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Gene Ellis

Utilities Switch Off Investment in Fossil Fuel Plants - NYTimes.com - 0 views

    • Gene Ellis
       
      Note:  a LARGE power station =s 40 direct jobs.
  • workers at the large power station known as Keadby 1 are preparing to shut it down at the end of the summer, with the loss of about 40 jobs.
  • fluctuations in global energy markets have made the natural gas power plant unprofitable
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  • It has also delayed new energy investments and is planning to close almost a quarter of its fossil fuel power plants,
  • European energy companies, struggling to respond to weak demand in a flatlining economy, say they need guaranteed pricing to keep open unprofitable plants or to invest in new ones.
  • Their revenue is being hit by dwindling demand for electricity and by new wind and solar projects that undercut the price of the energy produced from many fossil fuel plants.
  • At the same time, record-low prices on carbon emissions trading markets, which were introduced to encourage clean and efficient energy production and use, have perversely become a disincentive to investment.
  • Many of the Continent’s aging power stations, particularly those that burn highly polluting coal, are earmarked for closure by 2020 to meet stringent local environment regulations.
  • Without these investments, industrial companies in Europe may face higher energy prices when local economies eventually recover,
  • “Energy utilities are facing a perfect storm,”
  • In a bid to generate 20 percent of the European Union’s electricity from renewable sources by 2020, Germany, Spain and other E.U. countries have provided hefty subsidies to wind and solar farms, which now constitute a sizable minority of daily electricity generation, often surpassing the 20 percent target.
    • Gene Ellis
       
      In effect, a cheaper overall form of energy (non-renewables) had to compete with heavy subsidies to renewables, which, once built, had low operating costs.  They cannot compete and do not invest, and there are major problems w/investing more in renewables (they are overall more expensive, and they have built-in faults, producing electricity erratically, or during the wrong times.)  The high costs of energy also lie with government, who cemented long-term deals with the ex-USSR linking other energy prices to the price of oil.  In short, they shot themselves in the foot.  Several times.
  • European utilities like E.On of Germany have announced plans to shut down less-polluting natural gas-fired plants that have been undercut by dirtier coal-burning generators benefiting from a flood of low-cost coal imports and low carbon emissions prices.
  • Despite the upfront costs associated with green energy projects, they are inexpensive to run. In contrast, Europe’s gas and coal plants, which also provide backup power when renewables cannot operate, need constant spending on fossil fuels.
  • Policy makers are debating a system of support payments to keep uneconomic power plants open,
  • “Without long-term signals of energy prices, investment won’t happen.”
  • Some analysts also expect domestic regulators to eventually create financial incentives for companies
Gene Ellis

The German locomotive has become Europe's liability - FT.com - 0 views

  • It is true German exports to Russia and eastern Europe have declined since the beginning of the year. But, given that they never accounted for more than 4 per cent of total exports, this does little to explain the country’s lacklustre performance.
  • The main problem is not weak export demand or the reluctance of consumers to spend money but the fact that companies are unwilling to invest in new productive assets. Investment now accounts for a smaller portion of output in Germany than in most other industrialised countries.
  • Germany’s public investment in transport infrastructure and education has long been among the lowest in Europe.
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  • The country should also use its political clout to convince its partners and Brussels to implement a European reform agenda that targets investment and growth.
Gene Ellis

China's Economic Empire - NYTimes.com - 0 views

  • China has also invested heavily in building infrastructure, undertaking huge hydroelectric projects like the Merowe Dam on the Nile in Sudan — the biggest Chinese engineering project in Africa — and Ecuador’s $2.3 billion Coca Codo Sinclair Dam. And China is currently involved in the building of more than 200 other dams across the planet, according to International Rivers, a nonprofit environmental organization.
  • China has become the world’s leading exporter; it also surpassed the United States as the world’s biggest trading nation in 2012.
  • annual investment from China to the European Union grew from less than $1 billion annually before 2008 to more than $10 billion in the past two years. And in the United States, investment surged from less than $1 billion in 2008 to a record high of $6.7 billion in 2012, according to the Rhodium Group, an economic research firm. Last year, Europe was the destination for 33 percent of China’s foreign direct investment.
Gene Ellis

