Poverty researchers win Nobel Economics Prize

STOCKHOLM - A trio of American economists on Monday won the Nobel Economics Prize for their work in the fight against poverty, including novel initiatives in education and healthcare, the Royal Swedish Academy of Sciences said.

Indian-born Abhijit Banerjee of the US, his French-American wife Esther Duflo -- a former advisor to ex-US president Barack Obama -- and Michael Kremer of the US were honored "for their experimental approach to alleviating global poverty," the jury said.

"This year's laureates have introduced a new approach to obtaining reliable answers about the best ways to fight global poverty," the jury said.

The science academy said that "more than 700 million people still subsist on extremely low incomes," and that around five million children under the age of five still die every year from preventable or curable diseases.

The three found efficient ways of combatting poverty by breaking down difficult issues into smaller, more manageable questions, which can then be answered through field experiments, the jury said.

"They have shown that these smaller, more precise, questions are often best answered via carefully designed experiments among the people who are most affected," it said.

"As a direct result of one of their studies, more than five million Indian children have benefitted from effective programs of remedial tutoring in schools. Another example is the heavy subsidies for preventive healthcare that have been introduced in many countries," the jury said.

Duflo is only the second woman to win the Nobel Economics Prize in its 50-year existence, following Elinor Ostrom in 2009.

CLINICAL TRIALS

Duflo, 46, who is also the youngest person to ever receive the Economics Prize, told the Nobel committee in a phone interview the honor was "incredibly humbling".

"I didn't think it was possible to win the Nobel Prize in Economics before being significantly older than any of the three of us," she added.

Duflo has made her name conducting research, together with her husband who was her PhD supervisor, on poor communities in India and Africa, seeking to weigh the impact of policies such as incentivizing teachers to show up for work or measures to empower women.

Her tests, which have been likened to clinical trials for drugs, seek to identify and demonstrate which investments are worth making and have the biggest impact on the lives of the most deprived.

"Our vision of poverty is dominated by caricatures and cliches," she told AFP in a September 2017 interview.

Banerjee, 58, and Duflo are both professors at the Massachusetts Institute of Technology (MIT) in the US, while Kremer, 54, is a professor at Harvard University.

In the 1990s, Kremer used field experiments to test interventions to improve school results in western Kenya.

He has also helped develop programs to incentivize the distribution of vaccines for diseases in the developing world.

ONLY NOBEL NOT IN WILL

Unlike the other Nobels awarded since 1901, the Economics Prize was not created by the prizes' founder, philanthropist and dynamite inventor Alfred Nobel, in his 1895 will. It was devised in 1968 to mark the 300th anniversary of Sweden's central bank, and first awarded in 1969.

Each of the Nobels comes with a prize sum of nine million Swedish kronor ($914,000, 833,000 euros), to be shared if there is more than one winner in the discipline.

But unluckily for recent winners, the prize's value has lost around $185,000 in the past two years, due to the depreciation of the Swedish krona.

The trio will receive the prize from King Carl XVI Gustaf at a formal ceremony in Stockholm on December 10, the anniversary of the 1896 death of Alfred Nobel.

Last year, the prize went to William Nordhaus and Paul Romer of the US for constructing "green growth" models that show how innovation and climate policies can be integrated with economic growth.

The Economics Prize wraps up a Nobel season that stands out for its crowning of two literature laureates, Polish writer Olga Tokarczuk for 2018 -- delayed by a year due to a sexual harassment scandal -- and Austrian novelist Peter Handke for 2019, whose selection sparked controversy because of his pro-Serb support during the Balkan wars.

Prior to that, the laureates in the fields of medicine, physics and chemistry were announced.

On Friday, Ethiopian Prime Minister Abiy Ahmed won the Peace Prize for his efforts to resolve the long-running conflict with neighbouring foe Eritrea.

source: news.abs-cbn.com

After New York City’s war with Amazon, Uber could be next

NEW YORK — After New York City and Amazon went to war over a new campus in Queens, the city is heading into battle with another tech giant: Uber.

Mayor Bill de Blasio approved a yearlong cap on Uber vehicles last summer, making New York the first major US city to rein in the booming ride-hail company. Now de Blasio wants to extend the cap, prompting Uber to sue the city last week to overturn the law.

Uber has fiercely opposed the cap, arguing that it hurts New Yorkers who rely on the app, especially outside Manhattan, where there are fewer transit options. The lawsuit called the city’s regulatory approach “unfortunate, irresponsible and irrational.”

De Blasio, a Democrat with presidential ambitions, responded by saying the city’s new rules — both the cap and a measure to raise wages for drivers — were needed.

“No legal challenge changes the fact that Uber made congestion on our roads worse and paid their drivers less than a living wage,” said Seth Stein, a spokesman for the mayor. “The city’s new laws aim to change that.”

Like many other cities across the world, New York is struggling to respond to the explosive growth of the ride-hailing industry. The influx of vehicles has raised concerns about street congestion, working conditions for drivers, the decimation of the yellow cab industry and the siphoning of riders from public transit.

The lawsuit comes at a critical moment for Uber and its main competitor, Lyft, as both companies rush to go public. Uber, which could be valued as high as $120 billion, is likely to be one of the biggest-ever public offerings by a tech company.

The two ride-hail companies have bristled over new regulations in New York, Uber’s largest market in the United States. Lyft recently sued to stop the rules aimed at raising driver pay.

Uber and Lyft are also battling each other to dominate New York’s thriving bike markets. Lyft bought Motivate, the company that operates CitiBike, the city’s popular bike-share program. Uber bought another bike company called Jump and began offering electric bikes in the Bronx and Staten Island.

Uber supports the driver pay rules, but argued that the cap hurts drivers who want to join its app.

“It is disappointing to see the de Blasio administration remain singularly focused on a cap that evidence suggests is doing nothing to relieve congestion while preventing thousands of New Yorkers from earning a living wage,” Josh Gold, a spokesman for Uber, said in a statement.

Some business leaders worry that Amazon’s decision to abandon its deal with New York could hurt the city’s image as a tech hub.

But Nicole Gelinas, a senior fellow at the Manhattan Institute, said the struggle with Uber is not a tech issue — it’s about worsening street traffic.

