economy

Market and Regulatory Changes Prompt Investment Policy Review

June 9th, 2014 by Canright Communications

The continued low interest rate environment, ongoing regulatory reform and record stockpiles of corporate cash have contributed to a renewed focus on the investment policy process. While most large companies have an investment policy statement to help guide their cash investments, many privately held or smaller firms may not. It is considered best practice for companies to implement one.

Read the entire article here.

 

Taking on International Supply Chain FX Risks

June 2nd, 2014 by Canright Communications

As the US economy continues to strengthen, many treasury teams are wisely reviewing established payment practices to allow them to take full advantage of new growth opportunities. A US company that has taken the time to explore and implement finance and treasury processes that work best with international suppliers and customers will have greater opportunities to maximize rewards and gain a competitive advantage.

Read the entire article here.

DATA: Open Data, Transparency, and Efficient Markets

July 23rd, 2011 by Collin Canright

Control of information and data equates to control of people and markets. Warnings from Milton to Orwell and the ideological struggle between capitalistic and socialistic market approaches increasingly result in greater wealth and freedom.

At Chicago’s Techweek 2011  conference, the evolution toward freedom and away from control  manifested in Friday talks through the benefits of greater access to raw data, whether government data or market data. Information drives democracy and business, and the internet economy is “democratizing” the data required for both. “Data is the rocket fuel of the internet economy,” said Aneesh Chopra chief technology officer of the United States at his Techweek keynote speech.

Tapping the vast trove of government data to create applications can help citizens get more from their government at less cost while making government operations more accountable. “Simple information transparency can reduce costs,” he said.

The City of Chicago and the federal government are both using public challenges for apps and other ideas. “We’re crowdsourcing ways to make the city more efficient by providing raw data feeds,” said John Tolva, chief technology officer of the City of Chicago, in his keynote.

Data feeds are updated regularly by the city and made available to app developers. To see what’s available, check out the City of Chicago’s Data Portal. It contains thousands of datasets, maps, files and documents, charts, etc. Just fascinating.

Federal challenges include Health and Human Services’ Community Health Data Initiative , listed through the Administration’s Open Government Initiative.

Open government and data transparency in the context of the Obama Administration’s healthcare IT innovation initiative were the major themes of Chopra’s talk. “We will democratize government data,” he said. As I expect of a representative of the Obama administration, he’s a terrific orator and inspiring speaker, focusing throughout his talk on success stories of individuals while weaving in details of program initiatives.

One hope is that the private industry will follow suit and release more data.  That appears to be the case with the Blue Button, which allows individuals to download healthcare data. It started in the Veterans Administration and has been adopted by other agencies and private health organizations and companies.

It was apparent to me that there clearly is money in healthcare innovation if you can mine data for insight into how to provide better health for individuals, less costly payment options, and more efficient operations for the whole system.

The theme of transparency, based on increased access to data, continued in the afternoon session on financial innovation. Moderated by Jeff Carter, a co-founder of Hyde Park Angles and former CME board member, the panel featured four entrepreneurs creating trading exchanges and infrastructure to support for new markets.

All of the firms are based on the premise that transparency is critical for efficient markets. Markets are not efficient if they are not transparent, and markets are transparent when sufficient data are available on sellers and trades. The availability of market data itself can lead to the creation of trading in markets that did not exist.

“With transparency comes benefits. One of those benefits is a lower cost of capital,” said Nic Perkin, president, The Receivables Exchange. The firm’s platform requires companies wanting to list receivables for sale on the exchange to provide public cash flow and balance sheet data updated quarterly, something the small and medium sized business rarely need to do. “We bring transparency and standardization to market that typically has not had it.”

The data available on private companies in the internet space, for instance, led to the creation of an investment market for those companies, noted Adam Oliveri, managing director at SecondMarket, “a leading online destination for accessing market data”. You could easily see things like membership growth so the private exchange had information to work with.

The word “democratization” and the importance of increased data cropped up in Friday’s talks from Chopra’s to Craig Newmark’s and again in remarks from the financial innovation panelists.  As Perkin said, “The internet democratizes everything.”

