Category Archives: Finance

01May/17
millenials debt

Millennials and Debt

The United States is very much a debtor nation. From the country’s governmental debt to personal debt, the numbers are sitting at staggering levels. According to a report released by the organization UBS, the nation’s consumer debt currently sits at around $3.6 trillion, that’s trillion. Even more alarming is the fact it continues to rise month after month, year after year.

At that level, the US debt sits at 20% of GNP, which is reaching levels that are unsustainable. A closer look at the number indicates that millennials (21 years old to 34 years old) are responsible for $1.1 trillion of the total consumer debt amount. The causes of millennial debt reaching such limits are two-fold, college debt and an inability to or unwillingness to live within their means.

The college debt issue is not new, yet is still threatens to undermine the stability of the US economy if not addressed in the immediate future. According to New York Fed President William Dudley, “continued increase in college costs and debt burdens could inhibit higher education’s ability to serve as an important engine of upward income mobility.”

As for consumer debt, recent improvement in the situation is becoming more apparent. As millennials find themselves facing unmanageable debt issues, they are beginning to address the root causes of their problems. While they tend to still want to overspend on big ticket items, they are learning the benefits related to frugality and waiting for the lowest and best prices.

One trend that warrants monitoring relates to auto leasing. According to the UBS report 32% of millennial are foregoing car purchases in favor of leasing. While it certainly offers a lower priced option for transportation, they are having to walk away from leases without a meaningful asset to show for their efforts. With student debt so high, something has to give.

06Apr/17
Card skimming rise

Card Skimming is on the Rise

If any of the recent data is truly indicative of the degree of the problem, it would seem thieves are gaining an edge on the security used to detect skimmers. Skimmers are small devices inserted into the slot of an ATM machine. They are used to record data off a credit card or debit card’s magnetic strip. By also using a tiny, strategically placed camera to record a customer’s pin number as they enter it, thieves can duplicate the card and start using it for purchases and ATM withdrawals.

Some recent data released by FICO Card Alert Services indicates there was a 70% increase in the number of cards compromised by skimmers in 2016. Furthermore, there was a 30% increase in the number of cards that were hacked. These increases are attributed to technological advancements that are making it more difficult to detect skimming devices.

Even more alarming was this comment by T.J. Horan, FICO’s vice president of fraud solutions: “As the last few years have proven, skimming technology and know-how have improved and are more accessible to the general population. So we will continue to see increases in compromises and the speed at which they occur.”

As consumers, there are a few steps we can take to prevent a collective loss of billions of dollars to criminals.

1. Don’t use remote ATMs and point-of-sale terminals in poorly lit, low traffic areas. It’s better to stick with machines at major banks or with major department stores.

2. Try to shake the slot area of a ATM machine before using it. If it wiggles or is lose, tampering may be possible.

3. Use your other hand to protect your pin number from cameras as you enter it.

4. Only use credit and debit cards made with chip technology.

5. Check your card or bank statement frequently. The sooner you catch issues, the sooner you can stop cards and minimize your exposure.

20Feb/17
Surge equity market officials weigh

Officials Weigh in on Reasons for the Surge in the Equity Markets

As the U.S. stock market continues its surge, pundits and politicians are trying to hand out explanations for the market’s longest winning streak since the late 1990s. Of course, U.S. President Donald Trump would like to take credit for the recent rally, citing his impending fiscal policies and tax cuts as the primary reason for investor confidence.

While President Trump might in fact be due some level of credit, there are other possible reasons why the Dow currently sits at 20,624 and the NASDAQ is currently flirting with the 6,000 level. One such reason was recently laid out by current Fed Chairman Janet Yellen.

In her recent testimony in front of the House Financial Services Committee, Yellen was asked to discuss the latest trends in the financial markets, which have been coined as the Trump rally. According to Yellen, the answer is quite simple. She stated, “I think market participants likely are anticipating shifts in fiscal policy that will stimulate growth and perhaps raise earnings.”

