qe - Blog - Global Risk Community2024-03-29T00:50:26Zhttps://globalriskcommunity.com/profiles/blogs/feed/tag/qeGFMI to Host the 2nd Edition Insurance and Pension Asset Allocation Conference on February 26-28, 2018 in New York, NYhttps://globalriskcommunity.com/profiles/blogs/gfmi-to-host-the-2nd-edition-insurance-and-pension-asset2017-12-11T22:03:26.000Z2017-12-11T22:03:26.000ZAmanda Pinkhttps://globalriskcommunity.com/members/AmandaPink<div><p>Delegates attending the <strong>2<sup>nd</sup> Edition Insurance and Pension Asset Allocation Conference, February 26-28, 2018 in New York</strong> will gain invaluable insight into how they can achieve a greater yield from their fixed income assets as well as how they can better manage the risk associated with alternative investments. Develop competitive to enhance the profitability of your investment portfolios.</p><p> </p><p><strong>Attending This Premier GFMI Conference Will Enable You To:</strong></p><ul><li><strong>Develop</strong> profitable insurance asset investment strategies in the low rate environment</li><li><strong>Maximize</strong> returns on fixed income assets</li><li><strong>Increase</strong> yield through smart alternative investment choices</li><li><strong>Optimize</strong> the investment portfolio to generate greater alpha without increasing risk through effective ALM</li><li><strong>Improve</strong> the efficiency of investment operations through better navigation of the regulatory environment</li></ul><p><strong> </strong></p><p><strong>Key Speakers Include:</strong></p><ul><li><strong>Sara Bonesteel</strong>, Chief Investment Officer, Retirement & Group Insurance, <strong>The Prudential Insurance Company of America</strong></li><li><strong>Peter Teuscher</strong>, Managing Director, Head of Alternative Investments, <strong>Zurich Alternative Asset Management, LLC</strong></li><li><strong>Lisa M. Longino</strong>, Senior Vice President, Senior Managing Director, Global Portfolio Management, <strong>MetLife, Inc.</strong></li><li><strong>Eric Janecek</strong>, Head of Asset Liability Management Strategies & Development, <strong>Lincoln Financial Group</strong></li><li><strong>Xiaowei Han</strong>, ALM Actuary, Head of Enterprise ALM, <strong>Transamerica</strong></li><li><strong>Charles Schwartz</strong>, Head of Derivatives, <strong>AXA US</strong></li></ul><p> </p><p>For more information, please visit: <a href="http://bit.ly/2BCwj3x">http://bit.ly/2BCwj3x</a> or you can contact Amanda Pink at <a href="mailto:amandap@marcusevansch.com?subject=Agenda%20Request:%2012th%20Annual%20Liquidity%20Management%20(Supply%20Chain%20Brain)">apink@global-fmi.com</a></p><p> </p><p><strong><em>marcus evans</em></strong> <em>conferences annually produce over 2,000 high quality events designed to provide key strategic business information, best practice and networking opportunities for senior industry decision-makers.</em></p></div>Negative Interest Rates: The Real Reasonhttps://globalriskcommunity.com/profiles/blogs/negative-interest-rates-the-real-reason2016-02-10T17:45:28.000Z2016-02-10T17:45:28.000ZEnrique Raul Suarezhttps://globalriskcommunity.com/members/EnriqueRaulSuarez<div><p></p><p><a href="{{#staticFileLink}}8028242879,original{{/staticFileLink}}"><img width="340" class="align-center" src="{{#staticFileLink}}8028242879,original{{/staticFileLink}}" alt="8028242879?profile=original" /></a></p><p></p><h3 class="center" style="text-align:center;"><span class="font-size-4"><strong>Negative Interest Rates Aimed at Driving Small Banks Out of Business and Eliminating Cash: Economics Professor</strong></span></h3><p class="center" style="text-align:center;"><span class="font-size-4"> </span></p><p class="center" style="text-align:center;"><span class="font-size-4">Source:</span></p><p class="center" style="text-align:center;"></p><p class="center" style="text-align:center;"><span class="font-size-4"><strong>Washington's Blog</strong></span></p><p class="center" style="text-align:center;"></p><p class="center" style="text-align:center;"><span class="font-size-4">February 9, 2016</span></p><p class="center" style="text-align:center;"></p><p>More than one-fifth of the world’s total GDP is in countries which have imposed negative interest rates, including Japan, the EU, Denmark, Switzerland and Sweden.</p><p>Negative interest rates are spreading worldwide.</p><p>And yet negative interest rates – supposed to help economies recover – haven’t prevented Japan and Europe’s economies from absolutely tanking.</p><p>Nor have they even stimulated spending. As ValueWalk points out:</p><p>Japan has had ultra-low rates for years and its economy has been terrible. Trillions of debt in Europe now trades at negative interest rates and its economy isn’t exactly booming. Denmark, Sweden and Switzerland all have negative interest rates, but consumer spending isn’t going up there. In fact, savings rates have been going up in lockstep with the decrease in interest rates, exactly the opposite of what the geniuses at the various central banks expected.