Need Our Love?

The world no longer needs our love? Economists are seeing decoupling from the US. Could this be a return to an inverse correlation between European markets and the US? Could the addition of International investments allow for the simple investor to gain proper diversification by owning a piece of the European indexes?

This economist thinks it highly unlikely. But on that note What the hell do I know?

Wall Street economists are reviving a bet that the global economy will withstand the U.S. slowdown.

Just three years since America began dragging the world into its deepest recession in seven decades, Goldman Sachs Group Inc., Credit Suisse Holdings USA Inc. and BofA Merrill Lynch Global Research are forecasting that this time will be different. Goldman Sachs predicts worldwide growth will slow 0.2 percentage point to 4.6 percent in 2011, even as expansion in the U.S. falls to 1.8 percent from 2.6 percent.

Underpinning their analysis is the view that international reliance on U.S. trade has diminished and is too small to spread the lingering effects of America’s housing bust. Providing the U.S. pain doesn’t roil financial markets as it did in the credit crisis, Goldman Sachs expects a weakening dollar, higher bond yields outside the U.S. and stronger emerging-market equities

Ethan Harris, head of developed-markets economic research in New York at BofA Merrill Lynch, said in a telephone interview. He predicts the U.S. will expand 1.8 percent next year, compared with 3.9 percent globally.

I recently had the opportunity to speak with a friend who is a journalist for one of the many government owned companies in Canada. I asked him how he felt about the economy and its recent turmoil. His response befuddled me. “What turmoil?” While I realize that many Canadians don’t appreciate American fervor or our ability to dominate anything from the Olympics to the local Toronto bar. I was amazed by his ignorance. Or was it my ignorance?

He had mentioned that the housing debacle that plaque the Us over the last 3 years was not as present in the Canadian provinces. Mostly due to the banking regulation that has existed in their system . If minimized the down stroke. I was completely confused. How did Canada avoid participation in the CDO’s CMO’s SIV’s and the like? All he knew is that house prices seemed fairly robust. So I had to explore this phenomenon.

UncategorizedJames O'Brien