markets, he wrote - acg
TRANSCRIPT
By: Anirban BasuSage Policy Group, Inc.
May 23rd, 2017
Markets, He Wrote
On Behalf of
ACG Maryland Deal Forum 2017
Macro P.I.(Just How Hairy is the
Global Situation?)
Photo: Flixter.com
0.2%1.7%
1.1%2.6%
7.2%6.6%6.4%
1.4%3.0%
2.6%4.5%
2.3%3.1%
1.9%2.0%
1.2%2.6%
0.8%1.6%
1.4%1.7%2.0%
-6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
BrazilMexico
Latin America & the CaribbeanMiddle East, North Africa, Afghanistan, & Pakistan
India (3)China
Emerging & Developing AsiaRussia
Emerging & Developing EuropeSub-Saharan Africa
Emerging Market & Developing EconomiesUnited States
AustraliaCanada
United KingdomJapan (2)
SpainItaly
GermanyFrance
Euro AreaAdvanced Economies
Annual % Change
Estimated Growth in Output by Select Global Areas2017 Projected
2017 Proj. Global Output Growth: 3.5%Source: International Monetary Fund: World Economic Outlook Database, April 2017.
Notes: 1. Real effective exchange rates are assumed to remain constant at the levels prevailing during February 1–March 1, 2017.Economies are listed on the basis of economic size. The aggregated quarterly data are seasonally adjusted. 2. Japan’s historicalnational accounts figures reflect a comprehensive revision by the national authorities, released in December 2016. The main revisions are the switch from the System of National Accounts 1993 to the System of National Accounts 2008 and the updating of the benchmark year from 2005 to 2011. 3. For India, data and forecasts are presented on a fiscal year basis and GDP from 2011onward is based on GDP at market prices with FY2011/12 as a base year.
International Population Dynamics, 16 Largest Nations
Source: United Nations, Department of Economic and Social Affairs, Population Division (2015). World Population Prospects: The 2015 Revision.
NationPopulation (Millions)
% Change2015 2050 Net Change
Nigeria 182.2 398.5 216.3 118.7%Ethiopia 99.4 188.5 89.1 89.6%Egypt 91.5 151.1 59.6 65.1%Pakistan 188.9 309.6 120.7 63.9%Philippines 100.7 148.3 47.6 47.2%India 1,311.1 1,705.3 394.3 30.1%Mexico 127.0 163.8 36.7 28.9%Bangladesh 161.0 202.2 41.2 25.6%Indonesia 257.6 322.2 64.7 25.1%United States 321.8 388.9 67.1 20.9%Vietnam 93.4 112.8 19.3 20.7%Brazil 207.8 238.3 30.4 14.6%China 1,376.0 1,348.1 -28.0 -2.0%Germany 80.7 74.5 -6.2 -7.7%Russian Federation 143.5 128.6 -14.9 -10.4%Japan 126.6 107.4 -19.2 -15.1%World 7.3 billion 9.7 billion 2.4 billion 32.3%
*For statistical purposes, the data for China do not include Hong Kong and Macao, Special Administrative Regions (SAR) of China, and Taiwan Province of China.
Niamey Vice(Fertility Rates by Country, 2014)
Source: World Bank, World Development Indicators
Top 15 Bottom 15
Rank* Country Fertility Rate Rank* Country Fertility
Rate
1 Niger 7.60 186 Germany 1.39
2 Somalia 6.46 186 Italy 1.39
3 Mali 6.23 188 Malta 1.38
4 Chad 6.16 189 Hungary 1.35
5 Angola 6.08 190 Slovak Republic 1.34
6 Congo, Dem. Rep. 6.01 191 Greece 1.30
7 Burundi 5.95 192 Poland 1.29
8 Uganda 5.78 193 Spain 1.27
9 Gambia, The 5.72 194 Bosnia and Herzegovina 1.26
10 Nigeria 5.65 194 Moldova 1.26
11 Burkina Faso 5.52 196 Singapore 1.25
12 Mozambique 5.36 197 Macao SAR, China 1.24
13 Zambia 5.35 198 Hong Kong SAR, China 1.23
14 Tanzania 5.15 200 Portugal 1.21
15 Malawi 5.13 200 Korea, Rep. 1.21
*Rank among 200 countries for which data are available for the most recent year (2014)**Total fertility rate represents the number of children that would be born to a woman if she were to live to the end of her childbearing years and bear children in accordance with age-specific fertility rates of the specified year.