</p><p>Why is this happening? Simply, savers are scared. Lower interest rates have wrecked their retirement plans. Say you were doing some financial planning 10 years ago and plugged in 3% from your savings account. Now its 0%. You still have to plan for your retirement. Plug in 0%. What happens to your planning now? 0% compounded for X years is 0%. The math is simple. So in order to have your target savings at retirement, you need to save more, not spend more. But for some reason, the economists that run central banks around the world can’t see this. They are all stuck in their offices talking to one another and self-reinforcing this myth that they can drive spending up by reducing the rate of return on investments. Want to see consumer spending go up? Don’t wreck their savings plans so that they are too scared to spend. But that’s too simple. Instead, central banks use a chain of causation that doesn’t exist to try to create change 3 or 4 steps down the line. It hasn’t worked, and it won’t work. It isn’t in an individual’s self-interest to go out and spend their money on more “stuff” in order to spur economic growth.</p><p>So what’s really going on? Why are central banks worldwide pushing negative interest rates?</p><p><strong>Economics professor Richard Werner – the creator of quantitative easing – notes:</strong></p><p>The experience of Switzerland [shows that] negative rates raise banks’ costs of doing business. The banks respond by passing on this cost to their customers. Due to the already zero deposit rates, this means banks will raise their lending rates. As they did in Switzerland. In other words, reducing interest rates into negative territory will raise borrowing costs!</p><p>If this is the result, why do central banks not simply raise interest rates? This would achieve the same result, one might think. However, there is a crucial difference: raised rates will allow banks to widen their interest margin and make their business more profitable. With negative rates, banks’ margins will stay low and the financial situation of the banks will stay precarious and indeed become ever more precarious.</p><p>As readers know, we have been arguing that the ECB has been waging war on the ‘good’ banks in the eurozone, the several thousand small community banks, mainly in Germany, which are operated not for profit, but for co-operative members or the public good (such as the Sparkassen public savings banks or the Volksbank people’s banks). The ECB and the EU have significantly increased regulatory reporting burdens, thus personnel costs, so that many community banks are forced to merge, while having to close down many branches. This has been coupled with the ECB’s policy of flattening the yield curve (lowering short rates and also pushing down long rates via so-called ‘quantitative easing’). As a result banks that mainly engage in traditional banking, i.e. lending to firms for investment, have come under major pressure, while this type of ‘QE’ has produced profits for those large financial institutions engaged mainly in financial speculation and its funding.</p><p>The policy of negative interest rates is thus consistent with the agenda to drive small banks out of business and consolidate banking sectors in industrialised countries, increasing concentration and control in the banking sector.</p><p>It also serves to provide a (false) further justification for abolishing cash. And this fits into the Bank of England’s surprising recent discovery that the money supply is created by banks through their action of granting loans: by supporting monetary reformers, the Bank of England may further increase its own power and accelerate the drive to concentrate the banking system if bank credit creation was abolished and there was only one true bank left – the Bank of England. This would not only get us back to the old monopoly situation imposed in 1694 when the Bank of England was founded as a for-profit enterprise by private profiteers. It would also further the project to increase control over and monitoring of the population: with both cash and bank credit alternatives abolished, all transactions, money creation and allocation would be implemented by the Bank of England.</p><p>If this sounds like a “conspiracy theory”, the Financial Times argued in 2014 that central banks would be the real winners from a cashless society:</p><p>Central bankers, after all, have had an explicit interest in introducing e-money from the moment the global financial crisis began…</p><p>The introduction of a cashless society empowers central banks greatly. A cashless society, after all, not only makes things like negative interest rates possible, it transfers absolute control of the money supply to the central bank, mostly by turning it into a universal banker that competes directly with private banks for public deposits. All digital deposits become base money.