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Resounding cheers around the world greeted Barack Obama's election as U.S. president, but the world did not put its money where its mouth was. Stock markets nearly everywhere sank in the days that followed.
Plunging markets have been commonplace for months, and Obama was a short-priced favorite, so the timing could always be coincidental. But anxiety over what he will do when he is handed the keys to the White House is likely to account for some of the decline.
Investors might expect a Democratic president with populist appeal and a very liberal voting record during his brief tenure in the Senate to shape policies unfriendly to their interests, especially when both houses of Congress have large Democratic majorities. The biggest concern, and the biggest threat to portfolios, may be certain measures intended to protect American workers; they stand a better chance than others of being approved.
Many items near the top of Obama's wish list will be out of reach for months to come. There is little money available to overhaul health care, and as much as he would like to redistribute the nation's wealth, there isn't a lot of wealth these days to redistribute. Taxes will probably go up eventually, but not yet.
Steps to encourage domestic job creation and limit the ability of American companies to hire abroad, on the other hand, would cost little financial or political capital up front. The same goes for a renegotiation of the North American Free Trade Agreement or an increase in tariffs on Chinese goods.
Today in Your Money
Tossed by financial waves, but not sunk
Who wins and who loses under President Obama?
Timing the next rush to gold
No doubt such measures would be presented as necessary to defend the rights of workers at home or abroad, protect the environment, or redress some perceived unfairness like China's reluctance to let its currency float.
Interference in trade and labor practices, no matter how well intentioned, can exact a significant toll in the long run, however, on businesses, consumers, investors and the economy. Productivity, earnings growth and exports tend to decline, and inflation often rises.
The prospect of heightened protectionist fervor has become a hot topic among investment advisers, although levels of concern vary. Tobias Levkovich, Citigroup's chief U.S. equity strategist, said the president-elect “has some pretty centrist advisers on economic issues,” like Warren Buffett and Paul Volcker, the former Federal Reserve chairman. Levkovich said he was “not overly worried now.”
As the election approached, a paper by Research Affiliates, a Los Angeles asset manager, warned, by contrast, that a fresh wave of trade barriers might be “the most significant geopolitical change on the horizon that could perhaps alter our expectations for the future of capitalism.”
Research by Saxo Bank, a Danish institution, offered several possible outcomes, including a “base case” forecast of higher tariffs on some imports and greater impediments to global trade during the next four years. Under its worst-case outcome, global economic output would fall by 20 percent over that period.
That is not the sort of climate in which stocks flourish. Emerging markets could suffer most as employment flags and access to U.S. consumers is restricted. More trade barriers probably would hurt U.S. investors, too, especially in segments of the economy that globalization has benefited most.
“If you expect protectionism from the Obama administration, then you should avoid industries that outsource aggressively overseas or that rely more heavily on immigrant workers, as well as industries that distribute foreign imports,” said Jason Hsu, head of research and investment management at Research Affiliates.
The biggest impact might be on U.S. software providers, which employ many programmers abroad, and hardware manufacturers, which rely on foreign labor to produce components. Low-cost retailers like Wal-Mart would probably suffer too, Hsu said.
The best anti-protectionism asset, in Hsu's opinion, provides protection of a different sort. The prospect of higher prices and lower economic growth make inflation-protected government bonds a sound choice. Some domestic manufacturing industries, like steel, could see their fortunes improve, but carmakers, which have all but lost their ability to compete with foreign rivals, may be too far gone.
“Current economic conditions may be so severe,” Hsu said, “that nothing short of an outright government subsidy or bailout could save them.”
–>
Archive for November 14th, 2008
‘);
–>
Things are getting rough for the recreational boating industry. New sales of smaller vessels, typically financed by borrowing, have contracted sharply, and sales of preowned yachts are plummeting.
The picture at the top end of the market is markedly different. Demand for new superyachts, costing upward of $20 million, remains robust - but for how long?
