Zanny Minton Beddoes – Charlie Rose 02-10-15

Salient to Investors:

Zanny Minton Beddoes at The Economist said:

  • The economy’s fundamental drivers, particularly rapid technological change, means that the rewards disproportionately go to the top.
  • The latest IMF research suggests that you get stronger and more lasting economic growth in societies that are more equal.
  • The last time we had this huge a technological change – the Industrial Revolution – we also had huge changes in public policy.
  • The world has incredibly low interest rates and a big need for more spending on infrastructure so it is a no-brainer to do that.
  • India is the shining example of a country with remarkable economic growth and devotion to classic liberalism and to free markets.
  • A lot of China’s growth came from liberalization but more recently from debt-fueled investment binge. China is naturally slowing because it is richer and aging fast.
  • The US economy has accelerated in the last 6 months. Inequality and an aging population are challenges so rapid growth is going to be lower than it was 30-40 years ago.
  • Europe is still a mess. Japan shot itself in the foot with its consumption tax. The emerging world, including Brazil, is slowing.
  • The difference to the last time the Saudis let oil prices stay down for a while is that this time the shale investment time is much shorter than for traditional oil drilling. The oil market economics has shifted from one of OPEC domination to one that is supply and market driven.
  • Putin’s paranoia is under-appreciated as is the depth of his desire to remain popular.
  • Venezuela is headed for default quite soon.
  • The disproportionate losers from lower oil prices are also the tricky regimes, like Nigeria, Russia, Iran.
  • The short-term risk to the global economy is too much reliance on one engine, the US, an echo of the 1990s. Longer term, the risk is political economy fueled by stagnant living standards for the majority.
  • We are nearer the beginning than the end of this huge technology revolution.

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Quality Following Quantity in U.S. Hiring With $867 Pay – Bloomberg 07-25-14

Salient to Investors:

Paul Ashworth at Capital Economics said:

  • The 1.3 million private-sector jobs created in half1 2014 paid an average of $867 a week versus $843 per week for the existing 117 million private-sector jobs.
  • Mining, construction and business-services companies – which traditionally pay more than the average – are increasingly hiring.
  • The loss of 17,000 information jobs this year is negative given they tend to pay well above average.
  • Accelerating wage growth may be one of the biggest stories for half2 2014.

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Surprising Slowdown in Nonresidential Building: EcoPulse – Bloomberg 06-18-13

Salient to Investors:

Spending on lodging, office, commercial and manufacturing buildings grew 5.6 percent in April, the slowest pace in almost 2 years.

Kermit Baker at the American Institute of Architects said this type of construction normally exhibits late-cycle growth because the design and building process may take several years, while activity has been unusually volatile since the recession ended in June 2009, with only brief flashes of growth. Baker said the Architecture Billings Index is a good, solid leading indicator of non-residential construction 9 to 12 months down the road. The commercial and industrial component of this index fell in April to the lowest level in 7 months.

Brian Jacobsen at Wells Fargo Advantage Funds said investment in non-residential projects historically is on par with spending on homebuilding. Jacobsen said the Architecture Billings Index confirms other data, such as vacancy rates, pointing to a slowdown in construction in 2013.

Reis Inc. said the US office vacancy rate was 17 percent in Q1 versus the quarterly average of 17.4 percent in 2011-2012, while net absorptions for metro-area offices rose to almost 4.1 million square feet in Q1 from 3.3 million in Q4 2012 and the average of 4.3 million square feet since 2011. Ryan Severino at Reis said the absorption rate won’t accelerate much in the next 2 to 3 quarters.

Russell Price at Ameriprise Financial said excess capacity of commercial, industrial and office space has yet to be fully absorbed and is stalling the construction recovery in these industries, while limited credit is holding back the industry. Price forecasts that private non-residential construction spending will expand 1 percent in 2013, the 17.6 percent gain in 2012 was unsustainable, and the billings index will see sustained improvements later in 2013.

Stephen Volkmann at Jefferies said the sluggish recovery in non-residential construction is largely a confidence issue, and a fair amount of pent-up demand in commercial construction is good reason to have a positive bias on the industry.

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