</p><p></p></div>Negative Interest Rates Show “Desperation” of Central Bankshttps://globalriskcommunity.com/profiles/blogs/negative-interest-rates-show-desperation-of-central-banks2016-01-31T01:13:44.000Z2016-01-31T01:13:44.000ZEnrique Raul Suarezhttps://globalriskcommunity.com/members/EnriqueRaulSuarez<div><p></p><p><a href="{{#staticFileLink}}8028242273,original{{/staticFileLink}}"><img width="350" class="align-center" src="{{#staticFileLink}}8028242273,original{{/staticFileLink}}" alt="8028242273?profile=original" /></a></p><h2 class="center" style="text-align:center;"><strong>Negative Interest Rates Show “Desperation” of Central Banks</strong></h2><p class="center" style="text-align:center;"> </p><p class="center" style="text-align:center;"><span class="font-size-3"><strong>Source:</strong></span></p><p class="center" style="text-align:center;"></p><p class="center" style="text-align:center;"><span class="font-size-3"><a href="http://www.washingtonsblog.com/2016/01/negative-interest-rates-sign-desperation.html" target="_blank">Washington's Blog</a></span></p><p class="center" style="text-align:center;"></p><p class="center" style="text-align:center;"><span class="font-size-3">January 29, 2016</span></p><p class="center" style="text-align:center;"></p><p><em>Japan has joined the EU, Denmark, Switzerland and Sweden in imposing negative interest rates.</em> <em>Indeed, <a href="http://blogs.wsj.com/moneybeat/2016/01/29/over-a-fifth-of-global-gdp-is-now-covered-by-a-central-bank-with-negative-rates/" target="_blank">more than a fifth of the world’s GDP </a>is now covered by a central bank with negative interest rates.</em></p><p class="left">The Wall Street Journal <a href="http://www.wsj.com/articles/bank-of-japan-introduces-negative-interest-rates-1454040311" target="_blank">notes</a>:</p><p class="left">TOKYO—Japan’s central bank stunned the markets Friday by setting the country’s first negative interest rates, in a <strong>desperate</strong> attempt to keep the economy from sliding back into the stagnation that has dogged it for much of the last two decades.</p><p>BBC <a href="http://www.bbc.com/news/business-35436187" target="_blank">writes</a>:</p><p>The country is <strong>desperate</strong> to increase spending and investment.</p><p>Japan has been <strong>desperate</strong> to boost consumer spending for years. At one point it even issued shopping vouchers to stimulate demand.</p><p></p><p style="text-align:center;"><a href="{{#staticFileLink}}8028242459,original{{/staticFileLink}}"><img width="550" class="align-center" src="{{#staticFileLink}}8028242459,original{{/staticFileLink}}" alt="8028242459?profile=original" /></a><i>Image: </i><a href="http://ei.marketwatch.com//Multimedia/2016/01/29/Photos/ZH/MW-EE307_neg_ce_20160129121924_ZH.jpg?uuid=718b916c-c6ac-11e5-81af-0015c588e0f6" target="_blank"><i>MarketWatch</i></a></p><p style="text-align:center;"></p><p>The New York Times <a href="http://www.nytimes.com/2016/01/30/business/international/japan-interest-rate.html" target="_blank">writes</a>:</p><p>Moving to negative rates reflects a measure of <strong>desperation</strong> on the part of central banks. <strong>Their traditional tools have been largely exhausted</strong>, as most countries’ interest rates have been pushed to almost nothing.</p><p>MarketWatch’s senior markets writer, William Watts, <a href="http://www.marketwatch.com/story/critics-slam-bank-of-japans-negative-interest-rate-move-2016-01-29" target="_blank">notes</a>:</p><p>This might not be the sort of capitulation stock-market investors were anticipating.</p><p>The Bank of Japan’s surprise decision Friday to start charging depositors for parking excess reserves at the central bank triggered a global equity rally. But several monetary policy watchers and market strategists worried that the move was an acknowledgment that <strong>the world’s central banks are running out of ammunition in the battle against deflation</strong>.</p><p>“This is an interesting move that looks a lot more like <strong>desperation</strong> or novelty than it looks like a program meant to make a real difference,” said Robert Brusca, chief economist at FAO Economics.</p><p>Kit Juckes, global macro strategist at Société Générale, underlined the moment in a note to clients:</p><p>“First of all, forget the details, feed on the symbolism. <strong>Germany, Switzerland and Japan, the three great current account powers of the post-Bretton Woods era, whose surpluses have financed the frivolity of baby boomer Anglo-Saxons, are being told in no uncertain terms to stop saving.”</strong></p><p>Whether the strategy works or not is less important than what the decision says about global dis-inflationary forces, he said, which have forced the central banks to “set off on this path…following a trail of breadcrumbs as they head for the gingerbread house.”