While Europe’s financial crisis continues India grew GDP by 8.6% in the first 3 months of 2010. China continues to grow quickly as do many emerging countries, including Brazil. India’s Q4 GDP grows at 8.6% y-o-y
India’s economy had grown 6.7 percent in 2008/09, and the Jan-March 2009/10 growth rate matches the revised data for the second quarter of 2009/10.
Manufacturing output grew 16.3 percent on year in the quarter as consumers bought more cars and other goods, while farm output grew an annual 0.7 percent helped by a good winter harvest. The government expects the economy to grow 8.5 percent in the current fiscal year that started on April 1 on the prospects of a better farm output and a global recovery
The farm sector, which forms nearly 17 percent of the economy but is dependent on monsoon rains, is expected to do well in 2011 as the weather office has predicted a normal monsoon for the country. Prime Minister Manmohan Singh last week said an annual economic growth rate of 10 percent is needed in the medium term to address the problems of poverty and malnutrition.
Even as Singh aims for high economic growth, inflation has come to haunt his government and appears to be undermining its support base. Wholesale prices, the most closely watched inflation gauge in India, rose 9.59 percent in April from a year earlier amid the government officials claim that headline inflation had peaked.
Headline inflation numbers have been consistently higher than the official forecasts. The wholesale price inflation vaulted above the RBI’s end-March 2010 inflation forecast of 8.5 percent in January and crossed the 10-percent mark in February.
Although food price inflation has eased from its peak of 20 percent in December, it is still above 16 percent. Rising cost pressures are also dragging down the pace of manufacturing growth, as evidenced by a second-straight monthly decline in the HSBC Market Purchasing Managers’ Index in April. The rapid acceleration in the world’s second-fastest growing major economy after China is boosting consumer demand far ahead of what can be met by existing supply capacity.
The economies of India, China, Brazil, Mexico, Thailand, Vietnam… are still a fairly small fraction of global GDP but their share continues to grown. And the next few years look to continue this trend. Keys to how quickly they grow their share of global GDP are avoiding bubbles (which then burst), avoiding excessive government debt, continuing to build strong infrastructure for continued development and to what extent growth slows in Europe, USA and Japan due to the credit crisis and excessive consumer and government debt.
The emerging economies have done a good job avoiding the credit crisis failures visited by the large banks on the wealthiest economies but the dangers of slipping up are large and costly. The largest economies have lots of wealth even after allowing bankers and wall street to siphon off huge amounts for themselves. Less wealth economies will suffer much more than the wealthiest countries if they fall prey to the same political and economic failings. And those special interest (crony capitalism) favors are no less (I would say even more, in fact) likely in those countries than they are in the richest countries.
In his presentation Mike Milken explores foreign oil dependence for the USA and presidential statements:
President Richard Nixon (in 1974 with 36.1% of oil from foreign sources): “At the end of this decade, in the year 1980, the United States will not be dependent on any other country for the energy we need.”
President Gerald Ford (in 1975 with 36.1% of oil from foreign sources): “We must reduce oil imports by one million barrels per day by the end of this year and by two million barrels per day by the end of 1977.”
President Jimmy Carter (1979, 40.5%): “Beginning this moment, this nation will never use more foreign oil than we did in 1977 – never.”
President Ronald Reagan (1981, 43.6%): “While conservation is worthy in itself, the best answer is to try to make us independent of outside sources to the greatest extent possible for our energy.”
President George Bush (1992, 47.2%): “When our administration developed our national energy strategy, three principles guided our policy: reducing our dependence on foreign oil…”
President Bill Clinton (1995, 49.8%): “The nation’s growing reliance on imports of oil… threatens the nation’s security… [we] will continue efforts to…enhance domestic energy production.”
President George W. Bush (2006, 65.5%): “Breakthroughs…will help us reach another great goal: to replace more than 75 percent of our oil imports from the Middle East by 2025.”
President Barack Obama (2009, 66.2%) “It will be the policy of my administration to reverse our dependence on foreign oil while building a new energy economy that will create millions of jobs.”
