“A more sustainable recovery in rich countries (alt) has sharply reduced the risks of another global downturn, the International Monetary Fund said on Tuesday, as it began to look forward to economic normalisation…It now estimates only a 0.1 per cent probability of global recession in 2014, compared with a 6 per cent chance last October, with similarly reduced risks for 2015. Most of the IMF’s forecasts were little changed, although it now sees upside risks to growth in the US, Germany and the UK.” That upside growth risk is basically this: “If the U.S. grows a half-percentage point faster than expected, it would force the Federal Reserve to raise interest rates at a quicker clip…And if some key emerging markets slow faster than expected and investors pull their cash out of those countries en masse, it could send a shockwave through the global economy…[the Fed] should consider the potential ‘spillback’ consequences of its monetary policy.” Meanwhile, here’s a closer look at how the Bureau of Labor Statistics calculates the participation rate: “as the US definition includes everyone over 15, it makes no allowance for the natural increase in the numbers of those retired in an ageing population.” Furthermore, “misinterpreting the way the BLS presents the participation rate gives an over-optimistic view of the US economy…this would therefore help to justify postponing a rise in interest rates for longer than would otherwise seem justified.” Also, “the number of job openings in the U.S. jumped to 4.2 million in February, putting the number of unemployed per open position at 2.5 — the lowest level since July 2008.” Meanwhile, “although the S&P 500 is down only modestly from its 52-week highs, individual stocks have seen much larger declines…For the S&P 1500 as a whole, which encompasses large, mid, and small cap stocks, stocks are down an average of 12.8% from their 52-week highs.” Finally, here are four ways to adapt to an aging workforce.
“The Fed said banks would have two additional years to make sure their collateralized loan obligations don’t fall under the rule’s ban on speculative investments. The decision could force some banks to divest their CLOs, which are complex securities that bundle together corporate loans as well as bonds. The Volcker rule restricts banks from holding bonds as an investment. The rule impacts a handful of large firms, though some smaller banks have said they may be forced to sell CLO holdings as a result of Volcker.” Meanwhile, many large banks are holding their annual shareholder’s meetings a long way from home: “out of the big six banks only Bank of America and Morgan Stanley are sticking to their home states…some banks acknowledge privately the attraction of holding meetings in locations that are less likely to attract protesters, trade unions — or indeed shareholders.”
Good news: Harvard researchers say that “family businesses handily outperformed non-family companies during both the 2001 and 2008 recessions.” There are three key differences in marketing strategies which may account for family business outperformance during a recession: they are 1) more proactive with products launched, 2)maintain advertising and 3) maintain social responsibility. Furthermore, “family businesses’ proactive actions and long-term perspective during recessions are driven partly by a unique concern for future generations and an emphasis on preserving the family name.”
Indonesia may be the “least dirty shirt amongst the Fragile Five”: “Indonesia’s government bonds denominated in dollars have returned 5.74% in the three months through March 31…The rupiah has climbed over 7% this year to a five-month high and the rise in Indonesian shares, 14.4% this year, is one of the fastest among major global economies.”
“A cashless society will cause a marked change in the streetscape of cities. Panhandling has been around as long as we’ve had cities, and neither law nor custom has ever been able to fully eradicate it. But technology just might.”