Today's retail sales were horrible, but that was known before today when companies reported same-store sales.
The economic metrics are still bad: unemployment is climbing, retail sales are falling, and credit is contracting.
It still remains difficult to me to see how companies will be able to grow earnings over the next few years. Many companies loaded up on debt in the last few years, using the modern day American way of doing business -- which is to borrow as much as possible, expand the business, and as long as you can make the interest payments everything will be great.
But once we hit this current snag, which I maintain is deflationary, impacts to the Revenue line disproportionally weigh on earnings, as the debt payments agreed upon earlier remain in force.
I can be convinced that we are not in a deflationary environment, but I need to see evidence before I change my mind. A change from the deflationary environment would include evidence of an increase in asset prices, a tendency for people to buy things immediately rather than hold cash. Increasing retail sales, rising stock and commodity prices, rising bond yields. These are some of the metrics I will use to determine when we leave the deflationary environment.
Seemingly everyone wants to believe this downturn be over by year end. It is my belief that this will drag on for years. But the key is not to allow my belief to get in the way of evaluating data.
The economic metrics are still bad: unemployment is climbing, retail sales are falling, and credit is contracting.
It still remains difficult to me to see how companies will be able to grow earnings over the next few years. Many companies loaded up on debt in the last few years, using the modern day American way of doing business -- which is to borrow as much as possible, expand the business, and as long as you can make the interest payments everything will be great.
But once we hit this current snag, which I maintain is deflationary, impacts to the Revenue line disproportionally weigh on earnings, as the debt payments agreed upon earlier remain in force.
I can be convinced that we are not in a deflationary environment, but I need to see evidence before I change my mind. A change from the deflationary environment would include evidence of an increase in asset prices, a tendency for people to buy things immediately rather than hold cash. Increasing retail sales, rising stock and commodity prices, rising bond yields. These are some of the metrics I will use to determine when we leave the deflationary environment.
Seemingly everyone wants to believe this downturn be over by year end. It is my belief that this will drag on for years. But the key is not to allow my belief to get in the way of evaluating data.