“We’re not really afraid of being branded anti-tech,” Gelinas said. "In the long term, our problem is how do we deal with all of this growth — and not the risk that we’re going to drive away that growth with a little bit of rhetoric and a little regulation.”

De Blasio has a bitter history with Uber. When the mayor first proposed a cap in 2015, Uber launched an aggressive attack, introducing a “de Blasio view” in the company’s app to blame him for long wait times. Uber won the debate and became shorthand in his administration for an embarrassing defeat.

But Uber was on the defensive last year when the cap idea was revived by Corey Johnson, the City Council speaker. Uber’s reputation had been harmed by accusations of gender discrimination and other scandals. It hired a new chief executive and a new leader for New York to try to improve its image.

The number of for-hire vehicles in the city has surged to more than 100,000 vehicles, from about 60,000 in 2015. But while Uber and other companies are flourishing, many of their drivers are not. About 40 percent of drivers have incomes so low that they qualify for Medicaid and about 18 percent qualify for food stamps, according to a study by prominent economists last year.

The cap was expected to last a year while the city studied the proliferation of ride-hail trips. At the end of that period, the city’s taxi commission would review the number of vehicle licenses and decide on how they would be regulated.

Last month, de Blasio said in a radio interview that he wanted to “put ongoing caps in place on the for-hire vehicles.” Officials at City Hall confirmed that the mayor was considering extending the cap.

Uber’s lawsuit argues that it was not legal for the city to delegate the power to cap vehicles to the taxi commission. If Uber cannot meet growing rider demand, the lawsuit says that could hurt the state’s efforts to raise money for the subway through new fees on ride-hail trips.

The lawsuit, filed in state supreme court in Manhattan, questions the city’s motives: “This is less a ‘study’ and more a ‘post hoc rationalization’ of a remedy the city appears to have already selected.”

Lyft also opposes a permanent cap. “Any extension of this misguided policy would do even more significant, long-term damage to drivers and riders,” Lyft said in a statement.

The City Council is proud of the new regulations imposed on the ride-hailing industry and had the authority to approve them, said Jacob Tugendrajch, a spokesman for Johnson. The speaker, his office said, wants the taxi commission to make a decision about any future limits on vehicles based on data from its study.

The city’s taxi commissioner, Meera Joshi, recently announced that she was stepping down in March. Her successor will have a powerful role in determining the industry’s future.

In a separate lawsuit, Lyft challenged the city’s rules to raise driver wages to more than $17 an hour. Lyft claims the rules give Uber an unfair advantage because it judges companies differently based on their “utilization rate,” or how often drivers have a passenger in their car versus driving around empty.

The approach gives “the largest company with the biggest market share a built-in and perpetual advantage over companies with lower utilizations,” Lyft’s lawsuit said.

Lyft has sold itself as the more ethical ride-hail option. But the lawsuit hurt its image among some riders like Brad Lander, a councilman from Brooklyn, who said he deleted the app.

After facing harsh criticism, Lyft announced that it would comply with the new pay rules while its legal case proceeded.

Uber and Lyft say they care about public policy, but the lawsuits show their first priority is self interest, said Bruce Schaller, a former city transportation official who has closely studied the industry. The companies face a difficult challenge of balancing both profits and their public image. In this case, Schaller said, Uber chose to protect its bottom line.

“Uber in particular has been playing super nice since its change in management a year ago and particularly as they get closer to the IPO,” he said. “Suing the biggest city in the country isn’t playing super nice.”

source: news.abs-cbn.com

Alternative Investing in Binary Options

Finding the best alternative source of income can be challenging for most people; especially due to the time commitment required by most of the available options in the market.  Most of them might require a huge capital investment such as real estate investment. Others may require a lot time investment such as real-time forex and stocks trading; whereas others may be just be very complicated with a lot of technicalities to understand such as bond trading.


However, there are other new platforms such as 10trade that provide simpler and easy to understand alternatives for those with less financial knowledge. These options are also favorable to those who do not want to speed their whole day in front of a scree trying to follow every small movement of the Japanese candle sticks.  From the comfort of your home or your office, you can be able to make an extra income through binary options trading by using very simplified trading methods and tools available online.

Binary option trading is trading in commodities, stocks, indices, currency, bonds among other investment assets without actually owning the underlying assets. All you need to do as the trader is to predict the price movement of the underlying asset and if your prediction is right then you gain money from your transaction. If however your prediction is not correct, you end up losing money in that particular transaction. This is a very easy way to make money in the commodities, stocks and bonds markets without actually acquiring the real underlying assets and without having to undergo the pressure of understanding the complicated investment strategies involved in those markets.

By just being able to predict whether the price of a commodity like oil will either go up or g down and do that accurately, you become a binary options trader! However, there are a few basic things you need to know before you venture into binary options trading. First you need to know how binary options trading works, know the different types of binary options and finally get a few tips on how to become an above average trader in this new financial markets segment.

Trading in binary options has close similarities with derivatives trading. Both binary options trading and derivatives trading involve predicting the price movement of an underlying investment asset. In both investment alternatives, if your prediction is right then you gain from the transaction and you are said to be in the money. However, if you are wrong with your predictions as to how the price of the underlying asset will move, then you lose money and you are said to be out of the money.  Another similarity is that in both investment alternatives we have specific investment periods which are pre-determined when initiating the trade. We also have pre-determined gains which are also agreed upon when initiating the trade. Finally, in both cases you do not own the underlying investment asset, rather you just speculate on its price movement.

Back to binary options, there are two major types of the same. We have the call options trade which is the trade you place when you expect the price of the underlying asset to go up. For example oil could be trading at $70 and you expect that by the end of the day it will be trading at $85 due to sanctions imposed on one of the leading oil producers in OPEC. The binary option trade you place in this case is a call option because you anticipate that the oil prices will rise due to the changing macro-economic factors. If your prediction is true by the end of the day you make money; while on the other hand you lose money if it is wrong.

Put binary options are the direct opposite of call binary options. Here you make money when you become the prophet of doom and predict that the price of the underlying asset will fall. If for example you predicted that the price for oil from the example above would fall to $57 and it actually did fall, then you make money. If on the other hand the price went up, then you lose your money. This aspect of having to make a decision between only two alternatives while trading is what makes the trading be referred to as binary options trading.