Global Debt to Exacerbate Slow Growth?
Sources: 1. International Monetary Fund. October 2016. “World Economic Outlook: Subdued Demand: Symptoms and
Remedies.” 2. International Monetary Fund (IMF). October 2016. “Fiscal Monitor: Debt—Use It Wisely.”
• According to the IMF, global debt reached an all-time highin 2015;
• At $152 trillion, global gross debt of the nonfinancial sector now represents 225% of global GDP;
• About 2/3 of this debt is in the private sector;
• Current low nominal-growth environment is making adjustment difficult, setting the stage for a “vicious feedback loop” in which lower growth hampers deleveraging and the debt overhang exacerbates the slowdown.2
Note: The nonfinancial sector comprises the general government, nonfinancial firms, and households. Gross debt represents the unconsolidated liabilities of the three.
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$/B
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April 2017:$51.12 /Barrel
NYMEX Crude Oil Future Prices in U.S. DollarsApril 2001 through April 2017
Source: U.S. Energy Information Administration
*Month of April = average of daily prices from 4/3-4/28
US$ NominalBase metals include aluminum, copper, lead, nickel, tin and zinc.Precious metals include gold, platinum, and silver.
Base Metals
Iron Ore
Precious Metals
25
45
65
85
105
125
145
165
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2010
=10
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Metal Price IndicesApril 2007 through April 2017
Source: The World Bank
0
1,000
2,000
3,000
4,000
5,000
May
-09
Sep
-09
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
Sep
-16
Jan
-17
May
-17
Jan. 4, 1985: 1,000
May 19th
956
The Baltic Dry Index (BDI) is a measure of the price of shipping major raw materials such as metals, grains, and fossil fuels by sea. The BDI is a composite of 3 sub-indices, each covering a different carrier size: Capesize, Panamax, and Supramax.
Baltic Dry IndexMay 2009 through May 2017
Source: Quandl.com
USA CSI
Photo: AMCNetworks.com
(Commercial Situation Investigation)
Gross Domestic Product1990Q1 through 2017Q1*
Source: Bureau of Economic Analysis
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%19
90
Q1
199
0Q
419
91Q
319
92Q
219
93Q
119
93Q
419
94
Q3
199
5Q2
199
6Q
119
96
Q4
199
7Q3
199
8Q
219
99
Q1
199
9Q
420
00
Q3
200
1Q2
200
2Q1
200
2Q4
200
3Q3
200
4Q
220
05Q
120
05Q
420
06
Q3
200
7Q2
200
8Q
120
08
Q4
200
9Q
320
10Q
220
11Q
120
11Q
420
12Q
320
13Q
220
14Q
120
14Q
420
15Q
320
16Q
220
17Q
1
% C
ha
ng
e f
rom
Pre
ced
ing
Pe
rio
d (
SA
AR
)
2017Q1: +0.7%
*1st (Advance) Estimate
Contributions to GDP Growth by Component 2016Q2 – 2017Q1*
Source: Bureau of Economic Analysis
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
PersonalConsumption
GovernmentSpending
Net Exports GrossInvestment
2.9
-0.3
0.2
-1.3
2.0
0.1
0.9
0.5
2.4
0.0
-1.8
1.5
0.23
-0.30
0.07
0.69
SA
AR
(%
)
2016Q2 2016Q3 2016Q4 2017Q1
1.4
3.5
2.1
0.7
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
GDP
Pe
rce
nt
Ch
an
ge
fro
m P
rece
din
g P
eri
od
(S
AA
R)
2017Q1: +0.7%
*1st (Advance) Estimate
Net Change in U.S. Jobs, BLSApril 2002 through April 2017
Source: U.S. Bureau of Labor Statistics
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Th
ou
san
ds
April 2017:
+211K
National Nonfarm Employmentby Industry SectorApril 2016 v. April 2017
Source: U.S. Bureau of Labor Statistics
-46
21
40
56
173
173
179
213
304
512
612
-100 0 100 200 300 400 500 600 700
Information
Mining and Logging
Manufacturing
Other Services
Construction
Financial Activities
Government
Trade, Transportation, and Utilities
Leisure and Hospitality
Education and Health Services
Professional and Business Services
Thousands, SA
All told 2,237K jobs gained
U.S. Employment to Population RatioApril 2000 – April 2017
Source: U.S. Bureau of Labor Statistics
Note: Civilian employment-population ratio, population 16 years and over, seasonally adjusted (SA).
