Archive for Financial News

The long arm of the dollar

By The Economist online….

FEW banks can match the quaint serenity of Banco Delta Asia’s headquarters in Macau. Housed in a pastel-yellow colonial building opposite a 16th-century church, its entrance is flanked by tall vases, depicting sampan gliding between karst hills. In the tiled square outside, men laze under a banyan tree and an elderly woman peels a boiled egg for lunch.

But in 2005 this backwater bank incurred the wrath and might of the world’s financial hegemon. America’s Treasury accused it of laundering money for North Korea, prompting depositors to panic, other banks to keep their distance and the Macau government to step in. The Treasury subsequently barred American financial institutions from holding a correspondent account for the bank, excluding it from the American financial system.

Macau is over 8,000 miles from Washington, DC. But it is hard to escape the long arm of the dollar. Its dominance reflects what economists call network externalities: the more people use it, the more useful it becomes to everyone else. One person’s willingness to accept dollars from another depends on a third person’s readiness to accept dollars from them.

The dollar also benefits from a hub-and-spoke model for the exchange of currencies, the invoicing of trade and the settlement of international payments, as the late Ronald McKinnon of Stanford University argued. If every one of the more than 150 currencies was traded directly against every other, the world would need over 11,175 foreign-exchange markets. If instead each trades against the dollar, it needs only 149 or so. If you cannot buy the afghani with the zloty, you can still sell one for dollars with which to buy the other.

Likewise, if every international bank keeps an account in New York, any bank can transfer funds to any other through the same financial hub. “The global financial system is like a sewer and all of the pipes run through New York,” says Jarrett Blanc of the Carnegie Endowment for International Peace.

This gives America’s Treasury great punitive power and jurisdictional reach. Many companies that do not buy or sell wares in America nonetheless make or collect payment through New York. Because these transfers pass through American financial institutions, the Treasury can claim jurisdiction on the ground that its banks are exporting financial services to the bad guy. It can also hit companies where it hurts. For many, exclusion from America’s financial system is a more potent threat than exclusion from America’s customers. Last month, for example, the Treasury threatened to seize dollars paid to Rusal, a Russian metals firm that is one of the world’s biggest aluminium producers, crippling it and upending the global aluminium market, until the turmoil forced a rethink.

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Category: Business and finance, Approved, Finance and economics, FINANCE

Why drones could pose a greater risk to aircraft than birds

By The Economist online…

The “Miracle on the Hudson”—the successful ditching of a US Airways jetliner into New York’s Hudson River in 2009 after it hit a flock of geese—taught frequent flyers two things. First, it really is possible to land an aircraft on water, just as is shown on seat-back safety cards. Second, and more worryingly, the incident showed how dangerous birds can be to aircraft, particularly when they get sucked into engines. The machines are supposed to be designed to withstand an impact by the feathered creatures. Using big guns, chickens have been fired at aircraft engines in safety tests since the 1950s. But what about drones?

New research suggests that small unmanned aerial vehicles (UAVs) can actually be much more damaging than birds at the same impact speed, even if they are a similar weight. The study, published by the Alliance for System Safety of UAS through Research Excellence, a think-tank, used computer simulations to examine the impact of bird and UAV collisions in more than 180 scenarios. The researchers found that the drones’ rigid and dense materials—such as metal, plastic and lithium batteries—can put aeroplanes at much greater risk than a bird carcass. Kiran D’Souza, one of the authors, says that in every collision scenario with a drone there was at least minor damage to the plane and sometimes it was much more severe. In one case, the researchers discovered that if a drone were to hit an aircraft’s fan blades when it is operating at its highest speed, the blades could shatter and power to the engine be lost.

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Category: Business and finance, Gulliver

America’s culture wars are spreading to hotels

By The Economist online….
Choosing a hotel for a trip is generally seen as an apolitical decision. In contrast, restaurants and cafes have sometimes taken on an ideological tinge, with conservatives mocking liberals for their latte coffees, and liberals ribbing conservatives for their deep-fried everything and well-done steaks. But for most hotel users, location and good Wi-Fi matter more than the ideology of the owners. In some places that now appears to be changing: a trend turbocharged since the arrival of Donald Trump, an owner of an international hotel brand, in politics.

