Hong Kong Protests Trigger New Worries for China’s Economy – BloombergBusinessweek 09-30-14

Salient to Investors:

Gareth Leather and John Higgins at Capital Economics said:

  • If the protests in Hong Kong continue, its tourism and retail industries, some 10% percent of its GDP,  would be hit hard, and Hong Kong could easily be pushed into recession.
  • If Hong Kong’s status as an international financial center is jeopardized then China’s own economy would suffer.

Adrienne Lui at Citigroup said the strained relations between Hong Kong’s executive and legislative branches could impede passing key economy boosting policies and businesses and investors increasingly build in higher operational risks.

Andrew Colquhoun at Fitch said:

  • The demonstrations are unlikely to have an impact on Hong Kong’s credit rating in the short-term, and does not expect the protests to become on a wide enough scale and length to have a material effect on the economy or financial stability.
  • Economic policies are needed to deal with the overpriced housing market, the aging population, and future infrastructure needs.

Read the full article at http://www.businessweek.com/articles/2014-09-30/hong-kong-protests-trigger-new-worries-for-chinas-economy#r=rss

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World’s Biggest Market Crashes and You Didn’t Even Know It – Bloomberg 09-30-14

Salient to Investors:

Marco Lambertini at The World Wildlife Foundation said:

  • More than half of the world’s vertebrates have disappeared between 1970 and 2010, primarily due to exploitation (37%), habitat degradation (31%), habitat loss (13%), and global warming (7.1%). Meanwhile the human population has nearly doubled.
  • Latin America’s biodiversity dropped 83%, the most of any region.
  • It would take 1.5 planet Earths to meet the present demands that humanity makes on nature: if every human had the same lifestyle as the typical American, it would take 3.9 planet Earths.
  • The effects of climate change are only just starting to be felt and the toll on wildlife is rising.

Read the full article at http://www.bloomberg.com/news/2014-09-30/depressed-market-half-of-world-s-wildlife-disappears-in-40-years.html

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Investors Head for Exit as Commodities Extend Slump – Bloomberg 09-30-14

Salient to Investors:

  • Investors pulled the most money from US ETPs backed by raw materials since April.
  • US corn and soybean crops are the biggest ever, global stockpiles of nickel are at an all-time high, the US is producing the most oil since 1986, while China is headed for its slowest expansion in two decades.
  • The Bloomberg Commodity Index is set for a fourth straight annual loss, the longest slide since data began in 1991.
  • Societe Generale lowered its price forecasts for more than half of the 43 raw materials it tracks, and recommended shorting gold on rising US interest rates and a rising dollar, target below $1,000 over the medium-term.
  • Citigroup pared its outlook on crude oil, gold, corn and wheat.
  • Goldman Sachs still expects losses in copper and gold.
  • In August, Citigroup forecast the Arabica-coffee crop shortfall may leave a global production deficit lasting into 2016. Citigroup is bullish on palladium, copper, nickel, lead, coking and thermal coal, cocoa and coffee.
  • Deutsche Bank forecast commodities will end 2014 in a positive run with nickel, zinc and lead outperforming.
  • Donald Selkin at National Securities said certain markets are bullish because of supply issues, including cattle, nickel and coffee, while the worst may also be over for the big three – gold, crude oil and grains.
  • Jeffrey Currie at Goldman Sachs expects gold to fall to $1,050 by year-end, copper to fall to $6,200 a metric ton over 12 months due to a major increase in stockpiles.
  • The IEA said global oil demand will weaken because of weaker growth in China and Europe, rising exports from Libya, and booming US output, all outweighing potential output disruptions in Iraq.
  • Economists expect China to grow 7% in 2015, the slowest rate since 1990.
  • Quincy Krosby at Prudential Financial said you need growth in China to support a rally in raw-material prices.

Read the full article at  http://www.bloomberg.com/news/2014-09-29/gluts-spur-investor-exit-signaling-prolonged-price-slumps.html

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Global AgeWatch Index: Norway best for older people – BBC News 09-30-14

Salient to Investors:

HelpAge International said:

  • Norway is the best of 96 countries to grow old in, followed by Sweden, Switzerland, Canada and Germany. Afghanistan is the worst.
    Australia, Western Europe and North America rank highly.
  • By 2050, 21% of the global population will be over 60, when 40 of the 96 countries will have 30% of their population aged 60 or over.
  • Mexico, Peru and some other Latin American countries have risen in the rankings.
  • Mexico (30th) ranks ahead of Brazil, Russia, India, China and South Africa.

The tradition of caring for the elderly within extended families is weakening.

The growth of tax-financed, non-contributory “social pensions” is key to helping tackle inequality for seniors.

In Mexico, nearly 9 out of every 10 people aged 65 or older receive a social pension.

Read the full article at http://www.bbc.com/news/world-29426285

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Bond Warnings Rise as ’94 Parallels Seen in Fed-CPI Split – Bloomberg 09-29-14

Salient to Investors:

  • The last time consumer-price increases were slowing before the Fed started raising rates was in 1994, when Treasuries lost 3.3% and Greenspan doubled the benchmark rate to 6% despite inflation being at a 7-yr low of 2.5%.
  • Gary Pollack at Deutsche Bank said the critical example for the markets is 1994, and that is what we all fear.
  • Futures indicate the Fed will start raising short-term rates in July 2015 to 0.76% by the end of that year.
  • Margaret Kerins at Bank of Montreal said the Fed does not care about bond guys losing some money so when it’s time to tighten they will do exactly that.
  • Julian Robertson at Tiger Management said the bubble in bonds will end in a very bad way.
  • Leon Cooperman at Omega Advisors says bonds are very overvalued, and Howard Marks at Oaktree Capital says interest rates are unnaturally low.
  • The iShares 20+ Year Treasury Bond ETF just had its largest weekly redemption since inception in 2002.
  • Cathy Roy at Calvert Investments says bond investors have little reason to worry the Fed will opt for a more aggressive stance on rates because inflation will stay low without faster wage growth to get Americans to boost spending – if anything, we will see talk of raising rates pushed into 2016.
  •  Hourly earnings have risen an average 2% over the past 5 years, the weakest in any expansion since at least the 1960s.
  • Robert Tipp at Prudential Financial said faster growth in 2015 will prod the Fed into moving sooner to stay ahead of the curve – by mid-2015 we may have passed the tipping point.
  • Economists project 3% growth in the US in 2015.