58.0
59.0
60.0
61.0
62.0
63.0
64.0
65.0
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April 2017:60.2%
Employment Growth, U.S. States (SA) April 2016 v. April 2017 Percent Change
Source: U.S. Bureau of Labor Statistics
RANK STATE % RANK STATE % RANK STATE %
1 NEVADA 3.6 14 MONTANA 1.7 35 PENNSYLVANIA 0.8
2 UTAH 3.3 19 KENTUCKY 1.6 35 VERMONT 0.8
3 FLORIDA 2.6 20 ARKANSAS 1.5 37 OHIO 0.7
3 GEORGIA 2.6 21 CALIFORNIA 1.4 38 DELAWARE 0.6
3 IDAHO 2.6 21 HAWAII 1.4 38 MAINE 0.6
6 WASHINGTON 2.5 21 SOUTH CAROLINA 1.4 40 DISTRICT OF COLUMBIA 0.5
7 OREGON 2.3 24 ALABAMA 1.3 40 IOWA 0.5
8 TEXAS 2.2 24 MISSOURI 1.3 42 ILLINOIS 0.4
9 ARIZONA 2.0 24 NEW JERSEY 1.3 42 NORTH DAKOTA 0.4
10 TENNESSEE 1.9 24 WISCONSIN 1.3 44 CONNECTICUT 0.3
11 COLORADO 1.8 28 NEW MEXICO 1.2 45 MISSISSIPPI 0.1
11 NEW HAMPSHIRE 1.8 28 NORTH CAROLINA 1.2 46 LOUISIANA -0.111 SOUTH DAKOTA 1.8 30 NEBRASKA 1.1 47 KANSAS -0.214 MARYLAND 1.7 30 VIRGINIA 1.1 47 OKLAHOMA -0.214 MASSACHUSETTS 1.7 32 INDIANA 1.0 49 WEST VIRGINIA -0.414 MICHIGAN 1.7 32 NEW YORK 1.0 50 WYOMING -1.414 MINNESOTA 1.7 32 RHODE ISLAND 1.0 51 ALASKA -2.1
U.S. Year-over-year Percent Change: +1.6%
Rank MSA % Rank MSA %
1 Orlando-Kissimmee-Sanford, FL MSA 3.6 13Boston-Cambridge-Nashua, MA-NH Metro NECTA
1.6
2 Atlanta-Sandy Springs-Roswell, GA MSA 3.3 13 Portland-Vancouver-Hillsboro, OR-WA MSA 1.6
3Riverside-San Bernardino-Ontario, CA MSA
3.1 15Minneapolis-St. Paul-Bloomington, MN-WI MSA
1.5
4 Dallas-Fort Worth-Arlington, TX MSA 3.0 15Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA
1.5
5 Seattle-Tacoma-Bellevue, WA MSA 2.7 17Houston-The Woodlands-Sugar Land, TX MSA
1.4
6 Tampa-St. Petersburg-Clearwater, FL MSA 2.6 18 San Diego-Carlsbad, CA MSA 1.3
7 Phoenix-Mesa-Scottsdale, AZ MSA 2.5 19Washington-Arlington-Alexandria, DC-VA-MD-WV MSA
1.2
8 Charlotte-Concord-Gastonia, NC-SC MSA 2.4 20 Los Angeles-Long Beach-Anaheim, CA MSA 0.9
9Miami-Fort Lauderdale-West Palm Beach, FL MSA
2.3 20New York-Newark-Jersey City, NY-NJ-PA MSA
0.9
10 Denver-Aurora-Lakewood, CO MSA 2.1 22 Baltimore-Columbia-Towson, MD MSA 0.8
11 San Francisco-Oakland-Hayward, CA MSA 2.0 23 St. Louis, MO-IL MSA 0.4
12 Detroit-Warren-Dearborn, MI MSA 1.9 24 Chicago-Naperville-Elgin, IL-IN-WI MSA 0.3
Employment Growth, 24 Largest Metros (NSA)April 2016 v. April 2017 Percent Change
Source: U.S. Bureau of Labor Statistics, Current Employment Statistics (CES) Survey