Suddenly the new Trump International Hotel in Washington, DC—on the same street as the White House and Capitol building—became the most politically-charged building in the city, if not the country. Celebrity chefs scrapped their plans to open restaurants there after Mr Trump made incendiary comments about Mexicans. Meanwhile, organisations such as the Kuwaiti embassy felt political pressure to move their events from rival hotels to the Trump building, to curry the new president’s favour.

Last week the politics of hospitality got further amplified with the announcement that a new anti-Trump hotel will open its doors in Washington DC. The 209-room Eaton Workshop, set to open next spring just six blocks from the Trump hotel, is branding itself as a progressive haven for the anti-Trump set. The description on its website could be mistaken for a conservative parody of urban liberalism, promising to “set the stage for residing guests, locals and house members to congregate around creativity and consciousness-building.” The hotel will offer an arts programme, a progressive lecture series, and a “radical approach to food and beverage.” The firm plans to add a Hong Kong hotel next year, followed by outposts in San Francisco and Seattle.

Catering specifically to a liberal clientele in big cities is probably a savvy business move. Cosmopolitan urbanites tend to have plenty of spare cash to splash out travelling. And conservatives are few in number in these places. Just 4% of voters in Washington, DC, 9% in San Francisco, and 10% in Manhattan in New York voted for Mr Trump. And going against this urban grain is costly in the travel business. When New York taxi drivers boycotted the city’s John F. Kennedy Airport in January to protest against Mr Trump’s ban on travellers from seven majority-Muslim countries, Uber, a ride-hailing app, sensed a business opportunity and dropped its surge pricing so that rides from the airport would be cheaper. But Lyft, a rival app, sensed a different sort of opportunity and announced a $1m donation to the American Civil Liberties Union, an outfit which opposed the ban. That resulted in Uber reportedly losing 200,000 users, while its rival Lyft attracted many of the progressive former Uber users away. Since then its market share has continued to climb steadily in the city and across America.

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Category: Business and finance, Gulliver

Not there yet Janet Yellen: System is safer now, though ‘all-too-familiar’ risks remain

Federal Reserve Chair Janet Yellen, looking back a decade after the onset of the financial crisis, said Friday the financial system is safer now than it was then though some adjustments to regulations may be needed.

The central bank chief spoke at the Fed’s annual conference in Jackson Hole, Wyoming.

Though the speech is closely watched in financial markets, Yellen offered no clues about the future of monetary policy, instead focusing on the history of the crisis and what regulators have done in response. She warned that future crises are inevitable but said the housing meltdown taught valuable lessons.

“The events of the crisis demanded action, needed reforms were implemented, and these reforms have made the system safer,” she said in prepared remarks.

Yellen rejected arguments that regulation had stifled banking activity, insisting that higher capital requirements actually promoted loan growth.

Her review came less than six months before her term ends in February. President Donald Trump has been circumspect about whether he will reappoint her, and Yellen has refused to speculate about her future.


Fed watchers had been looking for some level of reflection from Yellenabout the Fed’s response to the crisis, and that was the focus of the speech. She cited the need for the bailout programs put into place in response to a liquidity crush on Wall Street and touted the effectiveness of the new regulations, such as the Dodd-Frank reforms.

However, she said the Fed is continually reviewing the moves to see what’s working and what might be holding back the system.

“A broader set of changes to the new financial regulatory framework may deserve consideration. Such changes include adjustments that may simplify regulations applying to small and medium-sized banks and enhance resolution planning,” she said.

“More broadly, we continue to monitor economic conditions, and to review and conduct research, to better understand the effect of regulatory reforms and possible implications for regulation.”

For instance, she said the Volcker Rule, which limits banks’ ability to trade for their own benefit, may need some “simplifying.” She also said regulations should be examined to make sure they aren’t disproportionately harming community and regional banks.

