Mergers & Acquisitions have traditionally been linked to investor confidence in the market, directly leading to more money going into the stock market. M & A activity has been very low since the recession began as CEOs are unwilling to take big risks, instead holding on to cash assets.

So, let’s take a look at some previous cycles of M & A Activity and how they corresponded to the stock market:

1) In 2007, there was a total of $4.3 trillion dollars worth of M & A activity. During this time, the DJI was at its all time peak. In 2009, there was a total of $1.3 trillion. Now, compare this to $90 billion in the last full week of August. Experts were hoping this would cap off an investor rally, but expectations were cut short by weak economic indicators. September tends to be a highly volatile economic month and positive indicators can help the stock market recover from its miserable August trading.

2) In 2000, total M & A reached $3.1 trillion dollars, almost a record for the time. At this point, the Dot Com industry was booming and stocks were at an all time high. However, in 2001, only $1.13 trillion of M & A activity was recorded- marking the start of the Dot Com crash.

3) Large deals make investors happy for a variety of reasons, sending signals to buy more stock. While people are worrying about the global economy, firms actually spending money to expand sends bullish signals to pundits, increasing hopes of more buying. Furthermore, investors tend to think companies buy when stocks are cheap (which is often incorrect) and that the financial climate is improving.

4) Banks and law firms are one of the largest winners of M & A’s. For example, the 40-billion takeover bid of Potash would have garnered 8 financial firms almost $200 million in consulting and legal fees. On average, 0.5% – 0.8% of total costs goes to these firms, so in a year with $4 trillion of M&A’s, they make over 4.8 billion dollars.  The total revenue grossed in bullish years is enough to dent their operating costs- signaling easier access to credit for buyers.

5) Spending money is a sign of more certainty in the future. It shows predictability in the economy and consistency. In our current vacillating economy, CEOs are reluctant to purchase because they don’t know whats going to happen the next quarter, much less over a longer time span. Companies rather hold on to assets than risk losing money over poor decision making. This is why they tend to takeover not when stocks are at the bottom, but when they hold their price over an extended period of time.

Hopefully, this article has shed some light on a clear economic indicator. If you follow finance, keep your eyes open for more Acquisitions in the coming months. It may be a key tip for your investment strategy.

Let’s face it guys – the economy is not really recovering. Sure, Dow Jones was up for like 9 straight weeks (before yesterday’s selling Bonanza) and some economic indicators were pointing to recovery, but has there really been a change in consumer spending, unemployment and easing of credit? The answer is a loud no.

In this article, I will prove to you that no matter what you hear – we are still in a recession and have not started to recover. Usual economic graphs would have a bottom. In this case, our bottom is a plateau. The same is true around the world. There is way too much uncertainty, risk factors, and negative reports to leave any hope of recovering from the worldwide economic downturn.

Here are my 4 real reasons that the economy sucks and won’t begin to show improvement until 2011 (at the minimum):

1) One word: Europe

By now, most countries in Europe are plagued with high unemployment, national debt, and budget deficits. Problems in Greece combined with the possibility of Greek like problems drove the Dow Jones to record drops today. Investors fear that the bailout won’t help Greece and that other countries – namely Portugal, Spain, and Ireland might face similar problems in the very near future. Credit downgrades have already made it hard for these countries to find much needed cash.

Look at this Newsweek image for an economic outlook in Europe:

Why Europe is In Trouble

Clearly, something is going on with the continent. Individual countries besides the UK, France, and Germany simply do not have the extensive GDP’s and purchasing power to bailout themselves similarly to the USA and China, relying on help from international organizations. However, if there is a domino effect of defaulting countries, we might be in for a double dip recession or even, a worldwide depression

2) Unemployment has remained stagnant worldwide and employers are not hiring.

One of the last stats I read really proved to me that employers are uncertain about hiring and workers are still out of jobs:

“80% of people unemployed in Summer 2009 still have not found a job.”

Unemployment is still hovering around 9.2-9.4% and underemployment around 16.5%.

3) Consumer spending is barely up, if at all.

Every month or quarter, I read a report that consumer spending is up by a small single digit percentage compared to this time last year. At first glance, this is great news and investors often buy up tons of stocks in a frenzy (especially in the consumer goods sector) when this news is released. This is all great, except for one thing: consumer spending was at record low levels in 2008 and 2009 – why are we delighted at single digit increases? It’s kinda like jumping in joy that the government of Bhutan recorded a 22% increase in 2008. With such low comparisons, double digit increases must be the only sign of recovery.