</p><p>But others worry that the move underlines a degree of <strong>desperation</strong> and a sense that the asset purchases at the heart of global quantitative-easing strategies are running up against some important limits.</p><p>Daiwa economists and others expect the Bank of Japan to remain under pressure to ease further. And when push comes to shove, the bank will be <strong>likely to push rates further into negative territory </strong>rather than ramp up asset purchases.</p><p>“Ultimately, negative interest rates from a veteran of monetary expansion such as the BOJ <strong>mark a capitulation about the effectiveness of QE alone</strong> as an inflation-targeting tool in world of lingering growth-debt imbalances and commodity price wars,” said Lena Komileva, economist at G-plus Economics, in emailed comments.</p><p>Banks will presumably move their deposit rates below zero in response ….</p><p>Likewise, Bloomberg previously <a href="http://www.bloombergview.com/quicktake/negative-interest-rates" target="_blank">noted</a> of the initiation of negative rates in the EU:</p><p>Negative interest rates are a sign of <strong><a href="http://www.bloomberg.com/news/articles/2015-10-22/the-great-negative-rates-experiment" target="_blank">desperation</a></strong>, a signal that traditional policy options have <a href="http://www.bloomberg.com/bw/articles/2013-11-18/larry-summers-has-a-wintry-outlook-on-the-economy" target="_blank">proved ineffective</a> and new limits need to be explored. They punish banks that hoard cash instead of <a href="http://www.bloomberg.com/news/2013-11-07/the-european-bank-s-underwhelming-surprise.html" target="_blank">extending </a>loans to businesses or to weaker lenders.</p><p>And negative rates <a href="http://news.yahoo.com/fed-consider-negative-rates-economy-soured-yellen-173212674--business.html" target="_blank">will</a> <a href="http://www.marketwatch.com/story/bernanke-says-fed-likely-to-add-negative-rates-to-recession-fighting-toolkit-2015-12-15" target="_blank">eventually</a> come <a href="http://www.zerohedge.com/news/2016-01-29/negative-rates-us-are-next-heres-why-one-chart" target="_blank">to America</a>.</p><p>Central bankers are implementing negative interest rates to force savers to buy assets … so as to artificially stimulate the economy. <a href="http://www.investopedia.com/terms/n/negative-interest-rate-policy-nirp.asp" target="_blank">Specifically</a>:</p><blockquote><p>A negative interest rate means the central bank and perhaps private banks will charge negative interest: instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank. This is <strong>intended to incentivize banks to lend money more freely and businesses and individuals to invest, lend, and spend money rather than pay a fee to keep it safe</strong>.</p></blockquote><p></p><p>Postscript: Ironically, the Fed has gone to great lengths to <a href="http://www.washingtonsblog.com/2013/06/81-5-of-money-created-through-quantitative-easing-is-sitting-there-gathering-dust-instead-of-helping-the-economy.html" target="_blank">DISCOURAGE banks from lending to Main Street</a>.</p><p></p><p style="text-align:center;"></p><p></p></div>ADP Job Report: Recovery Marches Onhttps://globalriskcommunity.com/profiles/blogs/adp-job-report-recovery-marches-on-12014-04-03T18:00:00.000Z2014-04-03T18:00:00.000ZJames McCallumhttps://globalriskcommunity.com/members/JamesMcCallum<div><div style="text-align:justify;"><span style="font-family:inherit;"><a href="{{#staticFileLink}}8028229263,original{{/staticFileLink}}"><img width="200" src="{{#staticFileLink}}8028229263,original{{/staticFileLink}}" class="align-left" alt="8028229263?profile=original" /></a>Private-sector employment increased by 191,000 during the month of March, according to the latest ADP National Employment Report (NER) released yesterday. The NER suggests a steady, albeit uneven growth of nonfarm private employment since net job creation first turned positive during the first quarter of 2010. The pattern of rising employment gains, confirms signs of an accelerated economic recovery reinforced by a March report that is above the 12 month average. </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Though the report is an indicator of continued recovery, job growth forecasts for the month were closer to 205,000. As fears of a jobless recovery recede, the US economy has a long way to go before pre-recession employment levels are achieved. Full employment requires the economy to create over 200,000 jobs per month for 48 consecutive months to achieve pre-recession employment levels. The monthly average is well below that level; even though the unemployment rate has been trimmed to 6.6%. </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">The March report is encouraging because it points to an accelerating pace of job