She cautioned against wholesale changes, particularly when it comes to risk-taking in the financial markets.

“Any adjustments to the regulatory framework should be modest and preserve the increase in resilience at large dealers and banks associated with the reforms put in place in recent years,” she said.

Yellen also was expected to address the current climate and the potential for dangers ahead like the real estate bubble that precipitated the crisis.

Fed officials have expressed varying levels of worry about the continuing climb of risk assets like stocks.

Indeed, Yellen cited the likelihood of “the all-too-familiar risks of excessive optimism, leverage and maturity transformation re-emerging in new ways that require policy responses.” read more

Samsung’s boss is sentenced to prison

By The Economist online

SAMSUNG’S founding family, the Lees, have good reason to dislike room 417 of Seoul’s Central District Court. In 2008 it was where Lee Kun-hee, the chairman of the sprawling South Korean conglomerate, was found guilty of tax evasion. On August 25th his son, Lee Jae-yong, the vice-chairman of Samsung Electronics, stood in the same room and was sentenced to five years in prison on charges including bribery, embezzlement and perjury. The elder Mr Lee has been in hospital since suffering a heart attack in 2014. Samsung now lacks both its official and de facto bosses.

The younger Mr Lee, who plans to appeal against the verdict, was accused of paying bribes to Choi Soon-sil, a confidante of the country’s former president, Park Guen-hye. Prosecutors had argued that he hoped the payments would secure government support for an $8bn merger of two Samsung affiliates, Cheil Industries, the group’s unofficial holding company, and Samsung C&T, a construction firm. The state-run National Pension Service, the single biggest shareholder in C&T, voted for the plan in July 2015. The deal was controversial, but it helped Mr Lee consolidate his control over the group and clear the way for his succession.

The decision is a milestone in a broader influence-peddling scandal that brought down Ms Park. She was impeached in March and arrested soon after; she now awaits the verdict in her own trial. Mr Lee’s conviction bodes poorly for her.

Less clear is what will happen to Samsung itself. Shares in Samsung Electronics, the group’s main earner, dipped by 1.05% following the verdict. Yet any slump may be fleeting. The group’s three chief executives were not caught up in the trial. While Mr Lee was awaiting the verdict in his case, the firm boasted record profits, thanks to booming demand for its memory chips. An analysis by the Asan Institute, a think-tank in Seoul, showed that each twist in the case had little impact on its share price. Last year had brought the disastrous release of the Galaxy Note 7 smartphone, which had an unfortunate habit of bursting into flames. But the firm unveiled a new model this week. Its share price has risen by more than one-third this year.

Yet Mr Lee’s absence could create a power vacuum at the centre of the group, which might prevent it from making big bets. “The good thing about having a founding family is they can think about the long term,” says Yoo Kyung-Park of APG Asset Management, a Dutch pension firm that owns shares in Samsung Electronics. The Future Strategy Office, which acts as the group’s control tower, was dismantled in February after Mr Lee’s arrest. Two of its former executives were also jailed. Bosses will be unwilling to make major decisions without the family’s sign-off, says Park Sangin of Seoul National University: “In a monarchy you need a king.”

One convicted South Korean boss, Chey Tae-won of SK Group, a telecoms and chemicals giant, avoided this problem by turning his jail cell into an office. While serving time for embezzlement earlier this decade, he held more than 1,600 meetings in 17 months. In theory Mr Lee could do the same. But the appetite for such behaviour is waning. Demands are intensifying to reform South Korea’s chaebol, the mighty conglomerates that helped forge the country’s economy but which are now often criticised for cosy ties with politicians. Byzantine structures allow the sons and grandsons of company founders to wield great influence, whether or not they have controlling stakes. The 26 Samsung affiliates, which operate in businesses from life insurance to smartphones, are controlled by the Lee family through a complex web of cross-shareholdings.

