Wall Street Journal Reports: Income Inequality a “Key Issue” for Global Economy.Absolutely. Hands down, no questions asked. Without income equality and a strong middle class no nation or its economy can function properly for very long. Unfortunately, over the last two decades the FED has been hell bent on destroying the middle class for the benefit of the rich and powerful. Now we find ourselves in the economy where the 85 richest people have more wealth than the bottom 3.5 Billion people.
Will this trend change anytime soon?
Not a chance. If we look at the actions of the Federal Reserve, they will perpetuate this trend until people get fed up and demand change. Until that time, they will continue to inflate the markets while providing free credit to the top 1-5%. Enriching them in the process. Unfairly I might add. As for you? Better luck next time. Either get rich or you will be stuck in this “income inequality conundrum” for the foreseeable future. A sad state of affairs.
Oh, I almost forgot, if you need someone to blame, blame Greenspan, Bernanke and Yellen.
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Income Inequality a ‘Key Issue’ for Global Economy
Income inequality is becoming a bigger issue on the global stage, with the IMF out this week saying it is one of the biggest challenges to global growth
“It’s a serious economic and political issue,” Eswar Prasad, author of the book “The Dollar Trap”, said this morning on the MoneyBeat show. “I’ve seen it close up-front in emerging markets.” When the people perceive that the vast majority of a nation’s wealth is going to small minority at the top, it erodes the desire for reform.
“Dealing with inequality is going to be a key issue in the years ahead,” he said. “Social instability is a major concern, not just in the advanced economies, but in many other emerging markets.”
Turning to China, where Premier Li warned about a wave of bankruptcies as the nation tries to introduce market-based reforms, Mr. Prasad said, “they’re playing a very dangerous game but one that they have no choice but to play.”
Various reports confirm. Attacks on Jews in Ukraine are intensifying (see report below).Just last night a Rabbi and his 3 year old son were beaten to a pulp by a group of neo-fascist closely related to Ukraine’s new government. That’s right, not by Russian troops, but by the same people who want the US to interfere militarily into Ukraine and possibly start a WW 3. President Obama met with the illegitimate and illegal leader of Ukraine in the White House. In the fu$%ing White House. My questions are as follows…..
Why is Obama meeting with a Neo-Fascist backed illegitimate government leader in the White House?
Why is Obama Administration hell bent on going to war over Ukraine? A small country 6,000 miles away from American shores.
Can someone explain this to me….or….. are these people just a bunch of fucking warmongers?
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After two Jewish Yeshiva students were attacked last month – a story covered by Times of Israel – Moshe Reuven Essman, one of the Chief Rabbis of Ukraine, urged Jews to flee Kiev if not the entire country while they still can.
According to an article in Ma’ariv, Essman said the following:
“I said to my community to go out from the city center or the city in general and if possible from the state,” says Essman. “I did not want to open your tongue, but there are always warnings about attacking Jewish institutions.”
With the situation in Ukraine having some to a head, with chaos and violence in the streets of Kyiv, concerns about the safety of the Jewish community in the city is rising. Many Jews live within walking distance of the main square – Maidan – where the violence has been occurring, and the situation remains unpredictable.
Although there has been no overt signs of anti-Semitism in the EuroMaidan protests to date, one of the leading political parties leading the protests has far-right neo-Nazi and anti-Semitic roots. As the BBC has noted, in 2005 Oleh Tyahnybok, the leader of Svoboda, signed an open letter to Ukrainian leaders, including President Yushchenko, entitled Stop the Criminal Activities of Organised Jewry, the comments of which the BBC summarized as follows:
• calling for the government to halt the “criminal activities” of “organised Jewry”, • Lists Jewish businessmen, who got rich in the 1990s, and claims they control Ukrainian media • Describes Zionism as “Jewish Nazism” and warns of “genocide” through the impoverishment of Ukrainians • Demands investigation into the activities of Jewish organisations headed by people “suspected of serious crimes”
Svoboda is now the fourth largest political party in the Ukrainian Parliament, and even beyond Tyahnybok, other Svoboda political leaders have also made anti-Semitic remarks. For example, Parliamentary deputy Igor Miroshnychenko once called Ukrainian-born American film actress Mila Kunis a “dirty Jewess”, while another deputy founded the Joseph Goebbels Political Research Center in 2005.
