we're not all hanging our hopes on that one again. About the only long-term trend I can see with Christmas is that the retailers keep moving the starting date forward to capture those precious shopping dollars before the competition does, lol. Sigh.

February 2, 2011
More Dangerous Advice from Jeremy Siegel

These healthy rates were not a surprise, since economic theory predicted that real yields should approximate real gross domestic product growth, which averaged between 3 per cent and 4 per cent at that time. - Jeremy Siegel

And yet, the Wharton School wizard believes/believed that "risks abound with inflation-linked bonds". In all fairness, I wouldn't touch his precious "Stocks for the Long Run" with a 10' pole either I suppose, especially that 4th edition released on November 27, 2007 (just 4 days before the Great Recession officially began).

According to Pablo Galarza of Money, "His 1994 book Stocks for the Long Run sealed the conventional wisdom that most of us should be in the stock market."

Siegel argues that stocks have returned an average of 6.5 percent to 7 percent per year after inflation over the last 200 years. He expects returns to be somewhat lower in the next couple of decades.

Here's a little known conventional wisdom fact. We didn't even know what aluminum investing was all about 200 years ago. Why? Aluminum wasn't even discovered until 1825! I would have tweeted it at the time, but my Internet connection was down. Speaking of aluminum, Goldman Sachs apparently opted to disregard the professor's advice and "invest" in the the wondrous element that is used to manufacture empty soda cans. Talk about silly. Why the empty cans? Why not the heavily marked up precious fluids within? And here's an even more interesting conventional wisdom fact. I just browsed data going back to the 7th century. Turns out the U.S. Government has only bailed out General Motors in the last 200 years. There are no indications of previous bailouts as far as I can tell. It's truly baffling. You'd think that if the good professor can use 200 year old data to predict the future then surely I could use today's data to predict the past. Where were the @#$%ing bailouts? It makes no sense! Horses? Horses you say? People drove them back then? That's cool. What kind of mileage did they get? How much did General Motors sell them for? Why is this data so hard to get!

Unlike the wizards and their dreams of frolicking unicorns safely tucked away within enchanted forests, I continue to believe that we'll have ZIRP well past 2014. It's just a hunch. Don't hold me to it!

But hey, it's all biscuits and gravy for now, at least until the next downturn anyway. Have no fear. I'll just be in a figurative bunker awaiting the next rubicon event. Would you believe that it has been almost two years since the last one? I know! Where does the time go. As seen in the data within the link, it's hardly unprecedented though.

This is not investment advice.

Source Data:
St. Louis Fed: GDP / DPI
St. Louis Fed: Real Disposable Personal Income Growth

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