Add it up - are we still anywhere near 2007 levels? Not at all.

4) The Stock Market is in Shambles and the Feds might make big changes to how trading is done.

After 9 great weeks, one of the largest selloffs took place this week, capping off on Thursday with the Dow Jones dropping by over 1,000 points (~10%) one and a half hours before closing. Fortunately, some gains were made after that point and the Dow Jones closed losing only 347.80 points (3%) in the worst day since February 2009.

Now, why would there be a day so bad if the economy was really recovering? Surely, this didn’t happen in other recovery periods. One reason: the economy is not recovering. We are very volatile and won’t maintain steady growth for another 6 months. All signs point to volatility. For example, Ford, one of the companies that I invest in, reported all kinds of positive signs (less debt, more profit, more sales, etc) this past month, but shares fell rapidly.

What I’m trying to say with this post is simple: be careful with your money. We are still in a recession and your hard earned dollars should be kept in close and trustworthy investment options. Don’t squander away your earnings.

I am going to turn the tables now and tell you the countries that have the worst economies in the world. Doing this list will allow people to see some common trends in these countries and help investors identify some trouble spots. Plus, its just interesting for anyone interested in finance to see how things are shaping up around the world after the Great Recession. To identify trouble areas, we list them in red so you can see what is each countries weak spot.

Without further delay, the Countries with the Worst Economies in 2010:

1. Portugal

GDP Growth Rate (2009): - 3.3 %
Public Debt: 75. 2 % of GDP
Unemployment: 10. 5 %
Economic Problems: Facing high unemployment and very high underemployment, a growing public debt, inefficient public sector, and corruption in the government.
Forecast:  Portugal will recover quickly from the crisis that has marred its once proud economy. Major parties signed an agreement on reducing debt on March 26, easing investor fears of a European economic fallout. Although the economy contracted in 2009, it is predicted to bounce back in 2010 with a 0.8% growth.

2. Zimbabwe

GDP Growth Rate (2009): - 5.7  %
Public Debt: 80% of GDP
Unemployment: 94 %
Economic Problems: Zimbabwe’s economy collapsed after the land reforms were initiated in the early years of the decade. Inflation was over 1 sextillion % (10^21), unemployment spiked, the GDP contracted 40%, and industrial production was cut in half.
Forecast:  Zimbabwe has the hardest obstacles on the road to recovery. Virtually no one has a job, the money is worthless and the government has no credit. Its going to take a lot of years of humanitarian effort and changes in the law to ensure that the country can be successful again.

3. Greece

Protest In Greece

GDP Growth Rate (2009): – 2.0 %
Public Debt: 125 % of GDP
Unemployment: 9.8 %
Economic Problems: The largest problem facing the Greek economy is an impending federal bankruptcy because of the huge debt. Furthermore, the government has a budget deficit of $50 billion dollars in 2009. Problems are further fueled by political and economic corruption.
Forecast:  As the 27th largest economy in the world, the faith of Greece can have lots of consequences on the world market. The stock market in the United States vacillates on positive and negative news from the Greeks and the EU and IMF (International Monetary Fund) are actively searching for ways to help Greece cope with its budget debt. The forecast looks bad for a few years (much worse than Portugal), but there is hope in the future once the worldwide market stabilizes.

4. Ireland

GDP Growth Rate (2010): -3.3 %
Public Debt: 42 % of GDP
Unemployment: 13.8 %
Economic Problems: Ireland has been in a depression since 2009 with GDP contraction of 14.5% in 2008, 9 % in 2009 and 3.3% predicted for 2010. Unemployment has skyrocketed to the highest amongst EU nations and bank solvency is under critical care.
Forecast:  Ireland faced the same problems that the United States is facing but was unable to come out of a deep recession because its economy was not strong enough. It has a shaky future, depending on financial bailouts from the EU powers and the ability for residential and commercial real estate to make gains.

5. Lithuania

GDP Growth Rate (2009): -16.8 %
Public Debt: 27 % of GDP
Unemployment: 14.6 %
Economic Problems: Lithuania was one of the last to be hit by the economic decline in Europe but was hit very hard. The economy contracted by almost 1/6th and unemployment skyrocketed, mostly due to reliance on Exports to EU countries. Real estate is still showing lackluster performance, but there is good news for trade as slight profits have been reported and the economy has stabilized.
Forecast:  Lithuania’s economic contraction is very similar this to the recessions that hit other Post- Soviet nations (Georgia, Armenia, Latvia, Ukraine, and Russia). However, most countries have begun to stabilize their economy and Lithuania is no different. It will begin to register growth by as early as Summer 2010.

