bizzXceleration: Performance, Value and Profit

Now it's early days as yet but we figured fore-warned is fore-armed. And when you read over the excerpts with increasingly pessimistic worldwide economic outlooks in general (so much for de-coupling) plus country specific problems increasing the vulnerabilities are growing. Rising inflation and its' repurcussions on food and energy costs put further pressure on things. If nothing else as an investor you want to be at least aware of these problems. And judging by the number, depth and breadth of our little story collection there's a lot to be aware of.

Perhaps that's all to mildly and carefully phrased on review and reflection. The economies of the developing and under-developed world have come under growing pressure because de-coupling is a myth. Worse, and much more importantly, recently exposed fault lines in the socio-political infrastructure on which their viability depends have been exposed. As food and energy prices continue to rise these fault lines are being subject to severe shocks which could cause major disruptions, tectonic (that is deep structural breakdowns) ones even.

Bottomline - these economies are increasingly vulnerable to short- and intermediate-term economic disruptions that could, and may, lead to major socio-political problems. While we're not expecting that to happen the chances are no longer so small as to ignore. And if the problems worsen things could get really....really ugly.

 

READINGS

IMF Lowers World Growth Forecast Amid Worst Crisis Since Great Depression The International Monetary Fund cut its forecast for global growth this year and said there's a 25 percent chance of a world recession, citing the worst financial crisis in the U.S. since the Great Depression. The world economy will expand 3.7 percent in 2008, the slowest pace since 2002, according to a document obtained by Bloomberg News at a meeting of Southeast Asian deputy finance ministers and central bankers in Da Nang, Vietnam. In January the fund projected growth of 4.1 percent. The reduction is the third by the Washington-based lender since last July, when it predicted the world economy would cope with the U.S. credit squeeze and grow 5.2 percent this year. Central banks will need to conduct policy ``as flexibly'' as the circumstances warrant, the statement said, adding that the European Central Bank has room to lower borrowing costs. ``The IMF's forecast is now below the world economy's longer- term trend so there is certainly some significance in what it is now seeing,'' said Andy Cates, a global economist at UBS in London. ``The world economy is slowing quite considerably and will be very different from what we've become accustomed to.'' The IMF gave a 25 percent chance that global growth will drop to 3 percent or less in 2008 and 2009, a pace the fund described as equivalent to a world recession. The last time that happened was in 2001. The fund lowered its forecast for U.S. economic growth to 0.5 percent this year, according to the document, below a 1.5 percent prediction made in January. The world's biggest economy will expand 0.6 percent in 2009, it said. The euro region will expand 1.3 percent in 2008, the document said, down from the fund's 1.6 percent projection in January.

ADB Cuts Asia Economic Growth Forecasts as Global Slowdown Damps Exports The Asian Development Bank lowered its economic growth forecasts for the region as a global slowdown weighs on exports and expansions in China and India cool. Asia excluding Japan is predicted to expand 7.6 percent this year, less than a September estimate of 8.2 percent, the Manila-based institution said in a report today. The economies grew 8.7 percent in 2007, the fastest clip in almost two decades. Central banks will pursue policies to quell inflation rather than spur economic growth, the ADB said, the second organization this week after the World Bank to warn of the threat of rising energy and food prices to the region. China will implement a ``tight'' monetary policy this year, the government's State Council said yesterday. In China, inflation has quickened to the fastest pace in 11 years, while consumer prices in Sri Lanka and Vietnam have neared or exceeded 20 percent. Singapore's consumer price gains have reached levels not seen since 1982. Inflation in Asia may reach the highest in a decade this year, the ADB said.

U.S. Slump Takes Global Toll The U.S., the economy at the center of the turmoil, is dragging down world growth. On Wednesday, Federal Reserve Chairman Ben Bernanke gave his most pessimistic assessment to date of the U.S. economy's outlook, strongly suggesting that a recession is likely. In testimony before Congress, he also said the Fed projects slower global growth over the coming quarters. How the other economies fare could offer important insight that world leaders already are trying to glean. Over the coming week, the global economy will be at the center of discussions as finance ministers gather for the spring meetings of the International Monetary Fund and World Bank in Washington. At the top of their agenda: what steps to take to revamp global financial regulation, ease the global credit squeeze and boost growth. Countries such as Australia, Brazil, the United Arab Emirates and Qatar are still expanding smartly, although down from 2007, because they have rich veins of high-priced oil, iron ore, alumina or copper. Old-line heavy-machinery makers such as Germany and Japan are riding out the problem because they have diversified their markets. On the flip side, consumer-goods exporters of Asia that rode to prosperity by trading with the U.S. -- Thailand, the Philippines, Malaysia and even China -- are seeing their lofty growth rates sag. And the Baltic countries, Hungary and Iceland, which borrowed heavily to finance growth, are now watched by international financial institutions to see whether they will come unhinged by the credit squeeze.