To provide some context, from a historical perspective, Ukraine does have a history of anti-Semitism, and there was widespread collaboration with the Nazis in Ukraine after the German invasion of the former Soviet Union in 1941. Ukraine suffered horribly under the forced farm collectivization Soviet Dictator Joseph Stalin in the 1930s, with as many as seven million Ukrainians dying from starvation, including three million children. Not surprisingly, many Ukrainians initially looked on the Germans as liberators from Soviet rule, and what many perceived as Russian “Jewish Bolshevism”.
It should be noted that the vast majority of the protesters on Euromaidan to date have been ordinary citizens who in the face of horrifying losses from pro-government snipers in the security forces, the opposition has forced the authoritarian Ukrainian President Victor Yanukovych to flee Kiev. The opposition seems to have a large proportion of young, democratically oriented liberals who wish to be part of what they perceive as a civilized EU and Europe rather than a Russian-dominated “Eurasian Customs Union”. And even Svoboda, as it emerged as a power in Parliament recently has moderated its language and seems to have purged itself of its previous anti-Semitic leanings.
With all that said, however, given the history of Jews in Ukraine, the situation in that country bears watching closely as events unfold.
Bill Gates intends to leave less than $10M for each if his three children “so they can make their own way” and that the family mostly drives a minivan when all going somewhere.
Bill Gates continued to fly coach until 1997, at which point his net worth was $36 billion.
Bill Gates has saved over 5-10 million lives by “bringing vaccines and improved healthcare to children internationally”.
The generic silhouette outline placeholder picture in Microsoft Outlook 2010 is actually Bill Gates’ mug shot.
Steve Jobs accused Bill Gates of stealing from Apple, Gates said, “Well, Steve, I think there’s more than one way of looking at it. I think it’s more like we both had this rich neighbor named Xerox and I broke into his house to steal the TV set and found out that you had already stolen it.”
ALSO, A FEW BILL GATES QUOTES:
“I really had a lot of dreams when I was a kid, and I think a great deal of that grew out of the fact that I had a chance to read a lot.”
“Be nice to nerds. Chances are you’ll end up working for one.”
“Intellectual property has the shelf life of a banana.”
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Dow 100,000, people have learned their lesson in 2008 meltdown, stocks will not drop 50% from the current levels, unicorn farm is opening up on the moon, etc…..Whatever you say Mr. Buffett.
Actually, I agree with him on two issues. No matter how much the Perma Bears huff and puff, the stock market will not decline over 50% in the upcoming Bear Market of 2014-2017. Our mathematical and timing work confirms the same. Sorry, Elliot Wave followers. The market is not going down 95%. I also agree that we will see DOW 100,000 right before the BIG WAR starts. Most of the gains will be from inflation thou.
I do take issue with Mr. Buffett when he states that “people have learned their lesson from the 2008”. I disagree, not when the Federal Government comes in and bails everyone out. In fact, current economic environment is continuation of insane macroeconomic policies that FED has implemented. The balance sheet is massively leveraged and our existing economy depends entirely on cheap credit and speculation. No doubt, Buffett understands this very clearly. He just can’t say it.
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Warren Buffetttold CNBC on Friday he would be “surprised a lot” if stock prices around the world fell 50 percent from their current levels.
Aanother financial crisis “someday” in the years ahead that will shock financial markets, but he doesn’t think it will happen anytime soon.
“Humans will behave in crazy ways, both on the upside and the downside in the next 50 years. It’s very unlikely they do it in the next few years because after something like 2008, once they get out of the emergency room, they’re a little more careful for awhile.”
During an appearance on CNBC’s “Squawk Box,” Buffett told 58-year-old host Joe Kernen that he will live to see the Dow at 100,000. “I won’t, but you will,” the 83-year-old Berkshire Hathaway (BRK-A) chairman said.
Buffett pointed out that Berkshire stock has dropped 50 percent four times in its history, but always recovered.
While he now thinks his characterization of the 2008 crisis as an “economic Pearl Harbor” now looks understated, the U.S. did recover and he believes “this country will come through anything.”
Buffett said he’s been bullish on the U.S. economy since the fall of 2008, but he doesn’t expect it to rapidly accelerate this year. Instead, he thinks it will continue its slow upward trajectory.
Buffett said he’d advise people to “stay away” from bitcoinbecause the cryptocurrency is a “mirage” without any intrinsic value, although it’s an efficient way to transfer dollars.