To be good in binary options trading, all you need is to be consistent in following trends in the markets for the underlying assets that you are trading on. For instant if you are trading in gold, you need to keep tabs of the latest trends in the gold market and other macro-economic factors that might affect the price of gold. This is not a difficult thing however since there many online business and economic news sites to keep you are informed. In addition, to be a veteran trader you need to separate your emotions from the trading and let the facts from the market analysis advice your decision making before you place any trade. Finally, keep trading and the more you do it, the better you shall become and eventually be a master of the game.

source: 20smoney.com

Asian stocks mostly down as Kuwait strike ends

Most asian stock markets turned lower as investors reacted to news that the labor strike in Kuwait has ended. - Business Nightly,  ANC, April 20, 2016

source: www.abs-cbnnews.com

The impact of the APEC 'family photo'

The 'family photo' of leaders participating during the Asia Pacific Economic Cooperation (APEC) is more than just a souvenir shot.

What seems to be just a normal photo opportunity, the "family photo" can actually help solve key issues in the region, such as reducing the level of tension over border issues, an economics professor said.

University of the Philippines Professor Cayetano Paderanga Jr. interpreted that the "family photo" of the leaders of the 21 APEC member economies symbolize the impact of the meeting.

“Just like the usual family photos that end up family reunions, we can’t underestimate the impact, the impact actually can be quite subtle but very important, this is when the new cousins get to meet the other cousins,” he said.

Paderanga said one of the inconcrete impacts may be a reduced level of tension, which has been quite high over the last two to three years, over territorial disputes.

“Let’s take a very good example, President Noy and Xi Jinping of China, everybody is watching what the chemistry is, because if the chemistry is good then that will be a signal that the tension in the border issues will go down,” he added.

But the economics professor said Xi's presence in the meeting alone already sends a message of a reduced tension between the Philippines and China.

“Just the fact that they are meeting, that in fact premier Xi Jinping came over is already a big [positive] message… and we also gave a very strong concession ‘look border issue is not on the agenda,’ and so he came, that’s already a very big reduction on the level of tension,” Paderanga said.

“And this [impact] will become multiplied when the government officials meet at the lower levels and then you start thinking about businessman much more comfortable talking to businessman coming from a country whose leader their leader doesn’t like,” he added.

WATCH: Paderanga speaks on reaping the gains of APEC meetings

source: www.abs-cbnnews.com

Confused about quantitative easing, deflation? Read this

FRANKFURT - The European Central Bank unveiled Thursday an eagerly-awaited programme of sovereign bond purchases, known as quantitative easing or QE, to ward off deflation in the eurozone.

After the ECB held its key interest rates at their current all-time lows at its first policy meeting of 2015, central bank chief Mario Draghi said a programme would be launched to buy 60 billion euros of private and public bonds per month starting in March.

QE is already used by other central banks around the world to stimulate their economies, but is contested in Europe because it is seen as a way of printing money to pay the way for governments out of debt, which the ECB is expressly forbidden from doing under its statutes.

And while consumer prices in the single currency area actually fell for the first time in five years in December, analysts and ECB officials insist that there is no sign of deflation in the region just yet.

What is deflation?

Deflation is defined as an extended period of falling prices where consumers begin to put off purchases in expectation they will fall further, sparking a damaging cycle of falling production, employment and prices.

Consumer prices in the eurozone fell by 0.2 percent year-on-year in December, the first drop in more than five years, driven down mainly by tumbling oil prices.

But a one-off like that is not synonymous with deflation, economists say. And ECB officials, too, have repeatedly stated that they see no sign of the eurozone sliding into deflation for now.

Normally, central banks keep inflation (and deflation) in check by adjusting their key interest rates.

If the economy is in downturn and companies are nervous about the future and scaling back on investment, a central bank can reduce the overnight rate that it charges banks, reducing their funding costs and encouraging them to make more loans.

In the wake of the financial crisis, the ECB, like other central banks around the world, slashed their overnight interest-rates to close to zero. But that still failed to spark a sustained recovery, so they resorted to more unconventional tools to encourage banks to pump money into the economy, including QE.

What is QE?

Under QE, a central bank in effect creates money by buying securities such as government bonds from banks with electronic cash that did not exist before.

The aim is to stimulate the economy by encouraging banks to issue more loans: the banks take the new money and then buy assets to replace the ones they have sold to the central bank. That raises stock prices and lowers interest rates, which in turn boosts investment.

In theory, the central bank can also purchase corporate debt, but the market for sovereign debt is much bigger and would therefore have a much bigger impact.

In order to get round the ban on government financing, the ECB buys bonds that have already been issued via the so-called secondary market.

In the past, the ECB has already bought up the sovereign bonds of a number of the countries hit hardest by the crisis, such as Greece, Portugal and Ireland. But these purchases were not considered to be QE because they were targeted specifically at the countries concerned and not on a wide scale.

Does it work?

The US Federal Reserve launched three QE programmes, buying up around $4.0 trillion of debt in total. The Bank of England also used QE several times, first in 2009 and then in 2011 and 2012.

Berenberg Bank economist Rob Wood estimated that Britain and the US averaged 3.0-percent nominal growth since embarking on QE, while the eurozone had only managed to clock up growth of 1.1 percent.

The Bank of Japan was the first to use QE as tool, back in the early 2000s, but the Japanese economy is still entrenched in deflation.

Nevertheless, QE for the eurozone is different because the ECB will buy the debt not of just one country, as was the case in the US or Japan, but of 19 different countries in very different states of economic health.

That raises a number of issues, since the sovereign debt of one country may be riskier than another.

Critics had expressed concern that European taxpayers would have to foot the bill if any one country defaulted on its debt.

But the ECB plan has been designed so that only 20 percent of those risks would be shared, with the other 80 percent to be shouldered by the national central banks of the countries concerned.

source: www.abs-cbnnews.com

ECB launches 1 trillion euro rescue plan

FRANKFURT - The European Central Bank took the ultimate policy leap on Thursday, launching a government bond-buying programme which will pump hundreds of billions in new money into a sagging euro zone economy.

The ECB said it would purchase sovereign debt from this March until the end of September 2016, despite opposition from Germany's Bundesbank and concerns in Berlin that it could allow spendthrift countries to slacken economic reforms.

Together with existing schemes to buy private debt and funnel hundreds of billions of euros in cheap loans to banks, the new quantitative easing programme will release 60 billion euros ($68 billion) a month into the economy, ECB President Mario Draghi said.

