Schlagwort-Archiv: europe

Trump, Juncker and the China Tariffs

Early this year the US president Donald Trump has imposed tariffs on washers. In March tariffs on steel and aluminuim followed. As Donald Trump threatens with tariffs on cars and other products the situation escalates.

Today Donald Trump said he wanted trade with EU without tariffs at all. But why all this stories. Tariffs up, tariffs down and escalating trade negotiations?

China is an upcoming nation with a very succesfull history. It was the largest country with the biggest economy globally until the end of the 18th century. The invention of foundry technology and mass production, paper money and the calculator are devolopments of chinese people. After the two opium wars the chinese fall.

The last 30 years chinese economy finds traction, supported by western companies which finds cheap workers in China producing goods for the west. Western countries supports the situation which delivers cheap high quality and high tech products to their stores.

China becomes the production hub of the world. But with the production, also knowledge and development finds it‘s way into chinese companies. In old tradition of discipline and endurance chinese ingenieurs began to develope their own products. China of today is the second biggest economy with the most innovative industry globally. It‘s the leading country of solar technology and the leading chip producer globally. It‘s army has carriers and is the second strong behind the army of the USA. China is on the way to build its own space station and planing landings on the moon, plays a leading role in electro vehicles and 3D printing.

But all those developments are from a country that competes to the systems of the western states. China is still a communistic nation. Differences between the western nations and China are big. Cultural cooperation between China and the western nations are still difficult. The western countries can‘t integrate easily China into their cultural system. So USA has to defend itself to keep the world‘s leadership. The situation of China is better than the situation of USA. As USA starts to impose tariffs on chinese goods the chinese starts to buy companies or plants which produce the goods they wanted to import in EU and USA. For chinese this has a doubled effect. First they circumvent the taxes. The second effect is, that they can buy new technology and patents, so they can change production technology and demand fees for the licenses. So USA strengths the control of mergers with CIFIUS.

China has a lot of people with a big domestic demand. It has capacity enough to sell it’s goods to the own people. With the big population of India in the neighborhood the demand strengthens.

Also the financial situation looks better for the chinese.

The US debt is 105,42% of GDP, personal debt is up to 134% reaching 19 trio $ as GDP is more than 20 trio $.

 

The chinese government debt to GDP ratio for 2017 increases to 47,6% the last 20 years.

But it‘s corporate debt widens dramatically, so the banks had to regulate lending conditions. Chinese has to watch it’s bad loans related to corporate lending. Both the USA and China are widening the credit gap.

The chinese answer to taxes on goods for the USA was taxes on agriculture products from the USA. So the farmers of the USA were beaten. Today Donald Trump and Jean Claude Juncker made a deal that there are no tariffs on european cars and different other european products exported from Europe to the USA and that the EU widens the import of US soya products. „Soy beans is a very big deal.“: president Donald Trump remarks at the press conference after the meeting with Jean Claude Juncker. It looks like the USA wanted to start action against China with an old ally, the Europeans. Will Europe follow the course of USA?

Global crisis? Where to invest in difficult situation

The strong debts in $ are a crucial faktor for the economy of China, Japan, EU and USA. Also for the emerging markets could the strengthening US $ become critical. Japan has a debt of more than 200% of GDP. It has no other possibility as to pay the debt draw upon quantitative easing. German exports will advance with a weaker € and will be competitive with Japan that way. But EU need a common fiscal politik to get rid of the debt crisis of it’s memeber states. But without a debt crisis the parlament will not install an integrative fiscal politic.

Also USA has to decrease the debt. Total average debt per US citizen is at 192,510$, the average personal debt per US citizen is at 52,773$, both at high level. The total debt is nearly the 6-fold of the tax revenue and over 100% of GDP. Prof Larry Kotlikoff estimate the uncovered debt at a value of 220 trio $. The QE in USA helped the banks, but didn’t influence the real economy in self-sutaining way. But the assets are increasing, so the investors could be content. But the US assets are very high valued. Between 2009 and 2014 the S&P 500 increases by 85% while the global equity market increases only by 12%. The stock exchanges of the emerging markets partially decreases.