Google has generated a large amount of cash due to the profitability of their business. It currently has $26.5 billion 3rd only to Microsoft and Intel of short term holdings of technology companies (though Apple likely should be considered as having higher cash holdings). Google’s Latest Launch: Its Own Trading Floor:
After a couple years of cautious cash management at Google, Callinicos says he’s beginning to build a higher-risk, higher-return portfolio. Since last year he has pulled away from U.S. government notes and moved into corporate debt securities ($4.9 billion as of Mar. 31, up from $695 million the year before), agency residential mortgage-backed securities ($3.3 billion, up from $60 million), and foreign government bonds ($332 million, up from zero).
The largest Google holdings are: cash 35%, corporate debt 18%, US agency debt 13%, residential mortgage backed US agency securities 13%, municipal securities 8%, US government notes 8%. For all the debt problems with government, consumers and corporations that followed advice of mortgage bankers to overly leverage themselves there are many companies that have much larger cash holding than every before. Google is one but many other companies have built up large cash positions as well.
I have been a long term investor in Google and think it is a great buy now. I don’t see myself selling it anytime soon (maybe anytime at all). I do worry a bit about Google wasting the cash on buyouts they are tempted into due to huge amounts of cash on hand. Hopefully they will avoid such mistakes. I think they may well be better off paying a dividend but they seem apposed to that idea.
Retiring overseas has been growing in popularity over the recent decades. A lower cost of living and health care systems that work are two of the big draws. Americans Who Seek Out Retirement Homes Overseas
She said a minimum amount for a comfortable retirement in a number of appealing places — Cuenca, Ecuador, and La Barra, Uruguay, being two examples — would be about $1,200 a month.
Mr. Holman said that if you purchased a home in Medellin, you could live quite comfortably on less than $2,000 a month. As time goes on, retirement hot spots change along with countries’ economic and political situations.
Ms. Peddicord said she used to recommend Ireland, Thailand and Costa Rica, but no longer does. She cited the high cost of living in Ireland, the anti-foreign sentiments in Thailand, and the growing crime rates both within and outside of San Jose, the Costa Rican capital.
“In Panama, for example, your rent could be $1,500 a month for a two-bedroom apartment in a nice building in Panama City with a doorman and a pool,” Ms. Peddicord said, “or it could be $200 a month if you choose instead to settle in a little house near the beach in Las Tablas, a beautiful, welcoming region.”
Lee Harrison, an American who retired to Ecuador several years ago and then moved in 2006 to Uruguay, said there were a wide range of financial issues to consider before making the leap to retire abroad.
For example, he recommends that retirees maintain a bank account and credit cards in their country of origin as well as in their new country, to facilitate money transfer. He also said that retirees should investigate their home country’s system of sending pension money to retirees abroad, as well as their new destination’s ability to accept electronic bank transfers.
Retirees also should request help from a tax adviser and make certain their move doesn’t trigger the need for a new will.
Financial considerations aside, advisers say that when making the decision to retire abroad, most retirees find that the journey itself is the reward.
“I know lots of people who retired to one country and then decided to move again somewhere else but never back” to their home, Ms. Peddicord said. “I don’t know of anyone who has decided to move back full-time after having had a taste of living abroad.”
Living overseas is something a significant portion of people in the USA have no interest in at all. But for those that like the idea there are appealing options with some strong benefits. At the same time you need to understand the significant change this bring to your life and plan for it I suggest visiting the location several times over the years – before you retire.
The idea for selling our own software really came out of frustration more than anything else. We were designing email newsletters for a lot of our clients but couldn’t find the right tool for the job. After trying everything on the market, we built a simple app that let our clients manage their own newsletters. All our clients loved it and it created a nice new revenue stream for us.
Over the last six years we’ve gone from open plan, to all closed offices and then to a combination of both. I’ve paid close attention to the pros and cons of each layout, and I’m convinced that closed offices are the best layout for a software company.