By September next year, more than 1 trillion euros will have been created under quantitative easing, the ECB's last remaining major policy option for reviving economic growth and warding off deflation. The flood of money impressed markets: the euro fell more than two U.S. cents to $1.14108 on the announcement, and European shares hit seven-year highs.

"All eyes were on Mario Draghi and he has delivered a bigger bazooka than investors were expecting," said Mauro Vittorangeli, a fixed income specialist at Allianz Global Investors, adding that the news marked "an historic crossroads for European markets".

The ECB and the central banks of euro zone countries will buy up bonds in proportion to its "capital key", meaning more debt will be scooped up from the biggest economies such as Germany than from small member states such as Ireland.

The prospect of dramatic ECB action had already prompted the Swiss central bank to abandon its cap on the franc against the euro. Denmark cut its main policy interest rate on Thursday for the second time this week after the ECB announcement, aiming to defend the Danish crown's peg to the euro.

Draghi has had to balance the need for action to lift the euro zone economy out of its torpor against German concerns about risk-sharing and that it might be left to foot the bill.

WILL IT WORK?

Economists noted that Draghi had said only 20 percent of purchases would be the responsibility of the ECB. This means the bulk of any potential losses, should a euro zone government default on its debt, would fall on national central banks.

Critics say this casts doubt over the unity of the euro zone and its principle of solidarity, and countries with already high debts could find themselves in yet deeper water.

"It is counterproductive to shift the risks of monetary policy to the national central banks," said former ECB policymaker Athanasios Orphanides. "It does not promote a single monetary policy. This path towards Balkanisation of monetary policy would signal that the ECB is preparing for a break-up of the euro."

A German lawyer who has been prominent in attempts to halt euro zone bailouts said he was already preparing a legal complaint against the bond-buying programme.

Draghi said the ECB's Governing Council had been unanimous in agreeing that the step to print money was legally sound. There was a large majority on the need to trigger it now, "so large that we didn't need to take a vote".

"There was a consensus on risk-sharing set at 20 percent and 80 percent on a no-risk-sharing basis," he added.

One euro zone central banking source said five policymakers opposed the expanded asset-purchase plan: the central bank chiefs of Germany, the Netherlands, Austria and Estonia, along with Executive Board member Sabine Lautenschlaeger, a German.

Guntram Wolff, head of the Bruegel think tank, said the plan's size was impressive. "But the ECB has given the signal ... that its monetary policy is not a single one. That's a bad signal to markets and a bad signal to everybody in the euro zone."

The ECB is trying to push euro zone annual inflation back up to its target of just below two percent; consumer prices fell last month, raising fears of a Japanese-style deflationary spiral. But there are doubts, and not only in Germany, over whether printing fresh money will work.

Most euro zone government bond yields are at ultra-low levels and the euro had already dropped sharply against the dollar. Lower borrowing costs and a weaker currency could both help to boost economic growth but there is a question about how much further either can fall.

The ECB could create the basis for growth, Draghi said, but he put the onus on governments to follow. "For growth to pick up ... you need structural reforms," he said. "It's now up to the governments to implement these structural reforms. The more they do, the more effective will be our monetary policy."

Draghi was echoing the view of German Chancellor Angela Merkel, who said: "Regardless of what the ECB does, it should not obscure the fact that the real growth impulses must come from conditions set by the politicians."

The ECB has already cut interest rates to record lows and left its refinancing rate, which determines the cost of euro zone credit, at 0.05 percent.

Greece and Cyprus, which remain under EU/IMF bailout programmes, will be eligible for the ECB programme but subject to stricter conditions.

In practice, Greek debt does not currently qualify as another rule stipulates that a maximum 33 percent of the bonds issued by any country may be bought. The ECB and other euro zone central banks already own more than this, although they may start purchases once enough of their Greek bonds have matured to take the total below the 33 percent threshold.

Greece votes on Sunday in an election where anti-bailout opposition party Syriza is on track to emerge as the biggest party in parliament.

source: www.abs-cbnnews.com

IMF slashes 2015-2016 world growth forecast

WASHINGTON - The International Monetary Fund on Tuesday sharply cut its 2015-2016 world growth forecast of only six months ago, saying lower oil prices did not offset pervasive weaknesses around the globe.

The IMF said poorer prospects in China, Russia, the euro area and Japan will hold world growth to just 3.5 percent this year and 3.7 percent in 2016.

That was 0.3 percentage points lower than in its previous World Economic Outlook in October, and underscored the steady deterioration of the economic picture for many countries, due to sluggish investment, slowing trade and falling commodity prices.

While the United States will remain the one bright spot among major economies, Europe will continue to struggle with disinflation, and China's growth, hit by slower export growth and a real estate slump, will drag to its slowest pace in a quarter-century.

The IMF forecast that the United States, the world's largest economy, will expand by 3.6 percent this year, up a half-percentage point from the previous outlook.

China, the second largest economy, will expand at 6.8 percent this year -- 0.3 percent slower than previously expected -- and 6.3 percent in 2016, the IMF said.

The last time Chinese growth fell below seven percent was in the crunch of 1990, when it slowed to 3.8 percent.

The impact of slower Chinese growth will spill over especially to other Asian countries, the IMF said, resulting in its downgrade of their growth prospects as well.

For the eurozone and Japan, it said, "stagnation and low inflation are still concerns" requiring sustained monetary easing untraditional means to keep interest rates from rising.

In the eurozone, where the region's central bank is expected to decide to boost stimulus this week, low oil prices and the depreciated euro are a help to growth. But it will also struggle with low levels of investment and poorer demand for the region's exports from emerging economies.

The region is expected to expand 1.2 percent in 2015, and 1.4 percent next year.

Japan's stimulus has not worked as well as expected, and the IMF expects it to expand just 0.6 percent this year, picking up to a still-sluggish 0.8 percent in 2016.

Russia, already pressed by sanctions over its support for secessionists in Ukraine, is particularly hurt by lower oil prices. The IMF now says the country's economy will contract 3.0 percent this year and 1.0 percent in 2016. In October the IMF was still predicting slight growth for the country.

Cheap oil good but...
The world's crisis lender warned that continued volatility in markets, partially a product of the US beginning to tighten monetary policy, pushing the dollar higher, will challenge governments and central banks around the world for some time to come.