Globally the debts are increasing from 87trio$ in 2000 to 141trio$ in 2007 and 199 trio$ in the middle of 2014.

From 2008 to 2014 the cash generation in USA increases about 10 trio$, normally a very strong stimuli for the economy. Nonethless the economy slows to recession by stagnant development of prices. Additionally the prices for commodities did fall in the last year. If there would be a strong demand the prices would increase. Falling commodity prices are also a sign for a slowing industry.

Measured on price-earnings ratio the stock exchange was only more high-priced at the end of the 1990th and in the year 1929. Both dates are warning signs for a crash scenario.

Investors have high sentiment, assets are increasing but the transport sector slows. A booming industry needs goods and where goods are needed the goods have to be transported. A slowing transport sector is a sign for slowing economy. And industry is producing for their stocks which increases the offer by slowing demand. The industry prices are falling since 4 months. Further the strong US $ will decrease the export. This could influence the consumer prices. US economy is still stagnant even though the US weapon industry booms. The US stimuli for the economy had no sustainable grip in the economy and the labor market, So FED will not increase the rate and slowing profits were often the reason for crisis. The PMI of USA decreased from 57.9 to 51.5. The profit of the large corporates for 2014 decreases compared yty.

We had in 2014 in USA a very good year for IPO’s. Benessaince Capital declared that 273 companies delivered 84.9 bio$. The best sentiment for IPO’s is always at the end of a boom, because investors have a lot of money to invest. Carry trades, margin debt and lombard credits in February 2015 obtained 465 bio $. A very high level and no problem as long as the stock exchanges are booming. But if the market slows the broker will find no more money and has to close his positions. That could turn into a sharp drop at the indizes.

So there are some reasons not to invest broadly in the US economy. Also the EU and China has to be obeyed carefully to find the right values to invest. Africa, which economies which have high GDP growth, is political very unstable, so the investment in African states have to be very well-considered and China has it’s fight against the housing bubble, slowing economy and the consequential mortgage crisis. Investors should think about conservative investments like pharmacy or foodstoff like Nestle or Fronterra. Another niche could be industry values related to the US arms industry, because the Arabien states and Israel are buying high value of US weapons for their fight against Al Qaeda and other rebels. So Israel bought for 1,87 bio$ weapons

The strong debts in $ are a crucial faktor for the economy of China, Japan, EU and USA. Also for the emerging markets could the strengthening US $ become critical. Japan has a debt of more than 200% of GDP. It has no other possibility as to pay the debt draw upon quantitative easing. German exports will advance with a weaker € and will be competitive with Japan that way. But EU need a common fiscal politik to get rid of the debt crisis of it’s memeber states. But without a debt crisis the parlament will not install an integrative fiscal politic.

Also USA has to decrease the debt. Total average debt per US citizen is at 192,510$, the average personal debt per US citizen is at 52,773$, both at high level. The total debt is nearly the 6-fold of the tax revenue and over 100% of GDP. Prof Larry Kotlikoff estimate the uncovered debt at a value of 220 trio $. The QE in USA helped the banks, but didn’t influence the real economy in self-sutaining way. But the assets are increasing, so the investors could be content. So the US assets are very high valued. Between 2009 and 2014 the S&P 500 increases by 85% while the global equity market increases only by 12%. The stock exchanges of the emerging markets partially decreases.

Globally the debts are increasing from 87trio$ in 2000 to 141trio$ in 2007 and 199 trio$ in the middle of 2014.

From 2008 to 2014 the cash generation in USA increases about 10 trio$, normally a very strong stimuli for the economy. Nonethless the economy slows to recession by stagnant development of prices. Additionally the prices for commodities did fall in the last year. If there would be a strong demand the prices would increase. Falling commodity prices are also a sign for a slowing industry.