creation. The post Christmas season employment surge represents a 70,000 job gain over January's anemic numbers. The service sector accounted for over 164,000 of the job gains. The manufacturing and goods producing sector combined to create 28,000 jobs. Construction offered confirmation of a tepid recovery in the housing market adding 20,000 jobs during the month. The construction industry has lost over 2.1 million jobs since its peak in 2008. </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">The report also indicated that the five selected industry groups all reported positive job growth for the second consecutive month. The professional/business service sector was the strongest performer adding 54,000 jobs, followed by trade/transportation/utilities with 36,000 and financial services and manufacturing each adding 5,000 jobs. Job creation is welcomed for all sectors of the economy but sustainable economic growth can only be achieved by a robust turnaround in the goods producing and manufacturing sectors. Service sector jobs offer lower wages, tend to be highly correlated to retail consumer spending and positions are often transient in nature. Small and Mid-Sized Enterprises (SME) is where the highest concentration of service jobs are created and the employment figures bear that out with SMEs accounting for over 124,00 jobs created in March. </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Large businesses added 67,000 jobs during the month. The balance sheets of large corporations are strong. The great recession provided large corporates an opportunity to rationalize their business franchise with layoffs, consolidations and prudent cost management. Benign inflation, global market presence, favorable tax codes, outsourcing, low cost of capital and strong equity markets created ideal conditions for profitability and an improved capital structure. The balance sheets of large corporations continue to exceed $1 trillion in cash and it appears that large businesses are beginning to deploy this capital into job creating initiatives. </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">The restructuring of the economy continues. The Federal Reserve Quantitative Easing program is ratcheting down. The capitalization of banks has grown considerably stronger with fewer bank failures and only Citibank failing the last round of FDIC stress testing. Most believe this will free more capital for loans to SMEs. This coupled with the emergence and development of nascent alternative credit channels bodes well for future job creation</span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Macroeconomic Factors: </span></div><div style="text-align:justify;"><span style="font-family:inherit;">The principal macroeconomic factors confronting the economy are the continued widening of the wealth gap and the creation of low paying jobs. The unemployment rate continues to decline and signs of a recovering housing market are encouraging. Tax policy, fiscal stability of state and local governments and the underfunding of deteriorating civic infrastructure continue to vex economic recovery strategies. </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">In the United States, as the 2014 election cycle proceeds, acute partisanship will undermine the political will to address recovery initiatives with legislative action. The Affordable Health Care Act (AHCA) is being implemented against a backdrop of continued partisan strife. The AHCA should drive long term economies in public health care. The goal of seven million program enrollments was achieved by the March 31 deadline. Enrollment levels confirms the pent up market demand for affordable health care. Going forward a nagging concern of the AHCA is the quality of the experience pool of enrollees and the consistent payment of monthly insurance premiums to fund the program. The complex rules for business participation in the program creates a level of uncertainty of how the AHCA will affect SMEs.</span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Globally, political uncertainty in Eurasia is an emerging risk particularly for the European Community which is just beginning to emerge from its recession. The cooling of the BRICS as global economic drivers seems to have run its course as is the case with all commodity sensitive business cycles. China's GDP growth is expected to be 7%. This predicted modest growth will tamp down China's role as a principal driver of global growth. </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">The volatility of global energy markets remain susceptible to the political stability of OPEC. Political instability in Venezuela and the disintermediation of Russian oil and natural gas supply to the EC may encourage the acceleration of NG , shale oil extraction and refining in North America. </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">The Intergovernmental