Posts Tagged ‘Japan’

Who Wants To Be a Millionaire?

Tuesday, July 10th, 2012

Wobbly economies that shook up markets in 2011 took their toll on the world’s rich, though fast-growing Asia for the first time had more millionaires than North America.  According to the report, the global personal wealth of people worth $1 million declined in 2011 for the second time in four years, a side effect of the Eurozone crisis and economic sluggishness in developed markets.  Several emerging markets also suffered, with the number of millionaires in India and Hong Kong falling by nearly 20 percent.  With Europe’s debt crisis bedeviling the continent, the outlook for wealth creation in 2012 remains weak, according to a report prepared by Capgemini and RBC Wealth Management.

The world’s millionaires grew by 0.8 percent to a record 11 million, according to the report, yet their collective wealth fell by 1.7 percent to $42 trillion.  Only the Middle East experienced no decline in wealth.  It was the first global decline in millionaire wealth since the 2008 financial crisis, when the ranks of the wealthy fell 15 percent and their wealth declined by 20 percent.

Families worth $30 million or more saw their collective wealth fall 4.9 percent and their ranks shrink by 2.5 percent to just 100,000 individuals.  This decline reflects holdings in higher-risk and less liquid investments like hedge funds, private equity and real estate.

“It was a challenging environment for our clients,” George Lewis, global head of wealth management at Royal Bank of Canada, said.  The Toronto banking giant began sponsoring the widely watched report in May.  Lewis pointed out that the number of high net worth individuals rose even as overall wealth fell.  “It at least suggests there continues to be upward mobility and the ability to generate wealth around the world,” he said.

Curious about how many millionaires live in nations around the world?  Read this:  Singapore toppled Hong Kong as home to Asia’s wealthiest in 2011 as declining stock markets hit the former British territory significantly harder than its Southeast Asian rival.  Hong Kong, whose stock market capitalization fell by 16.7 percent last year, saw a bigger decline in the ranks of people with more than $1 million to invest as a larger proportion of that wealth was tied up in equity.  Southeast Asia also has shown stronger signs of resilience to global turmoil than the rest of Asia as domestic spending offset struggling exports.  The number of millionaires in Hong Kong fell 17.4 percent to 83,600 last year, compared with a decline of 7.8 percent to 91,200 people in Singapore, according to RBC Wealth’s head of emerging markets Barend Janssens.  Hong Kong took the lead from Singapore in 2010 after falling behind in 2008.

China still is home to the most high net worth individuals in Asia Pacific, with a population of 562,000 millionaires.  The top five countries by population of high net worth individuals are the US (3.07 million), Japan (1.82 million), Germany (951,000), China and the United Kingdom (441,000).  According to RBC, this significant concentration of high net worth individuals is why wealth managers are attracted to Asia even if they have to contend with competition from domestic banks.

Are the troubles in the Eurozone likely to impact Asia?  Lessons learned from the 2008 financial meltdown show that while Asia tends to get hit when the world economy stumbles, the severity varies depending on which countries have the biggest trade and financial linkages, and are best-prepared with big currency reserves, overflowing government coffers and central banks with the ability to cut interest rates.  Generally speaking, Asia has more room than the West to react with interest-rate cuts and government spending.  But some things have changed since 2008, and some countries, primarily India, Vietnam and Japan, may not be in shape to survive another financial jolt.  “As we saw with Lehman, when you get a seizure in the global financial system, nobody can hide from that in the short run,” said Richard Jerram, chief economist at the Bank of Singapore.  In that type scenario — which analysts say could still occur if Greece doesn’t live up to its commitments and leaves the Euro, or Spain and Italy require a bailout that Europe can’t afford — Asian stocks and currencies would fall, shipping lanes would see less business, and lending to consumers and businesses would dry up, slowing world economies.

Tepid 1st Quarter Growth Disappoints

Tuesday, May 15th, 2012

The American economy grew less than expected during the 1st quarter as the biggest gain in consumer spending in more than a year failed to overcome a diminished contribution from business inventories.  Gross domestic product rose at a 2.2 percent annual rate after a three percent increase in the 4th quarter of 2011, according to Department of Commerce Department statistics.  The median forecast called for a 2.5 percent increase.  Household purchases rose 2.9 percent, exceeding the most positive projection.  Home building grew at its fastest pace in almost two years.  The GDP data confirm the view of Federal Reserve officials who expect “moderate” growth as they repeated that borrowing costs are likely to stay low at least through late 2014.

In addition to the improvement in consumer purchases and home building, the economy benefited from a rise in auto production.  The GDP was negatively impacted by a drop in government spending and slower growth in business investment.  The United States is faring better than some other major economies.  The United Kingdom is in the throes of its first double-dip recession since the 1970s.  In Japan and Germany, GDP declined in the final three months of 2011, while China’s economy, the world’s second-largest, is also cooling.

