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Economic

Strikes are inevitable and not an aberration

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1 month ago

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The writer is the CEO of the Resolution Foundation think tank

The snow and strikes that dominated UK headlines last week have a lot in common. Both closed schools and canceled trains, but while the ice has melted away leaving little trace, the strikes are here to stay well into 2023.

There is a great deal of industrial strike action, and a great deal of confusion about its causes and consequences. But we have to realize that large-scale downtime is an inevitability, not an aberration.

Britain is an energy importer during the global energy crisis. More expensive imports mean the country is getting poorer, but it doesn’t automatically determine who gets poorer or how. Instead, it is shaped by power, politics and politics, as well as markets. Strikes are just one part of that messy process. It is no coincidence that in the 70s energy prices and industrial conflicts rose.

The amount of pain to be shared is great, with the highest inflation rate in four decades. Capital and labor are in an extraordinarily high-stakes competition, and one has plenty of room to lose for both: real wages have fallen 2.7 percent over the past year, but earnings as a share of GDP are not rising and companies expect their costs to grow faster than their revenues in the future. . Big winners are something in the early PPE contract contests, not in today’s industrial disputes.

High-profile railway strikes, as well as the first strike in the history of the Royal College of Nursing and strikes by ambulance workers, highlight conflicts in the public (and quasi-public) sector. Private sector workers lack unionization rates (only 13 percent are members) to strike on a large scale. Alternatively, with the good fortune of holding this contest during a tight labor market, they can seek a wage increase through individual force: a letter of resignation, threatened or actual. The threat of employer transfer is less of a use for public sector workers due to centrally set wages, but with 50 percent of them unionized, collective power takes center stage.

Jeremy Hunt, Counselor, to cautionand, unconvincingly, that successful strikes to increase public sector wages may lead to an increase in inflation. Rapidly rising prices are causing public sector strikes rather than the other way around, and it is high wage growth in the private sector that is worrying the BoE’s inflation hawks.

There are real trade offs when it comes to public sector wages, but they are not about wage price vortices. Nurses’ salaries can’t cause this kind of spiral when the NHS, fortunately, doesn’t have rates. Instead, it is the payroll tax whirlpools that really worry the government. Having already announced plans to raise taxes to its highest level since then In World War II, Hunt wants to avoid more big tax increases before the 2024 general election.

Higher wages must be paid in the public sector, and decisions about them are seen as balancing how much poorer Britain becomes and fall precisely on public sector workers or – more broadly – on taxpayers or public service users.

Ignore claims that it would cost an extra £28 billion for inflation-proof public sector wages – some wage increases have already been set, and public sector workers are already paying taxes. But the burden-sharing choices being made here are substantial: double-digit wage increases could easily cost low double-digit billions.

Through this lens, the counselor’s approach is understandable. But it is also indefensible. The gap between public and private sector wage growth (2.7 percent versus 6.9 percent, respectively) is not sustainable. The government can set wage rates for public sector jobs, but it cannot force people to take them. There’s a reason job vacancies in healthcare and education remain at nearly record levels.

Large-scale industrial work will affect the economy in 2023. The direct economic impact of shutting down the rail network is small, but the indirect effects are significant (one-third of rail passengers have jobs that cannot be done from home). Strikes in the NHS will lead to fewer operations, and with more than 7 million people already waiting to start routine treatment, it is clear that our failure to improve the health of the population is undermining our ability to create wealth.

Ministers will say that this is why the workers must stop striking. But the more realistic conclusion is that there are real benefits from quickly resolving conflicts. The wage increase agreed upon today is cheaper than the same wage increase agreed upon six months after the strike.

The strikes are a symptom, not a fault, of where the UK economy finds itself. Get ready for more picket lines in 2023.

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Economic

We need to pay more attention to skewed economic signals

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3 weeks ago

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January 11, 2023

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The writer is chair of Queen’s College, Cambridge and advisor to Allianz and Gramercy

Inflation was the dominant economic and financial issue of 2022 for most countries around the world, especially for advanced economies that have a consequential impact on the global economy and markets.