Rank MSA UR Rank MSA UR
1 Denver-Aurora-Lakewood, CO MSA 2.4 13 Los Angeles-Long Beach-Anaheim, CA MSA 4.2
2Boston-Cambridge-Nashua, MA-NH Metro NECTA
3.4 13 San Diego-Carlsbad, CA MSA 4.2
3 San Francisco-Oakland-Hayward, CA MSA 3.5 15 Dallas-Fort Worth-Arlington, TX MSA 4.3
4Washington-Arlington-Alexandria, DC-VA-MD-WV MSA
3.7 16 Charlotte-Concord-Gastonia, NC-SC MSA 4.4
4 Seattle-Tacoma-Bellevue, WA MSA 3.7 17 Baltimore-Columbia-Towson, MD MSA 4.5
6Minneapolis-St. Paul-Bloomington, MN-WI MSA
3.8 17 Chicago-Naperville-Elgin, IL-IN-WI MSA 4.5
7 Orlando-Kissimmee-Sanford, FL MSA 3.9 19 Atlanta-Sandy Springs-Roswell, GA MSA 4.6
7 Portland-Vancouver-Hillsboro, OR-WA MSA 3.9 19Miami-Fort Lauderdale-West Palm Beach, FL MSA
4.6
9 St. Louis, MO-IL MSA (1) 4.0 19Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA
4.6
10New York-Newark-Jersey City, NY-NJ-PA MSA
4.1 22 Detroit-Warren-Dearborn, MI MSA 5.1
10 Phoenix-Mesa-Scottsdale, AZ MSA 4.1 23 Riverside-San Bernardino-Ontario, CA MSA 5.3
10 Tampa-St. Petersburg-Clearwater, FL MSA 4.1 24Houston-The Woodlands-Sugar Land, TX MSA
5.7
Unemployment Rates, 24 Largest Metros (NSA)March 2017
Source: U.S. Bureau of Labor Statistics
U.S. Unemployment RateMarch: 4.5% April: 4.4%
1. Area boundaries do not reflect official OMB definitions.
21 Jump Street
(And Other Addresses of Interest)
Photo: TheMoveDatabase.org
National Nonresidential Construction Spending by
Subsector, March 2016 v. March 2017
Source: U.S. Census Bureau
-22.3%-13.9%
-12.3%-9.7%
-7.3%-4.2%
-2.4%-1.4%
1.0%2.5%
4.9%8.3%
9.2%10.9%
15.7%18.5%
-30% -20% -10% 0% 10% 20%
Sewage and waste disposalWater supply
TransportationManufacturing
ReligiousConservation and development
Highway and streetHealth careEducational
Public safetyPower
LodgingAmusement and recreation
CommercialOffice
Communication
12-month % Change
Total Nonresidential Construction YOY:
+$7.36B; +1.0%
Commercial/Multifamily Offshore Investment
Sales Volumes Reach New Heights in 2015
$8.5
$19.0$21.3
$35.0
$45.0
$12.5
$3.9
$14.0
$19.6
$26.8$30.1 $30.9
$76.2
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Bil
lio
ns
of
$US
Source: Jones Lang LaSalle; Real Capital Analytics Note: Among transactions larger than $5.0 million
Foreign Investment Increases 146.6 Percent in 2015 to $76.2b
Top Markets for Foreign Office Investment, 2015
$172 $249 $347 $394 $515 $602 $709
$995 $1,184
$1,935 $2,323
$11,237
$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000
HoustonSilicon Valley
Dallas/Fort WorthSan Francisco
Los AngelesAtlantaMiami
ChicagoSeattle Bellevue
BostonWashington, DC
New York
Millions of $US
Annual Foreign Office Investment Volume
Source: Jones Lang LaSalle; Real Capital Analytics
Foreign Office Investment Activity, as of 2016Q3
Source: Jones Lang LaSalle; Real Capital Analytics