The reason for this is fairly simple. It’s all about removing distractions. Jobs like software development, design and copywriting often require juggling lots of different things in your head at once.
Failing to pay for the deferred costs of current expenditures gets all those practicing credit card budget thinking in trouble. That includes lots of individuals. But it also includes many governments. They pay huge rewards to special interests and act like they think the cost doesn’t exist. Only an extremely financially illiterate society could elect so many of these people. We have not learned that in the modern financial economies financial illiteracy is a huge societal problem (along with scientific illiteracy).
Such poor financial management by public sector organization (California is horrible also) are causing huge damage to those living in such poorly managed states.
The use of public money for outsize retirement pay really stings when budgets don’t balance, teachers are being laid off, furloughs are being planned
Roughly one of every 250 retired public workers in New York is collecting a six-figure pension, and that group is expected to grow rapidly in coming years, based on the number of highly paid people in the pipeline.
Thirteen New York City police officers recently retired at age 40 with pensions above $100,000 a year; nine did so in their 30s.
Before Yonkers adopted a richer pension formula for police in 2000, for instance, it was told the maximum cost would be $1.3 million a year. But instead, the yearly cost is now $3.75 million and rising. David Simpson, a spokesman for the mayor of Yonkers, said pension cost projections were “often lowballs,” so the city could get stuck. “Once you give something, you can’t take it away,” he said.
It isn’t complicated. So long as you elect people that are financial illiterate and only care about granting favors to special interests, not the consequences of doing so, you are setting yourself up for a great deal of pain once your credit card bill comes due.
The fallout of the credit crisis continues. The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 10.1% percent of all loans outstanding as of the end of the first quarter of 2010, an increase of 59 basis points from the fourth quarter of 2009, and up 94 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 106 basis points from 10.4% in the fourth quarter of 2009 to 9.40% this quarter.
The percentage of loans on which foreclosure actions were started during the first quarter was 1.23%, up 3 basis points from last quarter but down 14 basis points from one year ago.
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the first quarter was 4.63%, an increase of five basis points from the fourth quarter of 2009 and 78 basis points from one year ago. This represents another record high. The combined percentage of loans in foreclosure or at least one payment past due was 14.0% on a non-seasonally adjusted basis, a decline from 15.0%.
The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 9.54%, a decrease of 13 basis points from last quarter, but an increase of 230 basis points from the first quarter of last year.
“The issue this quarter is that the seasonally adjusted delinquency rates went up while the unadjusted rates went down. Delinquency rates traditionally peak in the fourth quarter and fall in the first quarter and we saw that first quarter drop in the data. The question is whether the drop represents anything more than a normal seasonal decline or a more fundamental improvement. Most importantly, the normal seasonal drop is coming right at the point where we believe delinquencies could potentially be declining and the problem for the statistical models is determining which is which,” said Jay Brinkmann, MBA’s chief economist.
“The seasonal models say it is not a fundamental improvement and that the seasonal drop should have been larger to represent a true improvement, hence the increase in the seasonally adjusted numbers. Yet there is reason to believe the seasonally adjusted numbers could be too high. Simply put, fundamental market factors may be having a greater influence on the delinquency rates than is normally the case, but mathematical models have difficulty discerning the difference over a short period of time.
“Since discerning what represents a fundamental improvement versus a simply seasonal improvement is probably more of an art than a mathematical science at this point, the seasonally adjusted numbers should be viewed with a degree of caution.
The seasonally adjusted delinquency rate increased for all loan types with the exception of FHA loans. On a seasonally adjusted basis, the delinquency rate stood at 6.2% for prime fixed loans, 13.5% for prime ARM loans, 25.7% for subprime fixed loans, 29.1% percent for subprime ARM loans, 13.2% for FHA loans, and 8.0% for VA loans. On a non-seasonally adjusted basis, the delinquency rate fell for all loan types.