Buffett also said Berkshire Hathaway has “almost” eliminated its catastrophe insurance in the U.S. because rates have dropped too much.
“The rates came down dramatically, and we do not regard the exposure as having come down dramatically,” Buffett said.
Berkshire is still writing policies in Asia.
Asked about the controversy over faulty ignition switches in General Motors (GM) cars, Buffett said CEO Mary Barrahas a “new chance” because she just started in the post but the company needs to tell the truth and act quickly to fix any problems.
He said his advice is to “Get it right, get it fast, get it out, get it over, but get it right first.”
In another sign that the “Dead Cat Bounce” for the Real Estate market is now over, Blackstone Group has announced that it’s real estate acquisition pace has slowed 70% from last years pace due to higher prices. In fact, this is the trend seen across the industry. Investors, hedge funds, institutions are all slowing down their real estate acquisitions to the tune of 70-90%.
“The institutional wave has passed,” Gray, who oversees almost $80 billion in property investments, said in a telephone interview. “It’s at a much lower level than it was 12 or 24 months ago.”
What happens next?
Easy. The real estate market might hover here for some time. Not too long thought. As soon the Bear Market of 2014-2017 hits and the US falls back into a severe recession, you will see housing going down once again. Once investors realize where we are in the real estate cyclical composition (dead cat bounce and not expansion) you will see the likes of Blackstone trying to get rid of their properties as fast as possible. With investors heading for the doors, mass volume of real estate should hit the market. Collapsing existing values just as fast, if not faster, than their initial ascend between 2010-2014.
Good luck selling your 43,000 rental properties Blackstone.
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Blackstone Group LP (BX) is slowing its purchases of houses to rent amid soaring prices after a buying binge made it the biggest U.S. single-family home landlord.
Blackstone’s acquisition pace has declined 70 percent from its peak last year, when the private equity firm was spending more than $100 million a week on properties, said Jonathan Gray, global head of real estate for the New York-based firm. After investing $8 billion since April 2012 to buy 43,000 homes in 14 cities, the company has narrowed most of its purchasing to Seattle, Atlanta, Miami, Orlando and Tampa.
“The institutional wave has passed,” Gray, who oversees almost $80 billion in property investments, said in a telephone interview. “It’s at a much lower level than it was 12 or 24 months ago.”
Private-equity firms, hedge funds, real estate investment trusts and other institutional investors have spent more than $20 billion to buy as many as 200,000 rental homes in the last two years. They snapped up properties after prices fell as much as 35 percent from the 2006 peak and rental demand rose from the almost 5 millionowners who went through foreclosure since 2008. PresidentBarack Obama credited the investors for helping put a floor under the plunging housing market and consumer advocates such as the National Community Reinvestment Coalition later blamed them for soaring prices in some cities.
Photographer: Victor J. Blue/Bloomberg
Blackstone Group LP Global head of real estate Jonathan Gray said, “The institutional… Read More
Foreclosures Fall
American Homes 4 Rent and Colony American Homes, the second- and third-largest single-family landlords, also have been scaling back as bargains dry up. Home prices have risen 24 percent since a post-bubble low in March 2012, which was about when corporate buyers started their buying spree, according to the S&P/Case-Shiller index. The rate of U.S. foreclosure startsfell to its lowest level in eight years in the fourth quarter as higher prices allowed more delinquent homeowners to sell without taking a loss, according to the Mortgage Bankers Association.
Jade Rahmani, an analyst for Keefe, Bruyette & Woods Inc., said large investors are focusing on fewer locations as they gain experience and prices go up.
“Home prices have increased, which narrows the acquisition opportunity,” Rahmani said. “In addition, these companies have done this for a certain amount of time and there are lessons learned.”
While institutional purchases nationwide fell to a 22-month low in January, corporate investors were more active in the Atlanta region, buying 25 percent of homes sold, according to data firm RealtyTrac. That helped drive up Atlanta prices 37 percent since the March 2012 trough.
Outbidding Homebuyers
Last week, a group of 80 tenant and neighborhood advocacy organizations, including the National Community Reinvestment Coalition and the National Consumer Law Center, asked federal regulators “to address first-time homebuyers being outbid, tenants being displaced, and neighborhoods undergoing dramatic changes as private equity and investor cash continues flooding into local housing markets.”
