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The Most Noteworthy Takeaway from the 2013 World Economic Forum
A perfumed outlook doesn't mean the economy passes the smell test

By Bob Stokes
Tue, 29 Jan 2013 17:30:00 ET
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The 2013 World Economic Forum in Davos, Switzerland, has concluded. What's the big "takeaway"? 

Try this: The global economy is fragile, but many leaders who attended Davos claim it's on the right track.
Consider two headlines:
Was the Mood Too Good to Be True? – CNBC, Jan. 26
A 'sigh of relief' at the World Economic Forum – BBC, Jan. 27
The BBC article continues:
As Mark Carney – our soon-to-be Bank of England governor – joked at the traditional session on the global economy on the final day, he arrived on Thursday to find people saying the 'tail risk' in the global financial system had been reduced. By Friday night it had been 'eliminated.'
Shortly before the start of the Davos Forum, EWI's January 2013 Global Market Perspective (published Jan. 4) observed:
Optimism about Europe’s prospects in 2013 has reached an extreme.
Indeed, read what the European Central Bank president said at Davos regarding the euro zone: "The level of economic activity is in the process of stabilizing ... we foresee a recovery in the second part of the year." [emphasis added] – CNBC, Jan. 25
Yet the European Union was on the brink of an economic abyss just months ago!
So will the economic problems in Greece, Italy and Portugal just disappear in 2013? And what about Spain?
Consider these charts and commentary from the December 2012 Global Market Perspective:
The willing suspension of disbelief – an essential element in any circus sideshow or magic act – is very much alive in financial markets. The charts [above] convey just one example: a historic level of optimism relative to reality in Spain, the fourth largest economy in Europe. They show the collapse in Spain’s year-over-year GDP, Industrial Production and the Total Homes Price Index and a concurrent surge in unemployment.
Global Market Perspective, December 2012
The Los Angeles Times reported on Jan. 24 that "Spain's unemployment rate tops 26%."
More evidence from around the globe argues against the upbeat economic outlook from Davos. These recent headlines only scratch the surface:
           Japan Falls Into Recession – Wall Street Journal, Dec. 10
           S&P downgrades world's oldest bank to junk status – France 24, Dec. 5
           British economy headed towards 'triple dip' recession – Reuters, Jan. 25
           Illinois’ credit rating downgraded; state drops to worst in the nation – WGN TV, Jan. 26
           Moody’s downgrades long-term ratings of 6 Canadian banks – Washington Post, Jan. 28
           Stuck in Reverse, Detroit Edges Closer to Bankruptcy – CNBC, Jan. 29
These harsh economic realities versus the disconnected and extreme economic optimism at Davos should serve as an alarm.
But the World Economic Forum is not the only place where economic optimism is in overdrive. Consider this latest headline, which came after everyone left Davos.
Economic Optimism Growing on Wall Street: CNBC Survey – CNBC, Jan. 29
Now is the time to get an independent perspective on global markets and economies.

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