“Consumers are remarkably stable and steady,” said Julia Coronado, chief economist for North America at BNP Paribas in New York.  “We’ll need to see final demand continue to improve.  We’re still in muddling-along territory.”

According to MarketWatch, the devil is in the details. “Growth of 2.2 percent is mediocre, but it’s worse than that once you peel away a few layers — about a fourth of the growth in gross domestic product was accounted for by a build-up in inventories, and half of it came from the building and selling of motor vehicles.  Strip away the inventory growth, and final sales in the economy increased 1.6 percent, the 4th quarter in the past five that was below two percent.  Although all the headlines report on the GDP numbers, the number to watch is final sales, because that gauges demand for our products, not merely how much we made.  Away from King Consumer, the rest of the economy is slowing.  Business investment spending dropped 2.1 percent, the first decline since 2009.  Let’s not get carried away too much by the gloom and doom.  The economy IS growing, even if it’s not as fast as we’d like.  The economy has grown by nearly seven percent since depths of the recession in 2009.”

As disappointing as the 2.2 percent is, the market will have to learn to live with lowered expectations.  From a market perspective, lukewarm growth could force Ben Bernanke’s hand to unfreeze lending, keep interest rates at their current lows, or re-use other monetary policy tools to keep money flowing.  Ironically, even with the Fed’s relaxed monetary policy, most of the extra cash in the economy remains on corporate balance sheets (Apple has billions on hand) or is going into the securities markets.

Official reaction was as expected. “Today’s advance estimate indicates that the economy posted its 11th straight quarter of positive growth, as real GDP (the total amount of goods and services produced in the country) grew at a 2.2 percent annual rate in the first quarter of this year.  While the continued expansion of the economy is encouraging, additional growth is needed to replace the jobs lost in the deep recession that began at the end of 2007,” said Alan Krueger, chairman of the White House’s Council of Economic Advisers.

Fed chairman Ben Bernanke called the slow pace of recovery “frustrating. Here we are almost three years from the beginning of the expansion, and the unemployment rate is still over eight percent.  It’s been a very long slog.  And that, I think, would be the single most concerning thing,” he said.

Follow the March Madness Money

Monday, April 4th, 2011

March Madness is so popular among American sports fans that even President Barack Obama was featured on ESPN filling out his brackets. The President, who predicted a Men’s Final Four of Duke, Kansas, Ohio State and Pittsburgh, said “One thing I wanted to make sure is that viewers who are filling out their brackets — this is a great tradition, we have fun every year doing it.”

According to Investopedia, like so many things in American popular culture, March Madness is an exercise in follow the money. “While many consider the annual NCAA Division I Men’s Basketball tournament to be one of the greatest tournaments in sports, there’s more to the madness than just the teams battling for their place in the Final Four.  Like all great sporting events, the tournament has its share of economic impacts on a variety of levels.”

For example, the CBS television network controlled the March Madness airwaves for years; in 2011 a landmark deal was made to allow Time Warner’s Turner to split the rights for the next 14 years at a cost of approximately $10.8 billion.  “Along with the steep price tag comes the revenues from broadcasting the tournament both on television and via other media outlets,” Investopedia said.  “Last year, CBS is estimated to have raked in about $620 million from TV advertising alone, while revenues from ‘non-traditional’ sources were up 20 percent.  Even with more people watching their favorite television shows in non-traditional ways, sporting events have still managed to keep live viewership growing, and there’s nothing quite like the nail-biting thrills of a last-second jumper.”

Then, there are the schools.  According to Forbes, “The NCAA distributes money from their media contracts to Division I conferences based on their performance in the Division I Men’s Basketball Championship over a six-year rolling period.  Independent institutions receive what’s called a ‘full unit share’ for every game they play in the tournament over the same rolling six-year period.  The basketball fund payments are sent to conferences in mid-April each year, and then conferences allocate the money as they see fit.  Some conferences equally split the revenue among all conference schools, while some provide a disproportionate share to the teams that were actually responsible for the ‘unit creation.’  One ‘unit’ is awarded to a conference for each game a member school participates in, except the championship game.  In 2009-10, each ‘basketball unit’ was approximately $222,206 for a total $167.1 million distribution.  The 2010-11 season was supposed to be the last year of the old TV contract, where CBS was slated to spend $710 million for media rights.  Based on this figure, the NCAA estimated that each ‘basketball unit’ would be roughly $239,664 for a total $180.5 million distribution.”

Sports tourism is another way that March Madness stimulates the economy.  Because the games are played in various locations across the country, teams and their fans spend money on hotels and restaurant meals, a positive economic impact on the host cities.  The biggest winner of 2011 is expected to be Houston, where estimates have direct spending by March Madness fans hitting $100 million.  Denver, Cleveland and New Orleans are also expected to reap significant economic benefits.

March Madness also offers Americans an opportunity to gamble.  According to Sportsbook.com, approximately $75 million was bet in Las Vegas on the tournament.  Office pools totaled more than $3 billion, with the cost of lost productivity estimated to be approximately $1.8 billion.

