Tuesday, May 17, 2016


Are we headed into a recession in 2016-2017?

The decline in the key drivers of economic growth say yes:

Business investment and employment are critical factors in economic growth.

As a result of these negatives:

China’s struggles area concern. Its growth has consistently slowed. 2015 was its slowest year in 25years. This is a factor in the global decline in the demand for commodities and the 55% reduction in commodity prices since 2014 negatively affecting capital investment and employment. Unfortunately 2016 growth is difficult to accept as real as it has been stimulated by debt in an economy that is seriously overleveraged.

Will this result in the Big Three’s costs being higher than its competitors? Probably. It will most likely lead to lower unit sales and lower overhead absorption resulting in lower operating profits, lower cash flows, less capital investment and lower employment.

Adding to the puzzle about General Motors’ viability is its $500 million investment in Lyft – a Uber competitor. Lyft is a business outside of GM’s vehicle manufacturing core. Is GM losing disciplined strategic focus?

Follow-up articles: 

Business Insider, May 26,2016, “Japan's prime minister is warning world leaders about a 'Lehman-scale crisis'” He interprets economic data as pointing to the reemergence of the global financial crisis of 2007-2008.

InvestmentWatch, May 26, 2016: Interview with former Federal Reserve Chairman Alan Greenspan: “Greenspan: Western World Headed for a State of Disaster”. “…have a very profound long-term problem of economic growth…(not) on the verge of a market…collapse…”