The foreclosure starts rate increased for all loan types with the exception of subprime loans. The foreclosure starts rate increased six basis points for prime fixed loans to 0.7%, 17 basis points for prime ARM loans to 2.3%, 18 basis points for FHA loans to 1.5%, and 8 basis points for VA loans to 0.9%. For subprime fixed loans, the rate decreased nine basis points to 2.6% and for subprime ARM loans the rate decreased 39 basis points to 4.3%.
Predicting is much harder than explaining past data. But I believe the odds for better reports on foreclosures and delinquencies over the next 12 months. Delinquencies may well rise. But it is certainly possibly things will get worse. And if the jobs added each month doesn’t average close to 200,000 things will likely not be very good. My guess is we will add over 2.0 million jobs in the USA in the next 12 months but that is far from certain.
The Future of Manufacturing in the US and Europe, The German Marshall Fund. Speakers: Ron A. Bloom, Simon Fraser, Wilfried Porth and Philip Stephens. I must admit I didn’t find this to be the most useful webcast but for those interested it may be worth watching.
Related: Manufacturing Driving USA Recovery – USA Manufacturing Output Continues to Increase (over the long term) – Manufacturing Output in Historically by USA, Europe and Asia – Capacity Utilization Rate Up Slightly From All Time Low (Aug 2009)
Charlie Munger’s Thoughts on Just About Everything by Morgan Housel
Benjamin Graham used to say, “It’s not the bad investment ideas that fail; it’s the good ideas that get pushed into excess.” And that’s a lot of what happened here.
Some economic distortions come from the masses believing that other people are right. Others come from the need to make a living through behavior that may be less than socially desirable. I’ve always been skeptical of conventional wisdom. You have to be able to keep your head on when everyone else is losing theirs.
Take soccer as an example. It’s a tremendously competitive sport, and often times one team tries to work mayhem on the other team’s best player. The referee’s job is to limit this mayhem and rein in extreme forms of competition.
Regulation is similar. Most ambitious young men will be more aggressive than they should. That’s what happened with investment banking. I mean, look at Lehman Brothers. Everyone did what they damn well wanted until the whole place was pathological about its extremeness.
A lot of this [financial collapse] can be blamed on accountants. Accountants as a whole have been trained with too much math and not enough horse sense. If some of these insane accounting practices were never allowed, huge messes could have been avoided. Bankers have become quite good at manipulating accountants
Learning has never been work for me. It’s play. I was born innately curious. If that doesn’t work for you, figure out your own damn system.
More good thoughts from Warren Buffett’s partner at Berkshire Hathaway.
To me, the prospects of a Euro currency surviving over the long term were not helped this week. The markets have behaved as though some great solutions have been adopted but it seems to me the fundamental problems if anything are worse now. It is true the short term is more stable. But at what cost?
“I was stunned,” Rogers, chairman of Rogers Holdings, said in a Bloomberg Television interview in Singapore. “This means that they’ve given up on the euro, they don’t particularly care if they have a sound currency, you have all these countries spending money they don’t have and it’s now going to continue.”
“It’s a political currency and nobody is minding the economics behind the necessities to have a strong currency,” Rogers said. “I’m afraid it’s going to dissolve. They’re throwing more money at the problem and it’s going to make things worse down the road.”
This makes sense to me. The problems with the Euro also explain why the dollar hasn’t fallen more over the last few years. The only significant alternative is the Yen. The BRIC countries (Brazil, Russia, India and China) are looking to increase the profile of their currencies supposedly – or even forming their version of the Euro (I can’t see how that could happen).
[Rogers suggests] Investors should instead buy precious metals including gold or currencies of countries that have large natural resources, Rogers said. Among other asset classes, he favors agricultural commodities as the best bet for the next decade as well as silver because prices haven’t rallied.
It is very difficult for the politicians in the USA, United Kingdom and other countries to behave fiscally responsible when their taxpayers will eventually have to pay the bill. When you can hope to have others bail you out it seems that much less likely people will behave responsibly. Then again I was skeptical the Euro would be created without first having more consolidation of European governments. There are lots of good things about having the Euro, but in the long run there are very challenging issues to deal with.