The effects have been seen in declining living standards, increasing inequality, increasing borrowing costs, stock and bond market losses, and occasional financial mishaps (fortunately small and so far contained).

In this new year, recession, both actual and feared, has joined inflation in the driving seat of the global economy and is likely to replace it. It’s a development that makes the global economy and investment portfolios subject to a wide range of possible outcomes — something that a growing number of bond investors seem to be aware of more than their equity counterparts.

International Monetary Fund iYou will likely review soon Her economic growth forecasts again, predicting that “a third of the world will be hit by recession this year”. What is particularly notable to me about these worsening global prospects is not only that the world’s three major economic regions – China, the European Union and the United States – are slowing down together, but also that this is happening for different reasons.

In China, a chaotic exit from the wrong Covid-19 policy is undermining demand and causing more supply disruptions. Such headwinds to domestic and global economic well-being will continue as long as China fails to improve the coverage and effectiveness of its vaccination efforts. The strength and sustainability of the subsequent recovery will also require that the country more vigorously renew a growth model that can no longer rely on greater globalization.

The European Union continues to deal with energy supply disruptions as the Russian invasion of Ukraine continues. Strengthening inventory management and reorientation of energy supplies is well advanced in many countries. However, it is not yet sufficient to lift immediate constraints on growth, let alone resolve long-term structural headwinds.

The United States has the least problematic view. The headwinds to growth are due to the Fed’s struggle to contain inflation after mischaracterizing rate increases as fleeting and then initially being too timid to adjust monetary policy.

The Fed’s shift to an aggressive front-load of interest rate hikes came too late to prevent the spread of inflation in the services sector and wages. As such, inflation is likely to remain stubborn at around 4 percent, be less sensitive to interest rate policies and expose the economy to greater risk for accidents from additional policy errors that undermine growth.

The uncertainties facing each of these three economic areas suggest that analysts should be more careful in reassuring us that recessionary pressures will be “short and shallow”. They need to be open, if only to avoid repeating the mistake of prematurely dismissing inflation as transient.

This is especially important because these diverse drivers of recessionary risk make financial fragility more threatening and policy shifts more difficult, including potentially Japan. Get out of interest rate control Policy. The range of possible outcomes is extraordinarily large.

On the one hand, a better policy response, including improving the supply response and protecting the most vulnerable populations, can counteract the global economic slowdown and, in the case of the United States, avert a recession.

On the other hand, additional policy errors and market turmoil can lead to self-reinforcing vicious cycles with rising inflation and rising interest rates, weakening credit and compressed earnings, and stressing market performance.

Judging by market prices, more bond investors are better understanding this, including by refusing to follow the Fed’s interest rate guidance this year. Instead of a sustainable path to higher rates for 2023, they believe recessionary pressures will lead to cuts later this year. If true, government bonds would provide the yield and potential for badly missed portfolio risk mitigation in 2022.

However, parts of the stock market is still weakly bearish pricing. Reconciling these different scenarios is more important than investors. Without better alignment within markets and with policy signals, the positive economic and financial outcomes we all desire will be no less likely. They will also be challenged by the risk of more unpleasant outcomes at a time of less economic and human resilience.

Video: Divided Markets: The Great Threats to the Financial System

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Economic

Macro hedge funds end 2022 higher, investors say, while many others take big losses By Reuters

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3 weeks ago

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January 10, 2023

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© Reuters. FILE PHOTO: Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City, US, January 5, 2023. REUTERS/Andrew Kelly

By Svea Herbst Baylis

NEW YORK (Reuters) – Some hedge funds betting on macroeconomic trends have boasted of double and even triple-digit gains for 2022, while other high-profile companies that have long been on technology stocks have suffered heavy losses in volatile markets, investors said.

Rokos Capital, run by Chris Rokos and one of a handful of so-called global macro companies, gained 51% last year. Fund investors this week, who asked not to be identified, said Brevan Howard Asset Management, the company where Rokos once worked, posted a gain of 20.14% and Caxton Associates returned 16.73%.

