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Sun, 28th May 2017

Anirudh Sethi Report

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Archives of “Names of large numbers” Tag

Both ECB And BOJ Are Just Months Away From Running Out Of Bonds To Buy

With the Fed contemplating whether to hike again next month and start “normalizing ” its balance sheet before the end of 2017, the two other major central banks are facing far bigger problems.

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Two months after the BOJ quietly started tapering its QE program, when it also hinted it may purchase 18% less bonds than planned…

… Governor Haruhiko Kuroda admitted last week that the Bank of Japan’s bond holdings are currently growing at an annualized pace of only ¥60 trillion ($527 billion), 25% below the bottom-end of its policy range, and confirming that without making any formal announcement, the BOJ has quietly followed the ECB in aggressively tapering its bond buying program.

Watching and waiting for China’s capital-control-induced bubble

Anyone in mainland China with a lot of money to move — companies foreign or domestic, or individuals — now seems likely to run into the capital controls that the authorities have thrown up in hopes of stopping a sell-off in the currency.

Real estate tycoon Pan Shiyi has given up on selling the Hongkou Soho, a striking Shanghai office tower whose tenants include Japanese electronics group Panasonic. Located just north of the Bund, the city’s iconic waterfront, the building was designed by Japanese architect Kengo Kuma. Pan had been looking to invest proceeds from the sale overseas but sees little hope of gaining approval for that.

 Similar cases of apparent official obstruction have surrounded other foreign deals. Online game developer Giant Interactive’s agreed-on purchase of an Israeli peer for 30.5 billion yuan ($4.42 billion) remains under review. Technology group LeEco and conglomerate Dalian Wanda Group have yet to complete their respective U.S. acquisitions of television maker Vizio and TV studio Dick Clark Productions.

Meanwhile, total social financing, China’s broad measure of credit and liquidity, continues rising by double digits. With limited outlets to overseas, Chinese money has nowhere to go but domestic assets.

WhatsApp plans to enter India digital payment services

Facebook’s WhatsApp messaging service plans to enter digital payments in India, where it will take on Alibaba Group Holding-backed digital wallet company Paytm that has added millions of customers following a government push to promote electronic payments.

Digital payments in India received a fillip after Prime Minister Narendra Modi last year recalled high-value notes of 500 rupees and 1,000 rupees that accounted for 86% of the currency in circulation. The move, aimed at curbing unaccounted wealth, triggered a cash shortage in Asia’s third-largest economy, prompting people to explore new digital cash options.

 Paytm, backed by China’s Alibaba Group, is consolidating its leadership in India with more than 200 million users. In 2015, Alibaba and its financial-services affiliate Zhejiang Ant Small & Micro Financial Services Group, invested over $500 million for a 40% stake in One97 Communications, the parent of Paytm. Zhejiang Ant is the parent of Alipay, China’s biggest mobile-payment service.

Paytm had signed up over five million new users within days after the currency ban in November.

The Fortune 500’s Fastest Growing (And Shrinking) Companies

Since 1955, Fortune Magazine has released an annual list of the highest revenue generating companies in the US – the Fortune 500. In 2016, the US Fortune 500 companies generated $12 trillion in combined revenue, accounting for over two-thirds of US GDP, and employed 27 million people worldwide.

In today’s dynamic economy, we know some companies and sectors are growing rapidly and others are struggling. We wanted to see which of the Fortune 500 are growing and shrinking the fastest, and which sectors.

In the Craft company database, we looked up revenue for these 500 companies over 2014-16*, and calculated the average annual growth rate in that 3 year period.

We found that only 62%, 309 companies, had positive revenue growth and 38%, saw their revenues decline. Healthcare was the fastest growing sector, perhaps benefiting from the regulatory environment, and Technology came in second, driven by relentless innovation in Silicon Valley. The Energy sector declined the most, matching a steep drop in the global oil price.

Here are the 50 fastest revenue growth companies in the US Fortune 500.

The US Is About To Hit $20 Trillion In Debt

As the vulture pundits in the mainstream media pick apart hollow political scandals, the essential bankruptcy of the federal government looms just ahead. The national debt is creeping toward 20 trillion dollars, and the United State’s largest problem is once again staring the world in the face.

