3. 2
SPEAKERS
GEOFFREY ALLEN PIGMAN, D.Phil.
• Consultant to public and private
entities in Europe, N.A., Africa
• Political economist
• Research Associate, University of
Pretoria and Research Associate at
the Institute for Global Dialogue
• Published author
• D.Phil (Oxford), MA (Johns
Hopkins SAIS), BA (Swarthmore)
CHRISTOPHER W. YOUNG, Ph.D.
• Managing Director, Economist
at Sobel & Co. [Valuation]
• Prof. Rutgers Business School
• Ph.D. (Rutgers), MBA (Rutgers),
Mathematics, [CUNY]
4. 3
“The only function of economic
forecasting is to make astrology
look respectable.”
John Kenneth Galbraith
5. 4
“The most reliable way
to forecast the future is
to try to understand the
present.”
John Naisbitt
6. 5
APPROACH
• Comprehensive – not inclusive of all endogenous variables
• Normative based upon historical economic data
• Inclusive of opinions of other economists and financial service
firms
• Includes discussion about exogenous market threats and
opportunities
• END RESULT: Mosaic to consider when addressing future
market and economic conditions
8. 7
End of gold
standard
1st IT revolution –
EFT begins
End of Cold
War
German
reunification
2008
financial
crisis
GLOBAL TRADE % OF U.S. GDP
1950-2011
Brazil China Germany India Japan U.K. USA
10. US TOP TEN TRADING PARTNERS:
Jan-Nov 2015
Rank Country Exports
($ B)
% Total
Exports
1 Canada 259.0 18.7%
2 Mexico 217.8 15.7
3 China 106.1 7.7
4 Japan 57.7 4.2
5 UK 52.0 3.8
6 Germany 45.9 3.3
7 S Korea 40.1 2.9
8 Netherlands 37.2 2.7
9 Hong Kong 33.8 2.4
10 Belgium 31.6 2.3
Rank Country Imports
($ B)
% Total
Imports
1 China 443.9 21.5%
2 Canada 271.6 13.2
3 Mexico 271.6 13.2
4 Japan 119.8 5.8
5 Germany 113.4 5.5
6 S Korea 66.4 3.2
7 UK 53.7 2.6
8 France 43.7 2.1
9 India 41.7 2.0
10 Italy 40.2 2.0
9
~48% of US Goods imports were intra-firm and ~30% of US
Goods exports were intra-firm
11. 10
U.S. GOODS / SERVICE TRADE BALANCE:
1992-2015
Total Net Trade
Deficit
increasing at
12.0% per annum
Goods Net
Trade Deficit
increasing at
9.4% per annum
Services Net
Trade Surplus
increasing at
6.1% per annum
Net Exporter of Services
Millions
14. GLOBALIZING THE SUPPLY CHAIN:
intra-firm trade vs. outsourcing
13
Global market size of outsourced
services 2000-2014 ($ Billions)
THREE CATEGORIES OF
OUTSOURCING:
1. Logistics, sourcing &
distribution
• contract manufacturing
2. IT services: software creation,
computer center management
3. business process outsourcing
(BPO)
• call centers
• financial transaction
processing
• HR management
15. TRADE
AGREEMENTS
14
US implementation: Trade
Promotion Authority (TPA)
(formerly ‘Fast Track’) –
agreements get an up-or-
down vote in Congress
Treaty principles: most favored
nation (MFN), non-discrimination,
national treatment, reciprocity
Bilateral/Regional – NAFTA,
FTAs with Israel, Australia,
South Korea, Morocco,
Jordan, etc.
Multilateral – World Trade
Organization (WTO)
– GATT, GATS,
Agreement on
Subsidies &
Countervailing
Measures, Agreement
on Agriculture
16. LOOKING
AHEAD
15
New considerations for
prospective trade agreements
Plurilateral
– Trade in Services
Agreement (TiSA)
Mega-regional
– Trans-Pacific
Partnership (TPP)
– Transatlantic Trade
and Investment
Partnership (TTIP)
– Regional
Comprehensive
Economic Partnership
(RCEP) – China, India,
Japan, SE Asia (not
USA)
17. GEOPOLITICAL RISK:
China in transition
* Supply-
demand
imbalance
from exports
to services and
consumption
* equities
* markets
16
* Military: maritime
expansionism, SCO
* New Silk Road,
energy sourcing
* Regional
Comprehensive
Economic
Partnership (RCEP)
* Anti-
corruption
drive = Xi
power push
* Rivalries: PLA,
provinces, etc.
POLITICS ECONOMY SECURITY
18. ASSESSING
GEOPOLITICAL
RISK
THREATS
• Migration/refugee flows
• War in the Levant/terrorism
• Putin
• Integrity of the European Union:
‘Brexit’, integrity of UK, Spain
• Hotspots: North Korea, Venezuela
• Domestic: shadow of 2016 election
• Trade agreements
• Cuba
• Iran
• African Union
• Domestic: post-
election
17
OPPORTUNITIES
19. SUMMARY: IMPACT OF GLOBAL
ECONOMY ON U.S. BUSINESS
4. Focus on sustaining
sources of US power
entrepreneurship,
innovation, capital
markets, regulatory
leadership,
transparency, rule of
law, security umbrella
18
3. China rising and
changing
2. US hegemony
persistent
1. US dependence
on cross-border
flows of goods,
services, capital
and labor
growing
20. 19
U.S. ECONOMIC THEMES
• CONSUMER – slowing tailwinds in the forecast
• CORPORATE – headwinds strengthening
• GOVERNMENT – stand still, for now
• MARKET VOLATILITY
25. U.S. CONSUMER SENTIMENT
University of Michigan
24
92.0 January 2016
98.1 January 2015
Consumer expectations (not included
here)
82.7 January 2016
91.0 January 2015
30. U.S. Housing Market (Starts)
29
Number as of December 31, 2015
Represents the number of new homes starts (beginning of construction
on new residential housing)
31. U.S. Housing Market (Permits)
30
Number as of December 31, 2015
Represents the number of building permits granted
32. U.S. Housing Market (Price)
31
Number as of December 31, 2015
Based on CaseShiller Index (tracks the prices of repeated residential
home sales over time]
51. GOV’T SPENDING AS % OF OUTPUT
50
World War II
Korean War
Cold War
Vietnam War
Great Society
‘Second’ Cold War
Dot.com boom
TARP
Auto, bank nationalizations
FDR
New Deal
52. U.S. FED. DEBT RELATIVE TO OUTPUT
51
‘Second’ Cold War
defense buildup
Reagan tax cuts’
‘Peace dividend’
Dot.com revenues
TARP
Auto, bank nationalizations
54. THE BATTLE OF PENNSYLVANIA
AVENUE: The White House v. Congress
53
3. Budget Control Act
of 2011
2. National debt
ceiling debate
1. Annual Fed. Budget
appropriation
process
55. RECAP
54
1. Expect to see a solid performance from the
consumer in the first half of 2016 – yet tailing off
in back half of the year.
2. Corporates expected to see challenging year –
profits squeezed, margins decreasing and
exports decreasing.
3. Exogenous international factors unknown but
can have an impact on the global economy.
