U.S. is used to determine the global economic climate. The country has the largest economy of the world’s most influential central bank and the global reserve currency printing. In recent months, however some of the advanced economies and in particular Germany, have shown that developing better, seemingly losing its coherence with the business cycle in the U.S. Growth of gross domestic product (GDP) was revised to U.S. down to 1.6% of the aligned on an annual basis, a basis for the second quarter. Meanwhile, Germany has a sharp jump in its GDP of 9%. Unemployment in the biggest European economy is already at lower levels than before the crisis, and other rich countries, including Britain and Australia, also enjoyed a stronger growth and lower unemployment than in the U.S. This unusual asinhron in the rich world led to a clash between competing economic theories which tried to explain to fiscal policy, exchange rates and debt levels. But all in common is that they do not reflect exactly the facts. According to proponents of the first theory, Germany and Britain, have been rewarded for that is he started seriously to repair public finances. From their perspective promise to reduce budget deficits in these countries was “liberating effect” on costs to consumers and businesses, because it reduced uncertainty about their economic future. During this time, the lack of government savings in the United States has increased concerns about public debt and its consequences for the economy, which led to businesses and households are restrained in their spending.
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Even some of the most cautious managers of hedge funds burned in 2008 because it kept their positions too long and anticipated time hanging market collapse. Now, amid the most recent data for the U.S. economy slowing down, at any price they want to avoid the same mistakes. Change that occurred in the investment portfolios in the second quarter, not simply be discarded as all risky assets - something that made the majority of smaller investors lately. Instead, hedge funds are directed to defensive strategies such as acquisitions of companies offering high dividends or operating in the utilities sector, shows study of Thomson Reuters, based on data from 30 of the largest fundamentally-oriented hedge funds. “Thinking of investors is not like a few years ago and quite risky assets are no longer in the game,” said Steve Goldman, chief market strategist at the company Weeden & Co, based in Greenwich, Connecticut. “The situation is desperate consumers, sustain the economy is disappointing and all are concerned about this,” he added. “Our portfolio is tailor so as to include the assets that we believe have the best balance between risk and return. Our exposure is significantly less than at the beginning of the year, “he wrote in a letter to investors Jeffrey Altman, who manages $ 5 billion in the Owl Creek Asset Management, one of the 30 funds included in the study.
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The annual growth rate of the U.S. economy during the last quarter of last year reached 5.6 percent, but will likely fall below 2 percent during the quarter. Meanwhile, for the second quarter of 2010, Germany has an annual growth rate * of nearly 9%, which propelled this indicator for the euro area by almost 4%. However, due to U.S. slowdown Bundesbank and other analysts foresee a much slower growth in Germany’s economy in the second half of the year. In short, if the U.S. economy is strong, and Europe slow down, the U.S. also lost momentum, and vice versa. This was no coincidence, writes Wall Street Journal. The rule is no longer (if ever there was one) that whatever happened in the U.S. remains in the U.S. and what happened in Europe remains in Europe. Just when it seemed certain that at last the U.S. are on the threshold of sustainable economic recovery, financial crisis and fears in Greece to Spain, Portugal, Ireland and Italy have become the latest nightmare for investors. As a result, U.S. banks looked quite redundant positions in debt obligations, especially those related directly or indirectly with government debt. This reflected a significantly more conservative approach to lending to European banks straha because bankers do not fall into the vortex of any governmental failures in Europe. The rate of the dollar rose as a result of such situations characteristic search of financial havens, which adversely affect prospects for U.S. exports and President Obama’s plans to promote the creation of millions of new jobs by strong exports. Deteriorated investment climate forcing U.S. companies to gain more than 2 trillion dollars in cash, which in better days would help to create much needed for economic recovery jobs.
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The Germany’s policy of budget cuts risk to the common European project and possible collapse of the EUR can not be ruled out, says one of the top forex brokers - the billionaire investor George Soros. “Germany’s policy is dangerous for Europe and would destroy the European project,” he said in an interview with Germany weekly Die Zeit. Soros, who in 1992 won a billion dollars, having bet against the British Pound, adding that “can not exclude the collapse of the EUR. “If the Germans do not change its policy, the best for the rest of Europe, can do is leave the euro area,” he says. The chancellor Angela Merkel proposed earlier this month, budget cuts of 80 billion for the next four years - a measure which it considers will help Germany to reduce its budget deficit within 3% by 2013. “Right now the Germans cause deflation in its European partners, and this portends a long phase of stagnation, which in turn leads to nationalism, xenophobia and social rebellion. Democracy itself is threatened, “said Soros. “Germany is a global isolation … Why not allow an increase in wages in their country? This would help to other European countries to recover, asking Soros. On Monday, Merkel defended his ideas to reduce spending after U.S. President Barack Obama called for patience in cutting budget deficits.