Panel on Climate Change (IPCC) has recently issued a report. The panel indicated that evidence is pointing to accelerated rates of climate change. Though climate change poses significant risk to political stability and economic growth, it also offers opportunities for governments, businesses and communities to engage in mitigation and adaptation initiatives with positive economic benefits. </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Political uncertainty tends to heighten risk aversion in credit markets. The emergence of the US and EC from the distress of the Great Recession and Global Credit Crisis has improved the conditions of global credit markets. Bank stabilization has grown opportunities for increase commercial lending to SMEs. The development of alternative credit channels like crowd funding, micro lending, asset financing is developing to the benefit of the global SME sector. </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Highlights of the ADP Report for March include:</span></div><div style="text-align:justify;"><span style="font-family:inherit;">Private sector employment increased by 191,000 </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Employment in the service-providing sector rose 164 ,000 </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Employment in the goods-producing sector increased 28,000 </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Employment in the manufacturing sector increased 5,000 </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Construction employment increase 5,000 </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Large businesses with 500 or more workers increased 67,000 </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Medium-size businesses, between 50 and 499 workers increased 52,000 </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Employment small businesses less than 50 workers, up 72,000 </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Overview of Numbers: </span></div><div style="text-align:justify;"><span style="font-family:inherit;">The 72,000 jobs created by the SME sectors represents over 65% of new job creation. Large businesses comprise approximately 20% of private sector employment and continues to underperform SMEs in post recession job creation. The strong growth of service sector though welcomed continues to mask the underperformance of the manufacturing sector. The 11 million manufacturing jobs comprise approximately 10% of the private sector US workforce. The 5 thousand jobs created during March accounted for 2.5% of new jobs. Considering the severely distressed condition and capacity utilization of the sector and the favorable conditions for export markets and cost of capital, the job growth of the sector appears extremely weak. The US economy is still in search of a driver. </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">The stock market continues to perform well. The Fed taper of QE2 initiative seems to signal a change in fiscal policy principally focused on the troubling dynamics of inflation/deflationary pressures. The IMF forecasts a 2.8% GDP growth rate for the US. </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Interest rates have been at historic lows for four years and despite the QE2 taper adverse conditions in the credit market appear to be benign. The political crisis in the EU has settled down but the long term stability of the currency and European Federation are under severe attack by growing nationalist movements across the continent.</span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">As the price of agricultural commodities, water rights and food staples continue to trend upward The balance sheets of large corporate entities remain strong. The availability of distressed assets and market volatility has eased. Venture capital and private equity capital formation continues to drive premium asset valuations in numerous tech sectors encouraging business start ups and global entrepreneurship. </span></div><div style="text-align:justify;"><span style="font-family:inherit;"> </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Solutions from Sum2 </span></div><div style="text-align:justify;"><span style="font-family:inherit;">Sum2 offers a portfolio of risk assessment applications and consultative services to businesses, governments and non-profit organizations. Our leading product Credit Redi offers SMEs tools to manage financial health and improve corporate credit rating to manage enterprise risk and attract capital to fund initiatives to achieve business goals. 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From the US perspective this has been a failed summit. The remaining G-19 member’s outlook could be interpreting this as a success. Our developed and emerging nations economic partners stood up to the minimum demands of the United States. It will not be the last time this outcome occurs.