Economic data rolls on

Chinese GDP

China released its third quarter GDP figures today. They claim that their economy grew by 8.9%. [I say ‘claim’ because Chinese statistics are notoriously manipulated.] Additionally, there is evidence that the economy is becoming more self-supporting and requiring less government stimulus. In the aggregate revenues are rising and not just profits. Profits can rise due to cost-cutting, but do not necessarily indicate the rise in demand that increasing revenues indicate.

Conclusion: Clearly this is good news. The world’s fastest growing economy also is a proxy for worldwide demand for manufactured goods. Additionally the Chinese government wants its economy to become more consumer based and less manufacturing based. And there is evidence of just that, too.

Jobless Claims

Initial claims for unemployment ticked up 11,000 over the prior week to 531,000.

Conclusion: Though this data is best looked at smoothed on a rolling average, the fact is that week in and week out the number improves and then worsens and then improves and then worsens. It remains hard out there for the U.S. consumer to find new work.

Stock Markets

In general, the stock markets seem to be only slightly up this earnings season. It’s too early to make any definitive statements, however it seems as if a strong third quarter was already priced into stock prices. This is not surprising after the market performance over the preceding 7 months. There needs to be new surprising data to move the markets either up or down by any noticeable amount.

Conclusion: The recession is over. But the recovery is weak at best. At this point investors need to see improvements in jobless statistics and in consumer spending in order to plough more money into the financial markets. It is a good time to be exploring what you would like to invest in over the next 3-5 years; especially if you missed out on the gigantic 2009 rally. In my opinion valuations are centered on fair value, contrasting strongly with the preceding 35 years of slight over-valuation to massive over-valuation of stocks.

Over and out.

Jason