Rising commodity prices helps the commodities exporting countries and hurts the importers. These are normal parts of economic cycles. However, when these cycles are manipulated by central banks, both sides of the trade could feel the pain
While equity markets in many countries are at all-time highs, other asset classes are at multi-year lows. The Bloomberg Commodities index tracks 22 different commodities. It tracks everything from nickel to sugar and even lean hogs. It recently closed at 116.67, its lowest since July 2009 at the depths of the recession. Oil has also tanked. The US price for oil (WTI) had declined to $75.58 a barrel on Friday.
It is not only commodities that are tanking. Currencies around the world are rapidly declining against the US dollar. The US dollar index is the highest it has been since 2010. It has risen substantially against the euro. The yen, thanks to the Bank of Japan, has also fallen to new lows. But, the developed countries currencies are in relatively good shape compared to the emerging markets. The rouble has plunged 23% in the past three months. The Ghanaian cedi is down 26% against the US dollar this year. The Nigerian naira is at an all-time low down 9% since January along with the better performing Kenyan schilling, which is only at a three year low. Not surprisingly, the worst performing currency is the Ukrainian hryvnia.
What does all this mean? Well from the US perspective, it sounds pretty good. The strength of the dollar is theoretically due to the expectations for a stronger US economy and higher interest rates. Non-commodity businesses are expected to do better from the fall of inputs especially oil. The US consumer will save an estimated $62 billion, which retailers are hoping they will splurge during the upcoming Christmas season. It also keeps inflation under control, at least in certain countries. This would allow certain central bankers to continue printing money.
However, there are many other perspectives. Many of the emerging markets have commodities-based economies. If the price of crude remains at $80, the members of the Organization of Petroleum Exporting Countries (OPEC) would lose $150 billion annually. At $80 a barrel, Venezuela, Iran, Russia and even Saudi Arabia will not be able to balance their budgets. Venezuela is even in an odd position for a country with some of the largest reserves on earth. They are having difficulty refinancing their debt, much of which they owe to China as well as Wall Street.
Falling oil prices may be partially due to too much supply. However, the fall of all commodities means that demand has dried up. Demand has dried up because the world economy is slowing. This is another indication that the major destination for many of these commodities, China, may be having more problems than have been previously suspected.
The problems of Venezuela are not isolated. The printing of money by developed countries central banks has sent money all over the world in the search for yield. Some investors bought higher yielding debt in local currencies. There are estimates that it could be about $2 trillion of foreign capital has been invested in emerging market local currency debt.
Other investors bought debt denominated in dollars. During Asian currency crisis, 80% of the developing countries sovereign debt was in dollars. Today the level is only 46%. Far lower, but it still dangerous when combined with burgeoning dollar private debt issued by corporations in emerging markets, many for the first time, has exploded. If this debt is not hedged, and much of it is not, then we could be seeing defaults. Strapped corporations will be trapped by a strong US dollar and slowing commodities economies. Finally, there is the liquidity issue, which I dealt with in an earlier piece.
When the value of currencies and commodities change in value, there are always winners and losers. A rising currency can mean less inflation and cheaper imports. A falling currency could mean more inflation, but better exports. Rising commodity prices helps the commodities exporting countries and hurts the importers. These are normal parts of economic cycles. However, when these cycles are manipulated by central banks, both sides of the trade could feel the pain.
(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first-hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and speaks four languages.)
Class-action lawsuit alleges company misled the health care industry
A California doctor is suing Kleenex maker Kimberly-Clark for more than $500 million for allegedly misleading health care professionals into believing that one of its surgical gowns provided a superior amount of protection against exposure to Ebola — despite the fact that many of the gowns experienced “catastrophic failures” during product safety tests.
The class-action lawsuit claims that Kimberly-Clark knew as early as 2013 that its MICROCOOL Breathable High Performance Surgical Gowns were unsafe and thus put doctors and patients at “serious risk” of exposure to Ebola, among other diseases transmissible through bodily fluids. Despite this knowledge, the lawsuit states that the company continued to market the gowns to the health care industry.
Kimberly-Clark started selling the gowns in 2011 and controls more than 50 percent of the surgical gown market, according to the lawsuit. The company has sold millions of the gowns, lead attorney Michael Avenatti told Reuters.
“Kimberly-Clark needs to immediately recall these gowns and come clean with the FDA, CDC, healthcare professionals and the general public,” Avenatti said in a statement, according to Reuters. “The risks associated with continued concealment of the truth are far too great.”
The company told TINA.org that it does not comment on pending litigation.
Click here for more of our coverage on the marketing of Ebola-related products.
Verizon remains committed to its program of inserting a tracking number into its customers’ cellphone transmissions
AT&T says it has stopped its controversial practice of adding a hidden, undeletable tracking number to its mobile customers' Internet activity.
"It has been phased off our network," said Emily J. Edmonds, an AT&T spokeswoman.
The move comes after AT&T and Verizon received a slew of critical news coverage for inserting tracking numbers into their subscribers' Internet activity, even after users opted out. Last month, ProPublica reported that Twitter's mobile advertising unit was enabling its clients to use the Verizon identifier. The tracking numbers can be used by sites to build a dossier about a person's behavior on mobile devices – including which apps they use, what sites they visit and for how long.
The controversial type of tracking is used to monitor users' behavior on their mobile devices where traditional tracking cookies are not as effective. The way it works is that a telecommunications carrier inserts a uniquely identifying number into all the Web traffic that transmits from a users' phone.
AT&T said it used the tracking numbers as part of a test, which it has now completed.
Edmonds said AT&T may still launch a program to sell data collected by its tracking number, but that if and when it does, "customers will be able to opt out of the ad program and not have the numeric code inserted on their device."
A Verizon spokeswoman says its tracking program is still continuing, but added "as with any program, we're constantly evaluating."
Verizon offers its customers an opportunity to opt out of the program. But opting out doesn't remove the tracking ID.