Read the full article at http://www.bloomberg.com/news/2014-09-29/bond-warnings-emerge-as-94-parallels-seen-in-fed-cpi-split-1-.html

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U.S. Still the Dog Wagging Tail of World Economy as China Slows – Bloomberg 09-29-14

Salient to Investors:

Joseph Lupton et al at JPMorgan said:

  • The US economy will grow 3% in Q3 and into 2015, while China growth will be below its 7.5% average of the past 8 quarters.
  • The US is mostly the dog that wags the tail: each 1% change in US demand alters GDP elsewhere by 0.8%, twice the impact of 1% change in China, alters developed economies by 0.9%, or 4 times the impact of China, and alters emerging markets by 0.7%,  or the impact of China.
  • The benefits of stronger US growth are felt across the globe while the spillover from a China slowdown is concentrated in other emerging market economies.
  • The upturn in US spending on capital equipment should offset the effect of China’s slowdown on emerging nations.
  • Global inflation as low as 1% in the current quarter should boost purchasing power, underpinning consumer demand.
  • Global goods demand is basically solid.

Read the full article at http://www.bloomberg.com/news/2014-09-29/u-s-still-the-dog-wagging-tail-of-world-economy-as-china-slows.html

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Gross’s Last Defiance Stuns Allianz, Pimco in Janus Move – 09-28-14

Salient to Investors:

  • Kurt Brouwer at Brouwer & Janachowski said Pimco have mishandled their corporate decisions but from a money-management perspective he has no issue with Pimco.
  • Pimco’s Total Return Fund is on track to underperform a majority of rivals for the third year in four.
  • Sanford Bernstein said Gross’s departure may mean asset withdrawals of 10 percent to 30 percent for Pimco.

Read the full article at http://www.bloomberg.com/news/2014-09-29/gross-s-last-defiance-stuns-allianz-pimco-in-janus-move.html

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Emerging Stocks Drop to Four-Month Low Amid Hong Kong Protests – Bloomberg 09-29-14

Salient to Investors:

  • Hertta Alava at FIM Asset Mgmt said Hong Kong is usually very safe so the riots are unexpected, while Russia’s economy is getting weaker.
  • Dmitry Polevoy at ING said the market is getting closer to panic, while the ‘ghost’ of peak external debt payments in September and December is the most often-cited enemy of the ruble.
  • The MSCI Emerging Markets Index is at 10.7 x estimated earnings versus 14.8 x for the MSCI World Index.
  • Arbitrage opportunities between dual-listed stocks in Hong Kong and Shanghai are disappearing as prices move toward parity before the cities link their bourses.

Read the full article at http://www.bloomberg.com/news/2014-09-29/emerging-stocks-drop-to-four-month-low-after-hong-kong-protests.html

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What Putin Wrought Has World Asking What Russia Might Have Been – Bloomberg 09-29-14

Salient to Investors:

  • Michael McFaul at Stanford University sees long-term damage to Russia from Putin’s new direction.
  • Anders Aslund at the Peterson Institute for Intl Economics sees a similar shortfall in Russia’s 2014 growth to 2013’s growth of 1.3%, and versus IMF’s 2013 forecast of 3.9%.
  • Alexei Kudrin expects Russia to post zero or negative growth for the next 2 to 3 years.
  • Charles Collyns at IIF said engagement with Ukraine has put the Russian economy on a far weaker growth path.
  • EPFR Global said global investors withdrew $850 million from Russian bond and stock funds in the year through September 24.
  • Goldman Sachs and Citigroup CEOs skipped the Petersburg Economic Forum gathering in May. Blackstone has stopped seeking investments in Russia.
  • Sergei Guriev said Putin’s dream of making Russia one of the world’s 5 biggest economies by 2020 is in ruins and predicts he will soon have to shrink spending on military and pensions as a falling oil price provides another fiscal challenge.
  • Vladimir Lukin said the US and EU must bear some responsibility for their persistent and unilateral expansion of NATO, and then the EU, towards Russia’s borders.
  • Benoit Anne at Societe Generale expects further sell-offs in ruble assets because international investors are either primarily or have decided to avoid them.

Read the full article at http://www.bloomberg.com/news/2014-09-29/the-cost-of-putin-s-economic-u-turn.html

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Flows to Emerging Markets Rebound After August Slump, IIF Says – Bloomberg 09-29-14

Salient to Investors:

The IIF reported:

  • Emerging markets received $18 billion in total inflows in September versus the $24.4 billion monthly average from 2010 to 2013.
  • Indian and Mexican bond markets and the Brazilian equity market had inflow gains.
  • South Africa, Turkey and Indonesia had reduced inflows.

Read the full article at http://www.bloomberg.com/news/2014-09-29/flows-to-emerging-markets-rebound-after-august-slump-iif-says.html

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