Gray, 44, said the influence of corporate investors on home prices has been exaggerated. They represent at most 10 percent of the 2 million homes bought by investors in the last two years, according to Rahmani, the analyst.
“There’s a narrative out there that institutional buyers are driving the market,” Gray said. “But the reality is that institutional buyers are in a relatively limited number of markets, their buying is tapering and yet home prices continue to go up at a pretty strong clip nationally — even in markets where institutional buyers haven’t purchased a single home.”
American Homes
At the height of its activity, Blackstone’s Invitation Homes LP made purchases that may have comprised as much as 6 percent of sales for several months in one or more of its 14 markets, Gray said. This may have had a short-term impact on prices, he added.
“We definitely helped alleviate excess distressed housing stock,” he said. “We weren’t 5 or 6 percent for a sustainable period of time in any market.”
After collecting more than 21,000 homes in 42 markets, American Homes 4 Rent (AMH) has slowed its buying in some locations, chief executive officer David Singelyn said at a March 5 investor conference in Florida. The benefit of being in 22 states is that the Agoura Hills, California-based company has the ability to move within many locations and “buy as the opportunities ebb and flow,” Singelyn said.
Colony Financial Inc. (CLNY), a REIT that invests in Colony American Homes, slowed its funding for acquisitions last year to focus on improving operations, CEO Richard Saltzman said in a November conference call. Colony Financial has been gradually allocating less to the landlord business and capped its investment at $550 million for the quarter ending Dec. 31, Saltzman said last month.
Slowing Purchases
Colony American, which owns 16,000 homes, declined to comment, according to Owen Blicksilver, an outside spokesman for the Scottsdale, Arizona-based landlord. American Homes 4 Rent Chief Financial Officer Peter Nelson didn’t reply to a phone message seeking comment.
American Residential Properties Inc., a landlord with 6,000 homes, slowed acquisitions by almost half in its latest quarter ending Dec. 31. It invested $104 million in 633 homes compared with $204 million on 1,251 homes in the previous quarter, the Scottsdale, Arizona-based company said in a statement.
“We intend to maintain the pace of our acquisition activity at roughly the same rate we had in the fourth quarter,” CEO Stephen Schmitz said in an earnings conference call yesterday.
Ramping Up
Some corporate rental companies are still focused on growth.
“We’ve been ramping up acquisitions,” David Miller, CEO of Silver Bay Realty Trust, which owned 5,642 homes as of Dec. 31, said in a conference call with investors last week.
“Looking ahead, we plan to acquire in Florida and Texas while opportunistically adding properties to our Atlanta market and perhaps other markets as well.”
While their acquisitions slow, Blackstone and Colony are extending their reach into the rental business by offering financing to smaller landlords. Last month, Blackstone’s B2R Finance LP originated its first loan for $5.7 million and Colony formed a joint-venture with plans to originate $1 billion in landlord financing this year.
Both companies plan to package the loans as mortgage-backed securities, similar to Blackstone’s $479 million bond issue in October, the first securitization of single-family rental properties.
Long Haul
That’s concerning to U.S. Representative Mark Takano, a Democrat from California. This month he called for the Consumer Financial Protection Bureau, the Department of Housing and Urban Development, the Securities and Exchange Commission and the Treasury to report on the possible risks of “the recent increase of investor owned rental properties and the development of single-family rental-backed securities.”
Institutional investors are not going away even though their size will remain a modest part of the market, Gray said.
“We’re not selling the homes. We’re building a long-term business,” he said.
If you’ve had any doubts who China aligns itself with, those doubts should now be gone. In no uncertain terms China warned the West to “Back Off” from any sanction threat against Russia. In fact, according to the Chinese any sanctions against Russia can spiral into a chain of events with unforeseeable consequences. I tend to agree.
If you look at Russia at this juncture, Putin is in no mood to mess around. Should the West push forward with sanctions, the EU might find itself on a receiving end of Putin’s wrath. If sanctions go through two things will happen immediately. In defiance, Putin will immediately invade Ukraine (flipping the proverbial bird to the West) and possibly shutting down gas/commodity supplies to the West. Or he can demand payment for gas in gold. Whatever the case, this will send a massive economic shock wave throughout the EU and start the “Dangerous Spiral” China is talking about.
Let’s see who blinks first.
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China warns of dangerous Russia sanctions ‘spiral’
(Reuters) – China’s top envoy to Germany has warned the West against punishing Russia with sanctions for its intervention inUkraine, saying such measures could lead to a dangerous chain reaction that would be difficult to control.