Measured on price-earnings ratio the stock exchange was only more high-priced at the end of the 1990th and in the year 1929. Both dates are warning signs for a crash scenario.

Investors have high sentiment, assets are increasing but the transport sector slows. A booming industry needs goods and where goods are needed the goods have to be transported. A slowing transport sector is a sign for slowing economy. And industry is producing for their stocks which increases the offer by slowing demand. The industry prices are falling since 4 months. Further the strong US $ will decrease the export. This could influence the consumer prices. US economy is still stagnant even though the US weapon industry booms. The US stimuli for the economy had no sustainable grip in the economy and the labor market, So FED will not increase the rate and slowing profits were often the reason for crisis. The PMI of USA decreased from 57.9 to 51.5. The profit of the large corporates for 2014 decreases compared yty.

We had in 2014 in USA a very good year for IPO’s. Benessaince Capital declared that 273 companies delivered 84.9 bio$. The best sentiment for IPO’s is always at the end of a boom, because investors have a lot of money to invest. Carry trades, margin debt and lombard credits in February 2015 obtained 465 bio $. A very high level and no problem as long as the stock exchanges are booming. But if the market slows the broker will find no more money and has to close his positions. That could turn into a sharp drop at the indizes.

So there are some reasons not to invest broadly in the US economy. Also the EU and China has to be obeyed carefully to find the right values to invest. Africa, which economies which have high GDP growth, is political very unstable, so the investment in African states have to be very well-considered and China has it’s fight against the housing bubble, slowing economy and the consequential mortgage crisis. Investors should think about conservative investments like pharmacy or foodstoff like Nestle or Fronterra. Another niche could be industry values related to the US arms industry, because the Arabien states and Israel are buying high value of US weapons for their fight against Al Qaeda and other rebels. So Israel bought for 1,87 bio$ weapons from USA incl bunker-buster-bombs and anti-air missiles. Saudi Arabia bought 10 Seahawk helicopters and 100 Hellfire rockets. And Qatar made a 11bio$ weapon deal with the USA. And Russia has it’s fight with the sanctions. But if Russia can handle the sanctions it could be also worht to think about a awell-considered investment,  because the values had a big drop and could turn up.

See also:

http://fritzfische.de/finance/?p=14

The results of the banking test of ECB

The ECB published the results of banking stress test. Most of the institutes passed the test with success.

Key results of comprehensive assessment of 130 largest euro area banks:

  • Capital shortfall of €25 billion detected at 25 participant banks
  • Banks’ asset values need to be adjusted by €48 billion, €37 billion of which did not generate capital shortfall
  • Shortfall of €25 billion and asset value adjustment of €37 billion implies overall impact of €62 billion on banks
  • Additional €136 billion found in non-performing exposures
  • Adverse stress scenario would deplete banks’ capital by €263 billion, reducing median CET1 ratio by 4 percentage points from 12.4% to 8.3%
  • Exercise delivers high level of transparency, consistency and equal treatment
  • Rigorous exercise is milestone for the Single Supervisory Mechanism starting in November
  • The AQR showed

    • that as of end-2013 the carrying values—or book values—of banks’ assets need to be adjusted by €48 billion.

    • that banks’ non-performing exposures increased by €136 billion to a total of €879 billion.

    • that a severe scenario would deplete the banks’ top-quality, loss-absorbing Common Equity Tier 1 (CET 1) capital—the measure of a bank’s financial strength—by about €263 billion. This would result in the banks’ median CET1 ratio decreasing by 4 percentage points from 12.4% to 8.3%. This reduction is higher than in previous similar exercises and is a measure of the rigorous nature of the exercise.

    You love to see the result of the banking test of your bank?

    See

    http://www.ecb.europa.eu/pub/pdf/other/aggregatereportonthecomprehensiveassessment201410.en.pdf

    at page 140 following pages

    or

    http://www.ecb.europa.eu/ssm/assessment/html/index.en.htm

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