There are increasing fears of global recession in 2016 and equity markets saw significant correction in the beginning of 2016 on global slowdown concerns. According to latest global economic data, growth remains sluggish and in my view, investors need to remain cautious when considering fresh exposure to risky asset classes. This article discusses some key economic indicators that point to…
Sunday, 28 February 2016 00:00

The Diminishing Impact Of Debt On GDP Growth

Debt and leveraging has been a key point of discussion after the financial crisis of 2008-09. In the period prior to the crisis, the private and household sector witnessed significant leveraging and the crisis started with the sub-prime loans, before spilling over to the entire financial system. Eight years down the line, there seems to be little learning from the…
Saturday, 27 February 2016 00:00

US Government Liability Is 147% Of GDP

For the fourth quarter of 2015, US GDP was $18.1 billion with total public debt at $18.1 billion for 3Q15. Therefore, the US government debt-to-GDP is approximately 100% as of December 2015. However, a deeper investigation into the financial report of the United States government shows that the government liability is significant higher. This article details how US government liability…
Saturday, 27 February 2016 00:00

Federal Debt And $1 Trillion In Debt Servicing

Point of Discussion – The United States Government is Potentially in an Inescapable Debt Trap Since the great financial crisis of 2008-09, the private sector and the household sector have deleverage (or moderately leveraged) while the government sector has leveraged significantly. To put things into perspective, the total Federal debt was $9.2 trillion at the beginning of 2008 and Federal…
Monday, 15 February 2016 00:00

China In Renewed Economic Downturn

China has been in news for not so good reasons from an economic and financial markets perspective. While China’s real economic activity continues to remain sluggish, the country’s equities have slumped by 17% for YTD16 and by 31% in the last six months. A meaningful slowdown or recession in China is likely to have a significant impact on the global…
Sunday, 31 January 2016 00:00

Economic Growth Trending Lower

There is little doubt that global economic growth has been weak in the recent past. The chart below that gives the “Global Purchasing Managers Index” confirms my point on weak economic growth. I wanted to highlight this chart as the recent meltdown in equities has strong fundamental factors driving the downside.     It is clear from the chart above…
Much has been discussed about a potential credit crisis in China and I believe that the worst might still not be over for the economy. From published data perspective, China’s manufacturing PMI remains below 50, indicating continued contraction. In my view, manufacturing PMI is likely to remain below 50 through 2016 with the global economy also heading towards a meaningful…
Saturday, 02 January 2016 00:00

Probability Of US Recession In 2016

The probability of US recession can be predicted by the Treasury spread and this article looks at the Treasury spread as of December 2015 to discuss the probability of recession. Before discussion the recession probability, I must mention here that there are internal factors that are likely to impact GDP growth and there are external factors that are also likely…
Sunday, 23 November 2014 00:00

The PIIGS Debt Refinancing Wall

In one of our earlier articles, we showed that seven Euro-Area countries are already in deflation and we believe that the Euro-Area will slip into recession in 2015. Amidst the concerns related to deflation and recession, the PIIGS have significant sovereign debt repayment scheduled for 2015 as shown in the chart below.   Therefore, the year 2015 will be busy…
Thursday, 20 November 2014 00:00

Seven Euro-Area Members In Deflation

The globally economy is slowing down and certain regions are in deeper trouble than others. The chart below gives Euro-Area harmonized CPI as of September 2014. Seven Euro-Area members are already in deflation as of September 2014. We believe that the Euro-Area is likely to slip into recession in 2015. In line with this opinion, we are underweight the Euro-Area…