Haider Capital Management’s Haider Jupiter Fund rose 193%, an investor said.

Data from hedge fund research showed that many macro managers have avoided crumbling stock markets that have been rocked by rapid interest rate increases and geopolitical turmoil, including the war in Ukraine, to rank among the best performers in the hedge fund industry. The company’s macro index rose 14.2% while the general index of hedge funds fell 4.25%, its first loss since 2018.

Equity hedge funds, where the bulk of the industry’s roughly $3.7 trillion in assets are invested, fared worse with a loss of 10.4%, according to HFR data. And while that beat the broader stock market’s loss of 19.4%, some high-profile funds posted even bigger losses.

Tiger Global Management lost 56% while Whale Rock Capital Management ended the year with a 43% loss and Maverick Capital lost 23%. Coatue Management ended 2022 with a loss of 19%.

But not all companies that bet on technology stocks suffered. John Thaler JAT Capital finished the year with a 3.7% gain after fees after a 33% increase in 2021 and a 46% gain in 2020.

Sculptor Capital Management (NYSE::), where founder Dan Och is fighting the company’s current CEO in court over his salary increase, posted a 13% drop.

David Einhorn’s Greenlight Capital, which bet that Elon Musk would be forced to buy Twitter, ended the year up 37% while Rick Sandler’s Eminence Capital rose 7%.

A number of so-called multi-manager companies where teams of portfolio managers bet on a variety of sectors also boast positive returns and have been able to deliver on their promise that hedge funds can deliver better returns in distressed markets.

Balyasny’s Atlas Fund (NYSE: Enhanced) gained 9.7%, while Point72 Asset Management gained 10%. Millennium Management gained 12% while Carlson Capital ended the year with a 7% gain.

Representatives for the companies either did not respond to requests for comment or declined to comment.

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Economic

German automakers point to easing supply chain problems

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3 weeks ago

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January 10, 2023

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Sales at BMW and Mercedes-Benz jumped in the final months of 2022 as the German premium auto brands indicated supply chain problems plaguing the industry were abating.

Automakers around the world have experienced parts shortages since the pandemic, especially semiconductors, leaving many of them with large fleets of incomplete vehicles that can’t be delivered to customers.

BMW and Mercedes each said their full-year vehicle deliveries fell last year by 4.8 percent and 1 percent, respectively, due to Suppliers Bottlenecks as well as lockdowns in China and the war in Ukraine.

But supply pressures eased in the last quarter of the year, as BMW recorded a 10.6 percent jump in sales, with 651,798 vehicles delivered, and Mercedes fulfilling 540,800 orders, up 17 percent from the same period in 2022.

BMW He said the main effects of supply chain bottlenecks and continued lockdowns were felt in the first six months of the year, adding that “sales were steadily picking up in the second half.”

Mercedes boss Ula Kallenius told the Financial Times last week that the list of problems in the auto supply chain was declining, but added that long waits for cars would continue into 2023.

“One chip is enough to be vital [ . . .] Missing, and then you can’t finish the car, even if you have everything else.

Both brands recorded strong sales growth electric car. Mercedes, which last week announced a plan to build 10,000 charging docks, said EV shipments grew 124 percent to 117,800 last year compared with its predecessor.

Similarly, BMW reported strong growth in electric vehicle sales, with deliveries of fully electric vehicles doubling last year to 215,755.

Analysts at Bank of America said that sales of electric vehicles, including hybrid cars, reached a historic peak last November, with 1.1 million units sold. They attributed this largely to the upcoming phase-out of customer subsidies in Germany.

Participate in Mercedes BMW and BMW prices held steady Tuesday morning as investors priced in an image of an improving showing.

Rolls-Royce, a subsidiary of BMW, announced Monday that sales have hit a 119-year record, driven by strong demand in the United States, its largest market.

The luxury brand has been largely unaffected by the semiconductor pressure, mainly because it makes relatively few compounds and therefore needs fewer chips.

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