Académique Documents
Professionnel Documents
Culture Documents
2013 issue 9
MassiveJapaneseRallyCouldEndinTears
Greece's youth unemployment hits 60% as recession continues to cripple the country
Bernanke admits the Fed is looking at asset markets closely for signs of excessive risk taking.
Relentless quantitative easing is driving markets to extremes. Central banks want more GDP growth. But they also get extra low yields, high commodity and asset prices, hurting many consumers. They also get markets which rely on even more easy money - and which could fumble at some point...
April Jobs Stronger Than Expected but Recovery 'Very, Very Slow
US employment growth beats expectations with increase of 165K jobs in April, unemployment rate falls to 7.5%
Emerging Asian neighbors are bracing for a surge in capital flows after Japan's unprecedented bid to pump up its long-moribund economy but most believe the upside of cheap cash and a stronger Japanese economy outweighs the risks. JapanTrashesYen
OnlineRetailersCallInternet SalesTaxa'Nightmare'
FranceDeclaresAusterityOver asGermanyOffersWiggleRoom
ABRAHAM GULKOWITZ
abe@gulkowitz.com
917-402-9039
The PunchLine...
In This Issue
Complex Recovery Paths
Major central bank activism and some surprisingly good economic data in the U.S. have lifted equity markets and also helped the credit markets continue their rally. Central bank policy has been focused on an emergency bailout footing to stave off sudden panic and is also is aimed at stimulating economic activity. This has involved incentivizing households and businesses to expand and take some more risk. But no new policy initiative is perfect not in implementation nor is it precise in its impact. Some in the markets and even in the Fed itself worry that the massive and unprecedented easing could be causing its own distortions and perverse side effects. It has clearly triggered a chancy search for yield that may yet lead to new asset bubbles and financial instability. There are numerous examples. One is highlighted on the this first page of the PunchLine and later on the credit pages. Bank lending to larger corporates has exploded, growing at rates not seen since the boom that was central to the great financial collapse. Also, Spanish and Italian benchmark borrowing costs are now at their lowest levels since the last quarter of 2010, as these high-yielding peripheral securities have caught the attention of both domestic and international investors. While the liquidity provided by key central banks -- including the move by the Bank of Japan to initiate massive monetary easing -- will likely continue suppressing yields, there is a serious argument to be made that the rallies have moved beyond fundamentals This increases the likelihood of more surprises, not less
You Cant Handle the Truth The Likelihood of Unlikely Events... Households?
(pg 8) (pg 9)
Lots of recovery signals but far off the normal recovery path. Numerous questions remain for a once free-spending sector whose housing and mortgage finance machinery have not just collapsed but are severely damagedThe previous boom cannot and should not be recreated But the world aches for a vibrant U.S. consumer with job growth (pg 10)
(pg 1)
(pg 2)
There will be far-reaching repercussions from this weak recovery path combined with the awkward easing easing policy of central banks. But what choice is there? And lets not forget that the challenges are clearly an international affair, rife with politics and therefore difficult to resolve (pg 3)
A Closer Look Data Detective Pumping iron Credit Matters Credit Concerns Deal or No Deal in Europe The DNA of Business Some More Industry Specs Real Estate and Construction Will Life Ever be the Same?
(pg 11) (pg 12) (pg 13) (pg 14) (pg 15) (pg 16) (pg 17) (pg 18) (pg 19) (pg 20)
New Directions The New Geography of Business U.S. Break Out Potential The Return to Normal
Contact information:
Abraham Gulkowitz
phone: 917-402-9039
email:abe@gulkowitz.com
Headlines and data appearing in The Punch Line came from widely available publications including national and international newspapers, trade journals, economic and industrial bulletins and news websites.
The PunchLine...
Engine Drivers
Eurozone Economic Confidence Falls More Than Forecast
Eurozone economic confidence declined more than expected in April with broad-based contraction across sectors excluding consumer sentiment, survey data showed
US consumer spending rises, The private sector comes to U.S. economy's rescue
The PunchLine...
