2. John E. Mullins, CPA/PFS, CFP
Brian J. Hayes
Greystone Financial Group, Inc.
One Riverway Suite 1200
Houston, TX 77056
713-860-0202
3. U S Economy 2014
Growth rate 2.3%
Consumer price index 1.7%
Unemployment 5.8%
Debt to GDP 106.2%
Quantitative easing ends
OIL
Source: Economist and OECD Economic Outlook
4. Euro Area Economy 2014
Growth rate 0.8%
Consumer price index 0.5%
Unemployment rate 11.5%
Debt to GDP 107.7%
Financial solvency issues reappear
ECB next step?
Source: Economist
5. Japan Economy 2014
Growth rate 0.5%
Consumer price index 2.7%
Unemployment rate 3.5%
Debt to GDP 229.6%
Abenomics
Fiscal Stimulus
Monetary Easing
Structural Reform
Interest rates
Source: Economist
6. China Economy 2014
Growth rate 7.3%
Consumer price index 2.1%
Unemployment rate 4.1%
Debt to GDP 22.4%
China is transitioning from Capital Formation
To Consumer Economy
Source: Economist
7. Geopolitical
• Russian aggression
• ISIS-Syria-Iraq-Afghanistan
• Iran
• Israel and the Middle East
• North Korea
• China’s territorial disputes
• Terrorism in general
• Cuba
• Saudi Arabia and OIL
8. 2015 Growth Outlook
United States 3.0%
EU Area 1.1%
Britain 2.6%
France 0.8%
Germany 1.3%
Italy 0.4%
Greece 2.3%
China 7.0%
Japan 1.1%
Source: Economist
9. United States 2015
• Slowing global growth affect GDP?
• Wage growth rising
• Labor productivity gains slow
• Capital spending rising-Transportation-IT
• Impact of rising interest rates
• Reduced shale development
• Stronger dollar
• Political gridlock
• Earnings growth 5%
• M&A activity to remain stable
Source: Ned Davis Research
11. United States Budget 2015
Sources and Application of Revenue
Taxation $2.200Trillion
Trust Fund Revenue 1.120
Borrowing .561
$3.880Trillion
Mandatory Spending $2.560Trillion
Discretionary 1.070
Interest on Debt .252
$3.880Trillion
Source: OMB
12. Europe
• Monetary easing may expand
• Rising nationalism could slow austerity
• Greece may need bailout again
• Italy may have bank failure
• EU may go into deflation
• Euro on par with dollar possible more likely 2016
• Declining euro will help exports
• Monetary policy alone cannot correct EU
Source: Ned Davis Research
13. China
• Capital formation to consumer economy critical
• Projected growth slowing 7.8% to 7.0%
• Real estate values declining
• Prior misallocation of resources
• One child policy
• Wage growth pressures
• Xi government focused on economic growth
• Renminbi may strengthen against dollar
• China Bank tightened but easing probable
14. Developed Nations Overview
• Deeply in debt
• Ageing population
• Rising social costs
• Rising regulatory hurdles
• Geopolitical tensions
• Energy dependent
• Long term outlook questionable
15. What is Missing
Has to be bigger than the political class
“The elixir of life”
Sustainable Growth
16. Prior Growth Periods
1946-1968, the United States was the only developed
nation capable of producing goods.
1968-1982, entered a period described as Stagflation. A
combination of a faltering economy and high inflation.
1982-2000, the personal computer and the internet changed
the world.
2000-Present, financial meltdown, low labor participation,
political divisiveness, doubling national debt, most volatile
financial decade over past 18. Source: Jeremy Siegel
17. Future Growth
• A tipping point in Human History
• Similar to the Renaissance Period
• Global transition from subsistence level living
• Rise in the Middle Class
• 70-100 million people per year joining the middle cla
• Asia Pacific region consumer spending $3 Trillion to
• $30 Trillion by 2030
Source: World Bank, Brookings Institute, Oppenheimer, Basel minutes
18. Growth with Volatility
History gives us a guide. Rising middle class and
education shifts attention from subsistence level
living. Renaissance, Enlightenment Period
ushered in a period of political and social unrest.
Fast paced growth coupled with geo-political
volatility.
19. Implications
• Basic consumer goods
• Capital formation
• Education
• Health
• “Rising tide lifts all boats” John Kennedy
• Increased tension
• Rising commodity prices
20. United States Will Benefit
• Global presence in dominant industries
• Technical capability-Innovation
• Distribution system
• CAPITAL-Lifeblood of economy
• Educational system
• Positive birth rate
• Energy-A game changer
21. Conclusion
• Tepid global growth
• Euro parity with dollar
• Capital flow to the United States
• Rising wages
• Interest rate hike
• Legislation during lame duck period?
• Bank failure in Italy?
• Shocks during 2015
• Energy
• Rise in the Global Middle Class
