US GDP fell at an annual rate of 3.8% in the fourth quarter, below the decline of 5% or more that many economists had anticipated.

However, there is precious little reason for optimism. Almost all the unexpected growth came from a small rise in business inventories. This is almost certainly because firms did not reduce production quickly enough to keep pace with slumping orders. To get inventories back in line, more production cuts in the current quarter are likely. Morgan Stanley had expected GDP to fall by 4.5% in the current quarter, but now thinks it will fall by 5.5%.

While US purchasing managers have slashed their stocks, the ISM customer inventories index jumped to 57 in December,the second-highest reading ever.  So even if demand stabilizes quickly, which is in doubt, more production cuts lie ahead…

Inventories have become very resilient in this recession… FOR NOW.

Wall Street had a terrible 2008. The devastation is reflected to some extent in the size of bonuses on offer from America’s financial institutions. The average reward for a job well done is likely to be a little over $110,000 compared with around $175,000 in 2007. Although it is always wise to take measures to hang on to talent when times are tough, critics may well suggest that still-hefty bonus payments fail to reflect the full horror of Wall Street’s decline.

Do we think that Wall Street deserved 18.4 billions in Bonuses after such a “fantastic” job !!!???

Do you know the cost of attending to the WORLD ECONOMIC FORUM ? Let´s see :

1. Membership in the World Economic Forum costs 42,500 Swiss francs, or $37,500 at current exchange rates
2. Davos gathering, which goes for another 18,000 Swiss francs, or $15,900
3. Other expenses…

Which raises the question: What is anybody doing in Davos with the most severe economic crisis since the Great Depression worsening by the day?

Well the answer is simple : The first of the six “programme tracks” at the annual meeting is “Promoting Stability in the Financial System and Reviving Economic Growth.” A most worthy topic and one apropos for the World Economic Forum’s professed goal to “contribute towards solving the problems of our age.”

Do we really think that the guys that caused THE PROBLEM are going to be able to bring any solution ??? GOOD LUCK.

 A significant deterioration in public finances lies ahead, both over our forecast horizon and beyond. Wider budget deficits and bank-rescue operations should cause debt to climb quickly. A large majority of countries will find themselves in excessive deficit procedure soon and for the region as a whole debt will reach a new historical high.

The underlying long-run fiscal outlook will prove to be key for the chances of stabilising of the debt level. Continental Europe is in for a well-documented demographic demise, which will likely weigh on trend growth and on budget balances. A considerable part of the negative repercussions on the labour force could be fended off by people working longer. The ECB projects the euro-area budget balance to worsen by 5.5% of GDP between 2010 and 2050, thus arriving at an estimate that is about a quarter above the previous official EU estimates of the projected increase in age-related public spending (see ECB Working Paper 994 – Fiscal Sustainability and Policy Implications for the Euro Area). According to the ECB projections, only Finland, Germany, Austria and Italy might get away with small or no policy adjustments . Such long-term projections need to be taken with a pinch of salt, given their sensitivity to small changes in the underlying assumptions. But they provide a rough idea of the long-term headwinds for fiscal policy. The consumers’ trust in the long-term sustainability of public finances, including public pensions, is vital for their saving reaction.

The U.S. Energy Information Administration expects oil to average about $43 a barrel in 2009, while some Wall Street energy bulls consider $60 more likely. If either forecast is right, petro stocks will benefit later this year. If on the other hand, crude slides below its current level, as some Street bears expect, the shares could stumble further. Of course, few oil-price prognosticators have covered themselves in glory over the past year, and there’s no reason to assume that their forecasting skills have improved. Especially since just where the price will go has much to do with another great unknown: how long the global recession lasts and how strong the subsequent recovery will be.

But a recovery will come eventually, and higher oil prices almost surely will follow. The most enthusiastic bulls even see them returning to $100 within a few years. That’s why, over the next few months, patient investors would do well to buy the stocks of the best-positioned companies with the strongest finances and best long-term outlooks.

Even if Obama´s administration pushes for alternative Energies hard, Big Oil will stay around for a while.

Dear friends, yesterday I was very lucky because I could experience the future , driving the new TESLA.

Here what it is all about :

Tesla Motors Inc. began taking orders today for the Roadster Sport, a high-performance sports car based on the world’s leading all-electric, zero-emission vehicle.

The Roadster Sport does 0 to 60 mph in 3.7 seconds, compared with 3.9 seconds for the standard Roadster. It comes with a hand-wound stator and increased winding density for lower resistance and higher peak torque. In addition to Yokohama’s Ultra High Performance tires, the Roadster Sport has improved suspension with adjustable dampers and anti-roll bars that will be tuned to the driver’s preference.

And ZERO NOISE !!!

New figures show that China’s GDP growth fell to 6.8% in the year to the fourth quarter, down from 9% in the third quarter and half its 13% pace in 2007. Growth of 6.8% may still sound pretty robust, but it implies that growth was virtually zero on a seasonally adjusted basis in the fourth quarter.

Industrial production has slowed even more sharply, growing by only 5.7% in the 12 months to December, compared with an 18% pace in late 2007. Thousands of factories have closed and millions of migrant workers have already lost their jobs. But there could be worse to come. Chinese exports are likely to drop further in coming months as world demand shrinks. Some, forecast that exports in the first quarter could be 19% lower than a year ago. 2009 may well see the first full-year decline in exports in more than a quarter of a century.

Economists have become gloomier about China’s prospects, with many now predicting GDP growth of only 5-6% in 2009, the lowest for almost two decades. The most dismal view comes from Albert Edwards, from SG , who thinks China may be sliding into outright recession. He points to a fall in electricity output of 6% in the year to the fourth quarter, down from average annual growth of 15% over the previous five years.

Do we really believe the information that Spanish Government is giving us about the evolution of Housing prices in Spain.

We would like to share with you the info that Reinhard and Rogoff have published about the price of Real State markets after Financial crises since 1945 :

If the data given by our Government is true ( -2,8% in 2008), how South should the prices go and for how long ???

Washington had perhaps, the most festive gathering  and numerous in memory, as people cheerily waved flags in the bitter cold, others chanted “O-ba-ma” and “Yes we can”; many faces were covered in tears of joy. Millions more, around America and the world, watched the event live on television.

Mr Obama spoke with some eloquence, but used the occasion to warn repeatedly of difficult times ahead and the need for sacrifice. 

For  sure the markets got it fast !! At the same time as Obama was giving his speech, US stock markets were going South concerned about the Nasty Recession and Earnings season.