adversity is a way to reveal character

Political (structural) policies

which then set the stage for fiscal and monetary policies
Utilizing leading and lagging indicators to stimulate overall growth
There is an interdependce amongst all the levers such as fund rates, QE, fiscal
policy which then impacts secondary assets (gold, currencies, commodities, oil)
which can impact those economies that are heavily reliant on export (Africa, Sou
th America, Russia, etc)
Based on the political / trade policies and the current or future state of the e
conomy businesses will determine what products or services they offer, staffing
levels, investment or reinvestment

High Debt, Low Investment

Public Perception = years of low growth making people think this is the new norm
al
Public believes Monetary Policy or Fiscal Policy is useless
Consumer -> not spending
Business -> not investing
Possibly due to deflationary psychology
WEO Video
China's rebalancing process
Struggles of com. exports
Fed's first lift off of interest rates
3.1% current forecast for 2016 and 3.4% GDP for 2017, both below forecast.
Slow growth in the world economy and low demand in the world economy: the slow d
own of trade relative to GDP and the other is deflationary pressures.
Political front the conditions have moved to the downside. THe brexit developmen
t which we didn't expect leading to uncertainty of trading relationships. Global
ly a backlash against globalization and a failure to reignite trade growth. Pers
istence of low growth could force policymakers to take action on a coordinated f
ront so as to reverse the further slow down in global growth.

Trade
Basics, where countries working at below capacity, would work -> infrastructure
spending. But Politics is delicate, public focused on costs and not long term be
nefits.
US, Ripping up trade deals and focusing on growth, through infrastructure invest
ment could be bad. Near capacity already and retaliation of trade barriers
Policy & Law
EM look well managed because they have found a way to get past political hurdles
and get lawmakers to work with them.
China must manage a soft landing after its hypergrowth. Xi is shifting the econo
my from corp cap investment to consumer spending, similar to the US. But how to
manage the falling yuan, leading to capital leaving the Country.
Oil, Fed Fund Rate (interest), Gold to be static over 2017
Developed world uncertain on how to restore growth, while all parts of society s
hare in that growth. Globalization is being reconsidered. Why? autonomy over imm
igration and regulation.
EU (Germany)Countries with outsized trade surpluses like Germany are under fire.
They continue to export while other EU countries import their product letting t
hem stimulate their economy but not others. They also have excess capacity so as
demand increases they can fill the void faster than other Countries.
Fed Funds Rate -> rate hikes over 2017 to >1% but some concerned that the engine
in US isn't as robust
Soft growth globally should keep oil depressed and globally Countries agreed to
cooperate in terms of supply
Gold, a hedge against inflation and political turmoil, will stay flat

Looking at how companies react to macroeconomic news is also important. It gives

us insight in how corporate leaders perceive the current economic climate. It a
lso points to where there might be cracks or bright spots as the economy continu
es to shift.