And while the halving of crude prices is a net positive for the world, the strong dollar partially negates that effect for many oil importers using weakening currencies. And the impact of slower growth in trade, low commodity prices and market turbulence will all but erase the gains from cheap oil.

"New factors supporting growth -- lower oil prices, but also depreciation of euro and yen -- are more than offset by persistent negative forces, including the lingering legacies of the crisis and lower potential growth in many countries," says Olivier Blanchard, the IMF's chief economist.

Blanchard said it means "good news for oil importers, bad news for oil exporters. Good news for commodity importers, bad news for exporters... Good news for countries more linked to the euro and the yen, bad news for those more linked to the dollar."

The IMF stressed that countries need to persist in restructuring, reform and investment despite the weaker conditions.

"Raising actual and potential output is a policy priority in most economies... There is an urgent need for structural reforms in many economies, advanced and emerging market alike," even as they face different choices and needs in their overall economic policies.

It included in that prescription the need for governments to take advantage of lower oil prices to cut subsidies to strengthen their budgets for the long term.

source: www.abs-cbnnews.com

Growth, investment at risk from emerging markets rate hikes

LONDON - A growth-crushing downward spiral looks imminent for emerging markets, threatening to turn back the tide of foreign investment that flooded into developing countries on the premise of fast economic expansion.

Countries in Asia, Latin America and emerging Europe are being forced to raise interest rates sharply to stave off currency collapses and a wholesale exodus of foreign investors. Turkey, India and South Africa jacked up rates this week, heaping pressure on others to follow suit.

Whether these steps will steady the currencies is unclear, but one thing is sure - economic growth, developing countries' main trump card over their richer peers, will take a hit.

Analysts reckon Turkey's dramatic 425 basis point rate hike could almost halve this year's growth rate, to 1.7-1.9 percent, for example, while the South African Reserve Bank, which raised by half a point, cut its estimates for 2014 and 2015 growth.

Indonesia's economy last year probably grew at its slowest pace in four years, below its long-term average of above 6 percent, after 175 bps in policy tightening since June.

Even before the latest increases in borrowing costs, developing country growth rates were under the cosh.

Not only was the developing world's 4.7 percent growth last year almost a full percentage point under International Monetary Fund forecasts, its premium over growth rates in advanced countries has shrunk to its lowest in a decade.

In Brazil and Russia, growth is running below the levels forecast for Britain and the United States in 2014.

That is very bad news for the investment outlook, going by the findings of a recent IMF study that examined capital flows for 150 countries between 1980 and 2011.

Net capital flows to emerging economies, estimated at as much as $7 trillion since 2005, have tended to be highest during periods when their growth differential over developed economies is high, the paper found.

And investment flow is also "mildly pro-cyclical" with domestic growth rates, the paper said, meaning that as developing economies expand, they draw more investment.

"Investors are getting what they asked central banks for - higher interest rates. But there is no denying that there is a massive headwind to capital flows into emerging markets," said David Hauner, head of EEMEA fixed income strategy and economics at Bank of America Merrill Lynch.

"Historically the two main drivers of capital flows to EM (are) the difference between EM-DM growth... (and) real U.S. interest rates which are starting to go up."

SUDDEN STOP?

Higher interest rates raise borrowing costs for the corporate sector and curb credit growth and consumer demand, thus hurting companies' profits. They also make fixed income assets less attractive.

Clearly then, bad news for bond and equity investors who, Thomson Reuters service Lipper says, have pumped almost half a trillion dollars into emerging assets in the past decade.

Add to that bank loans, merger and acquisition deals and direct investments by foreign companies into manufacturing and services, and the figure just since 2005 could be as large as $7 trillion, Institute of International Finance data show.

Like Hauner, Morgan Stanley analysts see the central bank moves as broadly positive, in that they raise inflation-adjusted, or real interest rates. That ultimately makes economies more competitive by slowing wage growth.

In the meantime though, emerging markets are exposed to the risk of a sudden stop in capital flows, highlighting potential ructions on credit markets, asset prices, economic growth and also politics as a result of the rate rises.

"Will we see an orderly slowdown, or a more disorderly unwind?" Morgan Stanley said in a note. "An orderly deceleration in growth will also be important in keeping political uncertainty at bay with elections ahead of us in many double-deficit countries."

India, Brazil, Turkey, Indonesia and South Africa are among key developing countries facing elections in 2014 and which are seen as vulnerable to the withdrawal of the Fed's cheap cash because of their budget or current account deficits.

NOT YET IN ASSET PRICES

Equity investors found out the hard way in China that fast economic growth doesn't equate with investment returns, enduring miserable stock market performance for two decades even as the economy grew at turbo-charged rates.

Slowing growth is at least partly driving heavy outflows from emerging markets, where funds tracked by EPFR Global shed over $50 billion in 2013 and over $8 billion so far this year.

But the growth allure is yet to completely fade, with many investors focusing on long-term positives such as demographics or low ownership of goods such as mobile phones or cars.

The question is when will asset prices reflect the inevitable growth-inflation hit these developing countries will take, says Steve O'Hanlon, a fund manager at ACPI Investments.

"Markets are pricing a pretty dire situation in emerging markets (but) is EM cheaper given potential future output? I wouldn't say so but it's getting there," O'Hanlon said.

"When currencies stop selling off, if (governments) produce real reforms, I will be investing in those markets. If you don't see any reforms, the rate hikes will just destroy growth, discourage investors and make the situation far worse."

source: www.abs-cbnnews.com

Fed cuts bond buying in 1st step away from historic stimulus

WASHINGTON - The Federal Reserve on Wednesday embarked on the risky task of winding down the era of easy money, saying the U.S. economy was finally strong enough for it to start scaling down its massive bond-buying stimulus.

The central bank modestly trimmed the pace of its monthly asset purchases, by $10 billion to $75 billion, and sought to temper the long-awaited move by suggesting its key interest rate would stay at rock bottom even longer than previously promised.

At his last scheduled news conference as Fed chairman, Ben Bernanke said the purchases would likely be cut at a "measured" pace through much of next year if job gains continued as expected, with the program fully shuttered by late-2014.