The decision is a milestone in a broader influence-peddling scandal that brought down Ms Park. She was impeached in March and arrested soon after; she now…

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Category: Business and finance, Approved, Business and finance, Business

The pay is too damn low: July Jobs Report Shows Growth, but Wages Stubbornly Stagnant

The July employment report was almost about as good as it gets. The U.S. economy generated 209,000 new jobs, well in excess of the anticipated 180,000. As expected, the unemployment rate fell to 4.3 percent, matching the May low for this cycle. Average hourly earnings have yet to accelerate, but the pace did increase modestly in the month, and the participation rate edged higher. If the Fed does, indeed, intend to shrink its balance sheet starting in September, there was likely nothing in this report that would dissuade it from doing so. And following the report, expectations for a December rate hike increased to 40 percent from the 37 percent the day prior.

The one missing ingredient at this level of unemployment remains the stubborn refusal of wages to increase in a meaningful way. The last time the unemployment rate was close to this low, in 2007, wages were growing between 3.0-3.5 percent on a twelve-month basis. It should be noted, however, that back then core inflation was running between 2.0-2.3 percent as measured by the Personal Consumption Expenditure (PCE) deflator, not the 1.5 percent pace of this past June.

We will see how consumer prices started out the third quarter on Friday with the July Consumer Price Index report. The twelve-month headline rate is expected to edge higher to 1.8 from 1.6 percent in June, while the core rate is expected to be unchanged at 1.7 percent.

As labor continues struggling to participate fully in this recovery, shareholders are the beneficiary. Profit margins remain high, and corporate earnings are exceeding expectations. Second quarter earnings season is now roughly 90 percent complete, and according to Factset, S&P 500 companies in the aggregate are reporting an increase in margins compared to last year.[i] And earnings are likely to grow by 10.1 percent when full second quarter results are in, well ahead of the expected 6.4 percent pace at quarter end. Only the consumer discretionary sector is expected to see a decline.

The third quarter looks less promising. Estimates have been lowered since the end of the second quarter, as expectations for the energy sector in particular have been reduced along with the price of oil. Earnings in the third quarter are now expected to grow by 5.6 percent, down from 7.1 percent on June 30. But it should be noted that third quarter estimates are now lower for all but technology and telecom, which is still expected to suffer a decline, just of somewhat lesser magnitude. Nevertheless, current estimates of 9.5 percent for the full year have remained relatively steady.

Despite the robust July jobs report, bond yields fell for the week. The ten-year note closed at 2.26 percent, down from 2.29 the prior week, although it did bounce off its lows following the jobs report on Friday. The two-year note rose just one basis point on the week to 1.36 percent. The dollar rebounded sharply after the jobs report as well, arresting for the time being its year-long decline. Stocks edged higher, with the S&P 500 adding just 0.2 percent to close just one point shy of the record set the week before. The Dow Jones Industrial Average did manage to set another new record high at week’s end, its eighth consecutive record close.

Congress is in recess until after Labor Day, and with earnings season winding down, equity investors will be grasping about for something to fill the void as we get into the historically-weak months of August and September.


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Maximize the Resale Value of Your Car

By Savings Experiment Staff

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Did you know…

There are some easy things you can do to get more money for your used car, with a little less stress!

First, spruce up your vehicle – and not just the interior. A good wash on the outside and a thorough detailing on the inside can help let nervous buyers know that your little roadster has seen a lot of love.

If you need some help, look into hiring a professional detailer. For between $100-$200, they’ll rejuvenate your ride by removing minor paint imperfections, buffing the finish, and cleaning the carpets….it’s like a spa-day for your car. Just doing this can potentially get you over $500 more on your sale – so depending on your vehicle, it may be worth it!

Next, inspect your tires. Seasoned buyers always check the tire tread to get a sense of overall wear and tear. If your treads are worn out or uneven, replace the tires at the very least with some used ones, which can cost as low as $30 per tire. A small price to pay, considering that buyers will often expect a big discount if the tires are in poor condition!

So give these simple tips a try…with a little prep, you can get more cash for your used car. Farewell, old friend!

