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What a way to end 2015. The Federal Reserve voted Wednesday to raise interest rates and begin pulling back its
unprecedented support for the American economy and financial markets. The shift, ending an era of easy money that
helped save the nation from another Great Depression, had been slow in coming , and the years of easing had created its
own distortions and dependencies. The Fed also pledged to wean the nation off its stimulus slowly, an acknowledgement
that further progress is not guaranteed and that the central bank is operating in uncharted territory. In addition, the shift
amounts to a vote of confidence that the American economy finally stands somewhat more resilient. - - perhaps uniquely
in the world. Yet we cannot ignore the reality of a poor global growth trajectory, dogged by crashing commodity prices, a
slowdown in China and new traumas in the speculative high-yield and emerging markets. Indeed, even the U.S. economy
has yet to produce a full-throttled expansion. We will continue to highlight the nuances, peculiarities of the regional and
sectoral differences in business recovery and worlds of finance. Fasten your seatbelts for 2016.
OPEC
JustKeepPumping
Commodity Rout
ABRAHAM GULKOWITZ
abe@gulkowitz.com
917-402-9039
FEDshouldnotfeartightening
BISwarnsagainstpolicyconcernsduetoanxiety
overmarketvolatilityorcorporatebondfalloutfears
Central banks should press ahead with plans to tighten monetary
policy and not let market volatility sway their judgment, the
Bank for International Settlements has warned ahead of the
expected first rate rise by the US Federal Reserve in nine years.
The PunchLine...
In This Issue
Engines of Growth
Last Chapters
What a way to end 2015! The Federal Reserve voted Wednesday to
raise interest rates and begin pulling back its unprecedented support
for the American economy and financial markets. The shift, ending an
era of easy money that helped save the nation from another Great
Depression, had been slow in coming, and the years of easing had
created its own distortions and dependencies. The Fed also pledged
to wean the nation off its stimulus slowly, an acknowledgement that
further progress is not guaranteed and that the central bank is
operating in uncharted territory. In addition, the shift amounts to a
vote of confidence that the American economy finally stands
somewhat more resilient. - - perhaps uniquely in the world. Yet we
cannot ignore the reality of a poor global growth trajectory, dogged by
crashing commodity prices, a slowdown in China and new traumas in
the speculative high-yield and emerging markets. Indeed, even the
U.S. economy has yet to produce a full-throttled expansion. We will
continue to highlight the nuances, peculiarities of the regional and
sectoral differences in business recovery and worlds of finance.
Fasten your seatbelts for 2016.
(pg 1)
In This Issue
Its the Combo effect
The Return to Normal ?
You Cant Handle the Truth !
Market Roar
New Perspectives
Dislocation, Dislocation
(pg 2)
(pg 3)
(pg 4)
(pg 5)
(pg 6)
(pg 7)
(pg 8)
Intense and confusing stress signals emanating from around the globe
but particularly from the commodity markets, high yield and key
emerging 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 faces
woefully inadequate growth prospects and difficult policy options. The
U.S. stands alone in the shift in monetary policy and the improvement
in job markets. Very obvious financial vulnerabilities and serious
geopolitical concerns are aggravating the uncertainty. And lets not
forget that many of the challenges are not fleeting, and many cannot be
resolved easily or quickly
(pg 9)
Households
New Reference Points
The Likelihood of Unlikely Events...
Risk Now You See it
Credit
A New Geography of Business
Pumping Iron
The DNA of Business
Real Estate and Construction
More Real Estate
Will Life Ever be the Same?
Contact information:
Abraham Gulkowitz
phone: 917-402-9039
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.
email:abe@gulkowitz.com
(pg 10)
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(pg 15)
(pg 16)
(pg 17)
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(pg 20)
The PunchLine...
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 fell
1.1 percent in November, with much of this decrease attributable to sizable declines for coal mining
and 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.
The PunchLine...
The People's Bank of China (PBoC) has cut interest rates and required
reserve ratios five times this year -- the fastest pace of monetary policy
adjustment since the 2008-09 financial crisis. However, the effectiveness of
the intervention is diminishing each time, leading to pessimistic expectations
of both the stock market and the macroeconomic outlook.
Joining the IMFs reserve basket is a symbolic feat. China is still a long
way from letting free markets set the value of its currency. But a
slowing economy, lower interest rates and capital outflows all suggest
the yuan will continue to slip against the resurgent U.S. dollar.
The yuan has made it into the global lenders basket of reserve
currencies, despite Chinas patchy reform record and clumsy market
interventions. For Beijing politicians, getting into the IMFs club is itself
a reward. Persuading investors to want more yuan will be tougher.
