Is the Economy Facing Boom or Bust

The Danger Signs Appear All Around Us – Trouble for the Economy

There are many pundits predicting severe troubles ahead for the economy. We must remember that at all times, in every economy, there are those predicting severe headwinds or a deep depression ahead that will rival the Great Depression or the Economic Collapse of 2008.

Illustration with economic terms
The Economy

This time, there are enough troubling signs that one has to take these fears seriously. 

  • The US housing market remains extremely weak, with pockets of rising prices, but a tremendous backlog of foreclosed homes and defaulting homes that have not yet hit the market.
  • The US jobless numbers remain high signalling a stalling economy.
  • The Japanese debt continues to rise to unprecedented levels that appear unsustainable.
  • The EU remains mired in ever increasing debt and negative growth.
  • Greece is facing Nationalistic fervor and rising restlessness.
  • The Rupee in India is plummeting signalling economic troubles.
  • The empty cities, malls, highways and condos in China are remaining empty and prices are weakening.
  • The massive debts incurred by China to fuel their massive jump forward are now coming to the fore.
  • Deficits everywhere are increasing. In very few places are current budgets balanced and total debt continues to rise.
  • Consumers are taking on ever increasing debt fueled by historically low interest rates.
  • The radioactive water leakage from Japan’s ruined nuclear plants continues to leak into the oceans and environmentalists are speculating as to when these radioactive waters will hit the west coast of the US.
  • The ice caps are melting and the sea levels are rising.
  • Interest rates are so low that they have to rise, and this will cause economies to collapse.
  • Woe is me

These and so many more warning signs make one wonder if indeed the world can survive the economic mess that greedy and uncaring Wall Street and naive governments combined to create.

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What Should Investors Expect? What is Coming?

As many signals as there about impending danger, there are an equal number of signals that the world is proceeding as expected. Some examples follow:

  •  NY Times Aug 22/13  Euro Zone Economy Shows Further Signs of Growth
  • Aug 27/13 German business confidence rose to the highest level in 16 months in August, beating forecasts and indicating that the recovery in Europe’s largest economy is gathering pace.
  • August 22, 2013 The global Copper market in May slipped to its first deficit after seven consecutive months of surplus to show a 17,000 t shortfall, as demand rose in China and the United States, the International Cu Study Group (ICSG) said on Wednesday. ICSG said apparent refined demand from top consumer China in May was at its highest level since December 2011, while usage in the United States was at its highest since March 2012, outpacing a steady rise in global refined production.
  • And so many more. US jobless has fallen dramatically and jobless claims continue to fall. Auto production in North America is at record levels as is car maker profits. real estate prices in major centers are mostly up. The annual deficit in the US is falling. And so on.

If one looks for signals, it is almost like using the same economic data to prove the case for the coming collapse, as it is to use the same data for a robust and expanding level of the coming prosperity.

Economic Cycles 

Many of my previous articles have dealt with understanding economic cycles. Throughout modern history, mankind has shown a remarkable ability to jump on good things and exaggerate them until they have reached the ridiculous. Whether it be the Great Tulip & Tulip Bulb craze of the year 1674, or the Tech Bubble of the year 2001, or the Mortgage Backed Securities of the year 2007-8, mankind has repeated the same pattern over and over and over again. 

 The progress of each cycle is the same as the last. When the cycle hits bottom, great economic stress has been placed throughout society, and many pundits predict greater coming collapses. But when hope is at the darkest, signs of growth appear and the economy slowly starts building again.  That is where the economy is now. There are signs of growth on a number of fronts.

The Engine of Growth

The USA, with all of its troubles, deficits and malaise, is a remarkable economic growth engine, that sputters to life because of its capitalist system. That is what is happening now. There are hot spots of tech activity that are creating such a large number of new companies, that the news is now full of dire predictions of a new crash in the tech sector, which is ridiculous at this stage of the recovery.

Now is the time to buy stocks, while they are showing signs of life, but still struggling.

Those that buy when others fear, do best over the long term.

 

We may or may not have positions in securities we name. In making an investment decision consider numerous factors such as portfolio balancing, timing, cash and capital reserves, asset allocation and other. Do your own research. Matters discussed contain forward-looking statements that are subject to risks and uncertainties and actual results may differ materially from any future results, performance or achievements expressed or implied.

Views expressed are opinions and not investment advice. You should retain a licensed professional to guide you and  not rely on the opinions expressed herein. This report is neither a solicitation nor a recommendation to buy or sell securities. We are not a registered investment advisor nor a broker-dealer. The information contained herein is based on sources which we believe reliable but is not guaranteed as being accurate or a complete statement or summary of the available data.

 

By Larry Cyna

Mr. Cyna is an accomplished investor in the Canadian public markets for over 20 years, and has managed significant portfolios. He is a financing specialist for private and public companies, and has expertise in real estate and debt obligations. He has assisted private companies accessing the public markets, has been a founding director of public companies and continues as a strategic consultant to selected clientele. He is and has been a director, a senior officer and on the Advisory Board of a number of TSX and TSXV public companies in the mining, resource, technology and telecommunications sectors, and the Founding Director of two CPC’s with qualifying transactions in mining and minerals. He was an honorary director of the Rotman School of Management MBA IMC program, has completed the Canadian Securities Institute Canadian Securities Course & Institute Conduct and Practices Handbook Course, was a former Manager under contract to an Investment Manager at BMO Nesbitt Burns, a roster mediator under the Ontario Mandatory Mediation Program, Toronto, a member of the Institute of Corporate Directors of Ontario, a member of the Upper Canada Dispute Resolution Group, and the Ontario Bar Association, Alternate Dispute Resolution section. He obtained his designation as a Chartered Accountant in Ontario in 1971 and was the recipient of the Founder’s Prize for academic achievement together with a cash reward. He became a CPA in the State of Illinois, USA in 1999 under IQEX with a grade of 92%. He is a Member of the Institute of Chartered Accountants of Ontario and the Canadian Institute of Chartered Accountants. He holds certificates in Advanced ADR & in Civil Justice in Ontario, Faculty of Law, University of Windsor, certificate in Dispute Resolution from the Ontario Institute of Chartered Accountants. Previous accomplishments are Manager of Cymor Risk Consultants LP specializing in Risk Management Assessment; CEO of Cyna & Associates specializing in mediation and ADR; Founder & Senior Partner of Cyna & Co, Chartered Accountants, a fully licensed and accredited public accountancy firm with international affiliations; and was a partner in a large public accountancy firm. Mr. Cyna is well known in the Canadian Investing community. He is invited to, and attends presentations given by public companies usually 3 or 4 times each week. These presentations are intended by the various hosting companies to present their inside story to sophisticated parties and Investment Managers for the purpose of attracting funding, or of making parties more interested in acquiring shares of those companies. Being a part of this keeps Mr. Cyna deeply involved in the current market and leads to numerous investment opportunities.