Biotech Values

[DewDiligence]

Here’s some free economic forecasting c/o Caterpillar. (Why would
anyone pay for this kind of research?) The following are excerpts from
yesterday’s Caterpillar PR, edited, rearranged and highlighted by me.

http://finance.yahoo.com/news/Caterpillar-Responds-to-Sharp-prnews-14981411.html

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• We expect the world economy to decline about 1.3 percent and remain in recession for most of the year, making this the worst year of global growth in the postwar period.

• Governments have responded with almost $4 trillion in spending programs, with about $1.8 trillion slated for infrastructure construction. …we expect that governments are likely to announce additional programs.

• Economic problems started in August 2007 when credit spreads widened and some financial markets deteriorated. Higher credit spreads and tighter lending standards worked to shrink the world economy to match available credit. While credit markets have improved, credit spreads remain elevated and banks continue to tighten lending standards.

• Recovery will require a halt in asset price deflation and increasing available credit, which means continued easing of monetary policies. Central banks have dropped interest rates to record lows in many countries, often near zero, and some have taken the next step of increasing money growth.

• Commodity prices have recently strengthened [especially copper] and could allow producing countries, particularly those earning surpluses, to rebound quickly.

• Home prices are still declining, and mortgage interest rates hit a record low. As a result, housing affordability is the best on record. We expect mortgage interest rates will decline further, which should lead to a recovery in housing starts in the last half of the year. The weak start to the year means 2009 starts will likely be less than 700 thousand units, and 2009 will replace 2008 as the worst year for housing since 1945.

• The United States was the first to enter recession and should be the first developed country to recover, probably late this year. The US stimulus package increases funding for infrastructure, but we think the impact on total construction spending will be fairly limited. Up to $70 billion could be disbursed in 2009 and that would represent about 6.5 percent of last year's total construction spending. We do not expect this increase to offset steep declines in private construction spending. The infrastructure portion of the stimulus package was disappointing in that it was less aggressive than other countries and missed an opportunity to correct past underinvestment in U.S. infrastructure. For example, China, with an economy one-third the size of the United States, is allocating over three times as much for infrastructure.

• North American economies are expected to decline by at least 2.5 percent in 2009, with the United States beginning to improve late in the year.

• The European economy should decline nearly 2 percent this year. Recessions in both the euro-zone and United Kingdom will likely last most of the year, making these recessions the worst in the postwar period.

• The Japanese economy should decline at least 3.5 percent this year, making the recession the worst in the postwar period.

• Developing countries outperformed developed countries throughout this cycle, and some of these countries could be the first to recover. In particular, China aggressively eased economic policies and has enacted infrastructure stimulus, with better growth expected in coming quarters. In addition to the stimulus package, the central bank reduced interest rates to match the 2004 low, and money growth has accelerated. We project these actions will allow the Chinese economy to grow at a rate of more than 7.5 percent in 2009, and construction activity should rebound later in the year. Economic growth in the developing economies should average about 1.5 percent in 2009, the slowest since at least 1970, and an abrupt change from more than 5-percent growth in 2008.
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