The move, which surprised some investors but did not cause the market shock many had feared, was a nod to better prospects for the economy and labor market. It marked a historic turning point for the largest monetary policy experiment ever.

"The recovery clearly remains far from complete," Bernanke said. But "we're hopeful ... we'll begin to see the whites of the eyes of the end of the recovery, and the beginning of the more normal period of economic growth."

Bernanke said he consulted closely on the decision with Fed Vice Chair Janet Yellen, who is set to succeed him once he steps down on January 31 after eight years at the helm. "She fully supports what we did today," he said.

Investors took the action as a validation that the outlook for the economy was improving. After a brief pullback, U.S. stocks rallied sharply, with both S&P 500 and Dow industrials closing at all-time highs.

At the same time, U.S. Treasury bond prices fell, but the move was modest, capped by the Fed's strengthened commitment to keep interest rates near zero for a long time irrespective of the reduction in its asset purchases.

The Fed said monthly purchases of both mortgage and Treasury bonds would be trimmed by $5 billion each, starting in January.

"This is a modest change, not a big one, and it shows that they are not in a rush," said Scott Clemons, chief investment strategist for Brown Brothers Harriman Wealth Management. "The Fed is using very careful language that they are going to continue to support the economy."

END OF AN ERA

The Fed's extraordinary money-printing has helped drive stocks to record highs and sparked sharp gyrations in foreign currencies, including a drop in emerging markets earlier this year as investors anticipated an end to the easing.

"They finally pulled a Band-Aid off that they've been tugging at for a long time," said Rick Meckler, president of hedge fund LibertyView Capital Management in Jersey City, New Jersey.

The Fed launched its third and latest round of quantitative easing, or QE, 15 months ago to kick-start hiring and growth in an economy recovering only slowly from the recession. Its first program was launched during the 2008 financial crisis.

The central bank's asset purchase programs, a centerpiece of its crisis-era policy, have left it holding roughly $4 trillion of bonds, and the path it must follow in dialing it down is rife with numerous risks, including the possibility of higher-than-targeted interest rates and a loss of investor confidence.

To soothe investors' nerves, the Fed said it "likely will be appropriate" to keep overnight rates near zero "well past the time" that the jobless rate falls below 6.5 percent, especially if inflation expectations remain below target.

The Fed has held rates near zero since late 2008.

It was a noteworthy tweak to an earlier pledge to keep benchmark credit costs steady at least until the jobless rate, which dropped to a five-year low of 7.0 percent in November, hits 6.5 percent.

"The actions today are intended to keep the level of accommodation the same overall," said Bernanke, who held out the prospect of fresh stimulus if the economy stumbled. He said officials could further bolster their low-rate pledge, or even cut the interest rate they pay banks on excess reserves held at the Fed in a bid to spur lending.

EXPECTATIONS ON INFLATION, RATES

In fresh quarterly forecasts, the central bank lowered its expectations for both inflation and unemployment over the next few years, acknowledging the jobless rate had fallen more quickly than expected. It now sees it reaching a range of 6.3 percent to 6.6 percent by the end of 2014, from a previous prediction of 6.4 percent to 6.8 percent.

Three policymakers expect the first rate rise to come in 2016, up from only two in September, while 12 of the Fed's 17 top officials still see the move in 2015. Futures markets do not see better-than-even odds of a rate hike until September 2015.

Critics of the bond buying, including some Fed officials, have worried the program could unleash inflation or fuel hard-to-detect asset price bubbles.

But some have credited the purchases with stabilizing an economy and banking system that had been crippled by the 2008 financial crisis and with staving off what could have been a damaging cycle of deflation.

One policymaker, Eric Rosengren of the Boston Fed, dissented against the decision, which he felt was premature given the still-high unemployment rate.

Bernanke stressed the Fed was not giving up on supporting the economy, and said it would take action if inflation failed to rise to the central bank's 2 percent target. Inflation as measured by the Fed's preferred price gauge rose just 0.7 percent in the 12 months through October.

Even so, recent growth in jobs, retail sales and housing, as well as a fresh budget deal in Congress, had convinced a growing number of economists the Fed would trim the bond purchases.

But many thought the central bank would wait until early in the new year, given persistently low inflation and the fact that the world's largest economy has stumbled several times in its crawl out of the 2007-2009 recession.

source: www.abs-cbnnews.com

Apart from dollar, investors keep cool about US shutdown

The first U.S. government shutdown in 17-years weakened the dollar on Tuesday, sending it to an eight-month low against the euro, but met a subdued response from investors in equity and fixed income markets.

U.S. Federal government agencies have been directed to cut back services after lawmakers failed to pass a temporary spending bill before a midnight deadline, threatening the salaries of over a million workers.

"No one really knows when they are going to get their act together, so you would have thought there would have more of a reaction than there has been," said Greg Matwejev, director of FX Hedge Fund Sales and Trading at Newedge.

The dollar has borne the brunt of the response so far, falling to a 1-1/2 year low against the safe-haven Swiss franc and hitting an 8-month low against a basket of six major currencies. The weakness lifted the euro to an eight-month high of $1.3589.

However, MSCI's world equity index, tracking shares in 45 countries, gained 0.15 percent by early in the European session, though it saw its biggest daily fall of September on Monday as investors anticipated the shutdown.

Europe's broad FTSEurofirst 300 index inched 0.2 percent higher after the open but held near a three-week low.

U.S. stock index futures also pointed to gains when Wall Street opens later in the with the broad S&P stock futures inched up 0.5 percent after cash prices fell on Monday.

"The U.S. shutdown is a central point for the markets, but as long as the hope for just a temporary shutdown exists, it will not be a strong burden for equities," Christian Stocker, equity strategist at UniCredit said.

Markets were also absorbing the mixed readings on economic activity across the manufacturing sector for September.

Euro zone factory activity grew for the third month running in September as demand enabled picked up. While activity in China expanded only slightly last month raising questions over the strength of its nascent recovery.

DEBT FLAT

In fixed income markets, German government bond yields, normally seen as a safe haven by investors in times of uncertainty, were steady though yields on U.S. Treasury 10-year notes did rise to hit 2.645 percent, a gain of three basis points.

Gold, another traditional safe haven asset, did pop higher after the shutdown became apparent, hitting $1331.66 an ounce, though it is trading well within its recent $1,300 to 1,350 range.

