Global Economic Picture In Aggregate Is Deteriorating: Things Are Getting Expensive, China Is Slowing Down, Weakest EU Countries Cutting Back On Healthcare Spending, Sales of Beverages Getting Weaker, Global Debt Crisis Worsening, And Europe Is Heading Into A Full-Scale Disaster


America’s Biggest Companies Reveal What’s Really Going On In The Global Economy

Nike warns that it’s getting more expensive to make things in China

“Gross margin declined 80 basis points to 43.5 percent. Gross margin continued to benefit from pricing actions and product cost reduction initiatives, however, this was more than offset by higher input costs, primarily materials and labor.”

Source: FactSet

Johnson & Johnson says that Europe’s slowest economies are cutting back on healthcare spending

 

“Having said that, we continue to see headwinds in most of the European countries, and particularly Southern Europe, but also in Central Europe.”

Source: FactSet

Chipotle warns that drought-related food cost inflation will continue through the end of the year

“The effects of the drought from this summer is going to impact us. It’s already starting to impact us in October. We expect to see higher prices overall of in the low-single-digit range moving from the third quarter to the fourth quarter. And then on top of that, we expect to see continued effects from the drought, and the effects are going to be seen in higher dairy prices and higher meat prices.”

Source: Seeking Alpha

Coca-Cola predicts decreased sales of beverages as China slows

“As we look ahead to the next 6 months, it is reasonable to expect that China’s ongoing economic slowdown may have a short-term effect on our industry and on our business.”

Source: Seeking Alpha

Cummins warns that the global economic picture in aggregate is deteriorating

Jon Mills, a company spokesman, said “These actions are difficult and will impact a number of people who have worked for Cummins for many years but are necessary to respond to the current deteriorating global economic conditions.”

Sources: CBS NewsSeeking Alpha

 

Europe Is Heading Into A Full-Scale Disaster

You see, the debt problems in Europe are not simply related to Greece. They are SYSTEMIC. The below chart shows the official Debt to GDP ratios for the major players in Europe.

 

 

As you can see, even the more “solvent” countries like Germany and France are sporting Debt to GDP ratios of 75% and 84% respectively.

 

These numbers, while bad, don’t account for unfunded liabilities. And Europe is nothing if not steeped in unfunded liabilities.

 

Let’s consider Germany. According to Axel Weber, the head of Germany’s Central Bank, Germany is in fact sitting on a REAL Debt to GDP ratio of over 200%. This is Germany… with unfunded liabilities equal to over TWO times its current GDP.

 

That’s one thing most invetsors don’t know about Europe.

 

To put the insanity of this into perspective, Weber’s claim is akin to Ben Bernanke going  on national TV and saying that the US actually owes more than $30 trillion and that the debt ceiling is in fact a joke.

 

What’s truly frightening about this is that Weber is most likely being conservative here. Jagadeesh Gokhale of the Cato Institute published a paper for EuroStat in 2009 claiming Germany’s unfunded liabilities are in fact closer to 418%.

 

Think BAD. As in systemic collapse bad.

 

Indeed, let’s consider TOTAL debt sitting on Financial Institutions’ balance sheets in Europe. The below chart shows this number for financial institutions in several major EU members relative to their country’s 2010 GDP.

 

Country Financial Institutions’ Gross Debt as a % of GDP
Portugal

65%

Italy

99%

Ireland

664%

Greece

21%

Spain

113%

UK

735%

France

148%

Germany

95%

EU as a whole

148%

Source: IMF

‘One in five living in poverty in Spain’

Japan reports worst September trade figures in 30 years

Japan posted its worst September trade figures in more than 30 years, official data showed on Monday, as the global slowdown and a territorial dispute with China weighed on the world’s third-largest economy.

The country has been struggling to turn around its fortunes following theMarch 2011 earthquake and tsunami disaster, while also suffering from Europe’s debt crisis, slowing Chinese demand and the strong yen.

Weaker shipments to the US market also dug into the latest results, which showed a monthly trade deficit of 558.6 billion yen (£4.4bn), reversing a year-earlier surplus of 288.8 billion yen as exports fell 10.3pc on year.

It was the first deficit for September since 1979, when comparable data became available, as demand for everything from chemicals and cars to medical products and computer parts fell away.

Japan’s shipments to Asia-Pacific – including China, South Korea, Indonesia, Australia and India – also weakened as demand slowed in a region that has been a key driver of global growth.

 

Greek public debt and deficit worse than estimated

Provisional figures released by Greece’s national statistics authority have shown the country’s deficit and public debt for 2011 are worse than estimated.

According to provisional data published by ELSTAT statistics agency on Monday, the 2011 deficit stood at 9.4 percent of gross domestic product and the public debt at 170.6 percent.

“The revisions as regards the debt ratios are primarily due to the update of gross domestic product estimates,” the agency said in a statement.

 

Bill Gross Explains The Fed’s Bubble “Merry-Go-Round” In One Tweet

Bill Gross has become quite the expert at explaining the Fed’s flawed, ruinous and destructive “policies” in 140 characters or less. Today is no exception.

Gross: Fed merry-go-round: inflate stocks til 2000. Then inflate housing til 2007. Then inflate stocks til 2012. Now inflate housing again.

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