ABRAHAM GULKOWITZ
abe@gulkowitz.com
917-402-9039
2014 issue 10May 29, 2014
All that cheap money
US stocks continue to breach record levels while highly rated government bond yields slide - - all with the prospect of continued support from the world’scentral banks. Indeed, expectations that the European Central Bank would unveil a package of supportive policy measures when it meets next week werebolstered by the release of select weak eurozone stats. It must be noted that all this cheap money is finding its way into various asset classes, most notablyequities and debt products. Hence, record levels for Wall Street alongside historically low sovereign bond yields. This wild euphoria is supported somewhatby signs of an improving economic environment, notably in the US, but remains way ahead of market fundamentals. U.S. government bonds are heading for a fifth monthly gain, the longest since 2006, as growth --- but not rapid growth --- underlined an appetite for long-term debt of all stripes. The new ranking of global competitiveness has just been released and underscores some of the key themes in these pages. The US leads, Europe struggles to recover, andbig emerging markets grapple with some new realities. Given the ever tighter spreads and the relentless march of markets, some, including the EuropeanCentral Bank, have warned that investors' wild pursuit of higher returns could be creating new price bubbles, sounding the alarm as financial markets chasequick gains. In a strongly worded message they clearly underscored concerns that have been penned in these pages as well, There may be an uglydownside to runaway market enthusiasm. The ECB cautioned that the dash for higher returns could suddenly unravel, sending the investor herd charging inthe opposite direction.
Could inflation be the big surprise in 2015-16?
Russia’s holdings of U.S. Treasury securities declined by 20% in March tothe lowest level since September 2008 as Russian banks tried to avoid U.S.sanctions and the country’s central bank sought to support the currency.Russia’s holdings fell to $100.4 billion in March from $126.2 billion inFebruary, posting a fifth straight month of decline. The U.S. government hasfrozen the assets of 45 Russian individuals and 19 entities (mostly Russian banks), in reaction to Russia’s annexation of Ukraine’s Crimea.
Global Growth Worries Climb
Policy Makers in Europe, U.S. and China Grapple With What Steps to Take Next
Germany continues to act as the bloc’s locomotiveon the back of increasing business orders acrossall sectors, but slowing demand hits France
Thailand’s military has launched its 12thcoup of the modern era, plungingsoutheast Asia’s second
‐
largest economyinto a fresh phase of its crisis and raisingtheprospect ofinternationalsanctions.
Sales of U.S. new homes recovered in April after slumping in the previous two months. But Americans are still buying new homes at a slower pace than they did a year ago.
Gap
between
Canadian,
US
gas
prices
is
biggest
on
record,
report
finds
The growing gap between Canadian and U.S.gasoline prices is the biggest it's ever been onrecord, according to a recent report from the National Bank of Canada.
India: hopes of a big economic push under the incoming Modi-led government
.
India:
Whatever you think of him, Narendra Modi’s victory is a globalevent. Nobody knows whether Mr Modi will embrace the US-Indiarelationship or walk the multipolar walk. His swearing-in today as India’sprime minister coincides with Vladimir Putin’s “pivot to Asia” with the 30-year China-Russia gas deal. US President Barack Obama’s own pivotlooks increasingly content-free. If the US president is to retrieve thegeopolitical initiative, he will need to win over India’s new strongman.India, as they say, is the “global swing state” of the 21st century. MrObama must ensure it swings America’s way.
Air freight recovery stalls despite continuing year-on-year growth
The PunchLine...
2May 29, 2014
In This Issue
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.
•
Engines of Growth
Easy money and the timing of the Fed
’
s policy shift continue to dominate across the globe. Recovery is widely assumed for the next two years. But deep-seated weaknesses have also become more evident. Very obvious financial vulnerabilities, repercussions from various political stalemates and serious geopolitical concerns are aggravating the problems of clearly insufficient growth in the world economy. And let
’
s not forget that many of the challenges cannot be resolved easily …
(pg 9)
•
The Return to Normal…
(pg 10)
•
You Can
t Handle the Truth…
(pg 11)
•
Credit…
(pg 12)
•
Pumping Iron …
(pg 13)
•
The DNA of Business…
(pg 14)
•
Real Estate and Construction…
(pg 15)
•
A New Geography of Business…
(pg 16)
•
Will Life Ever be the Same?