Are you from any of these countries or have relatives living there that can describe the state of the economy? Where else do you think is the economy really hurting?

SmarterSpend has compiled a list of top ten ‘traditionally less known’ countries where investments can prove highly beneficial- whether it is a business or a real estate purchase. These countries are in no particular order.

Scroll through and let us know what you think.

1. Belarus

SmarterSpend Investment Rating: 8.0 / 10

Belarus Buildings

2008- 2009 GDP Growth Rate: 10.0 %

GDP: $118 billion

Population: 9.6 million

Human Development Level (HDI): 0.817

Government: Presidential Republic

Exports: machinery and equipment, mineral products, chemicals, metals; textiles, foodstuffs

Imports: mineral products, machinery and equipment, chemicals, foodstuffs, metals

Natural Resources: Forests, peat deposits, small quantities of oil and natural gas, granite, dolomitic limestone, marl, chalk, sand, gravel, clay

2. Brazil

SmarterSpend Investment Rating: 10.0 / 10

(+ for diverse economy, stable government, low threat of war/civil unrest, GDP growth, vast untapped natural resources, labor force, upcoming World Cup and Summer Olympics)

Aircraft Industry In Brazil

The Tidbits:

Brazil’s economy is the tenth largest in the world, but with a constant increase and a large population, it will be a focus of international investments in the future. Brazil has a strong agricultural sector fueled by coffee and soybean exports, oil reserves, industrial capability (VALE is a huge mining company), and petrochemicals. The trade balance is positive and there is no reliance on a single trading partner. The 2014 World Cup and the 2016 Summer Olympics, arguably the most international events in the world will be held in Brazil.

Look for Brazil to be in the news in the recent future as investors flock there.

2008- 2009 GDP Growth Rate: 5.1 %

GDP: $1.6 trillion

Population: 192 million

Human Development Level (HDI): 0 .813

Government: Presidential Federal Republic

Exports: transport equipment, iron ore, soybeans, footwear, coffee, autos, automotive parts, machinery

Imports: machinery, electrical and transport equipment, chemical products, oil, automotive parts, electronics

Natural Resources: Forests, peat deposits, small quantities of oil and natural gas, granite, dolomitic limestone, marl, chalk, sand, gravel, clay

3. Slovakia

SmarterSpend Investment Rating: 8.5 / 10

(+ for diverse economy, stable government, low threat of war/civil unrest, GDP growth. – for landlocked, – for negative growth rate)

Bratislava Financial District

The Tidbits:

Slovakia is a post-communist country in Central Europe and a member of EU, EuroZone, and NATO. Its economy is marked with the lowest income disparity in the world and foreign investment oriented laws. 1.6 million tourists visited Slovakia in 2006 as it features a beautiful natural landscape and rich cultural heritage marked. The southern part of Slovakia (bordering with Hungary) is known for its rich farmland. Growing wheat, rye, corn, potatoes, sugar beets, grains, fruits and sunflowers. Vineyards are concentrated in Little Carpathians, Tokaj, and other southern regions. The breeding of livestock, including pigs, cattle, sheep, and poultry is also important.

2008- 2009 GDP Growth Rate: 6.1 %

GDP: $119 billion

Population: 5.3 million

Human Development Level (HDI): 0.88

Government: Parliamentary Republic

Exports: Automobiles (16%), iron and steel (9.5%), and refined petroleum products (6.5%) apparel (4.3%), motor vehicle parts and accessories (3.6%)

Imports: consumer goods, 12.3%; food, 4.5%; fuels, 17.6%; industrial supplies, 30.6%; machinery, 19.9%; transportation, 15.0%; and other imports, 0.1%.

Natural Resources: Brown coal and lignite; small amounts of iron ore, copper and manganese ore; salt; arable land

4. Argentina

SmarterSpend Investment Rating: 9.0 / 10

(+ for diverse economy, stable government, low threat of war/civil unrest, GDP growth, high literacy rate, – for wide income disparity)

Buenos Aires Skyline

The Tidbits:

Argentina may be the most European influenced country in the Western Hemipshere, with 93% of the population coming from European ancestry. Argentina has a very high literacy rate and was considered one of the richest countries in the world in the start of the 20th century. Foreign nationals hold $76 billion worth of investments in Argentina and the country is open to moderate amounts of migration. Also, the country has rich mineral deposits and arable farmland.