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The stress tests of the banking sector in Europe are not sufficiently demanding to reveal impending worsening economic climate in the region, said Nuri Roubini cited by CNBC. “The set values for economic growth and public debt are not sufficiently realistic,” said Roubini, owner of Roubini Global Economics, who after a series of apocalyptic predictions has gained the name of the darkest market analyst. Most of the risk of government securities held by banks and maturity as the test scenario precludes state bankruptcy, these bonds are not taken into account, he said. European stress tests imply an increase of 6% unemployment, economic decline of 3% and 6% increase in market interest rates. The test results are sufficiently detailed to enable investors if they choose themselves how to calculate the losses will accumulate in the event of bank failures government says the head of the Committee of European Banking regulators Karozio Giovanni. “In some cases this is so,” admits Roubini, stating that while the evaluation of Spanish banks’ exposure to government debt has been relatively easy, the same can be said of Germany banks. Moreover, some toxic assets in bank balance sheets “are not even reported,” said Roubini. Roubini said tests last year of U.S. banks also were not harsh enough, but since then the shares of some major U.S. banks earned significantly since the tests have helped to restore investor confidence.
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When the 2001 Goldman Sachs created Brik abbreviation for the largest emerging economies in the world - Brazil, Russia, India and China, many believe that the country, which most do not conform to the group, is Brazil. Nine years later the leading candidate for exclusion is Russia, but expectations of Brazil still remain skeptical”. Martin Wolf for example, which is the chief economic commentator in the Financial Times, pointed out recently that Brazil’s share of world gross domestic product (GDP) has decreased over the past 15 years from 3.1 percent in 1995 to 2.9% in 2009 According to him on this show that Brazil can not become so large player in the world economic stage as China and India. According Rikupero Rubens, a former finance minister of Brazil, for the first time in its history the country enjoys a favorable development in four areas that have so far hampered its economic growth.
Raw materials
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The record U.S. budget deficits have caused fierce criticism of the government of this country create one of the greatest risks to the development of its economy in the long term. Despite threatening size of government debt, however, interest in U.S. government securities (GS) fell, and in a time of economic expansion, which never happened in the last 50 years. Another proof of this was a two-year government bonds auction on July 23 in which the yield fell to their lowest historical values of 0.5516 percent. Meanwhile, yields on 10-year bond dropped to 2.85 percent last week, which is its lowest level in 15 months, after speaking of the Federal Reserve chairman Ben Bernanke, who raised concerns about the fragile state of U.S. economy. This prompted investors to sell riskier assets, such shares shall be construed and take refuge in U.S. bonds. As a result, their demand was noted record levels this year. Submitted bids for participation in auctions of government securities exceeded on average 2.9 times the value of bonds offered for sale, which is 18 percent more annually.
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The billionaire investor George Soros warns U.S. lawmakers not to withdraw due to insufficient financial incentives to strengthen the economy. “I think this is not the right time for withdrawal of economic incentives,” said Soros. “Cut in salaries and bonuses to aid states with declining tax revenues are counter-measures, because the only way out of financial crisis is economic growth,” said the investor, who turns 80 years in August. Soros said that the U.S. signs on inflation and said that 10-year U.S. government bonds are traded at a yield of 3 percent - the lowest level since the beginning of the year. Soros, who is chairman of New York-based Soros Fund Management LLC, made similar comments on Europe, insisting that Germany will abandon its plans to cut its own budget expenditures. If this is not done, Europe will enter the deflationary cycle, he warned. U.S. President Barack Obama called on Republicans to stop blocking the legislative initiative in the U.S. Senate, which provides for an extension of unemployment benefits, as well as measures to assist small businesses. In an address last week, Obama criticized Republican representatives in the Senate to block the extension of long-term unemployment, which rely on millions of Americans to pay their bills. “Think what such a tactic for millions of Americans who lost their jobs since the crisis,” said the president. “For many, this was the only means to survive while looking for work.”
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The heads of companies around the world refrain from big plans for fundraising in anticipation economies to stabilize further survey shows Economist Intelligence Unit, made for Royal Bank of Canada and said. Only 38 per cent of respondents intend to raise fresh capital over the next two years despite the gradual increase of activity in mergers and acquisitions transactions in equity initial public offerings (IPO). The most popular way to raise funds expected to be equity transactions (down from 37 per cent of respondents), followed by syndicated loans (35%), issuance of bonds with investment grade (25%), secondary offerings of shares and securitization of 14 percent and IPO (11%). The study which was conducted between April 28 and May 25, participated 440 senior financial executives and others from around the world. Managers surveyed expect economic growth to recover in the next two years, but economic uncertainty saw the main markets as the biggest risk to fundraising. As the main risks are also political uncertainty and volatility in currency markets. Only five percent of respondents said that new regulations pose a risk to their plans to raise funds.
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The former Federal Reserve Chairman Alan Greenspan of the U.S. said that the recent decrease in the indexes is “typical” recovery and international instability are more to blame for this downturn than the problems in the U.S., says CNBC. “That which we encountered was an invisible wall that, as far as I know, is a typical break, which occurred in an economic recovery,” said Greenspan. “We must keep in mind that this is no ordinary economic recovery. I just go by the most unusual and pathogenic global financial crisis that has ever happened, “he says. “The current decline in the indexes is more international than American history,” he said, during that “there is innate instability in the euro area. Recovery is different now, “says Greenspan,” because it is dominated by large banks, individuals with high incomes and big businesses, while refunds in the past a major driver for the stirring of the economy are small businesses.
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