To complete my point from CNBC Fast Money tonight

TV clips can be so fast that its a miracle you get any complete thoughts out sometimes. My point that was not finished on Fast Money tonight was that western world over-consumption and then retrenchment, has triggered the global recession. And this new reduced level of consumption is likely to continue for several years.
To think that emerging markets can somehow pick up the slack in world demand because they have a few billion people walking about is to miss the point about consumption. It is not just about population; it is about marginal propensity to consume per unit (human). US consumers have until recently been consuming 10X more goods per person than those in Chindia. This means that 300 million American consumers at full tilt were the equivalent consumption of about 3 billion people from China and India. And then we have the world's other great over-consumers, the Europeans and Brits, also batting down the hatches. Considering pretty much all western consumers have now retrenched to build savings, world GDP will feel this loss acutely and for some time.
So after costs have been cut and estimates have been slashed, business will find its way back to profit (at least the ones that can survive) but it will be based on considerably lower revenue in most cases. This is the new normal. And given that the US is still,on average, relatively more wealthy than most places in the world and given that America has considerable natural geographical advantage and given that they hit the wall first in this crisis and have responded bigger and faster than most, it is likely that Amercia will survive bettter and recover faster than much of the world.
And in case you missed it (as another example) here is what is happening in Spain right now. Spain is the country that was most heavily levered to the UK housing bubble. Brits were buying vacation properties in Spain in the boom, levered off their over-valued properties in the UK. Spain was to the UK what Florida was to America. Now they too are paying the price.

This entry was posted in Main Page. Bookmark the permalink.

6 Responses to To complete my point from CNBC Fast Money tonight

  1. Anonymous says:

    Ms Park,
    Nice job on Fast Money. You raised an eyebrow when you talked about emerging markets and caused a panel member to defend his turf. I think he'll remember your name after that interview.
    The CNBC ” circus/entertainment program is not the correct environment for credible people like yourself…. my opinion.
    Refreshing book, ” Juggling Dynamite”.

  2. Anonymous says:

    Hi Danielle, what do you think of S&P500 breaking out above 950 today on not too bad volume? Your comments are appreciated

  3. Anonymous says:

    If I may be so bold as to make a suggestion: Try to summarize your most potent points into the shortest sentences possible.
    Then consider what the most common counters may be to those points and come up with counters to them also.
    Most of the civilized world lets people finish their sentences but CNBC is a gong-show. There is no way to be effective when on there unless you can hit hard with the few seconds they give you.
    Luckily for some of us, we can watch you on BNN!

  4. Anonymous says:

    Hi EF: I think it is suggesting the recession is expected to end now or soon and there is a lot of hope that earning will now begin a long climb back. I would like to belive this is the case. I would be more impressed if we can get through the next couple of months with this thesis in tact. And I am interested in adding equities on dips rather than after 4 months almost straight up. And we must also have a plan for the “what if” we get a double dip in 2010. So I am looking to buy dips but always carefully and preservation of capital strategies are still key to survival.

  5. Anonymous says:

    Tim was far to quick to cut you off and blab about emerging markets. He was pushing them for about a year leading to the collapse. His appearances were few but always resulted in a plug for the Brazilian ETFs and other EM ETFs.
    I agree with the other comments. CNBC is a tough place to be logical. After all, it is their show and they want the TV time. Keep up the good work and enjoying your blog.

  6. Anonymous says:

    I think there is general agreement among your readers that the CNBC crowd are not serious commentators. I'll trust your judgement over theirs every time.
    Bill B.

Leave a Reply

Your email address will not be published.