2008- 2009 GDP Growth Rate: 6.97 %

GDP: $578 billion

Population: 40 million

Human Development Level (HDI): 0.86

Government: Federal Presidential Republic

Exports: Soybeans and byproducts, 23.4%; cereals (mostly maize and wheat), 9.7%; motor vehicles and parts, 9.3%; refined fuels, 6.5%; chemicals, 6.2%; aluminum and steel, 4.9%; natural gas and petroleum, 4.4%; other industrial products, 11.1%; all other (mostly processed agricultural products), 24.5%.

Imports: Industrial and computing machinery and parts, 39.4%; industrial supplies, 35.2%; automobiles and other consumer durables, 12.8%; refined fuels and lubricants, 7.5%; all other (mostly consumer non-durables), 5.1%

Natural Resources: Fertile plains of the pampas, lead, zinc, tin, copper, iron ore, manganese, petroleum, uranium

5. Panama

SmarterSpend Investment Rating: 8.0 / 10

(+ for diverse economy, stable government, GDP growth, – reliance on few trading partners, large trade deficit)

Panama City

The Tidbits:

Panama, an American invention, is a fully dollar based market economy with an emphasis on the banking and tourism sectors. Its near future economy will be bolstered by tolls from the Panama Canal rebuilding project, which will allow for twice the number of ships to pass. Unemployment is minimal and the country exports heavily to the United States.

2008- 2009 GDP Growth Rate: 9.21 %

GDP: $42 billion

Population: 3.3 million

Human Development Level (HDI): 0.840

Government: Constitutional Democracy

Exports: $10.29 billion: bananas, shrimp, sugar, coffee, and clothing

Imports: $15 billion: capital goods, foodstuffs, chemicals, consumer and intermediate goods

Natural Resources: Copper, Mahogany Forests, Shrimp, Hydropower

6. Romania

SmarterSpend Investment Rating: 8.5 / 10

(+ for diverse economy, stable government, GDP growth, trade surplus, numerous trading partners, rich in natural resources – irregular government planning)

Bucharest Chamber of Commerce

The Tidbits:

Romania is a EU member that has recently shown high growth rates and development, and the 11th largest economy in Europe. The country has high per capita incomes and a growing middle class. It has declining oil reserves but enough mineral output to supply its industry. The country is planning on extending its highway system and has a strategic location in SE Europe, where it is an important stop for commerce. Also, a tertiary economy is present with 51% of the GDP coming from the service sector.

2008- 2009 GDP Growth Rate: 9.37 %

GDP: $270 billion

Population: 22 million

Human Development Level (HDI): 0.837

Government: Unitary Semi-Presidential Republic

Exports: agricultural products, chemicals, footwear, fuels, machinery, metal products and textiles

Imports: machinery and equipment, fuels and minerals, chemicals, textile and products, metals, agricultural products

Natural Resources: Petroleum (reserves declining), timber, natural gas, coal, iron ore, salt, arable land,
hydropower

7. Dominican Republic

SmarterSpend Investment Rating: 8.5 / 10

(+ for free trade zone earnings, stable government, GDP growth, availability of labor, rich in natural resources

- resource mismanagement, reliance on remittances, energy shortage )

The Tidbits:

The Dominican Republic is the second largest economy in the Caribbean and Central America. It is now the largest tourist destination in that area and mostly serviced based, although sugar cane and ferronickel production are one of the major sources of revenue for the country. Underdeveloped energy and fishing sectors are the prime areas for future investment, along with a booming tourism sector. DR trades heavily with the United States, although it has been diversifying in recent years with Japan, Venezuela, and Mexico.

2008- 2009 GDP Growth Rate: 9.37 %

GDP: 10.7% (2006), 9.1% (2007)

Population: 10.1 million

Human Development Level (HDI): 0.777

Government: Democratic Republic

Exports: ferronickel, sugar, gold, silver, coffee, cocoa, tobacco, meats, consumer goods

Imports: foodstuffs, petroleum, cotton and fabrics, chemicals and pharmaceuticals

Natural Resources: nickel, bauxite, gold, silver, fisheries

After the First Great War, there was no real power as Europe tried to recover from the devastating damage to infrastructure, the loss of a generation, and a Spanish flu virus which killed more people than the war itself. The United States began its dominance at sea, but surely, we weren’t the only power. During the 1920s- 1940s, the world suffered a global depression that was many times worse than today’s economic collapse and clearly and no country could be classified as a “superpower.”

