Home » Finance

Category Archives: Finance


Equities First – Regulators & Accounting Standard-setters Complicated Borrowing of Bank Loans

Financial institutions within the shadow banking system aren’t subjected to similar regulations as depository banks permitting them to regret extra debt obligations associated with their capital base or financial cushion. Accounting standard-setters and regulators permitted depository banks like Citigroup to shift large amounts of liabilities and assets off-balance sheet into compound legal entities referred as structured investment vehicles. That led to masking of capital base masking of the company, risk or leverage taken. One news agency approximated that the leading four US banks ought to give back $500 billion and $1 trillion into their balance sheets in 2009. That extended crisis uncertainty concerning the financial position of the key banks. The entities in off-balance sheet were likewise utilized by Enron being part of the scandal that led to the falling of the organization in 2001. In 1997, the Federal Reserve chairman (Alan Greenspan) fought to ensure the derivatives market remained unregulated. By 2008, the total OTC (over-the-counter) derivative notional value went up to $683 trillion with the derivatives being referred as “financial instruments of mass destructions”. Small business investors still finds it hard to secure affordable and easier bank loans with the financial institutions changing their regulations or even tightening their loaning patterns to prevent associated risks. Since the Great Recession incidence, various alternative lenders are witnessed in the market but one company that has hit the headlines is Equities First Holdings (http://www.equitiesfirst.co.uk/ ) with its special products (stock-based loans) reaching potential investors in all corners of the globe.

Investment banks leverage ratios greatly increased between 2003 and 2007. Before the crisis, financial firms had faced great leverage that increased their appetite for dangerous investments, hence minimizing their resilience when losses occur. Today, Equities First is a major provider of alternative lending services with the company registering an increasing traction of borrowers across the world.

https://beta.companieshouse.gov.uk/company/08120457 for more.

The American Economy Keeps Growing Despite Some Risks

The shadow of the Great American Recession can still be seen in some sectors of the United States economy, but the positive signs and the current figures greatly outweigh negative sentiment. Most economic indicators are in great shape: unemployment is under five percent, the Dow Jones Industrial Average is over 20,000 points and the consumer price index is growing at a 2.2 percent annual rate.


An even more important and promising economic benchmark is the American household wealth, which has climbed five percentage points on a year-over-year basis as of March 2017.


With all the preceding in mind, it is not surprising to learn that economists are expecting a very healthy output of the gross domestic product for 2017. Beyond this year, however, economists begin to worry. According to Martin Feldstein, an esteemed economics professor at Harvard University, there are reasons to be concerned about the Standard & Poor’s 500 Index, which is currently 70 percent higher than it should be by historic standards. Wall Street has taught us some very painful lessons about what happens when the major markets are overpriced, and there are fears that this might end up biting investors by October 2017.


The national debt does not seem to be a concern because of the high value of the American dollar, which means that the U.S. should not have a problem paying interest on ten-year Treasury bonds yielding just 2.5 percent. The problem is that many economists believe that the yield should be at least four percent, which would make it more challenging for the U.S. government to service as the value of the bonds is reduced.


Even though the risks above are very realistic, they are not bound by any laws to actually take place. Still, history shows that a period of ultra-low interest rates must be followed by economic hardships as the rates need to be increased. To this effect, the Federal Reserve is ready to impose rate hikes if it notices that Wall Street is becoming volatile due to excessive buying and artificial confidence. Two more interest rate hikes in 2017 would be strongly felt by the American economy.


President Trump’s Latest Executive Order Improves Economy at Environmental Cost

Coal miners and executives in the United States are celebrating the signing of the Energy Independence Executive Order, which essentially eliminates the environmental and climate change regulations of the previous administration,


Under former President Barack Obama, the American coal industry suffered due to the clean energy movement that favored production of electricity through hydro, wind and solar power generation. One of President Trump’s numerous promises during his controversial campaign was to roll back many of the environmental protection measures enacted during the Obama administration, and the gist of this promise was to put coal miners back to work in depressed economic jurisdictions such as West Virginia.


Ever since taking office, President Trump has focused on keeping his promises by means of Executive Orders and programs, although many of them have failed to work. Trump’s latest order is certainly good for the economy, but there are major concerns about the environment and public health.


According to a statement made by Fred Krupp, president of the Environmental Defense Fund (EDF), Trump is taking steps to revoke the Clean Power Plan, a set of laws and rules that the Obama administration worked very hard to enact. The EDF statement against Trump warns of the dangers of carbon power pollution; some of these dangers include widespread pulmonary disease similar to many regions of China, a country that is just beginning to enact laws to reduce carbon emissions.


At the signing ceremony for this order, President Trump specifically stated that he would like to see increased coal production and job creation, two activities that will prove beneficial for the American economy in the short term. In the longer term, however, the EDF believes that the public health issues created by the order will have a negative effect on the economy through missed work days, workers compensation payouts and mandatory medical treatment for those who work in the coal production industry.