New Directions
The PunchLine...
Urban violence is a persistent problem in Latin America, with cities such as San Pedro Sula, Acapulco and Caracas notorious for their high rates of crime. This is owing to a combination of factors including political instability, the growing presence of powerful criminal groups and the inability of the security forces to crack down on crime.
Foreign investment in Italian holiday properties is rising as Germans, Britons and Russians take advantage of a market where locals are struggling to purchase even a first home. Residential sales in the country dropped almost 26 percent last year amid a plunge in mortgage lending, almost two years of recession, and uncertainty surrounding a new tax on primary residences.
The European Commission Friday suggested granting more time to some European countries to adjust their finances after issuing fresh forecasts pointing to a delayed economic recovery amid dire jobs conditions and drying-up of credit to households and businesses.
Australia is set to become the world's largest liquefied natural gas (LNG) producer. Japan, the world's largest LNG importer, is its largest market by far. The LNG 17 Conference in Houston last month highlighted the challenges facing Australian producers and Japanese buyers. Cost escalation is jeopardizing projects in Australia, where huge reserves are being developed for export to the strongly growing Asian market. Meanwhile, there were repeated calls for new pricing mechanisms from Japan, whose electricity prices were described as spiraling out of control.
The PunchLine...
The PunchLine...
The PunchLine...
World Corruption Professional services firm Ernst & Young published its 12th annual fraud survey on May 7. Known for its large global sample and methodological rigour, the survey provides important insight into the perceptions of business executives regarding corruption, fraud and other types of misconduct. This year's results suggest that the pressures of economic downturn make executives more inclined to consider corruption and fraud as acceptable business practices. Despite the increasingly tough enforcement of anti-bribery laws, some executives continue to regard corruption as the only way to operate in certain geographical and sectoral contexts.
The chart illustrates why the bulls are running in the loan market. For one, the average price of S&P/LSTA Index loans reached a 6.5year high of 98.39 on April 30, up from 98.17 a month earlier and 96.79 at the end of 2012. Moreover, when TXU is excluded, the average Index price is within striking distance of par, at 99.29 at the end of April.
The PunchLine...
Fears over the sustainability of government debt have powered the political drive towards contractionary fiscal policy, despite tepid global demand, in the OECD. Yet a key empirical justification for this effort appears to have been discredited by a graduate student in recent published work, reigniting the debate over fiscal policy. Rising US government revenue from tax collections and bailout paybacks are shrinking the federal deficit faster than expected, delaying the point when the government will reach the so-called debt ceiling.
The PunchLine...
10
The PunchLine...
A Closer Look
US consumer credit rose by $8.0 billion in March following an increase of $18.6 billion in February. Economists had expected credit to increase by $15.0 billion. While non-revolving credit such as student loans and car loans rose by $9.7 billion, the increase was partly offset by a $1.7 billion drop in revolving credit, which largely reflects credit card debt.
11
The PunchLine...
Data Detective
12
The PunchLine...
General Motors reported sales growth in China accelerated last month while Toyota Motor Corp.'s deliveries continued to lag. GM sales climbed 15 percent to 261,870 units in April, according to figures released today by the carmaker. Toyota reported sales fell 6.5 percent to 76,400 units, the ninth drop in 10 months. GM's sales of Buick and Chevrolet vehicles rose more than 20 percent as the company seeks to keep its lead in China among foreign automakers for a ninth straight year. That's at the expense of Japanese automakers who are still coping with the fallout of a territorial dispute that flared in September. GM Sinks $1.3 Billion Into Chinese Cadillac Factory
13
The PunchLine...
14
The PunchLine...
Credit Concerns
15
The PunchLine...