14.9%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
200
320
04
200
520
06
200
720
08
200
920
1020
1120
1220
1320
1420
1520
16Y
TD
Foreign Participation as a % of Total Office Volume
1.1%
1.1%
1.4%
1.6%
1.9%
2.1%
2.8%
4.8%
4.8%
5.6%
6.8%
7.1%
8.4%
45.5%
0% 10% 20% 30% 40% 50%
San Diego
Philadelphia
Austin
Atlanta
Chicago
Northern New Jersey
Miami
Seattle-Bellevue
Los Angeles
Dallas-Fort Worth
Washington, DC
Boston
San Francisco
New York
Foreign Office Investment by Destination Market (as a % of Total, 2016YTD)
Note: Among transactions larger than $5.0 million; includes all office markets which received > 1.0% of offshore capital.
Primary markets continue to capture the lion’s share of inbound capital, receiving 78.2% of this capital YTD.
U.S. Mergers and Acquisitions, 2016
Average Value of M&A Announced in 2016: $106 million
Smaller than 2015 average: $115.4 million
Larger than the 2000-2014 average: $77.1 million
5 Biggest Deals in 2016
1. AT&T and Time Warner: $85.4 billion
2. Bayer and Monsanto: $66 billion
3. British American Tobacco and Reynolds American: $58 billion
4. Sunoco Logistics and Energy Transfer Partners: $52 billion
5. Qualcomm and NXP Semiconductors: $47 billionSource: Fortune.com
Mergers and Acquisitions, 2017
In the first quarter of 2017:
Total # of deals: -17.9%
Overall deal value: +8.9% (to $678.5B)
Average deal value: $403.4 million
Clampdown on outgoing capital by the Chinese government decreased the number of Chinese buyers
Value of Chinese deals down 86 percent compared to last year
“The erosion in barriers to entry and the slowdown in emerging markets is forcing struggling multinationals into finding new avenue of growth … M&A is actually the quickest route – sometimes easier than innovation and less risky than extreme cost cutting.” – Cedric Besnard, Consumer Equity Analyst at Citi
“High liquidity, access to cheap financing, healthy balance sheets and a need to demonstrate growth to shareholders via M&A all provide a positive outlook for 2017. Technology will drive M&A activity, with disruptive industries such as artificial intelligence, fintech and the internet of thing continuing to attract investor attention.” –Katharine Dennys, EMEA Research Editor, Mergermarket
Source: CNBC.com
Down to “The Wire”
Photo: RecapGuide.com
Sales Growth by Type of Business April 2016 v. April 2017*
Source: U.S. Census Bureau
-2.4%
-0.7%
0.5%
0.7%
0.7%
1.8%
2.3%
3.8%
3.9%
4.4%
9.3%
11.9%
12.3%
-5% 0% 5% 10% 15%
Sporting Goods, Hobby, Book & Music Stores
General Merchandise Stores
Clothing & Clothing Accessories Stores
Electronics & Appliance Stores
Health & Personal Care Stores
Miscellaneous Store Retailers
Food & Beverage Stores
Furniture & Home Furn. Stores
Food Services & Drinking Places
Motor Vehicle & Parts Dealers