Activists, scientists and legislators in some states are already planning to challenge the Energy Independence Executive Order. Judging by the limited success of previous orders signed by Trump, there is a major chance that his coal production initiative may fizzle.


The Stigma of Credit Card Debt

Millions of people have some form of credit card debt, with most individuals owing $5,000 or more in past and present credit card dues. Credit cards are essential when you need quick cash to make purchases, but they can quickly lead you to debt if you aren’t careful. The reason credit card debt is so problematic is because of the interest rates attached to these cards. Even a supposedly good card can have a 10 percent interest rate or higher, making it almost impossible to pay off your bills in a timely manner.


Because of the huge issue with credit card debt, it’s important that when you do take out a card, you’re careful with its usage and interest rate. For instance, if a new card offers a zero percent interest rate for the first few months, remember that this number will skyrocket once the new member introductory period has ended. Also, you might want to look at cards with a fixed rate as opposed to a variable one. Variable rates are great when they’re low, but they can go up significantly over the course of having the credit card open.


To avoid credit card debt, you need to pay off your bills before they’re due. Many have found that letting their credit cards become delinquent, even by just one month, automatically puts them in a precarious situation which makes it easier to spiral into a whirlwind of debt. It might help to put yourself on an automatic payment plan with your credit card company so that you don’t forget to pay. Once you forget one bill, the amount you owe doubles and it’s difficult to pay off in full, especially because of the accumulative interest charges. This isn’t to say that you should avoid credit cards altogether or close out the ones you already have, but you need to be more responsible with how they’re used. By using your credit cards only for emergency situations and then paying off any bill you owe each month, you’ll find that it’s actually enjoyable and helpful to have your very own credit card.


Why Savings Accounts Are So Important

It’s not uncommon nowadays for families to be living paycheck to paycheck. With our cost of living to income ratio, it’s difficult to make ends meet and see the light at the end of the tunnel. In many cases, families don’t have enough money in a savings account in case of an emergency. This emergency could be as expensive as needing a new septic system for the home or having mounting medical bills because of an injury. This is why it is crucial that you begin putting money into a savings account as soon as you possibly can.


It is never too early or too late to start putting some cash into a savings account. Savings accounts are often free to open and have no minimum balance, as long as you’re going with a good bank. You will then be able to put money into the account at virtually any time and withdraw on it when needed. The beauty about savings accounts when compared to checking accounts is that you gain interest on them. This may only be a few cents each month, but it’ll add up and increase the amount you already have in the account.


You need to make it a habit to put money into the savings account. It’s easy to open an account with a local bank, but it’s a whole other story to actually grow the account into something substantial. You could try putting a small percentage of your income into the account with each paycheck or you can make it a habit to put a certain amount in at the end of the month. Once you start building your savings account, you’ll find that you finally have the money you need for emergency situations. It will allow you to breathe easier knowing that you won’t need to take out a loan or credit card if you have a large expense that comes up out of nowhere. Savings accounts are also great for retired folks who will have a little bit of extra money to utilize each month when their Social Security and 401K plans aren’t cutting it.


Sticking to a Budget You Can Afford

We all want to be able to live within our means and have money leftover after each paycheck. Unfortunately, a lot of families spend all of what they earn, making it difficult to ever save any money for future expenses. This is where a budget comes into play and why it’s essential that you stick to one that’s easy for you and your loved ones.


The best way to create a budget is by knowing what bills you have each month and what you’re left with after paying everything. Once you know how much you have in your bank after paying your electric, cable, rent or mortgage, you’ll be able to see how much you can play around with. It’s important to only spend what you can afford and to stop overspending because of frivolous shopping or unnecessary purchases. You should also make it a habit to start putting money into a savings account each month so that you have cash to fall back on in times of need.


The importance of a budget isn’t because it teaches you to curb your spending, but instead it helps with future expenses. In a time when most families live paycheck to paycheck, it’s difficult to see the light at the end of the tunnel and know you’ll have cash for future events. Many people nowadays don’t even have enough money to retire on, causing them to have to work full-time well into retirement age. Budgeting yourself just means that you need to be more responsible with your spending. Set yourself a budget each month and do your best to avoid going over this amount. Don’t buy things on a whim and assume that you’ll still be on budget because this is often why people have issues with money. If you’re still having problems with budgeting, you might need to talk with a financial expert who can help set up an amount for you to live on comfortably. These individuals will not only create a budget plan for you, but they’ll be able to maintain it for you to ensure that you always stay on track.


Why More People Aren’t Retiring

Retirement used to be something that every American would do. Once your parents reached the age of 62, they were able to start collecting Social Security and get money from their 401K and savings funds without question. Nowadays, you’ll notice a growing trend of people who simply aren’t retiring. One of the main reasons for this is because people aren’t saving up for retirement the way they used to, and this is directly linked to our income to cost of living ratio.


The cost of living has gone up substantially over the past few decades, but minimum wage has only gone up a little bit. This has caused people to live paycheck to paycheck and not have much leftover to put into a savings account. Many people now also feel that they’d rather use all of their income towards living expenses as opposed to putting some of it towards a future account they can’t even touch. After all, if you begin to put money into a 401K plan and want to withdraw on it before retirement age, you’ll pay a pretty hefty tax penalty on the money you take out.


