Buisness Insider

David Bianco Has 3 Sustainable Reasons Why Stock Market Profits Can Outpace GDP (SPY)

David Bianco

Bill Gross rocked the world of stock market investors when he declared "the cult of equity is dying" in his letter to PIMCO clients.  Among other things, Gross argued that it was not economical for return on a stock market to grow faster than the country's GDP.

Since Gross published that letter, the stock market experts came out in full force to point out the flaws in Gross's argument.

David Bianco, Deutsche Bank's Chief U.S. Equity Strategist, is just the latest to publish a defense. Rather than just talking about stock market returns, he looks at profits.  From his note to clients today:

Higher S&P 500 profits relative to GDP can be attributed to sustainable causes
Some investors take concern with elevated S&P 500 profits relative to GDP vs. history. We believe this is secularly sustainable owing to: 1) lower interest rates and debt usage, 2) a higher proportion of S&P 500 profits from abroad, and 3) Technology sector gains. We also remind investors that the profitability of Energy and most Industrial and Materials companies was depressed in the 1990s owing to weak commodity prices and limited global infrastructure investment. Financial sector profits were high in the mid 2000s, but not now.

David Bianco told Business Insider that "S&P 500 profits by region" was one of the most important charts in the world.

Click Here To See The Most Important Charts In The World >

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The Bankruptcy Of The World's Oldest Shipper Signals Rough Waters Ahead For The Battered Industry

Stephenson Clarke Shipping

Stephenson Clarke, the British shipping company, has been around since 1730 when George II was king.

Sadly, they are now in liquidation and shutting down for good.

Here's part of their statement via Reuters:

"While previous economic downturns have been weathered, the current market is one of the worst experienced for many years with no upturn forecast for at least 12 to 18 months,”

Prior to the financial crisis, shippers placed huge orders for ships, which have lengthy lead times.  The Chinese shipping yards also brought an immense number of ships on line.

Once the economy soured, all of the excess capacity was left idling and shipping rates collapsed.  Shippers went deep into the red.

In recent years as the economy began to stabilize, the shipping industry rejiggered their finances and operations in an effort to navigate the bumpy economy.

However, even the most prudent strategic corporate maneuvers couldn't have saved Stephenson from an an economy that's rapidly deteriorating again.

Dagfinn Lunde Dvd Bank Se Marine Money Week Marine Money International Event June 2012 Bi Dng"The economy is growing slower than expected," said Dagfinn Lunde to Business Insider.

Lunde, who many recognize as the most powerful shipping banker in the world, thinks that Stephenson's forecast for a shipping industry upturn in 12 to 18 months is likely too optimistic.  He sees more shippers going down.

However, he pointed to some bright spots in shipping including offshore energy, liquefied natural gas (LNG), and cruises.

Even Lunde was surprise at how quickly the cruising industry recovered from the Costa Concordia disaster.

Ultimately, the problems of the shipping industry are largely supply issues, or issues within the shipping industry.

Regarding the economy as a whole, it's still growing.

"There is no recession on the demand side," said Lunde.

Don't Miss: We Had Drinks With The Biggest Players In The Shipping World, And This Is What They Told Us >

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BEN DAVIES: Asia's Hunger For Treasuries Is Turning Into A Hunger For Gold

Ben Davies

In a piece for King World News, Ben Davies, the CEO of Hinde Capital, said that Asia is a massive buyer of gold and has been stepping up their buy order. 

Asia has long been a buyer of US 10 year bonds, a historical pattern which he compares to the new surge from Asia in gold. 

"With 10 year yields at 1.68% and having topped out in our opinion, we do see a cessation of Asian bond buying and a switch to gold and other currencies by our Asian counterparts.  It is the end of the vendor-financing relationship."

Davies states that evidence points to an upside break for both gold and silver, though he is hesitent to state which way he expects the commodities to break. Either way, Davies expects a huge move for gold in the near future.

The Precious metals market is trend ready.  Gold, on our short and long-term trend indices, is primed for a substantial move.  This could be up or down.

Don't Miss: The Truth About Gold >

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