An Uneven and Unreliable Economic Recovery

April 30th, 2011 by Collin Canright

Recent economic reports present a mixture of disregard, denial, and disinterest. The Bureau of Economic Analysis reported GDP growth of 1.8%. The Economist wrote about how debt problems are constantly explained away and asked on its April 28, 2011 cover, “What’s wrong with America’s economy?” The Chairman of the Federal Reserve held a first-ever press conference that one writer tagged as “the message was the medium.”

Unemployment levels have apparently bottomed out, as have suburban home prices, and the markets are doing well. One boutique retailer we visited the week of April 25 reports an “awesome” spring, while a home remodeler we visited the same week sees 2011 so far as its worst start ever, largely a result the weather. A manufacturer we know had its bank loan called after missing a payment of some $2,500 by a day, likely a casualty of being on the wrong side of the transaction when successor banks take on the customers of failed banks.

A Long, Slow Recovery

The rate of recovery is agonizingly slow and highly unpredictable, noted Professor Martin Eichenbaum, Ethel and John Lindgren Professor of Economics at Northwestern University READ MORE>>

CRE Risks and Other Bank Stability Indicators

April 21st, 2011 by Collin Canright

In February 2011, economists told us that the Great Recession is receding, if not over. If many consumers—and their banks—still feel mired in that same recession, at least the fiscal crisis of 2008 is history. The markets are stable, business profits are up, employment is improving, and it looks like the free fall in real estate values for homes, office buildings, hotels, and shopping centers has finally ended. Prices are not likely to climb much in the next few years, but at least real estate markets will probably be stable soon.

It looks like the worst is over for the banking community, too. More banks will struggle with troubled commercial real estate loans, and some will fail. Yet little has changed with the commercial real estate (CRE) loan situation.

How Serious is the CRE Risk?

Last year, reports on the safety and stability of commercial real estate (CRE) loan were grim. “The greatest exposures faced by community banks may relate to construction loans and other CRE loans,” said FDIC Chairman Sheila Bair in October 2009. “These loans made up over 43% of community bank portfolios, and the average ratio of CRE loans to total capital was above 280%.”

In its February 2010 report, the Congressional Oversight Panel (COP), created o oversee the government’s massive financial-crisis intervention programs and defunct as of April 3, 2011, reported that some $1.4 trillion in CRE loans need to be refinanced between 2011 and 2014. Nearly half of them are “underwater,” where the mortgage-holders owe more than what the underlying property is worth. The COP’s February report warned that “a wave of commercial real estate loan failures could threaten America’s already-weakened financial system” over the next few years.

As of April 2011, some 3,000 community banks were still in trouble, mostly because of their CRE loan portfolios. At the end of the third quarter 2010, about $3.2 trillion of this real estate debt was outstanding, and about $1.6 trillion was held by community banks, so they faced great risk from default and foreclosure.

A glut of office and retail space and too many hotel rooms due to READ MORE >>

Notes on China’s Economy Today

April 15th, 2011 by Collin Canright

Inflation is the top economic concern of the Chinese government, said Kok-Chi Tsim, Managing Director and Senior Relationship Executive at JPMorgan Chase Bank, Chicago. He spoke March 30 at the monthly luncheon of the Economic Development Council of Chicago on “China’s Economic and Business Environment.”

The concern for inflation flows from one underlying economic fact: “China is a rich country with still a lot of very poor people,” with large differences between the coastal and the western inner provinces. Inflation is a concern because the hyperinflation of the 1940s led, in part to the ousting of Chaing Kai-shek in 1949 in favor of Mao Zedong and the communist state. The current government does not want to risk creating the same situation, especially when a portion of the population would suffer greatly should its income be eroded by inflation.

Inflation is running at 11% annually. Labor costs are also increasing. The minimum wage will increase by 15% this year. Last year, wages in major cities increased by 21%.

“That raised a lot of red flags among the Chinese government,” Mr. Tsim said. “Fighting inflation is the Chinese government’s top priority.”

To combat inflation, the Chinese government has allowed its currency, the renminbi (RMB), typically referred to as the yuan, to appreciate. This makes exports more expensive, which is a risk for the Chinese because the economy is driven by inexpensive exports.