Since Trump took office, the economy has continued to improve in many areas. While some of the credit should go to the Obama administration, Trump and his people have done nothing to decrease fiscal confidence across the nation. With all the recent improvements expected to continue, Yellen has made clear the Feds may be poised to increase rates as soon as its next meeting in March.

In the past, such an announcement would send some investors into profit taking mode. Such has not been the case up to this point in time. Investors and consumers remain confident that any changes brought about by Trump’s administration will only serve to make the U.S. economy even stronger.

Indeed, the corporate outlook looks very good in most sectors. With impending tax reforms and an emphasis on home grown products, the U.S. economy looks to be in full recovery mode after too many years stagnation.

02Sep/16
Taleo Reporting ECON against PRIIPS RTS

ECON voted against PRIIPs RTS

ECON (European Parliament Economic and Monetary Affairs Committee) has voted 55 / 0 against the PRIIPS RTS (level 2) adopted and published on July 1st 2016.

The vote has been motivated by the use of future performances rather than past ones, the treatment of Multi-Options Products and legal uncertainty.

PRIIPS level 1 still valid.

Indeed, PRIIPS performances scenarios in the current RTS could lead to positive performances even in the unfavorable scenarios. The opposite can happen in the favorable scenario. These situations reflect the observed average returns from the time series used for the computations.

Multi-Options Products could lead to the production of high volume of KIDS and push the investors to confusion.

Finally, computed indicators across different manufacturers of the same product could introduce legal uncertainty.

TALEO Reporting, key provider believes that there still is a real possibility for PRIIPS to go live on January 1st, 2017. However, a 6 months minimum delay is expected for the authorities concerned to redraft and agree on new RTS.

30Aug/16
Fed signals rat increases Asia stock market reacts

Fed Signals Rate Increases – Asia’s Stock Markets React

No one needs to look any further than Asian markets to get an idea of how much influence the U.S. Federal Reserve exudes over the rest of the world. As the U.S.’s economic environment continues to improve with increases in job development and consumer confidence, the Fed’s chairperson, Janet Yellen, has made clear that at least one and maybe two interest rate increases are on the table over the rest of the year.

At this past weekend’s monetary policy conference in Jackson Hole, Wyoming, Yellen failed to disclose the Fed’s specific economic targets, but she did indicate that things are moving in the right direction and nearing a point when the Fed will need to react with rate increases to stave off any possible issues related to inflation.

In reaction to Yellen’s comments made during the conference, AMP Capital’s Shane Oliver, Head of Investment Strategy in Australia, had this to say: “It’s clear from the Fed’s actions this year that it is aware of global risks, the impact of its own actions on those risks and any potential blow back to the U.S. economy and of the impact of a rising U.S. dollar in doing some of its work for it.”

Around Asia, traders showed caution as stock indexes fell after Yellen’s comment hit the wires. On China’s CSI 300 and Shanghai Composite, the drop was a modest .3% while Japan’s Nikkei went against the grain and actually gained 2.3% amid good economic news in Japan. After discounting the effect of these two indices, the MSCI’s broadest index of Asia-Pacific shares fell 1%. In America, the market also fell amid concerns over a strengthening dollar.

Among economists surveyed over the likelihood of an increase in September, the number rose from 21% to 33% following Yellen’s comment. Related to the possibility of an increase in December, the number came back at 59.1% compared to 51.8 from an earlier survey.

02May/16
Bull Market

Is the End of the Bull Market on the Horizon?

For 2,610+ days, the US stock market has been entrenched in a bull market. Anyone with any level of knowledge about the financial markets has to be aware that bull markets don’t run forever. There is going to come a time and place when the bears are going to come out of hibernation and have their day. But When?

According to successful UBS strategist Julian Emanuel, that day may be coming sooner rather than later. After studying market trends around other bull markets, Emanuel was able to identify several key indicators that led to the end of most bull markets throughout history, especially in 2000 and 2007. For the record, the 1990-2000-bull market was the longest in history, followed by the current bull market that started around the beginning of 2009.