Building Material & Garden Supplies Dealers
Internet, etc. Retailers
Gasoline Stations
12-month % change
*April 2017 advanced estimate
Total Retail Sales: +4.5% YOY
U.S. Saving Rate, March 2005 – March 2017 (Savings as Percentage of Personal Disposable Income)
Source: Bureau of Economic Analysis
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Mar
-05
Jul-
05
No
v-0
5M
ar-0
6Ju
l-0
6N
ov-
06
Mar
-07
Jul-
07
No
v-0
7M
ar-0
8Ju
l-0
8N
ov-
08
Mar
-09
Jul-
09
No
v-0
9M
ar-1
0Ju
l-10
No
v-10
Mar
-11
Jul-
11N
ov-
11M
ar-1
2Ju
l-12
No
v-12
Mar
-13
Jul-
13N
ov-
13M
ar-1
4Ju
l-14
No
v-14
Mar
-15
Jul-
15N
ov-
15M
ar-1
6Ju
l-16
No
v-16
Mar
-17
Sa
vin
gs
Ra
te (
%)
March 2017:5.9%
U.S. Gross Private Domestic Investment (SAAR)% Change from Previous Quarter, 2000Q1 – 2017Q1*
Source: Bureau of Economic Analysis
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
200
0Q
120
00
Q3
200
1Q1
200
1Q3
200
2Q1
200
2Q3
200
3Q1
200
3Q3
200
4Q
120
04
Q3
200
5Q1
200
5Q3
200
6Q
120
06
Q3
200
7Q1
200
7Q3
200
8Q
120
08
Q3
200
9Q
120
09
Q3
2010
Q1
2010
Q3
2011
Q1
2011
Q3
2012
Q1
2012
Q3
2013
Q1
2013
Q3
2014
Q1
2014
Q3
2015
Q1
2015
Q3
2016
Q1
2016
Q3
2017
Q1
2017Q1:+4.3%
*1st (Advance) Estimate
Conference Board Leading Economic Indicators IndexAugust 2007 through April 2017
Source: Conference Board
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%A
ug
-07
Dec
-07
Ap
r-0
8
Au
g-0
8
Dec
-08
Ap
r-0
9
Au
g-0
9
Dec
-09
Ap
r-10
Au
g-1
0
Dec
-10
Ap
r-11
Au
g-1
1
Dec
-11
Ap
r-12
Au
g-1
2
Dec
-12
Ap
r-13
Au
g-1
3
Dec
-13
Ap
r-14
Au
g-1
4
Dec
-14
Ap
r-15
Au
g-1
5
Dec
-15
Ap
r-16
Au
g-1
6
Dec
-16
Ap
r-17
On
e-m
on
th P
erc
en
t C
ha
ng
e
April 2017: 126.9 where 2010: 100
The Closer• Global economy remains weak,
and correspondingly . . . ;
• Global money has continued to pour into America in search of yield and safety, including into commercial real estate – that was particularly true in 2015, a bit less true in 2016 – M&A activity also stimulated;
• Inflationary pressures are on the rise – so, too, are interest rates –that could begin to squeeze asset prices in 2017, particularly if expected tax cuts are not passed into law;
• There are indications of mini-bubbles forming in commercial real estate, particularly in office, lodging and multifamily segments;
• There are also longer-term structural considerations, including the national debt and pending insolvencies of Medicare and Social Security – the longer-term outlook may be deteriorating even as the short-run improves;
• Momentum should see us through 2017, but tighter monetary policy combined with a heavy dose of political intrigue could render 2018 far different. By this time in 2019, the economy could be in a far different place and likely will be.
*Kyra Sedgwick as Brenda Leigh Johnson
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