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How Those Wily Americans Are Proving Me Wrong.

By Malcolm Stacey | Monday 29 September 2014

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello Share Dabblers. I think I may have spoken too soon when a said not that long ago that the USA was losing its grip on the world economy.

I argued that the growth of the bigger developing markets, like China and India, was becoming more important than what was happening in Wall Street.

Well, I was opining in the wake of that crisis of America’s fiscal cliff. You’ll recall that there was a lot of panic on both sides of the Pond that if USA Republicans did not vote the right way, given a scary  ultimatum by the Democrat president, the whole country would go bust.

Of course, that crisis was averted, but only at the last minute. But nobody talks about fiscal cliffs these days? And that’s because the States are making an unexpectedly fast recovery.

They still owe 500 billion dollars. But my favourite economist Hamish McRae reminds us that that only amounts to 2.9% of America’s GDP.

Sounds a lot, but put it in the context of Britain’s debt of 5.5% per cent of GDP and you can see that America is doing better than Britain is getting over the nasty years of recession.

You’ve probably noticed that USA stocks are still tickling their all-time highs, whereas in the UK we are still some way off a record Footsie level.

The dollar is also rattling along (which is very good for British firms. And just look at how two companies with big USA interests, Ashtead (AHT) and Signet (SIG) are shooting up share prices at the mo.)

I am not suggesting we should all now ditch our UK shares and re-invest in American companies. But I do think that when American shares rise, so do British ones. This may have not been so true just a few months back – and I said so at the time. But it is now.

The USA’s improving position shows me that British shares will mostly rise at least until the New Year.

It’s also the present view in the Punter’s Return.

Malcolm Stacey has been writing about shares for more than 20 years. His first book "The Armchair Tycoon" was first published in 1998 but a revised 2014 e-version is now available. To obtain a FREE copy fill in the form HERE 

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  1. Malcolm,

    Are you perhaps confusing the deficit with the National Debt in the case of both the UK and the USA? The reason I ask is, the National Debt – GDP of both countries are more like in excess of 90%; not including unfunded future liabilities. Just one reason I find my own thinking at odds with the rosy future scenarios you are predicting.

    The Western World is crusing into a sovereign debt crisis. It’s just a question of when, not if.

    Toodle pip.


  2. Thanks Jammo. It will be interesting to see whose view is right.

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