Reuters blog archive
Corporate profits and cash piles have never been higher. But it's not just an economic imperative that firms get spending and investing, it's their social and moral responsibility to do so.
Three of the four sectors that make up the economy got battered by the global financial crisis and Great Recession:
- Households: millions of workers lost their jobs, households retrenched their finances and times got extremely tough
- Governments: they rescued and guaranteed the global economy and financial system at a cost of trillions
- Banks: often vilified for their role in causing the crisis and apparent lack of punishment or contrition, they're being forced to undergo huge structural change that will cost them billions
The one sector that flourished - even more than banks (and bankers) - is the corporate sector. By some measures, it has never had it so good - profits, cash reserves and share prices have rarely been higher:
The problem is, hardly any of that is being reinvested and relatively few are enjoying the spoils. Management and shareholders are sitting pretty, thanks to dividend payments and share buybacks. According to financial market consultant and author Andrew Smithers, US companies invest barely twice as much as they pay out to shareholders. In the 1970s that ratio was as high as 15:1.
from The Human Impact:
"When we argued I felt cornered, like I was about to lose everything," he said in emailed comments to Thomson Reuters Foundation.
By Viktoria Dendrinou
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
And then there were three. Standard & Poor’s decision to strip the Netherlands of its triple-A credit rating leaves only Germany, Finland and tiny Luxembourg enjoying top-notch status in the euro zone. It is hard to argue with the assessment, but it would be wrong to see the downgrade as a red flag about the country’s economic health. While the Netherlands’ recovery from its housing bust is all too slow, property prices are bottoming, debt is low and reform is underway. Other euro zone members are bigger worries.
from Global Investing:
By Shadi Bushra
Yet another sign of the growth convergence between developed and emerging markets. Two of the "BRIC' countries have dropped out of the Top-30 in a growth index compiled by political risk consultancy Maplecroft, while several Western powerhouses have nudged their way onto the list.
Maplecroft's 2014 Growth Opportunities Atlas showed that Brazil and Russia -- the B and R of the BRIC bloc -- had dropped 26 and 41 places, respectively - due to slow economic reforms and diversification. The United States, Australia and Germany meanwhile broke into the top 30 on the index, which evaluates 173 countries on their growth prospects over the next 20 years.
When the U.S. Federal Reserve launched its third round of quantitative easing, or QE3, it was hailed as an "open-ended" policy that would last as long as needed. Most important for investors, the pace of the bond buying - which started at a somewhat arbitrary $85 billion per month - would be "data dependent." Especially throughout the spring, officials stressed they were serious about adjusting the dial on QE3 depending on changes in the labor market and broader economy. But as the unemployment rate dropped to 7.3 percent last month from 8.1 percent when the program was launched in September, 2012, the bond-buying has effectively been on auto-pilot for 14 straight months.
Now, some are wondering whether the decision not to at least tinker with the program has made the first so-called taper a bigger deal than it needed to be. "When you don't react to small changes in the data with small changes in the policy then the markets tend to read more into it when you do change policy," St. Louis Fed President James Bullard said last week after a speech in Arkansas. "It makes policy a little more rigid than it maybe should be."
from Data Dive:
The number of Americans filing new claims for unemployment benefits is at a two-month low, data released by the Labor Department this morning shows. From the report:
In the week ending November 16, the advance figure for seasonally adjusted initial claims was 323,000, a decrease of 21,000 from the previous week's revised figure of 344,000. The 4-week moving average was 338,500, a decrease of 6,750 from the previous week's revised average of 345,250.
from Global Investing:
Four years into the stock market party fueled by a punch bowl overflowing with trillions of dollars of central bank liquidity, you'd think a hangover might be looming.
But almost all of the fund managers attending the London leg of the Reuters Global Investment Summit this week - with some $4 trillion of assets under management - say the party will continue into 2014.
from Data Dive:
Here's a Reuters graphic answering this question, based on new Treasury sales data for September.
Here's more from Reuters:
Foreigners fled from short-term U.S. assets in September as a budget battle in Washington raised fears the government could default on some obligations, though demand for longer-term securities rose, U.S. Treasury data showed on Monday.
It’s euro zone third quarter GDP day and Germany and France are already out of the traps with the latter’s economy contracting by 0.1 percent, snuffing out a 0.5 percent rebound in the second quarter. Growth of 0.1 percent was forecast, not just by bank economists but by the Bank of France too.
Germany failed to match its strong 0.7 percent growth in the second quarter, but expanding by 0.3 percent – in line with forecasts - it is clearly in much better shape.
By Andy Mukherjee
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The Philippines could learn some lessons from the Indian Ocean tsunami. Like the 2004 tidal wave, typhoon Haiyan has caused death and destruction. The next challenge is to manage the economic distortions caused by rebuilding.