Macro Final

Bulls and Bears

A bull is an optimist on the stock market and the economy and therefore expects stocks to do well. A bear is someone who is pessimistic and therefore expects stocks and the economy to falter. A bear market is usually defined as a 20% or greater drop from a recent high in the stock market. Drops of 50% or more are possible and usually precede a recession.

Africa

Africa is one region of the world that has chronically underperformed. Several reasons include war, political corruption and more recently the Hiv-Aids epidemic. Also I think foreign aid has been less than successful. Jeffrey Sachs would say the aid has been too little but it seems its hard to find hard evidence its worked. Still Africa's time has come and its benefitting from the commodity boom as well as Chinese investment. Better corporate governance has helped as well. (Mo Ibraham has helped by paying African leaders that are good libertarians that promote democracy)

Argentina

Argentina is also a notable economy in South America. It was once one of the world's richest countries. Then poor economic policies led to hyperinflation and its economy became poor. It now boasts pretty good growth rates from a lower base. Recently policy has continued to be detrimental to economic prospects. For example it nationallized YPF an oil company owed by Repsol. This arguably hurt Argentina's oil prospects. Further inflation has worsened and the government puts out unreliable statistics. An election in 2015 will hopefully put Argentina on a better path! But Macri's reformed ran afoul of the strong dollar in 2018 and went to IMF(International Monetary Fund) to get a bailout.

Chile

Arguably, the star performer in South America is Chile. Chile is the most capitalist and most advanced economy in Latin America. Two principal exports are copper and wine. Recently A leftward tilt makes Chile's success particularly vulnerable to an economic policy shift under Michelle Bachelet. Chile generally has been managed by practical centrists and this has been an asset. Copper , wine and fish are its famous products

Botswana

Botswana near South Africa is another success story. Its diamond mines are considered by many a national treasure. Botswana has had tremendous growth and its a well managed economy. From 1966-2000 it was the fastest growing economy in the world! Now its GDP per capita is around $16,000 in PPP(purchasing power parity) Its big nemesis is AIDS where infection rates are notably high. Mauritius is Africa's freest economy and its now got greater economic freedom than the US. Its also got a vibrant democracy which is still too rare in Africa.

Brazil

Brazil is also a natural resource based economy and like so many others have benefited from rising commodity prices(and has a trade surplus with China). the biggest problem in Brazil is bloated government. It has a tendency to meddle in business as well. Petrobras and Vale which are partly owned by government have less attractive propects as a result. Unfortunately policy recently in Brazil has weakened recent economic performance. Dilma Roussef has meddled in companies like Petrobras as well as Vale and generally regulated too heavily. This has caused Brazil's stock market to weaken pretty dramatically recently. Dilma has become a pretty good advocate or poverty which has been reduced in Brazil but overall economic performance has been weak.Sadly Brazil has much work to do!

Denmark

Denmark's economy has like many small European countries has performed reasonably well. Its known for its heavy focus on energy conservation. Its energy use has been stagnant inspite of a growing economy. Further Denmark unlike most other countries has a probusiness attitude which has helped its growth rate . Denmark, oddly is known for its efficient agricultural sector considering its small size. Eastern Europe or if you prefer Central Europe has performed economically the best of all. Its economies have been transformed by flat taxes, foreign direct investment as well as strong educational systems.

Financial Literacy

Financial literacy is about learning more about investment options such as IRA and 401k's etc. Individuals need to learn about finance because many government programs are underfunded(ie broke like social security). Investing is based on the concept of present value. ($1 today is worth more than $1 in the future.) The discount rate is the interest rate used to discount future cash flows back to the present.(higher rates mean the future cash flow is worth less) . Compounding means that you earn interest on the interest and over the long-run allows great wealth creation(see rule of 70 or 72) Some popular investments include stocks which convey ownership.

Latin America

Latin America has always been too dependent on foreign money and is uniquely vulnerable to a strong dollar. Mexico still has the threat of renegotiated NAFTA which may not pass legislatures of the 3 countries.

Mozambique

Mozambique which was once a war torn region. Its growth the last few years has been stellar but its people are still regretably poor.Large natural gas finds are other resources have led to a boom. Ghana has also been booming thanks to gold, oil and natural gas with GDP growth often topping double digits. Another stellar performer has been Tunisia and its making a relatively smooth transition to democracy following the Arab spring. Egypt is facing a more difficult transition with 40% of people living on $2 a day or less. Their uprising follows a tripling of wheat prices and they are the largest importer of wheat. Mauritius is the freest and most democratic African nation with GDP per capita around 18,000 min PPP basis. (its country is now freer than US according to the Heritage foundation)

Mutual Fund

Mutual Funds are diversified portfolios that may invest in bonds, stocks or other assets and are professionally managed. You generally will not face unsystematic risk because each individual stock should be a small % of the total portfolio. (stocks individually face unsystematic risk which is unique to a specific company.) Mutual funds do have systemic risk which are those events that affects asset prices more broadly. (systematic risk example is the market forces drive stocks down as interest rates spiked.)