In an interview with Reuters days before the European Union is threatening to impose its first sanctions on Russia since the Cold War, ambassador Shi Mingde issued the strongest warning against such measures by any top Chinese official to date.
“We don’t see any point in sanctions,” Shi said. “Sanctions could lead to retaliatory action, and that would trigger a spiral with unforeseeable consequences. We don’t want this.”
The interview was conducted on Wednesday, the same day that the EU agreed a framework for sanctions that would slap travel bans and asset freezes on people and companies accused by Brussels of violating the territorial integrity of Ukraine.
German Chancellor Angela Merkel, who has taken the lead in trying to mediate in the crisis, has said the measures, which mirror steps announced by the United States, will be imposed on Monday unless Russia accepts the idea of a “contact group” to resolve the crisis diplomatically.
Using her toughest rhetoric since the crisis began, she warned in a speech in parliament on Thursday that Russia risked “massive” political and economic damage if it did not change course in the coming days.
Russia’s Deputy Economy Minister Alexei Likhachev responded by promising “symmetrical” sanctions by Moscow.
But Shi urged patience, saying the door for talks should remain open even after a referendum on Sunday in which Ukraine’s southern region of Crimea could vote to secede and join Russia. Merkel and other western leaders have denounced the referendum as illegal and demanded that it be canceled.
“We still see a chance to avoid an escalation. The door to talks is still open. We should use this possibility, also after the referendum,” Shi said.
Chinese President Xi Jinping, who will visit Berlin and other European capitals later this month, held separate phone calls on the Ukraine crisis with Merkel and U.S. PresidentBarack Obama earlier this week.
But beyond urging restraint and dialogue, China has shown little public interest in becoming involved diplomatically, a stance that is in keeping with its low-key approach to many international crises.
Still, Ukraine presents Beijing with a dilemma. On the one hand it is a traditional ally of Moscow and has routinely sided with its northern neighbor in major international conflicts. On the other hand, the question of territorial integrity is a tricky issue for the Chinese because of Tibet and Taiwan.
If the West’s confrontation with Russia over Ukraine worsens in the coming weeks, Xi’s visit, the first by a Chinese president to Germany in eight years, risks being overshadowed by the crisis.
Before coming to Berlin, Xi is due to attend a nuclear security summit in the Netherlands which Obama, Merkel and dozens of other world leaders will attend. He is also due to visit Paris and Brussels.
I don’t believe we have a place for an organization such as NSA in our society. It must go. Benjamin Franklin said it best over 200 years ago.
“They who can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety.” -Benjamin Franklin
Now, let’s take a look. Zuckerberg says:
“The U.S. government should be the champion for the Internet, not a threat,” he wrote in a post on his Facebook page yesterday. “They need to be much more transparent about what they’re doing, or otherwise people will believe the worst.”
“We encrypt communications, we use secure protocols for traffic, we encourage people to use multiple factors for authentication and we go out of our way to help fix issues we find in other people’s services,” Zuckerberg said. “When our engineers work tirelessly to improve security, we imagine we’re protecting you against criminals, not our own government.”
NSA says:
“NSA uses its technical capabilities only to support lawful and appropriate foreign intelligence operations, all of which must be carried out in strict accordance with its authorities,” it said. “NSA does not use its technical capabilities to impersonate U.S. company websites. Nor does NSA target any user of global Internet services without appropriate legal authority. Reports of indiscriminate computer exploitation operations are simply false.”
Who do you think is telling the truth here? I blame Obama.
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“The U.S. government should be the champion for the Internet, not a threat,” he wrote in a post on his Facebook page yesterday. “They need to be much more transparent about what they’re doing, or otherwise people will believe the worst.”
Zuckerberg’s comments follow reports that the National Security Agency has been disguising itself as Facebook to gain access to users’ computers for spying, according to documents leaked by former NSA contractor Edward Snowden to the online news site The Intercept. It was the latest in a string of revelations about government surveillance that led Facebook, along with Google Inc., Apple Inc. and others, to call on the U.S. to disclose more about government requests for user data.
“We encrypt communications, we use secure protocols for traffic, we encourage people to use multiple factors for authentication and we go out of our way to help fix issues we find in other people’s services,” Zuckerberg said. “When our engineers work tirelessly to improve security, we imagine we’re protecting you against criminals, not our own government.”
