Strategy

More ups than downs

Jaclyn Densley /

Now that Romney is on his home run to the first Tuesday in November world economic events are going to get a lot more confusing and leading companies will take the view that the next six months are going to see earnings rise as revenues remain flat.

Rising oil prices reflect increasing demand and the gold price reflects continuing volatility with more ups than downs.

The US economy is definitely on the way back but Bernanke is offering the President a get-out-of-jail card in the form of a freeze on interest rate cuts. Earnings per company are continuing to exceed expectations with Amazon and Apple still growing significantly.

Bernake anticipates that the Fed will not have to raise rates until late 2014 although members of the Fed Open Market Committee see the economy recovering a lot faster than that.

The contrary opinion comes from Paul Krugman who follows the line of economists in Australia who are calling for the central banks to promote growth by cutting lending rates to deal with sluggish global economies.

European banks are lending again and supporting local companies to expand across the region – they are taking the IMF at its word and customers are fighting back against austerity drives by cutting back on household savings.

The contrary view comes form US Treasury boss Timothy Geithner who warns that the spread of European bailouts threaten US growth.

He says we still live in a dangerous world, with Europe confronting a severe and protracted crisis.

“The world is engaged in a critical struggle which has added to upward pressure on oil prices,” Geithner says.

Here we see consumer confidence steady as people are led to believe that their mortgages will survive an attack of autonomy rather than austerity on the part of local banks – even if Reserve Bank head Glenn Stevens accepts the demand for a rate cut while Wayne gives us the haircut that Julia believes we all need.

Gary Morgan reports that the Roy Morgan Consumer Confidence is up for the third straight week to 112.4 (up 0.7pts). The contrary perspective is that a decreasing majority of Australians (54%, down 3%) say now is a “good time to buy’” major household items.

The biggest driver of this week’s rise was increasing confidence about the Australian economy with 33% (up 3%) of Australians expecting good times during the next 12 months and 36% (up 3%) expecting good times over the next five years.

Under all those conditions smart companies will wait until the RBA determines if it will follow Ben (with a 25-point bone to the market) or follow Paul (with a 50-point support for Wayne Swan to meet his promise to “return the budget to surplus”).

The Futurist suggests that now is the time to develop innovative marketing and communications budgets, to continue to hold onto good sales and customer service staff and to make the transition to on-line media advertising as Fairfax and Murdoch continue to make the shift from dead trees to very live technology.

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