ABRAHAM GULKOWITZ
abe@gulkowitz.com
917-402-9039
2013 issue 9May 12, 2013
ComplexRecoveryPaths…
MajorcentralbankactivismandsomesurprisinglygoodeconomicdataintheU.S.haveliftedequitymarketsandalsohelpedthecreditmarketscontinuetheirrally.Centralbankpolicyhasbeenfocusedonanemergencybailoutfootingtostaveoffsuddenpanicandisalsoisaimedatstimulatingeconomicactivity.Thishasinvolvedincentivizinghouseholdsandbusinessestoexpandandtakesomemorerisk.Butnonewpolicyinitiativeisperfect–notinimplementationnorisitpreciseinitsimpact.SomeinthemarketsandevenintheFeditselfworrythatthemassiveandunprecedentedeasingcouldbecausingitsowndistortionsandperversesideeffects.Equallytroublingistherealitythatmassiveeasingtendstosmoothperformanceintheshortrunevenastheriskstakemuchlongertoplayout.Ithasclearlytriggeredachancysearchforyieldthatmayyetleadtonewassetbubblesandfinancialinstability. Therearenumerousexamples.OneishighlightedonthethisfirstpageofthePunchLineandlateronthecreditpages.Banklendingtolargercorporateshasexploded,growingatratesnotseensincetheboomthatwascentraltothegreatfinancialcollapse.Also,SpanishandItalianbenchmarkborrowingcostsarenowattheirlowestlevelssincethelastquarterof2010,asthesehigh-yieldingperipheralsecuritieshavecaughttheattentionofbothdomesticandinternationalinvestors.Whiletheliquidityprovidedbykeycentralbanks--includingthemovebytheBankofJapantoinitiatemassivemonetaryeasing--willlikelycontinuesuppressingyields,thereisaseriousargumenttobemadethattherallieshavemovedbeyondfundamentals…Thisincreasesthelikelihoodofmoresurprises,notless…
US and EU Political Systems Struggling to Deal With 'New Realities'
The euro zone’s central bank did as little asexpected, a 25 basis point drop in its main rate,to 0.5 percent. A lack of unanimity suggests itwon’t cut more soon, or start any boldinitiatives. The ECB looks too divided to wage atougher fight against a sinking economy.
ECB Moves Markets, Not Economy
April Jobs Stronger Than Expectedbut Recovery 'Very, Very Slow‘
US employment growth beatsexpectations with increase of 165K jobs in April, unemployment rate fallsto 7.5%
Emerging Asian neighbors are bracing for a surge incapital flows after Japan's unprecedented bid to pumpup its long-moribund economy but most believe theupside of cheap cash and a stronger Japaneseeconomy outweighs the risks.
France
Declares
Austerity
Over
as
Germany
Offers
Wiggle
Room
Online
Retailers
Call
Internet
Sales
Tax
a
'Nightmare'Corporate
bond
prices
rise
to
new
2013
peak;
Yields
in
HY
continue
to
slide
Massive
Japanese
Rally
Could
End
in
Tears
Japan
Trashes
Yen
Emerging again as a competitive exporter
Greece's youth unemployment hits 60% asrecession continues to cripple the country
Corporate earnings deserve high marks. However,if you go to the revenue side, it was not a good quarter. Less than half (48%) of the companies beat sales expectations and it looks like we'regoing to finish with no growth for the quarter
Bernanke admits the Fed islooking at asset markets closelyfor signs of excessive risk taking.
Relentless quantitative easing is driving markets to extremes. Central banks wantmore 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 moreeasy money - and which could fumble at some point...
The PunchLine...
2May 12, 2013
In This Issue
Headlines and data appearing in The Punch Line came from widely available publications includingnational and international newspapers, trade journals, economic and industrial bulletins and news websites.
•
You Can’t Handle the Truth…
(pg 8)
•
The Likelihood of Unlikely Events...
(pg 9)
•
Households?