Photographer: Andrew Harrer/Bloomberg
Facebook Inc. Chief Executive Officer Mark Zuckerberg said, “When our engineers work…Read More
Caitlin Hayden, spokeswoman for Obama’s National Security Council, confirmed the conversation between Zuckerberg and the president. She declined to give any details.
NSA Statement
In a statement yesterday, the NSA said it is “inaccurate” to say it is impersonating Facebook or any other websites.
“NSA uses its technical capabilities only to support lawful and appropriate foreign intelligence operations, all of which must be carried out in strict accordance with its authorities,” it said. “NSA does not use its technical capabilities to impersonate U.S. company websites. Nor does NSA target any user of global Internet services without appropriate legal authority. Reports of indiscriminate computer exploitation operations are simply false.”
Zuckerberg, the 21st-richest person in the world according to the Bloomberg Billionaires Index, has been ramping up his involvement in political issues, from education in New Jersey to infrastructure development in Africa. He has donated to candidates in both the Democratic and Republican parties and started an advocacy group called Fwd.us to lobby for changes to U.S. immigration policy.
A massive down day with the Dow Jones losing -231 points (-1.41%) and the Nasdaq losing -63 points (-1.46%). Today’s market action closed the large gap that was left behind on March 4th when Putin promised not to invade Ukraine.
Is this a simple technical correction or start of a larger trend?
Over the last few weeks, and on numerous occasions, I have outlined how 5-Year cycles control large trends withing the stock market. For instance, the bull market between October 10th, 2002 bottom and October 11th, 2007 top was exactly 5 Years and 1 trading day. Thus far, the market topped out on March 7th. That’s right, exactly 5 Years and 1 trading day from March 6th, 2009 bottom.
Does that mean the bear market has already started?
The answer is a lot more complicated than just one cycle outlined above. I did mention before that the bear market of 2014-2017 has already started (on the Dow) on December 31st, 2013. If you would be interested in learning exactly where we are in this bear market and the exact composition of the decline over the next 3 years, please Click Here.
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As Bloomberg reports, investors poured $41 Billion into ETF’s over the last 4 weeks, suggesting further upside. What they didn’t mention is that there was a $40 Billion outflow in January and February when the market tanked. The net result? The Dow went down 1,300 points in Jan/Feb and went up 1,300 points over the last 5 weeks. A ZERO SUM GAME.
The report goes on “Dwindling outflows show investors regaining confidence that the global economy is going to grow,” Joseph Quinlan, the chief market strategist at Bank of America Corp.’s U.S. Trust, which oversees about $330 billion, said by phone from New York. “When you look at growth in the U.S., this is emblematic of one economy pulling other economies along.”
Based on our mathematical and timing work that is a misconception. No surprise, it’s coming out of Bank of America. It doesn’t show investor confidence, its shows herd mentality or yield chasing. Further, capital inflows are indicative of market tops and not market bottoms or acceleration points. Please see the chart below. Retail investors are nowhere to be found at market bottoms. Yet, they are always there in mass at market tops. Just as today. That has always been and will always be the case. Just another red flag for today’s market.
As our work indicates, the bear market of 2014-2017 is just around the corner. If you would like to learn more about exactly when it starts and its exact internal structure, please Click Here.
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ETFs Get $41 Billion Erasing Global Withdrawals as Economic Optimism Rises
Investors who beat a path out of global equity markets earlier this year are stampeding back in.
More than $41 billion has returned to U.S. exchange-traded funds that own shares in the past four weeks, reversing withdrawals that swelled to as much as $40.2 billion last month, according to data compiled by Bloomberg. Cash has flowed back as the MSCI All-Country World Index rallied 5.8 percent from the four-month low it reached Feb. 4, when turmoil in emerging markets spurred speculation the global recovery would slow.
The reversal is the latest sign of confidence in a five-year bull market that has gained momentum amid 11 straight quarters of expansion in U.S. gross domestic product. The MSCI gauge this month reached its highest level since 2007 after investors blamed cold weather for U.S. retail sales and housing data that trailed economists’ forecasts while world leaders pledged to maintain accommodative policies to spur growth.
“Dwindling outflows show investors regaining confidence that the global economy is going to grow,” Joseph Quinlan, the chief market strategist at Bank of America Corp.’s U.S. Trust, which oversees about $330 billion, said by phone from New York. “When you look at growth in the U.S., this is emblematic of one economy pulling other economies along.”