World War II left the United States and the Soviet Union as clear global powerhouses. During the 1960s, the American society enjoyed affluence due to noncompetitive outside markets and prospered like no other group of people ever had. The Soviet Union benefited from a broken down Europe and increased its influence all the way to East Germany until its collapse in the early 1990s.

After the dissolution of USSR, the United States was the only superpower in the world, both economically and militarily for the first time in its history. The Dot Com boom generated jobs and for a few years the United States had a budget surplus, the lowest poverty rates in its history, and the most years of consecutive sustained growth. Living in the 1990s it would be hard to imagine an America so.. ill.

With that said, it is possible to predict the influence of countries in the near future based on recent economic performance and potential for future growth. Countries are ranked in order of current GDP and given a score out of 10 based on certain criterion. All numbers are based on December 2008 figuresn. It is important to note that pre-recession numbers are accounted for in the growth rate because its likely that when the recession does end, similar growth patterns will be seen. Finally, red items are causes for concern and green items are the definite advantages.

1) The United States of America
Gross Domestic Product (GDP): $14.58 trillion
Real Growth Rate:  1.4% (2007-2008)
National Debt: $12.25 trillion
Population Growth: 0.883%
Other: America is still the most influential country in the world, with a diversified economy and very high per capita GDP. After the recession, American’s will spend less money and waste less, reducing public debt and forcing economic realignment. A quick end to the war(s) in Iraq and Afghanistan will provide more money for domestic purposes. The US is still the leading power as the global economic crisis affected every country.
Superpower Potential: 8.5

2) Japan
Gross Domestic Product (GDP): $4.48 trillion
Real Growth Rate:  0.7% (2007-2008)
National Debt: $1.492 trillion
Population Growth: -0.139%
Other: Japan economy plunged 3.3% last quarter and the GDP will slip at about 10% annually. Leading exporters are cutting jobs on a grand scale and the most successful companies are posting losses in the billions. Also, Japanese consumers are cutting back faster than American counterparts. Couple this with a negative population growth and an upside down population pyramid (more older people than young), Japan will see heavy declines in the upcoming decades.
Superpower Potential: 2.5

3) China
Gross Domestic Product (GDP): $4.22 trillion
Real Growth Rate: 9.8% (2007-2008)
National Debt: $420.8 billion
Population Growth: 0.629%
Other: A labor force over a billion people,  a rapidly growing economy, and vast land resources will allow China to prosper and influence the world in many ways. In understanding the Chinese rise to superpower status, one has to understand its main source of income, exports. If exports drop, China drops. In fact, due to recent decreases in demands, over 10 million Chinese were laid off last year. When China begins to be more diversified, then the world has reason to fear.
Superpower Potential: 7.0

4) Germany
Gross Domestic Product (GDP): $3.8 trillion
Real Growth Rate: 1.7% (2007-2008)
National Debt: $4.5 trillion
Population Growth: -0.044%
Other: Germany’s overwhelming national debt will stand as a problem in ever gaining leverage against other countries. Also, Germans have a very large public debt, similar to the United States. However, Germany had diverse exports and was second only to China in 2009 in total export value.
Superpower Potential: 4.0

5) Brazil
Gross Domestic Product (GDP): $1.665 trillion
Real Growth Rate: 5.2% (2007-2008)
National Debt: $236 billion
Population Growth: 1.3%
Other: Many people talk about China and India as superpower hopefuls in the 21st century, yet there is not much talk of Brazil. Oil, soy, and coffee exports have allowed Brazil to enjoy a quarter century of spectacular growth after the lost decade in the 70s. Brazil has vast mineral resources and has several huge international corporations (Petrobras, Vale, etc). The only negatives are a smaller population (althought growing fast) and less military power.
Superpower Potential: 5.5

6) Russia
Gross Domestic Product (GDP): $2.25 trillion
Real Growth Rate: 6.0% (2007-2008)
National Debt: $571 billion
Population Growth: -0.478%
Other: With tens straight years of growth at 7% annually since 1998 and a progress minded people hoping for the pre-Soviet collapse stability allowed Russia to jump into the world scene. The war in Georgia showed the West that Russia wants its respect back. Russia has oil and energy and provides up to 40% of the natural gas to Europe. Russia (largest land area) also has nuclear weapons, a powerful arsenal of advanced weapons, and untapped mineral resources in Siberia.
Superpower Potential: 7.0