Over time, Chinas new status may encourage central banks and other investors
to hold more assets in renminbi. But that process if it happens at all is likely
to be slow. Beijings bureaucrats still monitor cross-border capital flows, and
have recently clamped down on unauthorized transfers. The freely traded
Japanese yen has been an official reserve currency for decades, yet accounts for
less than 4 percent of central bank reserves.
The PunchLine...
Asia
Manufacturing remains mired
in stagnation
Oil prices
declined again
The PunchLine...
Oil prices tumbled towards their 11-year low on Monday, amid growing
concerns that the global oversupply would worsen in coming months.
The PunchLine...
New Perspectives
Think it Through
Retail Spending(%) Nov
Nov Y/Y
2014
2013
2012
------------------------------------------------------------------
3.3 2.7
3.7 3.8
7.5 8.3
-2.7 -0.7
6.2
3.4
3.6
4.9
9.0
4.3
5.9
The PunchLine...
The PunchLine...
Engines of Growth
NocheerasChinayuanhitsfourandahalfyearlow,oilatsevenyearlow
Its now three quarters of negative GDP stats for BRAZIL. Thats the
first three-quarter streak of negative GDP growth since 1999, and its a
far worse one at that.
Brazils sovereign credit rating was cut to junk status by Fitch
Ratings, which became the second major ratings agency to strip the
country of its investment grade this year. The downgrade left
Brazils rating at BB+, with a negative outlook. The agency cited
the countrys ballooning budget deficit, political turmoil, and worsethan-expected recession behind the move. The Brazilian real dropped
as much as 2.3 percent to 3.96 per dollar following the downgrade.
The PunchLine...
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The governor of the Bank of Canada just said the three most
controversial words in central banking: "negative interest rates.
In a speech on Tuesday, BoC Gov. Stephen Poloz discussed some
of the bank's framework for thinking about potential responses to
future incidents of financial distress. And among the tactics the
BoC could choose to take in the future, Poloz mentioned negative
interest rates. This is something central banks in Switzerland,
Denmark, and Sweden and most notably the European
Central Bank have all put in place.
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The PunchLine...
RISK
Now You See it and Now You Dont
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The PunchLine...
RETAIL
Claire's Stores bonds slump on third-quarter results miss
Bonds banking Claires Stores slumped today after the Apollo-owned jewelry and accessories retailer
reported third-quarter earnings that fell short of analyst expectations. The first-lien 9% notes due
2019 fell five points to a 70.25/71.25 market, trade data show. Adjusted EBITDA for the third quarter
came in at $39.2 million compared to $50.7 million during last year's third quarter, falling short of
expectations from Citi analysts, which predicted $49.6 million for the quarter.
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The PunchLine...
Pumping Iron
The Old Economy Revisited
November U.S. Rail Traffic Decreased 6 Percent
The Association of American Railroads (AAR) has reported that
U.S. rail traffic for the month of November 2015 when compared
with November 2014 was down 6 percent or 131,087 carloads and
intermodal units. Total U.S. rail traffic for the month was
2,065,767 carloads and intermodal units. November 2015 U.S.
carload originations totaled 1,041,605, a drop of 10.4 percent, or
120,259 carloads, compared to November of last year. Excluding
coal, carloads for the month were down 5.8 percent or 41,461
carloads compared to November 2014. Intermodal traffic for
November reached a total of 1,024,162 containers and trailers,
down 10,828 units, or 1 percent, compared to last November.
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The PunchLine...
U.S. health care spending last year grew at the fastest pace since
President Barack Obama took office, driven by expanded
coverage under his namesake law and by zooming prescription
drug costs, the government said. After five years of historically
low growth, national health expenditures increased by 5.3
percent in 2014, reaching $3 trillion, or $9,523 for every man,
woman and child. That followed a 2.9 percent increase for 2013.
Such seemingly small percentage shifts resonate when the total
is $3 trillion.
The report by nonpartisan experts at the
Department of Health and Human Services may signal the end
of an unusually long lull in health care inflation that has
benefited the Obama administration. While the presidents
health care law has increased coverage, the cost problem doesnt
appear solved.
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The PunchLine...
FED SURVEY:
Commercial loan demand was reported
to be generally strengthening in most
Fed Districts. Credit quality was mostly
stable. San Francisco noted an
increasing role of nontraditional
lenders in mortgage markets.
EuropeanRetailPropertyDealsSurge
Sales volume of European malls, shopping centers and other
retail real estate hit 64 billion as of the end of November
making 2015 a post-crash record
Rents are rising as a result in many markets with growing
demand for space from domestic retailers, U.S. companies like
Apple, Victorias Secret and Forever 21 and Asian stores like
Uniqlo, Muji and Samsung. Listed European retail companies,
excluding those in the U.K., saw 2.6% annual rental growth in
the first half of 2015, crushing inflation, which remained at
0%, according to a recent report by Green Street Advisors.
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The PunchLine...
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