Eurozone: Looking for growth | vox - 0 views

  • Empirical evidence suggests deleveraging episodes accompanied by a housing crisis will take on average five and a half years across high-income OECD countries (or seven years when accompanied by a banking crisis (Aspachs-Bracon et al. 2011, IMF 2012).
  • Little resolution of banking-sector difficulties in the Eurozone suggests that deleveraging and credit will probably remain slow and impaired for much longer than previously thought. Recoveries that happen without credit are, on average, a third longer than recovery episodes with credit (Darvas 2013).
  • Damages to trend growth are notoriously difficult to assess,
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  • In addition, observed GDP growth tends to be revised until several years after the first estimate
  • Our work is based on a simple Solow growth-accounting methodology.
  • A common feature of all economies is a collapse in productivity, which is typical of a big recession. In addition, Spain and Italy also underwent a very sharp labour contraction.
  • The additional effect of ageing.
  • A downside risk is that investment growth does not recover fully (for example, because banks fail to provide the necessary funding). In this case, we assume investment growth is only half what it was before the onset of economic turmoil.
  • We also estimate productivity through a convergence equation, which would slightly lift productivity in peripheral countries in the future.
  • This exercise suggests that in the absence of policy reforms, trend growth will have been damaged significantly, by at least one percentage point, post-crisis, compared with pre-crisis levels,
  • In the event that investment fails to recover quickly
  •  or unemployment levels take longer to fall than in previous recovery episodes, then trend growth would be significantly lower for longer. Trend growth might well remain negative in Spain and Italy, and may fail to increase for Germany or France.
  • this exercise shows the damage will indeed be long lasting, permanently impairing growth in a context of an ageing population that needs higher growth capacity than ever before.
Gene Ellis

Steel Industry Feeling Stress as Automakers Turn to Aluminum - NYTimes.com - 0 views

  • Steel Industry Feeling Stress as Automakers Turn to Aluminum
  • These are headed for Mexico, to Navistar’s stamping plant there.Continue reading the main story
  • Now, they are trying to respond, making lighter, stronger steel in a bid to retain one of their most important customers, the automakers.
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  • chief executive of Severstal North America, the United States subsidiary of Russia’s Severstal Group, which now owns the Rouge steel operations.
  • At Severstal’s Dearborn factory, for example, carmakers including Ford and others account for 70 percent of sales,
  • The shift to aluminum is gaining momentum. Automakers are under increasing pressure to meet strict new fuel-economy standards by 2025
  • United States Steel has invested $400 million in a joint venture with Kobe Steel of Japan to make advanced high-strength steel in a Leipsic, Ohio, factory expected to produce 500,000 tons annually.
  • Inside Severstal’s steel mill on a cold January day, hissing heavy machinery removed oxides from steel sheets, reducing their thickness to the equivalent of five human hairs.
  • For nearly a century, Ford’s River Rouge factory and its neighboring steel mill have worked in close harmony
  • Steel makers argue that they still have advantages in price — aluminum can cost as much as three times more — and flexibility, both for the manufacturer and the mechanic who will be fixing the car.“When you build a mass-produced vehicle, you really need to think about the consequences of the supply chain and repair and insurance costs,” Mr. Dey said.
  • new federal fuel-efficiency standards that will require a fleetwide average of 54.5 miles per gallon by 2025, a significant boost from the roughly 25 m.p.g. that vehicles average today.
  • “Sometimes there is a push from the aluminum side, and they win over with a particular model, and steel tends to be the comeback kid, with more innovation,” said Felix Schuler, a Munich-based partner in the Boston Consulting Group’s metals and mining practice.
  • What seems certain is that ordinary steel is likelier to lose out to its new and improved cousin than to aluminum, Mr. Schuler said.
  • Novelis is investing nearly $550 million to upgrade plants in Oswego, N.Y., and Nachterstedt, Germany, and to build a new factory in Changzhou, China, to triple its capacity from a year ago to 900,000 tons annually.
  • Alcoa, the country’s biggest aluminum producer, is investing about $670 million in its Iowa, Tennessee and Saudi Arabia facilities.Continue reading the main story
  • “Henry Ford was a control freak, and he wanted to control as much of the manufacturing as possible,” Mr. Casey said. “He made the steel, he made the glass, he made the tires.”
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Gene Ellis

Alibaba Is Investing Huge Sums in an Array of U.S. Tech Companies - NYTimes.com - 0 views

