A Growing American Economy

The U.S. economy is heading into the second half of 2018 with strong momentum. Nonfarm payrolls are beating expectations. Manufacturing and construction indexes are accelerating. Economists are expecting growth through the end of the year between 3.6% and 4.8%. Economic activity, passenger, and both domestic and global air and rail freight traffic flows are growing.

The expected value of our economy is in the direction of its activities, the processes and politics that enable those activities, and the ensuing progress in technology and productive efficiency of its participants. It’s driven by expectations of the future.

While there are many software programs that take into account cost, accounting, tax, and cash flow considerations, these programs may not say anything about the future ‘risk’ of current investment. Risk tools allow originators, investors, and portfolio managers to adjust investment and portfolio structure by testing transaction exposure under different scenarios. Enterprise business intelligence tools keep investment strategy on course and allow it to react to changes.

Recognizing that market volatility often will limit any plan’s short-term usefulness it is important to take a long-term view and look to the underlying direction of economic activity, inflation, and political policy backdrop. The goal is to transform current investment opportunities into revenues that contribute the most to your long-term bottom line.

Risks To Global Growth

Over the past year, global growth has been supported by still relatively low-interest rates, central bank balance sheets, and larger government deficits. But the trend toward nationalism (and economic protectionism) increases the risk of trade tensions, deglobalization, and moderating growth.

Some risks are judged acceptable because of their returns (others may be judged too large to be compensated for). An example: credit risk is the uncertainty about the lessee’s ability to make rental payments. Such risk might be managed with structured rent streams (front-loaded, back-loaded, or level payments).

To manage credit risk, you need four pieces of information: the ‘probability of default’, how that probability changes over your investment horizon, the expected recovery in the event of a default, and an estimate of the variability of each of the previous three. Although you seldom can time the market successfully you can improve your returns by knowing where you are in the business cycle. Given that we are nine years into the current expansion we might suggest there is a relationship between the state of the business cycle and credit risk.

Analytics in Investment

Understanding investment behavior with better information allows you to prepare for success. Advanced analytics are keeping planes flying more than 16 hours a day, helping to spread operating cost. Aircraft manufacturers like Bombardier, Boeing and Airbus are using “AI” (Artificial Intelligence) to scan reams of data in order to monitor their planes in flight. So-called health monitoring on planes such as Bombardier’s C Series allows data to be analyzed more quickly and accurately, enabling preventative actions to be immediately conveyed to airlines.

AI could eventually be used on all systems of aircraft, including brakes, generators, valves, engines, and avionics to extend the life of parts, minimize maintenance disruptions and offer huge savings to operators.

Best results are created with access to a wide range of perspectives. Bill Gates once said, “Once you embrace unpleasant news not as a negative, but as evidence of a need for change, you aren’t defeated by it, you’re learning from it.” Predictive analytics monitors trends and prioritizes investment using data, experience, research, and insight. True value lies in your ability to make reliable predictions.

Leverage our insight in translating raw data into meaningful and useful investment alternatives.


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