Thoughts From Joe - July 12, 2013July 12, 2013 Posted by: Joe Morgan, CFA
Top EightThe IMF scaled back its estimates for global growth to 3.1 percent from 3.3 percent. The International Monetary Fund reduced its U.S. outlook to 1.7 percent and cut expectations for emerging markets as well. The IMF, as well as most other economic prognosticators, has been expecting growth to pick up for several years now. Those expectations have followed a reliable pattern of downward revision. Economists always predict reversion to the mean, but what if the true long term mean has shifted downward? Well, they’ll figure that out in 20 or 30 years.
The SEC voted to lift the ban on advertising for private offerings that would include private equity and hedge funds. The 4-1 vote was made possible by the Jumpstart Our Business Startups Act and will go into effect in about 2 months. About $900 billion in annual private offerings are affected by the ruling. The rule of “caveat emptor” is healthy. However, when “mom and pop” lose their life savings in an inappropriate hedge fund let’s hope the taxpayer is not tapped to bail them out.
In China, both exports and imports dropped unexpectedly in June. Exports fell 3.1 percent while imports dropped 0.7 percent. Both measures underperformed economists’ expectations by around 6 percentage points. Is the Chinese miracle coming to an end? Not likely. There are some holiday issues with the calendar that may have affected the data, but more importantly China is simply following the global economy, which is headed in the wrong direction.
Eight banks to be subject to higher capital and liquidity requirements. The Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency have proposed to increase basic capital requirements for Goldman, Citigroup, Bank of America, JPMorgan, Wells Fargo, Morgan Stanley, Bank of New York, and State Street Bank. If the goal is to get banking down to zero risk, there are two options: 1) increase capital and liquidity standards to levels beyond sufficient to withstand a stressed downturn or 2) turn banks into utilities by stripping away profitable business lines. Efforts on option two are on the table as well. The European Union wants sole...Read More