  • Alibaba Is Investing Huge Sums in an Array of U.S. Tech Companies
Gene Ellis

Citi Cuts Costa Rica Growth Forecast After Firings - Bloomberg - 0 views

  • Citi Cuts Costa Rica Growth Forecast After Firings
  • Hours later, BofA said it would be exiting operations in Costa Rica, Guadalajara, Mexico and Taguig, Philippines, without saying how many jobs would be lost. Costa Rica’s foreign investment agency said the BofA move would result in 1,500 layoffs.
  • “This is a strong call to the country to keeps tabs on things like the rising cost of electricity, telecommunications, wages and social guarantees.”
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  • The country of 4.7 million people climbed seven spots to 102nd in the World Bank’s annual “Doing Business” report this year, lagging behind China, Vietnam and Namibia. Moody’s Investors Service lowered its outlook on Costa Rica to negative from neutral in September, citing a rising debt burden and widening budget deficit. Moody’s rates the country Baa3, putting it in the same category as Turkey and Iceland.
  • In a Bloomberg survey published last month, Costa Rica was ranked fourth behind Russia, Argentina and Ukraine on a list of countries confronting the biggest loss of investor confidence. The survey cited data including the rising cost of credit default swaps and the currency’s performance against the dollar.
  • California-based Intel, whose processors run more than 80 percent of personal computers shipped worldwide every year, originally chose to establish operations in Costa Rica after studying sites in Indonesia, Thailand, Brazil, Argentina, Chile and Mexico, according to a 2000 case study by Harvard University’s Center for International Development. The company’s $600 million investment at the time represented about 4.2 percent of GDP, prompting the company’s then-Vice President Bob Perlman to say Intel’s arrival was like “putting a whale in a swimming pool,” according to the study.
  • n 2013, about 21 percent of Costa Rica’s exports of goods came from Intel, according to investment promotion agency CINDE
Gene Ellis

Dani Rodrik shows why Sub-Saharan Africa's impressive economic performance is not susta... - 0 views

  • Africa’s Structural Transformation Challenge
  • As researchers at the African Center for Economic Transformation in Accra, Ghana, put it, the continent is “growing rapidly, transforming slowly.”
  • Fewer than 10% of African workers find jobs in manufacturing, and among those only a tiny fraction – as low as one-tenth – are employed in modern, formal firms with adequate technology. Distressingly, there has been very little improvement in this regard, despite high growth rates. In fact, Sub-Saharan Africa is less industrialized today than it was in the 1980’s. Private investment in modern industries, especially non-resource tradables, has not increased, and remains too low to sustain structural transformation.
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  • As in all developing countries, farmers in Africa are flocking to the cities. And yet, as a recent study from the Groningen Growth and Development Center shows, rural migrants do not end up in modern manufacturing industries, as they did in East Asia, but in services such as retail trade and distribution. Though such services have higher productivity than much of agriculture, they are not technologically dynamic in Africa
  • Xinshen Diao of the International Food Policy Research Institute has shown that this growth was led by non-tradable services, in particular construction, transport, and hotels and restaurants. The public sector dominates investment, and the bulk of public investment is financed by foreign grants. Foreign aid has caused the real exchange rate to appreciate,
  • What Rwanda and other African countries lack are the modern, tradable industries that can turn the potential into reality by acting as the domestic engine of productivity growth.
  • Studies show that very few microenterprises grow beyond informality, just as the bulk of successful established firms do not start out as small, informal enterprises.
Gene Ellis

The World According to China - The New York Times - 0 views

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    China's share of foreign investment, 2005-2013
Gene Ellis

"The Euro's Latest Reprieve" by Joseph E. Stiglitz | Project Syndicate - 0 views

  • Like an inmate on death row, the euro has received another last-minute stay of execution. It will survive a little longer. The markets are celebrating, as they have after each of the four previous “euro crisis” summits – until they come to understand that the fundamental problems have yet to be addressed.
  • Europe’s leaders have finally understood that the bootstrap operation by which Europe lends money to the banks to save the sovereigns, and to the sovereigns to save the banks, will not work.
  • Likewise, they now recognize that bailout loans that give the new lender seniority over other creditors worsen the position of private investors, who will simply demand even higher interest rates.CommentsView/Create comment on this paragraph
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  • It is deeply troubling that it took Europe’s leaders so long to see something so obvious
  • What is now proposed is recapitalization of the European Investment Bank, part of a growth package of some $150 billion. But politicians are good at repackaging, and, by some accounts, the new money is a small fraction of that amount, and even that will not get into the system immediately. In short: the remedies – far too little and too late – are based on a misdiagnosis of the problem and flawed economics.
  • Eurobonds and a solidarity fund could promote growth and stabilize the interest rates faced by governments in crisis. Lower interest rates, for example, would free up money so that even countries with tight budget constraints could spend more on growth-enhancing investments.
  • Even well-managed banking systems would face problems in an economic downturn of Greek and Spanish magnitude; with the collapse of Spain’s real-estate bubble, its banks are even more at risk.
  • Europe’s leaders did not recognize this rising danger, which could easily be averted by a common guarantee, which would simultaneously correct the market distortion arising from the differential implicit subsidy.
  • The euro was flawed from the outset, but it was clear that the consequences would become apparent only in a crisis.
  • Workers may leave Ireland or Greece not because their productivity there is lower, but because, by leaving, they can escape the debt burden incurred by their parents.
  • Germany worries that, without strict supervision of banks and budgets, it will be left holding the bag for its more profligate neighbors. But that misses the key point: Spain, Ireland, and many other distressed countries ran budget surpluses before the crisis. The down
  • turn caused the deficits, not the other way around.CommentsView/Create comment on this paragraph
  • If these countries made a mistake, it was only that, like Germany today, they were overly credulous of markets, so they (like the United States and so many others) allowed an asset bubble to grow unchecked.
  • Moreover, Germany is on the hook in either case: if the euro or the economies on the periphery collapse, the costs to Germany will be high.
  • While structural problems have weakened competitiveness and GDP growth in particular countries, they did not bring about the crisis, and addressing them will not resolve it.CommentsView/Create comment on this paragraph
Gene Ellis