Lot’s of recovery signals but far off the normal recovery path. Numerous questionsremain for a once free-spending sector whose housing and mortgage financemachinery have not just collapsed but are severely damaged…The previous boomcannot and should not be recreated…But the world aches for a vibrant U.S.consumer… with job growth…
(pg 10)
•
A Closer Look …
(pg 11)
•
Data Detective …
(pg 12)
•
Pumpingiron…
(pg 13)
•
Credit Matters
(pg 14)
•
Credit Concerns
(pg 15)
•
DealorNoDealinEurope…
(pg 16)
•
The DNA of Business…
(pg 17)
•
Some More Industry Specs…
(pg 18)
•
Real Estate and Construction…
(pg 19)
•
Will Life Ever be the Same?
(pg 20)
•
Complex Recovery Paths…
MajorcentralbankactivismandsomesurprisinglygoodeconomicdataintheU.S.haveliftedequitymarketsandalsohelpedthecreditmarketscontinuetheirrally.Centralbankpolicyhasbeenfocusedonanemergencybailoutfootingtostaveoffsuddenpanicandisalsoisaimedatstimulatingeconomicactivity.Thishasinvolvedincentivizinghouseholdsandbusinessestoexpandandtakesomemorerisk.Butnonewpolicyinitiativeisperfect–notinimplementationnorisitpreciseinitsimpact.SomeinthemarketsandevenintheFeditselfworrythatthemassiveandunprecedentedeasingcouldbecausingitsowndistortionsandperversesideeffects.Ithasclearlytriggeredachancysearchforyieldthatmayyetleadtonewassetbubblesandfinancialinstability.Therearenumerousexamples.Oneishighlightedonthethisfirstpageofthe
PunchLine
andlateronthecreditpages.Banklendingtolargercorporateshasexploded,growingatratesnotseensincetheboomthatwascentraltothegreatfinancialcollapse.Also,SpanishandItalianbenchmarkborrowingcostsarenowattheirlowestlevelssincethelastquarterof2010,asthesehigh-yieldingperipheralsecuritieshavecaughttheattentionofbothdomesticandinternationalinvestors.Whiletheliquidityprovidedbykeycentralbanks--includingthemovebytheBankofJapantoinitiatemassivemonetaryeasing--willlikelycontinuesuppressingyields,thereisaseriousargumenttobemadethattherallieshavemovedbeyondfundamentals…Thisincreasesthelikelihoodofmoresurprises,notless…
(pg 1)
•
InThisIssue
(pg 2)
•
Engines of Growth
There will be far-reaching repercussions from this weak recovery path combinedwith the awkward easing easingpolicy of central banks. But what choice isthere? And let’s not forget that the challenges are clearly an international affair,rife with politics… and therefore difficult to resolve…
(pg 3)
•
New Directions…
(pg 4)
•
The New Geography of Business
(pg 5)
•
U.S. Break Out Potential…
(pg 6)
•
The Return to Normal…
(pg 7)
Contact information:
Abraham Gulkowitz
phone: 917-402-9039
email:
abe@gulkowitz.com
The PunchLine...
3May 12, 2013
Engine Drivers…
Eurozone Economic Confidence FallsMore Than Forecast
Eurozone economic confidence declined more than expected inApril with broad-based contraction across sectors excludingconsumer sentiment, survey data showed
•
US consumer spending rises,
•
TheprivatesectorcomestoU.S.economy'srescue
Europe's Manufacturers Face a Test
Europe's industrialists are steeling themselves for a difficultsix months, forecasting at best a stabilization in their business,and at worst a further drop in sales.
Volumes on the Asia-Europe container trade sllidnearly 10% year on year in March, because of demandweakness in Europe, resulting in volumes for the quarter sinking into negative territory. According to thelatest data from Container Trades Statistics, volumes from Asia to northern Europe declined 9.7% year on yearin March to 698,052teu. As a result, volumes for the first quarter on the trade slipped 2.8% to 2.1 millionteu. Until March, volume growth on the trade had been relatively stable, increasing 2.2% year on year in January and declining 0.6% in February.
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