Global Equities
About $1.5 billion was deposited to global equity ETFs on March 11, bringing the total inflows for the month to $15.3 billion, data compiled by Bloomberg show. Investors pulled almost $15 billion out of the funds in January and the MSCI All-Country World Index was down as much as 5.8 percent through Feb. 4 after Argentina unexpectedly devalued the peso, Turkey doubled interest rates and manufacturing growth slowed in China.
U.S. consumer confidence improved last month and employers added more workers than projected, a sign that the world’s largest economy is starting to shake off the effects of the severe winter weather that slowed growth at the start of 2014.
Federal Reserve Chair Janet Yellen has pledged to maintain Ben S. Bernanke‘s policy of cutting bond purchases in measured steps. While policy makers monitor data to determine if recent weakness in the economy is temporary, “if there’s a significant change in the outlook, certainly we would be open to reconsidering,” she said in testimony to Senate Banking Committee on Feb. 27.
Bond Purchases
Three rounds of bond purchases from the Fed have propelled the Standard & Poor’s 500 Index as much as 178 percent higher from a bear-market low in 2009. The benchmark gauge hit an all-time high of 1,878.04 on March 7. It rose 0.1 percent to 1,870.56 as of 9:56 a.m. in New York as data showed retail sales rose for the first time in three months and jobless claims unexpectedly fell.
“Stocks seem to shrug off any hits that would have moved them lower,” Matt McCormick, who helps oversee $11 billion as a portfolio manager at Cincinnati, Ohio-based Bahl & Gaynor Inc., said in a phone interview. “The thinking is probably that Yellen will come in and bring liquidity to the market if we get anywhere close to a substantial correction, so why not enjoy the party while it lasts.”
Not only in the U.S., monetary policies remain loose from Japan to Europe. The Bank of Japan this week maintained record easing, keeping a pledge to expand the monetary base at a pace of 60 trillion to 70 trillion yen ($680 billion) per year. Seventy-three percent of economists surveyed by Bloomberg forecast the central bank will add to easing by the end of September to support the economy.
‘Long Way’
In the euro region, European Central Bank President Mario Draghi has cut interest rates five times and taken the central bank down unconventional policy routes since assuming office in November 2011.
Bill Schultz, chief investment officer who oversees about $1.1 billion at McQueen Ball & Associates in Bethlehem, Pennsylvania, says the return of equity inflows will only be sustained should growth pick up in coming months.
“I’m not committing new money to the market until I see signs there’s a reason to,” Schultz said. “We still need to see signs that the weather-related phenomenon was truly that — a slowdown in economic growth because of people not necessarily spending as much as they may have. The S&P has come a long way. It needs a new catalyst to get it moving forward.”
Investors are shifting to Europe while withdrawing from emerging markets as optimism mounts that growth in advanced economies is strengthening while developed economies are poised to falter.
Growth Forecasts
ETFs investing in international equities have drawn $448.8 million this year as demand for assets in countries from Japan to Italy and Spain increased, data compiled by Bloomberg show. Emerging-market funds lost $12.1 billion, more than double the total redemption of $5.6 billion for the whole year of 2013, according to the data.
While the euro region is forecast to rebound from a two-year recession in 2014 and growth in the U.S. will accelerate to 2.9 percent from 1.9 percent last year, the economies in some of the biggest emerging countries — Brazil, Russia, India, China and South Africa — are projected to stall at a growth rate of 5.6 percent, economists’ estimates compiled by Bloomberg show.
More Stability
“It is clear that developed markets will pull along the developing markets,” Quinlan at U.S. Trust said. “We haven’t hit the bottom with emerging markets. Investors are expecting them to get cheaper and want them to get cheaper before they take on that risk. They’re also looking for more stability over there.”
The MSCI Emerging Markets Index has lost 5.8 percent this year, trailing the gauge of global equities, as currencies from Turkey to South Africa tumbled while tensions between Ukraine and Russia escalated.
While turmoil in developing nations will boost market volatility, it’s not going to derail the global recovery, according to Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co.
“There will be this gradual improvement and momentum that will kick in,” Morganlander, whose firm oversees about $150 billion of assets and manages ETF portfolios, said by phone. “The inflows will continue in the coming months as investors try to get ahead of the existing economic data and earnings.”
