Tag Archives: Economic growth

The European Union rose “only” 0,4 percent in Q1 of 2018

Last week I talked about America`s fantastic growth of 4,1 percent on quarter in Q2 of 2018, and this is only the beginning. It is no doubt; President Trump must be doing something right. But, what about the European Union?

GDP in the European Union rose «only» 0,4 percent on quarter in the first three months of 2018. Not much to write home about. But the growth have never been above 1 percent since the financial crisis in 2008.

The European Union reached an all time high of 1,30 percent in 1999 and that is right before the tech bubble burst. Since then it has been a dead fish, reaching an all time low of -2,60 percent in the first quarter of 2009.

At the same time we can see that the unemployment rate reached a record low of 6,80 percent in February of 2008, and that`s right before the financial crisis. It reached an all time high of 11 percent in February 2013, but in May this year it fall down to 7 percent again.

This isn`t good enough if we are living in a capitalistic world.

The European Union in Brussels are nothing more than unelected bureaucrats. Draghi and the ECB have, just like Japan and the U.S «printed» a lot of money, and will continue to do so. If they can`t turn around the ship, they need to consider a strong cheerleader.

European Commission President Jean-Claude Juncker had a meeting with President Trump last week. They were talking about trade, free trade and tariffs. Mr Trump`s goal is to make better deals so both the U.S and the EU can take more profit and prosper.

I think that the EU should be glad for that and they need to hurry up. The U.S is the world`s third biggest exporter, yet exports account «only» for 13 percent on GDP. Exports in the U.S reached an all time high of 215328 USD million in May this year, which is pretty impressive.

The EU has 28 member states and the biggest among them all is Germany (21 percent of total GDP), the United Kingdom (15 percent), and France (15 percent).

Exports of goods and services account for 46 percent of GDP while imports account for 42 percent, adding 4 percent of total GDP. But this is about to change. If the UK contribute with 15 percent of the total GDP in the EU, then what will happen to their growth after Brexit?

That being said; nor is the UK a success story. The British economy grew by 0,1 percent in the first three months of 2018 and well below 0,4 percent in the previous period. It is the lowest growth rate since a 0,1 percent contraction in Q4 2012.

The largest contribution to growth in the UK was from household spending at 0,2 percentage points. From the production side, the service industries made the largest contribution to GDP growth, followed by production.

Agriculture, the smallest component within the output approach of GDP made no contribution to growth to one decimal place, while construction deducted from GDP growth. The service industries increased by 0,3 percent.

Positive growth was recorded within all sub-sectors of the services industries; distribution, hotels and restaurants (0,1 percent vs -0,1 percent).

President Trump have repeatedly said that the EU have treated the US very bad. I have written many articles about that long before Mr Trump`s inauguration. The European Commission has fined Google €4,34 billion for breaching EU antitrust rules this month.

In May 2009, Intel was imposed with a 1,06 billion euro fined for abusing its market dominance on central processing units. Microsoft has been in trouble with the Commission on several occasions. In 2004, the Commission ruled that Microsoft had abused its market dominance.

In 208, the Commission fined Microsoft nearly 900 million euros for charging «unreasonable» royalty fees. In 2013, another fine of 561 million euros was imposed on Microsoft. This time for failing to comply with the Commission`s ruling that it had to allow users to more easily choose a prefered web browser.

The European Commission fined Facebook for 110 million euros in May this year in relation to its takeover of WhatsApp. Facebook acquired the messaging service in 2014 for $19 billion, but provided the Commission with misleading information about the acquisition.

In August 2016, the Commission ruled that tech giant Apple had received illegal tax benefits from Ireland worth up to 13 billion euros. Ireland was ordered to recover the unpaid tax from Apple, plus interest.

As early as 1966, British Politician Tony Benn said that «Communism run by commissars from Moscow did not work, and nor will capitalism run by commissioners in Brussels. Both deny people their right to develop in their own way.»

Now, under President Donald Trump, big companies like Apple are moving home to the United States with billions of dollars. Apple alone, are bringing in $230 billion. They will build new plants and a magnificent campus.

They will spend their money wisely and the money will be in the U.S. All this is possible because of Trump`s tax cuts and reforms. This is how you make growth.

 

 

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Rally!

Yesterday, I was sitting in front of the TV…..eh…… in front of my computer, watching live streams with Chairman Ben Bernanke. He did not disappoint the markets. The DOW was up +1,84% and the S&P 500 was up +1,7%. What a rally!!!! Ho ho ho.

They are not going to taper now in December, but plan to start tapering in January next year. There was two good news yesterday: 1. The Fed will cut back it`s bond purchases by $10 billion, and 2. The interest rates could remain low even if unemployment drops below 6,5%. This is music in investors ears!

Gold went in the opposite direction and didn`t like the news from the Fed. Gold is now trading near the critical $1200 level. I have written about this critical level before, and this is the break even level for the mining companies.

The mining companies doesn`t earn money if the price goes below $1200. It will be very exiting to follow the gold price in the future. Watch out for this level and see if this level holds. The news yesterday was bearish for the gold, but bullish for the dollar.

A lot of investors and money makers have lost a lot of money in their gold investments since 2011 and that is because they didn`t recognize and adapt to the changing trend. We are in the same situation right now, where a lot of people don`t really know what is to come in 2014. Will we see a rally in gold?

As you can see from the gold chart, we are at a stage one basing phase. 150 and 200 moving averages is slowing down and start to go sideways. This will go on for about 6-12 months. So, now you know when to expect the gold bull market start again.

In this one phase stage, a market goes both up and down and it looks like it goes nowhere. Many people are getting frustrated and start to give up and others that is not in the market stops paying attention to the market. After a bear market, a stage one basing phase will follow and make a new way for a real bull market.

We have seen many bubbles like the internet bubble, housing bubble and the market crash in 2008. Now, it seems like a new bubble is on the way. The Fed are on the way to build a dangerous federal government debt bubble.

It can be avoided by reducing the Congress spending deficit. But in the budget deal last week, they increased the government spending. All this money printing have been a disaster for the U.S.

In Mars next year, we have seen a bull market lasting for five years. What do you think will happen to QE if the economy slows again? Goldman Sachs predict the domestic GDP growth to hit 3% next year (1,7% in 2013). I hope he has right. I look forward to 2014.

News today: Unemployment Claims at 8:30am, Existing Home Sales & Philly Fed Manufacturing Index at 10:00am.

Markets up

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