The two key indicators identified by Emanuel relate to merger and acquisition activity and a widespread rotation away from utilities and consumer based stocks in the financial services industry. In 2000 and 2007, both of these factors were very evident as the business community saw mergers decrease to a crawl while financial stocks received a big boost as interest rates started ascending.

Here in 2016, the Fed is beginning to consider raising interest rates, which would most likely start in the next few months based on current market conditions. As interest rates go up, financing costs go up, which puts a significant burden on manufacturers and distributors that are particularly sensitive to interest rates. As profitability shrinks for these business concerns, investors move investments into the financial sector, which usually benefits the most from rate increases. High interest rates are also found to a key reason why many companies put off acquisitions in favor of creating cash reserves as a hedge against inflation and higher borrowing costs.

While Emanuel believes the market will continue surging through the end of the year, he also believes the end of the bull markets is near. The catalyst into an extended bear market figures to be interest rates, which are about to start climbing. So say Emanuel.

01Feb/16
Bank of Japan Negative interest rate

Bank of Japan Goes Negative With Key Interest Rate

While many countries throughout the world are struggling with assorted economic issues, The Bank of Japan has decided to take extreme measures to try to help get Japan’s economy up and moving again. Effective January 29, 2016, Japan’s central bank lowered interest rates on monies kept with the central bank by commercial lenders to minus 0.1%.

In layman terms, that means the central bank is going to start charging a fee for deposits kept with the bank. This move is being used as a calculated way to encourage commercial lenders to start lending money so that cash can circulate throughout the stale economy.

For consumers, this move should provide them with cheap access to funds at both individual and business levels. In some cases, it might even result in borrowers being paid to take out a loan. It should be pointed out that other central banking units such as the European Central Bank have recently used this same option to help stir the international economic landscape.

This rate change signals a change of heart on the part of Bank of Japan’s governor, Haruhiko Kuroda. In recent weeks, he had been denying any claims of considering this type of move. According to Marcel Thieliant of Capital Economics, “Governor Kuroda has gained notoriety by changing course when it is least expected, and today’s move will only serve to cement this reputation.”

Immediate reaction to the interest rate cut was positive as financial markets throughout the world experienced big gains across the board. The only drawbacks from such a move could be the weakening of the Japanese yen in combination with most other currencies and the possibility of stirring up inflation fears.

For now, the goal is to keep the country’s economy from giving up modest economic gains made over the last few months. The last thing Japan needs right now is for the economy to go flat, creating the real possibility of another recession.

26Jan/16
Investors jitters deepen market - free fall

Investor Jitters Deepen as Market Goes into Free-Fall

With investors sitting on pins and needles, one has to wonder if the US stock market is headed for a huge fall. In recent days, the Dow jones Industrial Average has fallen below the 15,700 mark, which represents a 12.5% drop from its highs as recently as early November 2015. The Nasdaq and S&P 500 have experienced similar losses.

Fuelling some of the unrest is predictions from leading economists and market prognosticators who are predicting everything from a bear market to an 80% drop over the next year or so. While these predictions might sound a bit pessimistic and extreme, there are several relevant factors that warrant scrutiny.

China – As the second largest economy in the world, economical unrest in China is sending shock waves all around the globe. For the US, a selling off of US Treasuries and the unpredictability of China’s future growth could put upward pressure on interest rates.

Oil – With oil prices dropping below $30 a barrel, oil concerns are headed for trouble. They face the potential of closing operations, bankruptcy and laying off large groups of employees, which could stall an already weak US recovery.

The Dollar – Corporate earnings for US companies with overseas concerns stand to see a big hit against profits as rising interest rates and dropping oil prices push the dollar higher against many of the world’s currencies.

General Uncertainty – With corporate earning expectations being lowered and the Fed giving no clear indication as to future direction, investors are flocking to the sidelines until they can get some much-needed clarity.

The reality is that as long as these market conditions exist, the stock market stands to take a beating every time a little piece of bad economic news hits the wire. If a bear market is indeed forming after 5+ years of market growth, investors best anchor down for a long year.