For details and information on China’s desire to see the RMB become a global trade and reserve currency like the dollar, see Mr. Tsim’s webinar, “China: Internationalization of Renminbi (RMB).” This development is good for U.S. companies doing business in China, as it opens other payment options, given that RMB denominated accounts are now available in Hong Kong.

Other interesting facts and analysis from Mr. Tsim included:

  • The Chinese government does not have many tools for monetary control. The major method the government uses to control the money supply is putting quotas on bank loans. It’s difficult, however, because bank loans are the only source of financing in the country. Chinese do not invest in local stock because Chinese companies do not follow standards of corporate governance like western companies and are riskier investments as a result. Instead, they invest in real estate, with its boom-and-bust bubbles.
  • The largest pollution problem in China is not air pollution, as you may expect from the reports and reality of poor air quality in Beijing. It’s water pollution. The Chinese government is expected to spend hundreds of billions on water infrastructure in the coming years.
  • Overseas direct investments by China are increasing. “Access to natural resources, including agriculture, is the biggest challenge facing Chinese growth,” Mr. Tsim said.
  • The major hindrance to Chinese investments here is the U.S. government’s restrictions on the import of high-performance computer technologies. Given rising labor costs in China, productivity increases are critical, as they have been in every major industrial country. “Automation is absolutely necessary. That’s where U.S. companies can help.”
  • In response to a question on Chicago Mayor Daley’s trips to China and their influence, Mr. Tsim smiled and said, “You want me to be quite honest? I don’t think there’s much impact.”

—Collin Canright

Noteworthy Marketing Links for 03-24-11

March 24th, 2011 by Collin Canright

China, India, and Japan: A Dispatch from Sibos

December 3rd, 2010 by Collin Canright

China and India remain high on the financial and banking agenda, with attendees at SWIFT’s Sibos 2010 conference packing the room for a session called “India and China: How Do You Choose?” The rise of China especially, in both currency and trade, played as a theme through Sibos, the annual financial and banking conference held in Amsterdam this October.

Many U.S. and Europeans are not aware of how significant both countries and their rapidly growing economies are, said Gerard Lyons, chief economist and group head of research, Standard Chartered Bank. China is looking to move into emerging markets and plans to do the kind of business development that corporations in the United States and Western Europe generally consider their purview.

That means developing and marketing new products as well as providing inexpensive manufacturing facilities for other companies. As Lyons explained the Chinese expansion imperative, “You can’t rely on selling cheap goods to Westerners up to their eyeballs in debt.”

Chinese banks are planning to expand and were exhibiting with the best of them at Sibos 2010. The Bank of China plans to open a few branches in Europe next year. “We are going global,” said Hong Zhong, Director, strategic development, Bank of China.

For their part, the Indian panelists acknowledged that they and their banks are busy on their home turf, which is difficult for U.S. and European banks to enter. The Central Bank of India now has more than 28 million retail customers across 5,400 branches, with 57% growth in the small and medium business sector last year, said S. Sridhar, the bank’s chairman and managing director.

“In our growth strategy for the bank, the domestic economy plays a huge role,” said Om Prakash Bhatt, chairman of both the Indian Banks’ Association and the State Bank of India, in a Sibos session focused on the regulatory environment. Indian banks will go abroad as their customer do business abroad, and they will need to restructure in order to meet the needs of international corporations.

Session moderator Emmanuel Daniel, CEO and founder of The Asian Banker asked the Indian panelists about another serious issue: the income disparity between the rich and the poor, with little acknowledgement of the problem. “The inability of India to distill its wealth throughout its economy remains a problem,” Daniel said, “and its capacity to address this issue remains to be seen.”

The growth of both emerging and established industrial economies in Asia may depend on it.

Indeed, one Japanese attendee suggested that the so-called “lost decade” in Japan—a reference to low growth, high debt, and deflation after the country’s real estate bubble burst in the 1990s—may become a lost 20 years. He hoped it would not be a beacon of things to come for the United States economy, as Japan’s quality-based manufacturing techniques were in the 1980s.

The Japanese appear to be looking toward increased trade within Asia for growth. “Intra-region­al trade is mainly intermediary goods,” said Shinichi Hayashida, director and deputy head of the interna­tional banking unit at Sumitomo Mit­sui Banking Corporation. Increasing income and consumption within the rising Asian economies would be a welcome change.