Ireland's Debt to Foreign Banks Is Still Unknown - NYTimes.com - 0 views

  • Mr. Weber, who is also a member of the European Central Bank’s governing council, said that the statistics reflected Ireland’s status as a financial center: much of what is recorded as claims on Ireland is in fact money funneled through Irish subsidiaries of German banks, and ultimately bound for elsewhere, Mr. Weber said. He said total German exposure was closer to $30 billion.
  • In both cases more than half of the exposure was to Ireland’s private sector, rather than lending to the government or Ireland’s beleaguered banks.
  • In Germany, Hypo Real Estate, a property and public sector lender owned by the government after a bailout, owed its near collapse largely to problems at Depfa, its subsidiary in Dublin. Last month Hypo transferred most of its troubled assets to a so-called bad bank that will slowly wind down the investments.
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  • Taxpayers will bear the cost, but they may never find out how much. The bad bank, known as FMS Wertmanagement, has no plans to release financial statements, according to Soffin, the German government organization that oversees bank rescues.
  • The latest figures from the Bank for International Settlements put total European bank exposure to Portugal and Spain at $853 billion, with Germany, France and Britain the biggest creditors.
  • That worst-case forecast highlights another potential hidden risk. Credit-default swaps are typically sold over the counter by investment banks, with little information available publicly about the financial strength of the sellers. “Only then will we know for sure if the institutions that wrote the credit-default swaps have the liquidity and the financial strength to perform as contracted,” Mr. Weinberg wrote in a note last week.
Gene Ellis

Seven lean years for Europe, says Citi chief economist - Fund Forum - Investment Europe - 0 views

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Gene Ellis

Tunisia's Government Mortgages Economic Future - Al-Monitor: the Pulse of the Middle East - 0 views

  • The average cost of Tunisia's external debt is nearly 4%, and is mainly denominated in euros and US dollars.
  • Today, Tunisia’s situation under the troika comes down to the fact that the country is borrowing to consume and not to invest.
  • Another fact that will render paying off the debt more difficult is that the redeemable portion of the foreign debt within 10 to 20 years or more is 81.3 % of all loans taken from abroad.
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  • But where has the money gone? The answer is not difficult to guess. The debts were neither used for investment nor infrastructure or the creation of job opportunities. Instead, they were partly spent on reabsorbing the trade deficit and artificially replenishing reserve currencies.
  • This plan of action has been negative at all levels, to the extent that international financial institutions have already cut off their monetary support to Tunisia.
Gene Ellis

RealTime Economic Issues Watch | Transatlantic Economic Sanctions Against Russia - 0 views

shared by Gene Ellis on 25 Apr 14 - No Cached
  • Transatlantic Economic Sanctions Against Russia
  • First, I have recommended to government officials that US and EU negotiators give priority to energy cooperation and promotion of US exports of liquefied natural gas to Europe during the fourth round of talks on the Transatlantic Trade and Investment Partnership (TTIP) that start on March 10 in Brussels. Efforts should be made to conclude this part of the agreement quickly and immediately implement the obligations on a provisional basis
  • Second, the United States and the European Union should call for special consultations in the International Energy Agency (IEA) to review current oil and gas supply arrangements and reserves in Europe. The IEA should also be called on to assess the implications of the crisis in Ukraine for member and nonmember countries and their options for dealing with potential supply disruptions. Ukraine participates in consultations with IEA members on a regular basis anyway and clearly should be doing so now.
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  • they would help inoculate European economies against the adverse effects of energy disruptions in the medium term.
  • Consideration should be given to invoking GATT Article XXI, which provides exceptions for national security reasons from rights and obligations under the World Trade Organization (WTO), for example. Invoking this WTO exception would allow across-the-board actions against Russia without prior notification or even justification. The national security exception of Article XXI is that broad. In brief, the United States and the European Union could remove in one step all the WTO benefits they accorded Russia when it acceded to the WTO in August 2012. Doing so would disrupt bilateral trade and investment, possibly kicking tariffs back up to Smoot-Hawley levels of the 1930s.
Gene Ellis