Increased Consumer Spending Lifts U.S. 2010 GDP

Monday, February 7th, 2011

road-sign-blogThe United States’ 2010 GDP soared at an annualized rate of 3.2 percent, as consumer spending rose by the greatest levels in four years.   “The consumer really drove the economy in the 4th quarter,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia.  “The economy has moved beyond recovery to a stable state of growth.”  For all of 2010, the economy expanded 2.9 percent — the biggest one-year jump in five years — after contracting 2.6 percent in 2009.  The volume of all goods and services produced climbed to $13.38 trillion, for the first time surpassing the pre-recession peak reached in the 4th quarter of 2007.  Tiffany & Co. saw a significant increase in the sale of fine jewelry.  Apple reported record 4th quarter sales as consumers bought 7.73 million iPads as holiday gifts.  Ford Motor Company’s sales have been so good that the automaker plans to add an additional 7,000 manufacturing jobs over the next two years.  The automaker, which did not undergo bankruptcy, did lay off some salaried employees in 2008 as part of a restructuring in the face of slumping sales.

Exports also helped boost the American economy which should boost job creation over the next several years.  “The U.S. is expected to be one of the fastest growing developed countries in 2011, largely reflecting the contrast of the ongoing stimulus with other countries, such as the U.K. and other heavily indebted European nations, where austerity measures designed to reduce deficits are stifling domestic demand,” said Chris Williamson, chief economist at Markit, a London-based research firm.  “The acceleration of the U.S. GDP in the 4th quarter, and the changing composition of growth, raises hope that the economic recovery will move into a more self-sustaining phase in 2011 and generate sufficient jobs to reduce unemployment.”

Even the Federal Reserve, which renewed its commitment earlier this week to buying $600 billion in government bonds, agrees that the report shows the economy ended 2010 with moderate strength and breadth, but not enough to bring down the 9.4 percent unemployment rate anytime soon.  Personal consumption spending contributed slightly more than three percent to 4th quarter growth.  That is in line with retailers’ reports showing a respectable holiday shopping season.   Whether that level of spending holds up remains to be seen.  Many retailers remain cautious in their forecasts and report that consumers are still bargain-hunting.  As gasoline prices rise, disposable income may be limited.

Alter Now does see it as important to note the correlation with an overall increase in consumer credit debt in December, the first spike since 2008.  According to the Fed, overall consumer credit debt rose by 6.1 billion, or 3.0%, to $2.41 trillion while revolving credit debt (primarily from credit cards) rose by $2.3 billion (3.5%) to $800.5 billion. No revolving credit rose by $3.8 billion, or 2.8%, to $1.61 trillion.  While the spike in GDP is good news, let us remember that it is still being driven by deficit spending.

Compare the U.S. GDP with that of other nations last year and it’s clear who is winning.  China, for example, is expected to report an 8.5 percent jump in its GDP, not unexpected in the world’s fastest growing economy.  Japan’s real GDP was 3.9 percent higher in annualized terms for the 3rd quarter, beating estimates for a 2.5 percent rise for the year.

In the U.K., the economy shrank by 0.5 percent in the 4th quarter, compared with a 0.7 percent increase in the 3rd quarter.   By contrast, the nation with Europe’s largest economy – Germany – recorded a 3.6 percent growth rate in its GDP in 2010. 

Have We Hit Bottom Yet?

Wednesday, June 24th, 2009

Slowly advancing first-quarter sales may not make this the right time to pop the champagne corks-though it does represent a plateau compared with the previous quarter and suggests that the bottom may be in sight.  This update comes from Real Capital Analytics (RCA), which warns that “there is no recovery in sight”.

In its June Global Capital Trends, RCA notes that property sales in the Americas totaled an estimated $8 billion during the second quarter, down just six percent from the first quarter, an 83 percent drop for-sale-signs-lgcompared with last year.  Second-quarter totals for EMEA markets are down 24 percent from the first quarter to just $17.3 billion, a 71 percent drop from 2008.  The good news is in the Asia Pacific markets, where RCA projects an 18 percent gain over the first quarter with a total of $23.3 billion in sales, approximately half of the second-quarter worldwide numbers.

According to Robert M. White, Jr., RCA’s founder and president, “We’re probably at the bottom “in terms of transaction activity.  Globally, the upturn will be sporadic.  “If anything, the downturn was correlated more closely across property rates and geographic regions than the recovery will be.  Activity in Europe is growing, especially in the U.K.  And there is a buzz in the U.S., too.  In the past few weeks, we’ve seen more and larger deals.  I wouldn’t say it’s a quick rebound, but frankly I don’t think volume could sink any lower in the U.S.”

Pricing may be a different story, White cautions.  “We may already be there, but none of it will be realized until these distressed deals close.  We can look forward to move activity” in the fall and through year’s end.