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Category: car dealers, car dealerships, car insurance, car shopping, Resale Value, savings experiment, trade in, vehicle sales

One Quick Call Can Save You Hundreds

By Savings Experiment Staff

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Believe it or not, sometimes saving money on your cable, cell phone or car insurance bill can be as easy as picking up the phone. But once you call, you’ll need to know how to negotiate to cash in!

Let’s start with your cable and phone bill. One way to get on the fast track to discounts is to mention that you are looking to cancel your service. According to Consumer Reports, it costs companies five times as much to get new customers than it does to retain old ones.

You’ll have a little leverage at this point, so start fishing for deals. Use their marketing to your advantage ­ maybe you saw (or didn’t see) an ad about some new promos they’re offering. It’s a surefire way to get some good deals!

But what if you want to take a less aggressive approach? Sometimes, establishing your loyalty to the company or brand can actually be a more powerful negotiating tactic. If you like the service but it’s become too expensive, most people are willing to work with you. For example, when it comes to car insurance, asking for the bill to be moved to later in the month could give you a few free weeks of service.

Finally, if for some reason it’s not looking like a deal is going to happen, try asking for free trials, upgrades, or even advice on seasonal specials. Remember, promotions constantly change, as do the customer service reps, so if you get rejected once, don’t be afraid to try again.

What are you waiting for? Pick up the phone and start saving money! Sometimes, all you have to do…is ask!

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Category: bills, cable bill, insurance rates, lower bills, negotiate a deal, Savings Experiment, shopping and deals

Brilliant Ways to Reuse Dryer Sheets

By Savings Experiment Staff

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A lot of us use dryer sheets in our laundry…and a lot of us just toss them in the trash afterward. But, once you see all the nifty ways you can use these things – and save money to boot – you’ll look at them in a whole new way.

First, let’s talk cleaning. Dryer sheets reduce static cling, making them perfect for dusting your TV, computer screens, countertops, window blinds and everything in between. Don’t want to buy pricey refills for your dust mop? You don’t need to. Just stick a few sheets at the end of your handle, and you can still sweep up without the extra cost!

Next, open your gym bag…do you smell something? You don’t need to, thanks to dryer sheets, which work great as deodorizers too! Put them in your shoes, luggage, even at the bottom of your trash bin, to minimize any unwanted fragrance.

Lastly, know what else these will help you get rid of? Mosquitos! Before you venture into bug-land, take a couple of sheets and wipe them over your skin, and tuck one in a pocket for good measure. This will help minimize your scent and keep you out of their dinner plans.

Doing laundry never seemed so appealing, right? Give these tips a shot and you’ll see that a few dryer sheets can go a long way to help you save.

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Category: dryer sheets, laundry, Laundry Detergent, laundry savings, laundry soap, laundry tips, repurposing, Savings Experiment

Make Your Own Salad Dressings to Save

By Savings Experiment Staff

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Did you know…

Making your own salad dressing can also save you up to 70% off buying at the store? And it’s easy too!

For a classic vinaigrette, start with one part ​vinegar (or citrus juice) to three parts ​oil. Sprinkle in a little salt and pepper, and with a few whisks, you’re done!

This mixture can be served as is, but if you’re feeling creative, break out the blender and it can also be used as a base to make an endless variety of dressings! To add some zing, add ingredients like mustard, garlic, olives or ginger (to name a few). For a sweeter palate, mix in some honey, jam or even fruit!

And if you want to get creamy with it, try adding a few spoonfuls of yogurt, sour cream, buttermilk, or even mayo. Don’t want the dairy? Blend in ripe avocado, nut butter or tahini paste for a richer texture, without the lactose.

Aside from being super low­cost, you’re also making a fresher, higher quality dressing ­ store bought dressings can be watered down, at your expense!

So open up the fridge and pantry and whip up your own salad dressing! Your savings are only a few whisks away.

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Category: did you know, diy, food and beverage, healthy cooking, healthy cooking tips, salad dressing, salad dressing recipes, salad recipes, Savings Experiment

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