We’re on the lookout for the next big financial crisis here at McEldrew Young Purtell Merritt because frauds typically surface in a recession (hat tip to yesterday’s Wall Street Journal for conveniently confirming my prior analysis that this statement was true). And there’s been plenty to discuss on that front in the last week as the world has been dealing with economic issues on several fronts.
The free fall in the Shanghai stock market during the last two weeks of June may have been halted but that doesn’t mean that we are out of the woods yet. The head of emerging markets at Morgan Stanley Investment Management told Bloomberg that a continued slowdown in Chinese growth could plunge the world into a recession.
Some investment analysts are also starting to talk about a revenue recession in the United States, where the low or no inflation environment and stagnant economic growth makes it difficult for companies to increase sales or increase prices. Declining revenues in the energy sector from low oil prices are offsetting any positive aspects of the U.S. economy in information technology or other sectors.
However, there have been several positive events for world markets as well. The Iran nuclear deal is definitely a bright point for the world economy. If successful, it will be a potentially historic economic opportunity in one of the world’s largest countries. We have previously talked about how the land rush that will happen when sanctions are lifted could result in unprecedented violations of the Foreign Corrupt Practices Act. But by all accounts, the opening of Iran will be good for the world’s economy.
Turmoil in the bond market is also easing a bit after Greece reached a preliminary deal to stay in the euro zone. A Bloomberg Business article last night was titled “Wall Street’s Bond Machine Fires Back Up as Greece Tumult Fades.” However, a federal government report released this week did not identify a leading cause for the flash crash in the U.S. Treasury Market last October 15, 2014. Many have speculated that falling bond market liquidity could be the source of significant economic problems in the future.
We’ll continue to keep you updated on the changing economic conditions. We think this could present interesting opportunities for whistleblowers to alert us the U.S. Government to misconduct in the bond market or, a few years down the line, in the opening of the Iran economy.