Boat builders and dealers are understandably nervous, but they are determined to weather the turbulence, just like they weathered the downturn after the terrorist attacks of Sept. 11, 2001. John Mitchell, an analyst with the Yacht Report, the boating industry bible, reckons there are similarities between industry developments after the attacks and the current state of play.
“There was a significant dip in yacht builds immediately after the terrorist attacks, but this was followed by a substantial hike,” Mitchell said. “The general consensus on this being that not only were fortunes severely depleted at the time, but many owners did not want to build yachts at a time of crisis and suffering - even if they could afford to.”
Expectations were high at the International Boat Show, which ran Oct. 30 through Nov. 4 in Fort Lauderdale, Florida. At the show, an industry barometer for next season's trends, around 1,200 exhibitors occupied three million square feet or 279,000 square meters, of exhibition space, and an estimated 130,000 tickets were sold for the five-day extravaganza, which was - surprising to some - on a par with last year.
Today in Your Money
Tossed by financial waves, but not sunk
Who wins and who loses under President Obama?
Timing the next rush to gold
“After witnessing a slowdown at the Monaco Yacht Show in September, we were concerned that dealers would struggle to close sales at Fort Lauderdale, but the majority of exhibitors reported keen interest from qualified buyers and a healthy number of repeat viewings,” said Skip Zimbalist, the show's organizer. “There was a strong international presence, with potential buyers flying in from Europe, Russia, Mexico and the Middle East.” Although Zimbalist did not have exact figures, he reckoned international ticket sales were up by 15 percent from 2007.
Bargain hunters were out in force at Fort Lauderdale, and dealers did not disappoint. “There were terrific discounts if you were prepared to buy secondhand,” Zimbalist said. “Preowned boats less than two years old were on sale for 50 percent less than the cost of a new model.”
Whether this flurry of interest translates into concrete sales remains to be seen. Zimbalist is cautiously optimistic. “It will take a few weeks to gauge the overall success of the show, as deals are taking longer to close and the financing market remains tight,” he said. “But all the indicators suggest that people still have money to spend on boats - especially at the top end.”
Vendors say they expect sales to continue to contract at the lower end of the market as many small and midtier boat owners bought craft with borrowed money, often secured on residential property. In many cases the value of these loans now exceeds the value of the assets. But the superyacht industry, which is not dependent on financing, is stronger than it has ever been before, Mitchell said.
“Many of the yachts being built around the world are in fact orders from repeat clients,” he said, “and there are several thousand families joining this upper rank of wealth every year, capable of building these vessels.”
Figures released by Camper & Nicholson, an international yacht brokerage firm, showed that new orders for superyachts had grown 18 percent in 2008. The size of the average superyacht is also ramping up. In the late 1990s a typical superyacht measured 70 feet to 80 feet long, or 21 meters to 24 meters. Today, the average superyacht is pushing 190 feet, with some as long as 450 feet.
Tom Chant, a spokesman for Superyacht UK, which represents the interests of British yacht vendors and brokers, said that a recession was unlikely to halt the growth in size of super yachts. “The majority of repeat orders are from owners who are wanting to trade up to bigger and more exotic models,” he said. “Owning a superyacht is all about making a statement. If money is no object, then size becomes important.”
There is also a practical reason boats are getting bigger. “Many superyacht owners want privacy - a yacht that can house a full complement of staff, and provide all the amenities that the ultrarich would expect to have access to on a daily basis,” Chant said. Exotic add-ons, like helipads and submarines, are also increasingly popular, which is pushing up the size of the yachts being built today.
But as money continues to be lost on world stock markets, even the ultrarich may be required to make economies. The rising costs associated with manning a vessel, especially fuel, crew and maintenance costs, means that owners have to spend around 10 percent of a yacht's value on annual running costs. For an 80 foot yacht that translates into $8 million a year, and many wealthy people have several yachts.