Just before the government was slated to shut down in 2015 (as it did in 2013), Congress was able to pass a delay on the debt ceiling decision until March 15th of this year — Wednesday of this week. Recurring uncertainty caused by events like this has implications that extend far beyond our own borders. The amount of leverage in the current system has already forced foreign holders of U.S. debt to question the real value of America’s full faith and credit.

2016 was a record-setting year for the liquidation of foreign-held U.S. bonds, topping out at nearly $405 billion. The selling was led by China, America’s second-biggest creditor, which currently holds over $1 trillion of U.S. debt, almost 28% of the total held by foreign central banks. They weren’t alone, though, and even the U.S.’ number one lender, Japan, has rolled back their positions to protect themselves as the reality of U.S. insolvency comes into focus. A gradual change has been set in motion, and the global superpower status of the United States may be systematically eroded — not militarily, but economically.

If the government does shut down again, the Treasury Department reportedly has as little as $66 billion in reserves and just enough income from taxes to meet its essential obligations.

Japan Begins QE Tapering: BOJ Hints It May Purchase 18% Less Bonds Than Planned

With the Fed expected to further tighten financial conditions following its now guaranteed March 15 rate hike, and the ECB recently announcing the tapering of its QE program from €80 to €60 billion monthly having run into a substantial scarcity of eligible collateral, the third big central bank – the BOJ – appears to have also quietly commenced its own monteary tightening because, as Bloomberg calculates looking at the BOJ’s latest bond-purchase plan, the central bank is on track to miss an annual target, by a substantial margin, prompting investor concerns that the BOJ has commenced its own “stealth tapering.”

While in recent weeks cross-asset traders had been focusing on the details and breakdown of the BOJ’s “rinban” operation, or outright buying of Japan’s debt equivalent to the NY Fed’s POMO, for hints about tighter monetary conditions and how the BOJ plans to maintain “yield curve control”, a far less subtle tightening hint from the BOJ emerged in the central bank’s plan released Feb. 28, which suggests a net 66 trillion yen ($572 billion) of purchases if the March pace were to be sustained over the following 11 months. As Bloomberg notes, that’s 18 percent less than the official target of expanding holdings by 80 trillion yen a year.

Some more details: the central bank forecast purchases of 8.9 trillion yen in bonds in March, based on the midpoint of ranges supplied in the operation plan. Maintaining that pace for 12 months will see it accumulate about 107 trillion yen of debt. At the same time, 41 trillion yen of existing holdings will mature, leaving it with a net increase of 66 trillion yen, well below the stated goal of 80 trillion yen.

The Trillion Dollar Man: Bill Gates Projected to Break Net Worth Barrier

Image result for BILL GATESThe world’s richest man might be the first human to break the $1 trillion personal wealth barrier, over the course of the next 25 years, according to a report by Oxfam, an international group of charity organizations. Bill Gates, the co-founder of tech giant Microsoft, could reach a $1-trillion wealth mark by 2042, becoming the world’s first trillionaire.

Gates, whose net worth is currently estimated at some $75 billion, according to Forbes magazine’s list of world billionaires, will celebrate his 84th birthday in 2042, and his earnings are projected to breach that boundary at around that time.

Oxfam, an international organization that fights poverty worldwide, bases its predictions on measurements showing that Gates’s wealth has grown at an average rate of 11 percent annually since 2009.

“If billionaires continue to secure these returns, we could see the world’s first trillionaire in 25 years,” the Oxfam report said.

“In such an environment, if you are already rich you have to try hard not to keep getting a lot richer.”

The report claims that the sum total of net worth attributed to the top eight wealthiest people in the world is larger than the financial resources of the world’s poorest 3.6 billion.

First Big Shock For Wall Street: Republicans Warn No Trump Tax Reform Until Spring 2018

When it comes to Wall Street, Trump can launch martial law, suspend habeas corpus and/or use the Constitution for kindling and the market could care less as stocks will still go up. However, threaten some of Trump’s core economic stimulus projects like infrastructure spending (i.e., more public debt to fund corporate bottom lines) or tax reform (even more public debt flowing through to EPS), and suddenly stocks will pay very close attention.

It now appears that this particular “worst case” for stocks may be playing out. As we cautioned in our previous post looking at the impact of Trump tax reform on corporate earnings, the biggest risk for the controversial president is that “at this rate Trump may spend much of his first year dealing with immigration reform and Obamacare.”