(pg 17)
•
Reality Check…
US stocks continue to breach record levels while highly rated government bond yieldsslide - - all with the prospect of continued support from the world’s central banks. Indeed,expectations that the European Central Bank would unveil a package of supportive policymeasures when it meets next week were bolstered by the release of select weakeurozone stats. It must be noted that all this cheap money is finding its way into variousasset classes, most notably equities and debt products. Hence, record levels for WallStreet alongside historically low sovereign bond yields. This wild euphoria is supportedsomewhat by signs of an improving economic environment, notably in the US, butremains way ahead of market fundamentals. U.S. government bonds are heading for afifth monthly gain, the longest since 2006, as growth --- but not rapid growth ---underlined an appetite for long-term debt of all stripes. The new ranking of globalcompetitiveness has just been released and underscores some of the key themes inthese pages. The US leads, Europe struggles to recover, and big emerging marketsgrapple with some new realities. Given the ever tighter spreads and the relentless marchof markets, some, including the European Central Bank, have warned that investors' wildpursuit of higher returns could be creating new price bubbles, sounding the alarm asfinancial markets chase quick gains. In a strongly worded message they clearlyunderscored concerns that have been penned in these pages as well, There may be anugly downside to runaway market enthusiasm. The ECB cautioned that the dash for higher returns could suddenly unravel, sending the investor herd charging in the oppositedirection.
(pg 1)
•
InThisIssue
(pg 2)
•
New World Ranking…
(pg 3)
•
Dislocation, Dislocation…
(pg 4)
•
Go Figure…
(pg 5)
•
Households…
(pg 6)
•
BrieflyNoted…
(pg 7)
•
The Likelihood of Unlikely Events...
(pg 8)
Contact information:
Abraham Gulkowitz
phone: 917-402-9039
email:
abe@gulkowitz.com
The PunchLine...
3May 29, 2014
New World Competitiveness Rankings
The
World Competitiveness Scoreboard
presents the 2014 overall rankings for the 60 economies covered. The economies are ranked from the most to the least competitive
The competitiveness ranking is an annual survey compiled by the IMD institute's World Competitiveness Center. For its 2014 ranking, it looked into the economies of the world's 60 most industrialized countries. IMD has based its ranking on over 300 criteria, of which about two-thirds are statistics and the remaining third gathered from opinion polls.
http://www.imd.org/wcc/news-wcy-ranking/?MRK_CMPG_SOURCE=wcc-1514005&utm_source=DM&utm_medium=em&utm_campaign=WCC_14_DME_1514005
New World Competitiveness Rankings –Select Country Records
Source: Institute of Management Development, Switzerland; Competitiveness of 59 economies, based on over 330 criteria
Country 20142013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1990 1980--------------------------------------------------------------------------------------------------------------------------------------USA 11 21 3 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 3 2SWITZERLAND 22 3 5 4 4 4 6 8 8 14 9 Sweden 5 4 5 4 6 6 9 9 14 14 11 12 12 11 14 14 16 19 14 12 9 ----Canada 77 6 7 7 8 8 10 7 5 3 6 7 9 8 10 8 6 12 13 20 ---- Australia 1716 15 9 5 7 7 12 6 9 4 7 10 12 11 11 12 15 21 16 16 ----Germany 69 9 10 16 13 16 16 26 23 21 20 17 13 13 12 15 16 10 6 6 4 4Taiwan 13 11 76 8 23 13 18 18 11 12 17 20 16 17 15 14 18 18 14 22 ----U.K. 1618 18 20 22 21 21 20 21 22 22 19 16 17 15 19 13 9 19 15 14 ----France 272829 29 24 28 25 28 35 30 30 23 25 25 22 23 22 22 20 19 13 ----Japan 2124 27 26 27 17 22 24 17 21 23 25 27 23 21 26 20 17 4 4 3 1 1Korea 2622 22 22 23 27 31 29 38 29 35 37 29 29 29 41 36 30 27 26 ------China 2321 23 19 18 20 17 15 19 31 24 29 28 26 24 29 21 27 26 31 34 ----
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
IMDANALYSIS:
The overall competitiveness story for 2014 is one of continued success in the US,partial recovery in Europe, and struggles for some large emerging marketsMost big emerging markets slide in the rankings as economic growth and foreigninvestment slow and infrastructure remains inadequate. China (23) falls, partly owingto concerns about its business environment, while India (44) and Brazil (54) suffer from inefficient labor markets and ineffective business management. Turkey (40),Mexico (41), the Philippines (42) and Peru (50) also fall.
The world's biggest economy regained the top sport due to the recovery in itsfinancial sector, more technological innovations and and a wide range of successful companies.Germany was ranked in ninth place, alongside Switzerland and Sweden one of justthreeEuropeancountries which madeit intothe top10.
Note that in the early years of the rankings, China and Russia were not even considered.
The US leads, Europe recovers, and big emerging markets struggle
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