Read Going Global, the version of the article posted on ChinaForum.com

For other recent news on China, see:
China’s ‘Quality Not Quantity’ Strategy Yields Results
The Economist: A Special Report on China’s Place in the World

Social Media Moves in 2010

January 25th, 2010 by Collin Canright

Social media marketing takes the next step in 2010, from the next new thing to a powertool in the integrated marketer’s toolbox, for both business-to-business and consumer marketing, as reported last week in major marketing and technology media articles and blog posts.

Optimism, accountability, social media top trends

BtoB Magazine reports “cautious optimism,” especially over ad budget increases, and the “integration of social media as a marketing tool” as top trends in 2010.

Study Finds Marketers Embracing Social Media Marketing In A Big Way

TechCrunch reports on an Alterian study showing that “66 percent of respondents will be investing in social media marketing (SMM) in 2010.”

2010: Marketers Get Serious About Social Media

Forbes columnist Jeremiah Owyang opines that “senior marketers must have a plan for social marketing” as consumer adoption grows and CMOs get organized around social media–”get over the cool factor” and relate to customers.

The New Social Gurus

Adweek reports that “big brands are on the hunt for help in figuring out their approaches to connecting with consumers on Facebook, providing service on Twitter and instituting internal social media guidelines.” Are the new experts up to the task?

Spending on custom content expected to increase this year

BtoB Magazine reports on an Junta42 study showing that spending on “custom content,” the lifeblood of social media marketing, is set to increase in 2010, with marketers surveyed planning to allocate some 33% of their overall budget to custom content.

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Notes on the Economy in 2010

January 19th, 2010 by Collin Canright

Here are quotes and assessments on the economy in 2010 from panelists at tonight’s Massachusetts Institute of Technology Enterprise Forum Chicago program on the Economic Outlook for 2010. Tim Curley, a financial advisor at UBS Financial Services, moderated in front of a sell-out crowd.

Bryce Bulman, Senior Vice President, PIMCO/Allianz Investment Management
“PIMCO coined an expression called ‘the new normal.’ We’re not setting to a previous mean but going into new territory. We’re not going back to 2005 or 2006.”

“There are risks. The Fed is looking to exit from the mortgage market. It put a trillion dollars in buying mortgages. What happens when the Fed doesn’t buy mortgages like they have been? It could result in better values for patient bond investors.”

Adolfo Laurenti, Senior Economist, Mesirow Financial
“We are probably going to see big (GDP growth) numbers. Why, then, are we feeling so bad?

“The numbers for growth look good on paper. Most of those growth numbers will be quarter by quarter and build off temporary factors. In the first half of the year, the stimulus package. Massive inventory rebuilding for one or two quarters.

“Very little will contribute to a sense of momentum ahead. Temporary factors will not create momentum to create jobs and thus income.”

Mark Keeley, Keeley Investment Management
“My whole thesis is patience. People get impatient especially in their investment. . . . If you’re not moving money around, you’re not doing what you’re supposed to. Sometimes the best thing is to do nothing.

“If you remember one thing from tonight, it’s the point on retirement,” Mark said, in response to a comment about the job prospects of Generation Y and the retirement prospects of the Baby Boomers.

“Retirement income and inflation are related to purchasing power. This is the key point. When you stop working, you have to make money on your money. Your number is purchasing power and in an inflationary cycle it will be scary. That’s the real wild card. When we print all this money, there are repercussions.”

Angela Librizzi, Regional Director, Goldman Sachs Asset Management
The Goldman Sachs forecast is not optimistic and fraught with dangers but also hidden opportunities. “We need 100,000 new jobs to stay flat and 250,000 to decrease unemployment by 1%. We have a ways to go.

“Now that the economy is more normalized, we will see a dispersion of high quality and low quality. You’re always better off in quality. Owning good businesses is where you will win in 2010.”

That’s because the fundamentals of human capital and creativity in the United States remain sound. As Mark Keeley put it:

“We’re the greatest innovators in the history of the world. The Chinese are the greatest imitators in the history of the world. The Indians are poor, smart and hungry, and that’s what we learned to be, but they learned bureaucracy from the English.”

-Collin