Why are the markets yawning even though the President has announced a stimulus package? The reason is that
1) The extent of the consumer slowdown is uncertain, and
2) The extent of the global slowdown is uncertain.
But look at what two of the biggest companies in the world said this morning. Both IBM and GE (our parent company) had positive comments on their 2008 guidance. How can they come out and give strong guidance for the year if the consumer and global markets are so uncertain?
Some of it has to do with the way a big global company is structured. IBM, for example, has a high degree of recurring revenues and profits (that's why they moved away from selling hardware and moved toward subscription software services!) and is very well diversified. That gives them some degree of confidence in their forecast.
As for the global slowdown, bears are arguing it has already started--beginning in the U.K., where the FTSE is near a 52-week low. But who knows more about global business than GE CEO Jeff Immelt? On the much-listened to conference call, Immelt said he sees not sign the global infrastructure boom slowing down. In fact, GE's infrastructure orders grew by 40 percent ex-acquisitions, according to analysts.
This is not the only part of GE's global business, of course, and other parts may well weaken.
The bears are centering on the weakening consumer. Here's the dividing line: income creation. The bears who have argued (for all 18 years I have been at CNBC!) that the consumer is in over their head, that credit card debt will bring the country down have been WRONG because income creation has been strong.
Bulls are arguing that income creation will DECELERATE but not DECLINE. Analysts note that withholding tax receipts are growing 6.5 percent year over year.
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