While many market players expect the government shutdown, which in the past has lasted from one day to nearly a month, to ultimately be resolved, they are more fearful about implications for debt ceiling negotiations due later this month.

"People will start to think the deadline for the debt ceiling, which is around the October 17, is not going to be met in that case there is a risk of a default," Eric Chaney, chief economist at AXA Group, said.

Any likelihood of that the U.S. government is going have problems servicing its massive debt is likely to hit equity market hard though it would raise expectations the Federal Reserve will keep its monetary stimulus in place for longer.

Elsewhere Italian bonds were also broadly steady a day before Italian Prime Minister Enrico Letta faces a vote of confidence as Italy tries to draw a line on growing political tensions.

The yield on the benchmark 10-year Italian government bond was up one basis point at 4.58 percent.

Meanwhile Brent crude fell below $108 a barrel to trade near a 7-week low on worries that the shutdown of the U.S. government may crimp oil demand.

Brent crude for November fell 70 cents to $107.67 a barrel. U.S. crude was at $101.99, down 34 cents.

source: www.abs-cbnnews.com

What happens with a US gov't shutdown?

The U.S. federal government was due to start partially shutting down on Tuesday after lawmakers failed to compromise on an emergency spending bill before a midnight deadline.

With a partial government shutdown, there will be far-reaching consequences for everything from National Park admissions to economic data.

Much of the impact or relative lack of disruption is determined by whether agencies are partly funded by industry user fees or deemed to be essential services.  













Here is a roundup of some of the impact that would be felt:

FEDERAL WORKERS: As many as 1 million federal employees could face unpaid furloughs or missed paydays, according to the president of the American Federation of Government Employees, which represents 670,000 union members.

THE WHITE HOUSE: The Executive Office of the President will furlough about 1,265 staff and retain 436 as excepted workers. Among the staff retained will be 15 to provide "minimum maintenance and support" for the White House. Executive agencies will be reduced to skeleton staff, including four at the Council of Economic Advisors.

ECONOMIC DATA: The United States will stop publishing much of its economic data if the government shuts down, including the closely watched monthly employment report.

U.S. SECURITIES AND EXCHANGE COMMISSION: The SEC would continue reviewing applications for initial public offerings (IPOs) and monitoring markets as normal in the early weeks of a government shutdown, and can continue operating fully for a few weeks, a spokesman said.

DEPARTMENT OF HEALTH AND HUMAN SERVICES: Signup for the new U.S. health exchanges under the Affordable Care Act due to start on Oct. 1 will proceed. Across the vast department and its sub-agencies, about 52 percent of staff will be furloughed - some 40,512 workers. Among the programs shuttered would be the Centers for Disease Control's annual seasonal flu influenza program. The National Institutes of Health would not admit new patients in most circumstances.

U.S. FOOD AND DRUG ADMINISTRATION: Some 55 percent of the FDA's employees will be working. Of those reporting to work, 74 percent will be funded with fees paid to the FDA by the industries it regulates. The FDA's expert advisory committee meetings, which recommend whether the agency should approve new products, will for the most part continue. The next scheduled panel is on Oct. 8 to recommend whether to approve expanded use of certain pacemakers and defibrillators from Medtronic Inc. . The FDA will cease most of its food safety, nutrition and cosmetics activities, such as routine inspections of plants and facilities. It will also be unable to monitor imports, and will cease certain compliance and enforcement activities.

U.S. INTELLIGENCE AGENCIES: Substantial numbers of intelligence personnel could be placed on leave, but those assigned to vital national security missions, including supporting the president, and collecting data from informants or spy devices such as eavesdropping systems or satellites, will generally remain on the job.

Shawn Turner, chief spokesman for National Intelligence Director James Clapper, said: "The immediate and significant reduction in employees on the job means that we will assume greater risk and our ability to support emerging intelligence requirements will be curtailed."

NATIONAL PARKS: National parks would close, meaning a loss of 750,000 daily visitors and an economic loss to gateway communities of as much as $30 million for each day parks are shut, according to the non-profit National Parks Conservation Association.

DEFENSE DEPARTMENT: All military personnel would continue on normal duty status, but half of the Defense Department's 800,000 civilian employees would be placed on unpaid leave. Pentagon has said it will halt military activity not critical to national security.

Officials have said military personnel, who are paid twice a month, would receive their Oct. 1 paychecks but might see their Oct. 15 paychecks delayed if a government shutdown takes place and no funding deal is reached by Oct. 7.

INTERNAL REVENUE SERVICE: Most of the federal tax agency's 90,000 employees would be furloughed. Taxpayers who requested an extension beyond the April 15 deadline to file their 2012 taxes must do so by Oct. 15 and will be able to file these returns even if the IRS is still shut down then.

FEDERAL RESERVE AND OTHER FINANCIAL AGENCIES: Bank regulators, including the Federal Reserve and the Consumer Financial Protection Bureau, would stay open because they do not rely on Congress for funding. The Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency pay for themselves and would remain open. Loans guaranteed by Fannie Mae and Freddie Mac will still be available during the government shutdown. Both firms, which were seized by the U.S. government in 2008 as rising mortgage losses threatened them with insolvency, will continue normal operations. The Federal Housing Administration, which offers mortgage lenders guarantees against homeowner defaults, will have limited operations.

JUSTICE DEPARTMENT: Fewer than 18,000 of the department's 114,486 employees would be furloughed, and if the furlough is prolonged, some of those could be brought back to work. Criminal litigation would continue under a government shutdown, while civil litigation would be curtailed or postponed as much as possible "without compromising to a significant degree the safety of human life or the protection of property," the department said in its contingency plan.

COURTS: The U.S. Supreme Court would probably operate normally, as it has during previous shutdowns, but a spokesman declined to share the high court's plans. Federal courts would remain open for about 10 business days if the government closes on Oct. 1, and their status would be reassessed on or about Oct. 15.

U.S. TRADE REPRESENTATIVE'S OFFICE: Already squeezed by automatic spending cuts imposed by the so-called sequester, the USTR office has reduced travel to the 41 countries where there are concerns about intellectual property, Trade Representative Michael Froman said.

ENVIRONMENTAL PROTECTION AGENCY: The agency would be one of the hardest hit, with less than 7 percent of its employees exempt from furlough. The broad-based shutdown of all but emergency services would delay rule-making, potentially including finalization of renewable fuel volume requirements for 2014.