‘);
–>
E-Mail Article
Listen to Article
Printer-Friendly
3-Column Format
Translate
Share Article
Text Size
Resounding cheers around the world greeted Barack Obama's election as U.S. president, but the world did not put its money where its mouth was. Stock markets nearly everywhere sank in the days that followed.
Plunging markets have been commonplace for months, and Obama was a short-priced favorite, so the timing could always be coincidental. But anxiety over what he will do when he is handed the keys to the White House is likely to account for some of the decline.
Investors might expect a Democratic president with populist appeal and a very liberal voting record during his brief tenure in the Senate to shape policies unfriendly to their interests, especially when both houses of Congress have large Democratic majorities. The biggest concern, and the biggest threat to portfolios, may be certain measures intended to protect American workers; they stand a better chance than others of being approved.
Many items near the top of Obama's wish list will be out of reach for months to come. There is little money available to overhaul health care, and as much as he would like to redistribute the nation's wealth, there isn't a lot of wealth these days to redistribute. Taxes will probably go up eventually, but not yet.
Steps to encourage domestic job creation and limit the ability of American companies to hire abroad, on the other hand, would cost little financial or political capital up front. The same goes for a renegotiation of the North American Free Trade Agreement or an increase in tariffs on Chinese goods.
Today in Your Money
Tossed by financial waves, but not sunk
Who wins and who loses under President Obama?
Timing the next rush to gold
No doubt such measures would be presented as necessary to defend the rights of workers at home or abroad, protect the environment, or redress some perceived unfairness like China's reluctance to let its currency float.
Interference in trade and labor practices, no matter how well intentioned, can exact a significant toll in the long run, however, on businesses, consumers, investors and the economy. Productivity, earnings growth and exports tend to decline, and inflation often rises.
The prospect of heightened protectionist fervor has become a hot topic among investment advisers, although levels of concern vary. Tobias Levkovich, Citigroup's chief U.S. equity strategist, said the president-elect “has some pretty centrist advisers on economic issues,” like Warren Buffett and Paul Volcker, the former Federal Reserve chairman. Levkovich said he was “not overly worried now.”
As the election approached, a paper by Research Affiliates, a Los Angeles asset manager, warned, by contrast, that a fresh wave of trade barriers might be “the most significant geopolitical change on the horizon that could perhaps alter our expectations for the future of capitalism.”
Research by Saxo Bank, a Danish institution, offered several possible outcomes, including a “base case” forecast of higher tariffs on some imports and greater impediments to global trade during the next four years. Under its worst-case outcome, global economic output would fall by 20 percent over that period.
That is not the sort of climate in which stocks flourish. Emerging markets could suffer most as employment flags and access to U.S. consumers is restricted. More trade barriers probably would hurt U.S. investors, too, especially in segments of the economy that globalization has benefited most.
“If you expect protectionism from the Obama administration, then you should avoid industries that outsource aggressively overseas or that rely more heavily on immigrant workers, as well as industries that distribute foreign imports,” said Jason Hsu, head of research and investment management at Research Affiliates.
The biggest impact might be on U.S. software providers, which employ many programmers abroad, and hardware manufacturers, which rely on foreign labor to produce components. Low-cost retailers like Wal-Mart would probably suffer too, Hsu said.
The best anti-protectionism asset, in Hsu's opinion, provides protection of a different sort. The prospect of higher prices and lower economic growth make inflation-protected government bonds a sound choice. Some domestic manufacturing industries, like steel, could see their fortunes improve, but carmakers, which have all but lost their ability to compete with foreign rivals, may be too far gone.
“Current economic conditions may be so severe,” Hsu said, “that nothing short of an outright government subsidy or bailout could save them.”
–>
‘);
–>
Things are getting rough for the recreational boating industry. New sales of smaller vessels, typically financed by borrowing, have contracted sharply, and sales of preowned yachts are plummeting.
The picture at the top end of the market is markedly different. Demand for new superyachts, costing upward of $20 million, remains robust - but for how long?
