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December 24, 2008
The New Normal: A Post-Leverage Economy
My closing segment on The Call this morning about what I keep calling "the new normal". One day this downturn will end, but what does the world look like afterwards? How is a post- rocket fuel economy structured? What is GDP growth? What are corporate margins and profit growth?
They all almost certainly will be lower, not just in the U.S., but in most developed countries. I mean structurally lower, not cyclically so. And yet people insist on applying historical models and market multiples to what comes next, which is inappropriate and data-bound.
So why do they do it? Because it's easy, of course. But that doesn't make it right or less dangerous.
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