However, as Paul Ryan warned last week during the Republicans’ outing in Philadelphia, Trump’s “#1 priority”, repealing and replacing Obamacare may not take place for several months. To wit: 

House Speaker Paul Ryan told House and Senate Republicans that lawmakers likely won’t repeal and replace Obamacare until March or April. Speaking in the first major session of GOP lawmakers’ joint retreat in the City of Brotherly Love, Ryan said Wednesday that the health care law wouldn’t be repealed and subsequently replaced until spring.

“What we heard today was Obamacare is front and center,” Rep. Chris Collins, R-N.Y., told reporters, referring to the first session of the retreat, which outlined President Donald Trump’s first 200 days in office, or the “200 Day Plan.”  “Repeal and replace,” Collins added. “The word was by the springtime.”

Global Debt Hits 325% Of World GDP, Rises To Record $217 Trillion

While we eagerly await the next installment of the McKinsey study on global releveraging, we noticed that in the latest report from the Institute for International Finance released on Wednesday, total debt as of Q3 2016 once again rose sharply, increasing by $11 trillion in the first 9 months of the year, hitting a new all time high of $217 trillion. As a result, late in 2016, global debt levels are now roughly 325% of the world’s gross domestic product.

In terms of composition, emerging market debt rose substantially, as government bond and syndicated loan issuance in 2016 grew to almost three times its 2015 level. And, as has traditionally been the case, China accounted for the lion’s share of the new debt, providing $710 million of the total $855 billion in new issuance during the year, the IIF reported.

Joining other prominent warnings, the IIF warned that higher borrowing costs in the wake of the U.S. presidential election and other stresses, including “an environment of subdued growth and still-weak corporate profitability, a stronger (U.S. dollar), rising sovereign bond yields, higher hedging costs, and deterioration in corporate creditworthiness” presented challenges for borrowers.

Additionally, “a shift toward more protectionist policies could also weigh on global financial flows, adding to these vulnerabilities,” the IIF warned.

“Moreover, given the importance of the City of London in debt issuance and derivatives (particularly for European and EM firms), ongoing uncertainties surrounding the timing and nature of the Brexit process could pose additional risks including a higher cost of borrowing and higher hedging costs.”

For now, however, record debt despite rising interest rates, remain staunchly bullish and the equity market’s only concern is just when will the Dow Jones finally crack 20,000. 

Sadly, since we don’t have access to the underlying data in the IIF report, we leave readers with a snapshot of just the global bond market courtesy of the latest JPM quarterly guide to markets. It provides a concise snapshot of the indebted state of the world.

Indian wealth falls 0.8% to $3 trillion in 2016: Credit Suisse

Hit by adverse currency movements, India’s household wealth has fallen by $26 billion to $3 trillion in the current year, shows the latest report by global financial services major Credit Suisse.

According to the ‘Global Wealth Report’ compiled by Credit Suisse Research Institute, wealth in the country in dollar terms went down by 0.8% ($26 billion) to $3.099 trillion in 2016 compared to last year. The report noted that while wealth has been rising in India, not everyone has shared in this growth.

“There is still considerable wealth poverty, reflected in the fact that 96% of the adult population has wealth below $10,000,” the report said. “At the other extreme, a small fraction of the population (0.3% of adults) has a net worth over $1,00,000,” it added, noting that due to India’s large population, this translates into 2.4 million people.

As per the report, the country has 2,48,000 adults in the top 1% of global wealth holders, a 0.5% share. “By our estimates, 2,260 adults have wealth over $50 million, and 1,040 have more than $100 million,” it added. Overall, the Asia Pacific region in 2016 saw wealth increase by 4.5% to nearly $80 trillion. “China and India were hit by adverse currency movements and as a result, their household wealth fell by 2.8% and 0.8% to $23 trillion and $3 trillion, respectively,” the report noted.

Among other major economies in the region, wealth in Australia remained largely unchanged (decline of 0.2%) and South Korea saw an increase of 1%. Globally, the wealth stood at $256 trillion— a rise of 1.4% from a year ago. The report noted that rise in global wealth is in line with the increase in the world’s adult population with average wealth per adult remaining constant at $52,800.

According to Credit Suisse, while developing economies are likely to outpace the developed world in terms of wealth growth, they will still only account for just under a third of growth over the next five years. “They (developing nations) currently account for around 18% of global household wealth, against just 12% in 2000,” it added.