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">As recent calls from various interests for a return to a global gold standard, US quantitative and non-quantitative easing proposals, emergency standby EU guarantees on possible defaulting Irish debt, currency wars, protectionism, and inflation/double-dip recession concerns are washing across the globe, notwithstanding Friday’s blood-letting on Wall Street, two fundamental events are occurring concurrently that may or may not be escaping investors awareness.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">The first phenomenon is the acceleration of the structural evolution occurring in international commerce. The brunt of this change falls completely on US financial shoulders. Once upon a time our successful or unsuccessful economic conditions rose or fell primarily on our own predilections.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">Raw materials around the world were consumed or ignored, without regard to supply or cost, by the capricious needs and changing desires of the US. Many nations benefited from sharing their natural resources with us.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">Today, the role of puissant global power is being performed by an ascending Zhongguo or People’s Republic of China (PRC). The US is controlling less and less of our own economic fate. Fears ran through global markets overnight as China’s October inflation rate of 4.4% exceeded the prior’s month 3.6%. Also, China’s Consumer Price Index in October rose to an annualize rate of 12.1% up from the previous month’s 5.2%.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">As a result, Every US market was hit with selling; the DJIA fell 90.52 or .8% to 11, 192.58; the S & P 500 fell 14.33 or 1.18% to 1199.21 and NASDAQ fell 37.31 or 1.46% to 2518.21. The Bond market was hit worse; the 2-year, 10-year, and 30-year Treasury all fell on Friday, the day that Ben Bernanke started QE II by purchasing $ $7.23 billion in Treasuries coming due between 2014 and 2016.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">In commodities, gold lost $35.00 or 2.49% to $1368.30; silver fell $1.39 or 5.07% to $26.015, oil lost $3.08 or 3.51% to $86.53.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">Two things; first, global markets and their economies are concerned that China may begin a series of interest rate hikes to cool off their economy, thereby, stifling global growth and second, 15 years ago markets weren’t concerned about the Central Kingdom’s inflation rate.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">As disconcerting as this may be for the US investors this is the shape of things to come. The final cost of deregulation, NAFTA, one-way free trade, access to cheap labor, and open markets, plus developed nations’ seed capital generously pouring into emerging markets stretching over the last 20 years has produced today’s critical mass for a radical realignment of global economic power and market share. International capital will proceed with this new perspective on global economics.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">The second fundamental shift occurring, particular to the US economy, is the inevitable demise of the later 20th century business model in the 21st century. Corporations pursuing an endless mission of maximizing shareholders value from endless rising cash flow levels and robust Deltas on the back of an ossifying American economy will discover that that formula for success is breaking down. The formula began breaking down at the onset of a NAFTA induced globalization.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">This morning I spoke with a retired senior executive from the insurance industry and a friend. He told me that this week MetLife was exiting the long-term care insurance business. This follows other insurance companies that have exited both the fixed and variable annuity business in the last year. The insurance industry is realizing that their investment portfolios are becoming incapable of generating sufficient returns to sustain several of their traditional business lines going forward. Insurance industry mergers and acquisitions will only kick the can down the road - not solve the problem.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">Moreover, medical, pharmaceutical, and technological innovation over the next decade may extend their customer’s average lifespan 5 to 10 years or greater, crimping future earnings. Corroborating this thesis, Bill Gross of Pimco made a confession about this new reality and the subsequent detriment to the future performance of his $2 trillion portfolio in his November letter to investors.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">Performing objective analytical [connecting the] dot work, this is precisely the precarious position airline and automobile industry union workers and their unions found themselves, over the last decade, now facing municipal workers.