ABRAHAM GULKOWITZ
abe@gulkowitz.com
917-402-9039
2015 issue 22December 17, 2015
Last Chapters…
What a way to end 2015. The Federal Reserve voted Wednesday to raise interest rates and begin pulling back itsunprecedented support for the American economy and financial markets. The shift, ending an era of easy money thathelped save the nation from another Great Depression, had been slow in coming , and the years of easing had created itsown distortions and dependencies. The Fed also pledged to wean the nation off its stimulus slowly, an acknowledgementthat further progress is not guaranteed and that the central bank is operating in uncharted territory. In addition, the shiftamounts to a vote of confidence that the American economy finally stands somewhat more resilient. - - perhaps uniquelyin the world. Yet we cannot ignore the reality of a poor global growth trajectory, dogged by crashing commodity prices, aslowdown in China and new traumas in the speculative high-yield and emerging markets. Indeed, even the U.S. economyhas yet to produce a full-throttled expansion. We will continue to highlight the nuances, peculiarities of the regional andsectoral differences in business recovery and worlds of finance. Fasten your seatbelts for 2016.
The first rise in US interest rates since 2006does not portend immediate emerging-market external financial crises. But EMsovereign ratings are likely to continue on thedownward trajectory they first took in mid-2013. This would be consistent with their closer historical alignment to the value of theUS dollar and global commodity prices thanthe level of US interest rates.
ECB to Extend Asset-Purchase Program to 2017 or Longer
Region’s unpredictable geopolitical situation will affect policy in future, says Mario Draghi
The European Central Bank extended itsquantitative easing program by 6 months or beyond while cutting its overnight deposit rate further intonegative territory by 10 basis points to -0.30 percent beginning on December 9, 2015 to penalize banks for parking money at the ECB and encouragelending in the overall economy. The ECB isundertaking a €60bn per month quantitative easing program of government bonds that was extended today until March 2017 from its earlier end point of September 2016.
OPEC
Just
Keep
Pumping
Oil prices fell sharply after the Organization of PetroleumExporting Countries decided to raise the group’s productionceiling to 31.5 million barrels a day.
Junk bonds are headed for theirfirst annual loss since the creditcrisis, raising concerns that a six-year U.S. economic expansion andstock-market boom may be onborrowed time
FED
should
not
fear
tightening
BIS
warns
against
policy
concerns
due
to
anxiety
over
market
volatility
or
corporate
bond
fallout
fears
Central banks should press ahead with plans to tighten monetary policy and not let market volatility sway their judgment, theBank for International Settlements has warned ahead of theexpected first rate rise by the US Federal Reserve in nine years.
CHINARESERVESSLIDEFURTHER
China’s massive war chest of foreign exchangereserves dropped to its lowest level since February2013 as the central bank sold dollars to prop up theyuan amid rising capital outflows. Foreign currencyreserves fell by $87.2bn to $3.44 trillion at the end of November, from $3.53 trillion a month earlier,according to the People’s Bank of China (PBOC).This is the lowest level since February, and extendsthis year’s decline to $405bn.
Commodity Rout
Is a credit apocalypse awaiting us in 2016?
Federal Reserve raises key interest rate after historic era
The PunchLine...
2December 17, 2015
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.
•
EnginesofGrowth
Intense and confusing stress signals emanating from around the globe but particularly from the commodity markets, high yield and keyemerging markets such as China, Brazil, Russia have confounded investors and contributed to intermittent bouts of severe volatility.Despite massive easing, most of the global economy still faceswoefully inadequate growth prospects and difficult policy options. TheU.S. stands alone in the shift in monetary policy and the improvementin job markets. Very obvious financial vulnerabilities and seriousgeopolitical concerns are aggravating the uncertainty. And let
’
s notforget that many of the challenges are not fleeting, and many cannot beresolved easily or quickly…
(pg 9)
•
Households…
(pg 10)
•
New Reference Points…
(pg 11)
•
The Likelihood of Unlikely Events...
(pg 12)
•
Risk… Now You See it…
(pg 13)
•
Credit…
(pg 14)
•
A New Geography of Business…
(pg 15)
•
Pumping Iron …
(pg 16)
•
The DNA of Business…
(pg 17)
•
Real Estate and Construction…
(pg 18)
•
More Real Estate
…
(
pg 19)
•
Will Life Ever be the Same?
(pg 20)
•
Last Chapters…
What a way to end 2015! The Federal Reserve voted Wednesday toraise interest rates and begin pulling back its unprecedented supportfor the American economy and financial markets. The shift, ending anera of easy money that helped save the nation from another GreatDepression, had been slow in coming, and the years of easing hadcreated its own distortions and dependencies. The Fed also pledgedto wean the nation off its stimulus slowly, an acknowledgement thatfurther progress is not guaranteed and that the central bank isoperating in uncharted territory. In addition, the shift amounts to avote of confidence that the American economy finally standssomewhat more resilient. - - perhaps uniquely in the world. Yet wecannot ignore the reality of a poor global growth trajectory, dogged bycrashing commodity prices, a slowdown in China and new traumas inthe speculative high-yield and emerging markets. Indeed, even theU.S. economy has yet to produce a full-throttled expansion. We willcontinue to highlight the nuances, peculiarities of the regional andsectoral differences in business recovery and worlds of finance.Fasten your seatbelts for 2016.
(pg 1)
•
InThisIssue
(pg 2)
•
It’s the Combo effect…
(pg 3)
•
The Return to Normal… ?
(pg 4)
•
You Can’t Handle the Truth !
(pg 5)
•
Market Roar…
(pg 6)
•
New Perspectives…
(pg 7)
•
Dislocation, Dislocation
(pg 8)
Contact information:
Abraham Gulkowitz
phone: 917-402-9039
email:
abe@gulkowitz.com
The PunchLine...
3December 17, 2015
It’s the Combo Effect …
A sharp slowdown inChina's GDP growth rateto below 5% during 2016-2018 would disrupt globaltrade and hinder growth,with significant knock-oneffects for emergingmarkets and globalcorporates, according tonew analysis…
US industrial production declined 0.6 percent in November after decreasing 0.4 percent in October. In November, manufacturing production was unchanged from October. The index for utilities dropped 4.3 percent, as unusually warm weather held down the demand for heating. The index for mining fell1.1 percent in November, with much of this decrease attributable to sizable declines for coal miningand for oil and gas well drilling and servicing. At 106.5 percent of its 2012 average, total industrial production in November was 1.2 percent below its year-earlier level.
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