Tags: US | economy | revenue | global

Coke, IBM and McDonald's Show Global Economy Will Hurt US Investors

By    |   Wednesday, 22 October 2014 08:22 AM

Global economic news has been disappointing recently. Growth in China has slowed sharply in the past year. Germany is slowing, which could tip the eurozone into recession. Italy avoided falling into recession because officials revised the method for calculating GDP to include drugs, prostitution and other illegal activity. The activities remain illegal, but economists now estimate how much is spent on those activities when reporting GDP.

With weak economic growth overseas, U.S. companies are reporting a decrease in revenue. Coca-Cola, a company some analysts believe is so popular that it is nearly immune from economic woes, reported that third-quarter revenue was lower than expected. The stock price sold off significantly.

Warren Buffett, a large Coke share holder, suffered a billion dollar loss after the news. It was the second day in a row Buffett saw a billion dollar loss in an individual stock. The day before Coke's bad news, IBM delivered a disappointing earnings report.

McDonald's also reported lower-than-expected revenue, blaming problems in China for the disappointment.

Globalization has economic benefits, but there are also drawbacks. When one country experiences a slowdown, it will have an impact on its trading partners. The size of the U.S. economy means that the country is a trading partner of nearly every nation in the world.

In the next economic crisis, which is most likely to hit in the near future, U.S. investors will experience large losses because their investments have exposure to countries around the world. The depth of the crisis will determine the size of the loss and the crisis is likely to be severe, which points to losses like those seen in 2008 and 2009.

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Global economic news has been disappointing recently.
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Wednesday, 22 October 2014 08:22 AM
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