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">Austerity ideologues and the main stream media demonize and batter retirees and their unions who merely want their mutually agreed to benefits upon retirement. These contractual terms were earned in good-faith negotiations much like the negotiated terms of a mortgage contract. They are not the villains; the true villains are simple math and careless long-term assumptions.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">Failure of the marketplace to deliver non-guaranteed but optimistic presentations of average annual assumption rates, promoted as achievable by the investment industry, revealed the limitations of the marketplace and free markets. Securing organizations asset management business was the motive. Everyone suspended disbelief.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">I recently attended a Global Asset Allocation Summit and Emerging Managers Summit, both events hosted by Opal, and I was mildly shocked to hear that pensions and trusts are still clinging to 8% and 9% average annual return assumptions for their portfolios. That orthodoxy was never seriously challenged by most attendees. The predominant asset allocation still comprise of equities, fixed income, and real estate. Alternative Investment percentages are insignificant.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">While such returns were obtainable during the secular bull market of the 1980’s and 1990’s, investment portfolios now are confronting a secular bear stock market, a collapsed credit market restricting liquidity, punk consumer demand, and a residential real estate market in depression. For the foreseeable future, a consistent domestic 8% - 9% average annual return in a traditional asset allocation mixture is doubtful.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">Realize that the inability of the marketplace to deliver on these ring size returns is only the effect. The cause of this arrested development is the before mentioned structural change in international commerce which renders the general usage of the 20th century US business model itself unrealistic. The average American is absorbing petite returns on her principal in CDs and T-bills, flat wages, and shrinking net worth from stock market and real estate losses.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">Retiring baby boomers comprise a significant portion of affluent consumers. That generation’s consumption appetite and spending patterns has forever changed. Consumers, representing 70% of today’s US economy, are also gun-shy from one too many bubbles bursting, lately, to aggressively invest anymore. Consumer sentiment surveys oscillate from month to month, a clear sign of uncertainty and anxiety.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">Reconciling never ending corporate earnings increases with stunted cash flows and insecure disposable income from a matured economy captained by a constipated government, lacking a coherent industrial, fiscal and monetary policy and supposedly driven by upset and untethered voters, is unrealistic.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">Once, a $.50 cup of coffee is now a $4 Starbucks Venti Iced 24 oz. Caffé Vanilla Frappuccino/Soy/Whipped Cream; a $.25 phone from a phone booth is now a $125 monthly mobile smartphone bill from Verizon; free broadcast TV is now a high-speed internet and premium $200 monthly cable bill from Comcast. Free daycare in a single paycheck home is now a $200, $300, or $400 weekly Kender Care daycare expense for both working parents.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">Daily expenses that were recently considered trivial are now deemed luxuries for many. I would avoid many retail stocks whose products for consumers are totally discretionary in nature.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">The dreaded disease afflicting our economy is the big C - change. There is no cure. It is inevitable. How capital is managed differently, in a new century with different parameters, is equally important as where and when to invest.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">The last global intermission began shortly after the end of World War I and concluded after the end of World War II. The curtains are falling on that mid-20th century world that we inherited from the greatest generation whether or not we approve or are prepared for the aftermath.</span><div style="padding-bottom:15px;"></div><span class="Apple-style-span" style="color:rgb(0,0,0);font-family:arial, helvetica;font-size:12px;">Make no mistake; we are in another historical intermission. The datasets and impermanent financial laws of physics of the 20th century are approaching their expiration date.</span></div>