global investment-banking revenuesHigher Material Costs Cut Into Margins; Export-Import Bank Under Pressure

The latest survey from the National Association of Business Economics concludes that “during the first quarter of the year, 31 percent of businesses surveyed reported higher material costs, more than double the 15 percent that saw costs rise in the previous survey.  Additionally, 35 percent reported rising wages and salaries at their businesses in the past three months, up from 23 percent in January.”  Furthermore, “‘It appears that businesses were not able to pass on costs increases, resulting in increased pressure on margins.’”  Also, “capital spending rose for 38 percent of respondents, up from 28 percent in January…31 percent said they expect their businesses to raise prices.  That’s down from the 43 percent who said they planned to raise prices in January.”  Meanwhile, some members of Congress are pushing to scale back the Export-Import Bank of the United States (alt), a major financier of loans and loan guarantees for foreign purchases of US products (for example, last year Ex-Im supported $37.4bn in US exports).  Opponents see “Ex-Im as the embodiment of ‘corporate welfare.’…’There are more than 59, and counting, export credit agencies around the world and they would like nothing more than to snatch up sales from US companies and create jobs in their countries,’ said Fred Hochberg, the president of Ex-Im Bank.”  Meanwhile, here’s a list of some of the “once defunct but now in production” factories around the country.

Japan’s Pension Investment Fund Is Going Long Sweet Emerging Markets

Japan is reshuffling its “Investment Committee of the $1.26 trillion Government Pension Investment Fund (GPIF), in line with Abe’s drive to have the fund make riskier investments and rely less on low-yielding government bonds…GPIF now targets 12 percent of its investments in Japanese stocks, 60 percent in domestic bonds, 11 percent in foreign bonds, 12 percent in foreign stocks and 5 percent in short-term assets…GPIF has said it plans to expand its investment in foreign bonds to emerging markets bonds, foreign high-yield bonds and foreign inflation-linked bonds.”  Meanwhile, Rob Arnott, says that emerging markets are in a “sweet spot”:  “Fear creates bargains.  When we buy something as contrarians, our clients routinely say, ‘Why are you buying this; don’t you see what’s going on?’  Our reply is, ‘Well, yes.  That’s why these markets got cheap.’  Two years ago, our allocation to emerging markets was really skinny.  Today, it is much, much greater because people are afraid…”  Here’s something else to consider: “The politics of the next 20 years is going to make the politics of the past 20 years look polite and serene.  But 30 to 40 years from now, we are going to be looking at a transition to a new steady state in which births equal deaths.”  Meanwhile, here’s Robert Shiller on Robert Shiller: “there’s no easy way to win in this market, so I’m thinking you have [to] diversify and probably keep something in stocks.”

Global: FICC And Thin: The Engine Of Investment Banking Is Spluttering

Trading in FICC (fixed income, currencies and commodities), once a major profit engine for the world’s largest investment banks, is in retreat: “In 2009, the world’s big investment banks earned nearly $142 billion from FICC — 63% of their total revenue, according to Coalition, a data firm.  By last year that had halved to nearly $74 billion, accounting for slightly less than half of revenue…In 2013 alone revenues from FICC fell by almost 20%…The disappointing numbers are rekindling an argument within the industry over whether FICC’s decline is merely cyclical or the start of a long-term slump in the profitability of banks’ trading businesses.”  The cyclical position goes something like this: FICC trading volumes have plummeted with interest rates.  Once interest rates go back up, banks will see a sharp loss in revenue as bonds they own will depreciate in value, yet FICC trading volumes may surge again, providing renewed revenue for investment banks.  The long-term slump position is basically this: thanks to new capital requirements and proprietary trading regulation, FICC may never reignite as a major profit engine for investment banks.

USA: 5 Things To Know About The State Of Mortgage Lending

1) Low-down-payment lending is still prevalent, however “banks are making more loans with down payments of 5% or 10% outside of the FHA; 2) No-money-down mortgages “still exist, too, though they are much harder to get than before the housing bubble”; 3-5) Credit standards are very tight, and may be inhibiting economic growth, however any easing will be careful not to fuel “reaching for clients”

USA: Fuels From Corn Waste Not Better Than Gas

A new study “paid for by the federal government and released Sunday in the peer-reviewed journal Natural Climate Change concludes that biofuels made with corn residue release 7 percent more greenhouse gases in the early years compared with conventional gasoline.  While biofuels are better in the long run, the study says they won’t meet a standard set in a 2007 energy law to qualify as renewable fuel.”


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