World - Slide Show - China's Investment in Africa Comes With a Price - 0 views

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Gene Ellis

Global flows in a digital age | McKinsey & Company - 0 views

  • Global flows in a digital age
  • Now, one in three goods crosses national borders, and more than one-third of financial investments are international transactions. In the next decade, global flows could triple,
  • we find that countries with a larger number of connections in the global network of flows increase their GDP growth by up to 40 percent more than less connected countries do. The penalty for being left behind is rising.
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  • Exchanges of goods such as aircraft and automobiles, semiconductors, pharmaceuticals, and microelectronics, as well as professional services and foreign direct investment flows, are growing faster than others.
  • Digital technologies, which reduce the cost of production and distribution, are transforming flows in three ways: through the creation of purely digital goods and services, “digital wrappers” that enhance the value of physical flows, and digital platforms that facilitate cross-border production and exchange.
  • Developing economies now account for 38 percent of global flows, nearly triple their share in 1990. S
  • oday, digital technologies enable even the smallest company or solo entrepreneur to be a “micromultinational,” selling and sourcing products, services, and ideas across borders. Individuals can work remotely through online platforms, creating a virtual people flow. Microfinance platforms enable entrepreneurs and social innovators to raise money globally in ever-smaller amounts.
Gene Ellis

Waiting for the Markets to Blink - NYTimes.com - 0 views

  • “You get these occasional disconnects and start asking who’s right and who’s wrong,” said Daniel Morris, global investment strategist at TIAA-CREF.
  • “We think the equity market is right,” he said. “If that’s the case, bond yields are too low.”
  • “We’re constructive about the future and think all this intervention is going to work, but how much is priced in” to the stock market? So much, in his view, that “we’ve been selling into the strength,” he said.
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  • “Do you believe that things are going to get better? If you do, you don’t want to be in Treasuries at 2.5 percent,” he said. “Some things don’t make sense to me. It’s frustrating.”
  • He says it doesn’t make sense that the stock market has held up as well as it has amid the Fed’s debt purchases and its policy of maintaining short-term interest rates near zero, a measure taken in a crisis that is supposed to be over.
  • “How do you know there has been an economic recovery and the patient is breathing normally when it’s in an oxygen tent?”
  • For all of 2013, gross domestic product increased by 1.9 percent, compared with 2.8 percent for 2012.
  • Orders and shipments of durable goods
  • were flat in 2013, and housing has weakened. February was the eighth consecutive month of declines in pending home sales, leaving them down 10.2 percent from 12 months earlier.
  • “It will be extremely difficult for the U.S. economy to escape its Great Recession hangover with this poor profits backdrop,” Mr. Edwards wrote. “Indeed it leaves the economy extremely vulnerable to adverse shocks,” like declining growth in Asia.
  • “We’re keeping a very close eye on China,” Ms. Patterson said. “If there are signs that it’s slowing more than we expect, that would hurt our view of emerging markets and worsen the outlook for developed markets due to contagion” because of the increasing importance of China in the global economy.
  • American real estate companies and European banks, for instance — but he is keeping 13 percent of his fund in cash because of a dearth of attractive investment choices.
  • Mr. Morris finds a wider array of opportunities. He likes shares of consumer-discretionary companies, which provide the products and services that people want but do not need. The sector includes businesses as diverse as hotels, carmakers and clothing stores.
  • the industrial sector, which includes manufacturers of business equipment. Another preferred segment is banks; he expects them to flourish as interest rates rise and the gap widens between what they charge in interest and what they pay.
  • Mr. Morris encourages stock investors to buy American.
  • “You can’t just unwind quantitative easing, with all of its distortions, and achieve stability without some pain along the way,” he warned. “What that pain is, when it happens, that’s where the uncertainties lie. The margin to maneuver is getting less and less with the passage of time.”
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