With the economy moving sideways, unemployment low we want to see are major firm
s investing or are consumers buying? Are we containing the next systemic risk to
the system? Investing we can pay attention to heavy machinery, commodities, inf
rastructure spending, construction as well as planned CapEx (plants/factories).
Consumer buying we can try to determine changing demand as well as typical consu
mption habits (retail, apparel, e-shopping, beverages, restaurants, entertainmen
t)
- Apparel: Addidas seems to have found a niche and is pushing quite a bit into m
arketing. Lets see if they face headwinds in 2017 as it pertains to apparel spen
ding / China demand.
- Pharma: Alkermes worth watching to see if there is any changes in painkiller o
r heroin users trying to get off.
- Telecommunications: Altice a dutch firm is buying up cable companies in US but
now must show it can operate them with a profit.
- Tech: Worth monitoring consumers use of Amazon and its Prime offering. Is this
the new Costco
- Apparel: AEO within north america hasns't fallen out of fashion as they haven'
t raced to offer deep discounts. Using analytics to determine what consumers wan
t in the changing consumer behavior towards apparel.
- Apparel: In China (Anta) apparel, even sports apparel should grow. Worth watch
ing to see apparel industry there.
- Pharma: Worth understanding peoples willingness to pay such high costs for blo
od cancer treatment using Iclusig (Ariads)
- Finance: Interest rates on new domestic corporate loans in Brazil 30%
- Commodies: Barrick Gold used the increase in gold price to refinance some of i
ts corporate debt (sell its stocks at a high)
- Construction: heavy equipment maker staring at 4year of losses, very little ca
pital infrastructure development an issue
- Finance: EU's new risk roles (solvency II) impacting insurers forcing them to
ensure they have capital on hand to cope with worst case scenarios for any year.
- Chemicals: Spills caused by Chemours worth watching to determine hit to share
price
- Restaurants: How will chipotle rebound to food borne illness scares?
- Telecommunications: Will consumers want the quadruple play? Comcast will try
- Beverages: Diageo will the trend of cocktail culture help revive companies, wi
ll consumers spend on this?
- Chemical: Dow Chemical + DuPont -> 3 new companies. Huge deal
- Pharma: Diverse drugs at Eli worth monitoring as a leading indicator
- Construction: Infrastructure companies could reap the rewards of increased tra
vel throughout europe (Ferrovial) which build and manage highways, railways, par
king lots, toll roads and owns stakes in airports
- Auto: Ford relies on US for its sales
- AUto: Geely, which owns Volvo, will open chinese plants this fall to double pr
oduction of more profitable models
- Tech: More companies, such as GoPro, moving into the drone business
- Finance: Climate change could continue to case increased losses for ReInsurers
such as Hannover Rueck
- Retail: Hudsons bay used its real estate to bring in additional capital and bu
y up depressed value department stores
- Finance: ICBC (China) need to continue to contain nonperforming loans
- Retail: Americans are spending on their home or travel and less on apparel, es
pecially department stores, JC Pen is worth monitoring to see if trend continues
- Pharma: Kite Pharma also racing in the blood cancer segment
- Ahold & Delhaize fighting in the low margin supermarket space (US) but trying
something different -> limited assortment of deep-discount items and affordable
natural/organic items
- Construction: Will Lafarge attain cost savings after the merger with Holcim
- MetLife is not a systemically important financial institution, largest US Life
Insurer. They will now look to spin off its US Retail division (Brighthouse Fin
ancial) to improve profits
- Micro worth watching to see if PC sales rebound as they are heavily invested
/ reliant on memory chips
- Nestle: How will the trasformation into a health and wellness company pan out
for Nestle
- Tech: Can Netflix get into China?
- Oil&Gas: Novatek is 2nd largest gas producer in Russia. With Russia macroecono
mic issue improving it is worth watching if Novatek can properly invest in liqui
d natural gas terminals in the Arctic circle
- Tobacco sales back on the rise but through E-Cigs. 39% growth over 2015 to 201
7 with 4.2% of vape products as share of total tobaco market globally coming out
of the US. (3.1% italy, 2.1% germany, 1.2% russia)
- Household Products: P&G going through a broad restructuring, shedding its beau
ty line to fund its expansion outside the US. They are also reducing their portf
olio to 65 products down from 170.
- Apparel: Ralph Lauren will try its hand at fast fashion. The industry is run b
y Athletic wear and Fast Fashion. To do that though they must cut off the discou
nt retailers and close its underperforming stores (why go faster at stores that
are losers)
- Royal Bank of Scotland still hasn't cleaned up its toxic mortgages. Will see i
f the 5.6B set aside will cover the costs. Otherwise if this bank fails it could
have some reprcussions for investing and investor sentiment
- Hardware: How will cloud services affect Hard-Disk drives another PC manufactu
rer
- Consumer Electronics: Apple and Samsung took the mobile market, can Sony keep
the gaming console market and segway into VR ? Will consumers buy? 40M PS4 units
globally, 21M XBOX and 19M PCs (gaming systems)
- Retail: Steinhoff a South African furniture retailer is expanding into US and
UK. Can they pull it off and pay down the costs of doing so? Steinhoff has 25% o
f the US Mattress market now.
- Medical Devices: New Artificial Knee Implants to be introduced by Stryker whic
h has a 25% marketshare
- Agricultural: SUedzucker has been making acquisitions and expanding its distri
bution reach to be Europes No. 1 player in Sugar. This comes at a time when the
government has eliminated sugar quotas so volatility is expected.
- Oil&Gas: Suncor used large cash reserves to make acquisitions and ride out the
slump from the wildfires (production down 7% for 2016). Falling prices also to
blame. Will see if a bounce back will occur
- Real Estate: Swire is starting to buy up US appartments to diversify out of Ho
ng Kong. They built their own 5.4M sqft high rises in Miami
- Auto: Volkswagen needs to change its product portfolio to revive the image of
VW brand. They can't rely on AUdi or Porsche as those sales are plateauing
- Wal-mart is starting to diversify and invest in e-commerce businesses (Jet.com
) and hope to increase stagnant online sales
- Retail: Will the loyalty program help people stay with WHole FOods (Gross Marg
ins = 35.2%), now that more competition is coming after the organic foods? Will
lowering prices on produce and pushing digital coupons help or hurt?
- Software: Will more firms invest in Workdays Human Resource software (cloud ba
sed, where investment is going) especially with competition from Oracle and SAP
increasing
- Tech: Yelp is bolstering its sales force, improving ad and mobile technology,
which seems to be getting traction. They seen 41% local ad revenue and should be
worth monitoring.