AGRICULTURE DEPARTMENT: USDA meat inspectors would stay on the job. Statistical reports would not be published, and the important Oct. 11 U.S. crop report could be delayed depending on how long a shutdown lasts. USDA has said its website, USDA.gov, "will go dark and be linked to a 'splash' page," denying access to historical data and other information.

TRAVEL: Air and rail travelers in the United States should not feel a big impact, since passport inspectors, security officers and air traffic controllers will all continue to work as usual.

WASHINGTON SIGHTS: Most popular tourist spots in the nation's capital would close, including the Lincoln Memorial, the Library of Congress, the National Archives, the National Zoo and all Smithsonian Museums. The zoo's live animal webcams would be disabled. All animals will continue to be fed and cared for.

source: www.abs-cbnnews.com

Are you ready to invest in stocks?

MANILA, Philippines - Bull or bear? Red, orange or green? Dovish or hawkish? These are the terms you will need to learn if you decide to start investing in the stock market.

This year, the Philippine stock market broke benchmark records and attracted many first-time investors. Of late, the market has become bearish, causing concern among these same individuals.

When you purchase a share of stock, you actually become a fractional owner of the corporation. Of course, the percentage of your ownership depends on the number of stocks you purchased. Let’s say you bought 5,000 shares of common stock in a corporation with 100,000 outstanding shares. This means that you have a five percent ownership interest in it.

While stocks have consistently outperformed other forms of investments in terms of profitability, it is decidedly the riskiest of the lot. Most want to enter at the best time – but as many have discovered, it’s time in the market that counts, not timing it.

If you are considering buying stocks and playing the market, here are some things to watch out for:

1 Are you stock-market ready?

Because of its volatile nature, make sure you use only your extra money when trading in the stock market. Investing in the market should not affect your current lifestyle and future plans; nor should you resort to borrowing just to get in the game. Manage your expectations of returns and be realistic. It is also advisable to set a limit to the amount of money you are willing to risk, and accordingly, get out as soon as you have reached your investment cap.

2 Know your stocks.

There are different classifications of stocks trading at the Philippine Stock Exchange (PSE). Common stocks are the most popular with shareholders entitled to partial ownership, profits, and voting rights. There are two types of common shares: Class A shares are for Filipino investors and Class B for both Filipinos and foreigners. As its name implies, preferred stocks are a class above common stocks with shareholders entitled to a fixed minimum amount of dividends as declared by the company. Cumulative preferred stocks are even more special as its shareholders have prior rights to dividends over common stock holders. The stockbroker is your agent, buying or selling upon your advice. Be sure yours is of good standing at the PSE.

3 Do your homework.

Don’t invest in a firm just because of an unconfirmed rumor from an undisclosed source. Study the firm’s fundamentals. What is its share of the market? What is its significance in the industry? What are its development plans and its growth opportunities? How is it performing financially?

There are a number of ways by which you can get the answers to these questions. Read the stock market coverage of the newspapers. Watch relevant programs on television and access the Internet for the latest stock market information. Go to the company’s website and look at its annual reports, reviewing its financial statements, past achievement, and future plans.

4 Manage your risks.

As a stockholder, you can expect returns in the form of dividends or capital gains. Dividends depend on the company’s profitability and may be paid in the form of cash or stock. Capital gains pertain to the increase in the market value of your stock. As previously mentioned, investing in the stock market can be a risky proposition. Dividends are not fixed; nor are they automatic. They may be declared or not by the company. Capital gains, meanwhile, depend on the movement of the price of your stock, its value going up or down at any given day.

Such are the risks that investors have to deal with. Manage your risk by investing in different stocks from different industry sectors. Resist the temptation of putting everything you have in one stock – even if that one stock seems to be experiencing an upward trend. It is also a good idea to determine the maximum level of loss that you can incur. Once that level is breached, get out.

5 Keep a steady eye on your investments.

Watch the movement of the market carefully. Keep tabs on your stocks, noting any upward or downward trend in trading. Watch also for developments in the industry as well as the economy in general for issues or events that might affect the performance of the company or your stock. If the company consistently registers poor performance with low profits, it may be time to evaluate your ownership of it.

source: www.abs-cbnnews.com

Are ETFs a Good Way to Create Secondary Streams of Income?

ETFs, or Exchange Traded Funds, are all the rage in the investment world, but so far, they really don’t have much of a track record. This is a fairly new method for investing and the long term data just isn’t there to determine how effective these investments can be over time.

There is a lot of controversy over whether or not ETFs are sound, but many of them do produce impressive gains over the short term. So, are these investments a good way to create a secondary stream of income? Let’s take a look at the benefits and downsides of this form of investment.

Risk –

This will depend largely on the type of ETF you select. For example, those that sunk their money into housing or mortgage funds are truly regretting that decision now and facing catastrophic losses. Those that stuck with a more diversified fund, like the SPDR Trust, or the Vanguard Total Stock Market Vipers are in a better position.

The key is picking the right kind of ETF. Right now, until there is more data available on these funds, it is best to stick with the ones that are well known and diversified. These funds do have a short term track record of performing well, and there is much less risk than with a “designer” ETF.

Short Term Gains –

ETFs can do very well in the short term, with some returns in excess of 30% over six months. However, look at the long picture, and that may drop to -30% for twelve months. The bottom line is that this is not a reliable long term investment. There is just too much room for risk and losses can be high when you look at the data for many of these funds.

Some people have found that getting in and out with an ETF is the best strategy, but ultimately, that decision is up to you and your broker. Many of the benefits of an ETF are outweighed by the inherent risks and the overall lack of good performance data.

So, what does that spell for those looking to create multiple streams of income? Right now, unless you are willing to ride out the markets, the answer is probably now. So far, the data indicates that ETFs are solid performers short term, and not so reliable over the long term. Whether you want to take that risk of sinking your money in and hoping for long term gains is completely up to you. However, there are many other long-term performers out there that are much more suited towards building a reliable secondary stream of income.

Diversity is always good however, and if you have some extra money that you are not relying on, you may want to discuss ETFs with your broker. One thing is certain, these funds will be interesting to watch, especially over the next two years as the housing market and the state of the economy continue to affect them.

source:  richcreditdebtloan.com