Boat builders and dealers are understandably nervous, but they are determined to weather the turbulence, just like they weathered the downturn after the terrorist attacks of Sept. 11, 2001. John Mitchell, an analyst with the Yacht Report, the boating industry bible, reckons there are similarities between industry developments after the attacks and the current state of play.
“There was a significant dip in yacht builds immediately after the terrorist attacks, but this was followed by a substantial hike,” Mitchell said. “The general consensus on this being that not only were fortunes severely depleted at the time, but many owners did not want to build yachts at a time of crisis and suffering - even if they could afford to.”
Expectations were high at the International Boat Show, which ran Oct. 30 through Nov. 4 in Fort Lauderdale, Florida. At the show, an industry barometer for next season's trends, around 1,200 exhibitors occupied three million square feet or 279,000 square meters, of exhibition space, and an estimated 130,000 tickets were sold for the five-day extravaganza, which was - surprising to some - on a par with last year.
Today in Your Money
Tossed by financial waves, but not sunk
Who wins and who loses under President Obama?
Timing the next rush to gold
“After witnessing a slowdown at the Monaco Yacht Show in September, we were concerned that dealers would struggle to close sales at Fort Lauderdale, but the majority of exhibitors reported keen interest from qualified buyers and a healthy number of repeat viewings,” said Skip Zimbalist, the show's organizer. “There was a strong international presence, with potential buyers flying in from Europe, Russia, Mexico and the Middle East.” Although Zimbalist did not have exact figures, he reckoned international ticket sales were up by 15 percent from 2007.
Bargain hunters were out in force at Fort Lauderdale, and dealers did not disappoint. “There were terrific discounts if you were prepared to buy secondhand,” Zimbalist said. “Preowned boats less than two years old were on sale for 50 percent less than the cost of a new model.”
Whether this flurry of interest translates into concrete sales remains to be seen. Zimbalist is cautiously optimistic. “It will take a few weeks to gauge the overall success of the show, as deals are taking longer to close and the financing market remains tight,” he said. “But all the indicators suggest that people still have money to spend on boats - especially at the top end.”
Vendors say they expect sales to continue to contract at the lower end of the market as many small and midtier boat owners bought craft with borrowed money, often secured on residential property. In many cases the value of these loans now exceeds the value of the assets. But the superyacht industry, which is not dependent on financing, is stronger than it has ever been before, Mitchell said.
“Many of the yachts being built around the world are in fact orders from repeat clients,” he said, “and there are several thousand families joining this upper rank of wealth every year, capable of building these vessels.”
Figures released by Camper & Nicholson, an international yacht brokerage firm, showed that new orders for superyachts had grown 18 percent in 2008. The size of the average superyacht is also ramping up. In the late 1990s a typical superyacht measured 70 feet to 80 feet long, or 21 meters to 24 meters. Today, the average superyacht is pushing 190 feet, with some as long as 450 feet.
Tom Chant, a spokesman for Superyacht UK, which represents the interests of British yacht vendors and brokers, said that a recession was unlikely to halt the growth in size of super yachts. “The majority of repeat orders are from owners who are wanting to trade up to bigger and more exotic models,” he said. “Owning a superyacht is all about making a statement. If money is no object, then size becomes important.”
There is also a practical reason boats are getting bigger. “Many superyacht owners want privacy - a yacht that can house a full complement of staff, and provide all the amenities that the ultrarich would expect to have access to on a daily basis,” Chant said. Exotic add-ons, like helipads and submarines, are also increasingly popular, which is pushing up the size of the yachts being built today.
But as money continues to be lost on world stock markets, even the ultrarich may be required to make economies. The rising costs associated with manning a vessel, especially fuel, crew and maintenance costs, means that owners have to spend around 10 percent of a yacht's value on annual running costs. For an 80 foot yacht that translates into $8 million a year, and many wealthy people have several yachts.
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