Portugal's prime minister says he plans to raise the retirement age to 66 from 65 and lay off some 30,000 government workers in measures that aim to save 4.8 billion euros ($6.3 billion) over the next three years. Pedro Passos Coelho said in a televised address to the nation that the new measures are needed to ensure Portugal won't require another bailout. Portugal got a 78 billion euro rescue in 2011 after overspending, heavy debts and weak growth left it close to bankruptcy amid the eurozone's financial crisis. Poland Cuts Interest Rates to Record Amid Lack of Recovery Polands central bank cut its benchmark interest rate to a record low as the European Unions largest eastern economy struggles with slowing growth. The Narodowy Bank Polski lowered the seven-day reference rate by a quarter-point to 3 percent. Policy makers resumed reductions after a pause last month as inflation slowed to its weakest in more than six years and manufacturing shrank the most in 45 months in April. While the reduction in borrowing costs shouldnt be seen as a start of a new round of monetary easing, a further cut or unchanged rates are possible when policy makers meet next, Governor Marek Belka said
16
The PunchLine...
Iron Man is a bigger golden boy than ever with a $175.3 million opening weekend at the domestic box office for the superhero's latest sequel. According to studio estimates Sunday, "Iron Man 3" had the second-biggest debut ever, behind the $207.4 million start last year for "The Avengers," which teamed him with other Marvel Comics heroes. Opening a week earlier overseas, "Iron Man 3" has hauled in $504.8 million internationally, giving the blockbuster a worldwide total of $680.1 million. The summer box office season was jump-started by Iron Man 3 and its super(hero)-sized opening (2nd best all-time). While this is a healthy sign for the box office, the industry top 12 was still down ~13% from last year when The Avengers was tops with a record-breaking $207.4mm bow. YTD revenues and attendance are both tracking down 11%.
Poker devotees will soon be able to skip the smoky casino and legally gamble their dollars away on the couch - at least in the state of Nevada. A Las Vegas-based social gambling company is expected to launch the first legal, real-money poker website in the United States. The site, run by Ultimate Gaming, will accept wagers only from players in Nevada for now, but likely represents the shape of things to come for gamblers across the country. Internet poker, never fully legal, has been strictly outlawed since 2011, when the Department of Justice seized the domain names of the largest offshore sites catering to U.S. customers and blacked them out.
China Faces Fall in Factory Prices A sharp fall in factory pricesthe 14th consecutive monthly declinesignals further trouble for a Chinese economy already facing mounting debt and slowing growth.
Producer pricesa measure of prices of goods before they reach consumers dropped 2.4% in April, the sharpest decline since October, paced by particularly steep falls in the metals and chemicals sectors. That could add to concerns about China's slowdown in growth, say economists, because falling producer prices make it tougher for makers of industrial goods and commodities to make profits, pay off their debts and pay their suppliers on time. Part of a big surge in Chinese lending has been used to refinance debt or pay off interest of companies burdened by overcapacity
Home prices in US metropolitan areas saw their biggest year-over-year gains in more than seven years in the first quarter, evidence that the housing recovery is spreading across the nation.
17
The PunchLine...
20CITYSurveyMaterialsCostsCONSTRUCTION 1913=100 May2013 Source:ENR IndexValue %changeMonth%changeYear Materials 2976.14 +0.8 +2.0 CEMENT$/TON109.910.0+2.3 STEEL$/CWT 49.95 +0.8 0.9 LUMBER$/MBF434.26 +1.0+10.5
18
The PunchLine...
Congress Looks at REIT Tax Exemption A powerful congressional committee is examining the tax exemption that realestate investment trusts have enjoyed for decades as part of its comprehensive review of the tax code
More than 3 million square feet of vacant office space is slated to open next year at 1 World Trade Center and the neighboring tower under construction, 4 WTC. And another 2 million square feet are on the drawing board at 3 WTC, whose construction is stalled at seven stories for lack of commercial tenants
19
The PunchLine...
This publication is provided to you for information purposes and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The information contained herein has been obtained from sources believed to be reliable but is not necessarily complete and its accuracy cannot by guaranteed. The views reflected herein are subject to change without notice. No one connected to this publication accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents. This publication may not be reproduced, distributed to any person for any purpose without express permission from TPL Advisory, LLC. Please cite source when quoting. All rights are reserved.
20