India's Inflation Reaches Three-Year High, May Spur Higher Interest Rates India's inflation accelerated at the fastest pace in more than three years, underscoring the threat from rising food prices that prompted the government to announce that it would crack down on hoarding. Wholesale prices rose 7 percent in the week ended March 22 from a year earlier, faster than the previous week's 6.68 percent, the Ministry of Commerce and Industry said in New Delhi. A Bloomberg News Survey of 16 economists forecast a 6.64 percent gain. Stocks and bonds fell. Accelerating inflation buttressed expectations that the central bank will allow the rupee to strengthen and raise borrowing costs as soon as this month. Singh's Congress party lost ground in most state polls last year because of rising consumer prices. The government has announced a $15 billion loan waiver for farmers to shore up support among the nation's more than 700 million rural dwellers before elections due by May 2009.

Riding a Wave Commodity markets have been booming. Prices of many commodities—especially those of oil, nickel, tin, corn, and wheat—have reached record highs in recent months despite credit market turbulence and slowing activity in many major advanced economies (see Chart 1). The current boom has also been more broad based and longer lasting than is usual, and it contrasts noticeably with the 1980s and 1990s, when most commodity prices were on a downward trend. That said, despite the apparent reversal of the downward trend, inflation-adjusted prices of many commodities are still well below the levels seen in the 1960s and 1970s.

Run on Rice Prompts Exporters to Pare Sales Rivaling Credit Market Seizure From Cairo to New Delhi to Shanghai, the run on rice is threatening to disrupt worldwide food supplies as much as the scarcity of confidence on Wall Street earlier this year roiled credit markets. China, Egypt, Vietnam and India, representing more than a third of global rice exports, curbed sales this year, and Indonesia says it may do the same. Investigators in the Philippines, the world's biggest importer, raided warehouses last month to crack down on hoarding. The World Bank in Washington says 33 nations from Mexico to Yemen may face ``social unrest'' after food and energy costs increased for six straight years. Rice, the staple food for half the world, rose 2.4 percent to a record $20.985 per 100 pounds in Chicago today, double the price a year ago and a fivefold increase from 2001. It may reach $22 by November, said Dennis DeLaughter, owner of Progressive Farm Marketing in Edna, Texas.

Grains Gone Wild These days you hear a lot about the world financial crisis. But there’s another world crisis under way — and it’s hurting a lot more people. I’m talking about the food crisis. Over the past few years the prices of wheat, corn, rice and other basic foodstuffs have doubled or tripled, with much of the increase taking place just in the last few months. High food prices dismay even relatively well-off Americans — but they’re truly devastating in poor countries, where food often accounts for more than half a family’s spending. There have already been food riots around the world. Food-supplying countries, from Ukraine to Argentina, have been limiting exports in an attempt to protect domestic consumers, leading to angry protests from farmers — and making things even worse in countries that need to import food. How did this happen? The answer is a combination of long-term trends, bad luck — and bad policy. Where the effects of bad policy are clearest, however, is in the rise of demon ethanol and other biofuels. The subsidized conversion of crops into fuel was supposed to promote energy independence and help limit global warming. But this promise was, as Time magazine bluntly put it, a “scam.” This is especially true of corn ethanol: even on optimistic estimates, producing a gallon of ethanol from corn uses most of the energy the gallon contains. But it turns out that even seemingly “good” biofuel policies, like Brazil’s use of ethanol from sugar cane, accelerate the pace of climate change by promoting deforestation. And meanwhile, land used to grow biofuel feedstock is land not available to grow food, so subsidies to biofuels are a major factor in the food crisis. You might put it this way: people are starving in Africa so that American politicians can court votes in farm states.

Stocks' Pain Touches All Regions of the Globe The reverberations from the financial crisis in the U.S. left no region of the world untouched. From Germany to Japan, India to Iceland, stock markets fell around the globe and experienced their worst quarter in years. There is a succinct way to sum up the performance of global stocks in the first quarter: poor. The reverberations from the financial crisis in the U.S. left no region of the world untouched. From Germany to Japan, India to Iceland, stock markets fell around the globe and experienced their worst quarter in years. The malaise in foreign markets is in stark contrast with the past five years, when these shares trounced their U.S. counterparts. Now, with a few exceptions, they are faring as badly as, if not worse than, U.S. stocks. The Dow Jones World Index, excluding U.S. shares, fell 8.7% in dollar terms in the first quarter. The Dow Jones Industrial Average dropped 7.6%. Some of last year's highflying markets, like India and China, have seen this year's worst drops, with shares in both countries down more than 20%. Japan's stock market, a laggard in 2007, fell deeper into the red, with the benchmark Nikkei Stock Average of 225 companies down 18%. The gloom has been equally intense in Europe, with benchmark indexes in the United Kingdom, Germany and France each falling more than 10%. Germany's DAX index had the biggest decline of the three, tumbling 19%. France's CAC 40 index dropped 16% and the U.K.'s FTSE 100 fell 12%. Such declines around the world illustrate how far-flung markets have become correlated. Chart: Country-by-Country Derby