Peru

Peru has shown the best growth over the last decade in Latin America. Its economy is driven by metals and mining and has benefited from good economic policy as well as the China boom. Lately economists have voiced concerns about government meddling in Brazil and especially in Vale, the large iron ore maker as well as Petrobras. Government threatens their efficiency with bureaucratic red tape. Columbia is also an exciting country with terrific growth rates. It has substantially reduced crime and been friendly to foreign investment. Columbia is also considered investment friendly and its economy has done quite well over the last decade.

Financial Jargon

QE equals quantitative easing which has happened in the last few years and the market has applauded. The reason is the fed can push interest rates down which makes stocks more valuable. (QE lowers Long-term rates to stimulate the economy which pushes us stocks) Dovish and Hawkish: The market likes a dovish fed which keeps interest rates low while hawkish fed would raise rates higher which is bad for stocks. Arbitrage is the process where investments are bought and sold to profit from value disparity. Diversifiable Risk is the risk unique to a specific company. For example a company could be affected by losing its competitiveness in an industry for example.( this is measured by standard deviation) Systematic(or non diversifiable) risk implies the risk that adversely affects almost all investments(like a bear market) It is measured by Beta! Be careful of buying high Beta stocks if a bear market is coming!

Russia

Russia is partly in Europe and partly in Asia. Its a natural resource based economy that exports lots of natural gas to Europe. Its economy is doing ok thanks to high commodity prices in spite of problematic corruption. Putin keeps an iron fist but is still pretty popular within Russia. His popularity is beginning to wane due to the economic softness which is probaly a net positive to Russia's democratic ambitions. Russia is uniquely vulnerable to the fracking revolution transforming iol and gas production in US. (russia has the largest natural gas company in world called Gazprom. The olympics were held there in February, 2014 and will be interesting to see how they pull that off. Stock market is really cheap and oil/gas dependent!

Slovenia

Slovenia is the richest country and its even adopted the Euro. Some of these countries have growing pains with large current account deficits. Slovakia is known for its auto production. Slovakia has also joined the Euro.

Sweden

Sweden is the Scandanavian country which is known for its progressive attitude toward women as well as Ericcson, the largest cell phone infrastructure company. in the world. Its economy has performed pretty well despite high taxes. Further Sweden's more conservative tilt has propelled its growth rate as it deregulated and increased economic freedom. These Scandanavian countries (Norway, Sweden, Denmark and Finland)are well governed and have remarkeable income equality Like UK and Denmark its part of the European Common Market but out of the Euro(by choice).

Largest economy in south america is

The largest economy in South America is Brazil and like Mexico its economy has grown but not roared ahead like the Asain emerging markets. Brazil has some terrific companies such as Petrobras, the oil company. Its known for its deepwater technology as well as sugar cained based ethanol. Unfortunately, politicians have meddled reducing some of Petrobras' efficiency and recent Operation Carwash has led to serious political corruption allegations.

Nigeria

The most populated country and biggest economy in Africa is Nigeria which is a big oil producer. It has been reducing its debt and has found favor with international investors.Still corruption is rife but is beginning to improve and growth recently around 6% is pretty healthy. (GDP per capita in PPP is $2970)

South Africa

The second most important economy economically is South Africa which has a broad assortment of virtues. Mining is big and it reminds me of the California of Africa..However unemployment and inequality are rampant problems as well as poor education are serious problems.(Nigeria overtakes S Africa as the largest economy in Africa) South Africa has the best developed Stock market in Africa.(Its also the richest big economy)

The stark contrast with Pemex is telling.

The stark contrast with Pemex is telling. Petrobras is a publicly traded company while Pemex is fully owned by the Mexican government. Nieto has opened up the oil and gas sector which should help Pemex increase its efficiency as well as help Mexico expand its oil production which had been shrinking.. Unfortunately Nieto was chastised and his successor AMLO may undo many of his reforms.

Turkey

Turkey is a large Muslim country which has created a controversy with regard to its Euro membership. Many fear that its large and poor population would make it difficult to assimilate in Euroland. Its demographics are highly favorable and its youthful population would make it a good counterbalance to ageing Europe. Turkey recently has shown great economic vulnerabilities with its high current account deficits as well as political volatility.

Venuezla

Venezuela is another important country known for oil and Chavez who is America's biggest foe. Chavez is a populist who attacks America at every chance and recently died. Inflation is surging as its economy is severly challenged. Hyperinflation expected to hit one million %!

Zimbawe

Zimbawe(GDP per capita in PPP=$1010) and Sudan. Overall Africa growth will still be near 4% which is quite good and being a natural resource based economy will continue to help. Its a beautiful continent and hopefully with the right economic policies it will follow the success of Asia. I'm optimistic(bullish) on most of the continent. Africa has arrived and its a great place to invest. Recent economic growth rates in 2015 expected are below! Growth Stars Congo(Dem rep)8.6% Eritrea=8.3% Mozambigue =7.6% Congo(Brazzaville)=7.4 and Tanzania =7.3% Africa as a whole will post over 3% growth in 2018(2nd fastest region after Asia) People still worry about governance which has generally improved but some problem areas remain. Some worry things like Cobalt(used in electric cars) are mined in politically unstable areas.