Retiring is an important part of any person’s working career. It allows you to take a breather in your golden years and finally have the time to focus on yourself. In some cases, it can be downright unhealthy to work a full-time job when you’re a senior citizen. It is important that you begin saving up for retirement well in advance to your 62nd birthday. The sooner you start putting money away for retirement, the better off you’re going to be. It never hurts to talk to your employer about opening a 401K plan through your company since many bosses will match what you put into the account so that it grows quickly. Social Security may not be enough for individuals who didn’t earn a lot of money working throughout their lives, so having an extra fund that you can fall back on in times of need is almost a necessity and can save you from working for the rest of your life.


The Federal Reserve Grapples with Interest Rates and Image

The Federal Reserve finds itself mentioned in the news quite a lot. Rarely are the mentions flattering. The clandestine nature of the entity spawns more than a few conspiracy theories about how “The Fed” chooses to stabilize monetary policy. A bit of good news emerged from discussions about the Federal Reserve in the press. The entity has decided that raising interest rates is fine now. For several years, The Fed did not raise interest rates. In addition to making a single raise, two more raises are planned for the next year.


All of this is really good news. The reason the Federal Reserve feels that raising interest rates is a good move is because a strong sense about an improving economy has emerged. So far, the increase in the DOW from the 19,000 range to the 21,000 range would support beliefs that the economy is improving dramatically.


Of course, economies do experience swings in positive and negative directions. An economy that is seemingly stable can take a proverbial dive. The 2008 stock market collapse was a perfect example of how economic fortunes could change overnight. The harsh recession did recede as the current strength of the stock market clearly indicates.


Not everyone cheers the moves made by the Federal Reserve. If the entity chooses to keep interest rates low, people become suspicious. When a decision is made to raise interest rates, suspicions are also raised. While few would consider the Federal Reserve a rogue and dangerous entity, many simply do not understand the role it plays. After all, things are done in a secretive manner.


The word “secretive” comes with ominous overtones, but it shouldn’t. No government agency can operate without some level of internal operations privacy. The Federal Reserve is no different from any government agency or private corporation in the sense privacy helps ensure the smooth performance of tasks.


That said, the Federal Reserve should rethink its public relations processes. The cloud of secrecy surrounding the entity does not exactly help its image with the public. A better image would promote better trust. Better trust would support more faith in the decisions the Federal Reserve makes.




US Economy Grows at Slower Pace

Ensuring stable and gradual growth the overall economy in the United States is very important. While the economy has continued to grow a little bit recently, recent news reports (http://www.reuters.com/article/us-usa-economy-gdp-idUSKBN1711MX) have pointed out that the growth is a little bit slower than initially expected.


According to the US Commerce Department, the overall economy in the United States only grew by 1.6% in 2016. This overall level of growth does show progression in the growth of the United States, but was lower than the 2.5% growth in 2015 and was the lowest level of growth overall since 2011. Overall job growth also remained positive as jobless claims fell to a seasonally adjusted 258,000. This was then the 108th straight week where such claims were below 300,000, a level that has been a milestone marker for jobless claims.


While the overall rate for 2016 seems to be stagnant, it does appear that the growth was slower in the first half of the year than the second. In the fourth quarter of the year, the economy grew 2.1% compared to the prior year and the third quarter grew 3.5% compared to the prior year. The overall growth rate was affected by a number of different factors. On the positive side, the amount of consumer spending in the fourth quarter was higher, but the country also had its highest level of imports in several years, which offset some of the national growth.


The growth of the economy will be a major focus in the coming year. With the change in the administration, it remains to be seen how it will impact the level of consumer spending, job growth, and reliance on imports. The current administration has stated that they will focus on bringing a significant amount of jobs and manufacturing back to the United States, which could lead to an overall increase in the amount of consumer spending, reduction in imports, both of which would have a positive impact on overall growth.


Bitcoin in Crisis

Bitcoin has always had a controversy between those who say it’s the future and others who say it’s a pipe dream. But now Bitcoin supporters are fighting with each other and going for what looks like a power grab. The price of Bitcoin plummeted by 25% because of this infighting.


Opposing Factions:

Digital gold or electronic cash neither is wrong or right, just different strategies.

Those on the side of digital gold would rather have Bitcoins capped with no further mining and have other networks that act more like cash and linked to Bitcoin. Similar to how US dollars are backed by gold. This ideology being supported by Bitcoin Developers.


While the supporters of electronic cash would prefer Bitcoin to act more like the federal reserve and simply print more money. This being supported by Bitcoin Unlimited.


The developers and the miners both need each other but have opposing incentives, so they don’t fully trust each other. “Bitcoin is one of those things where nobody wants to be seen as controlling it,” says Bitcoin developer Andrew DeSantis.


The Current Situation:

The plummet in price was caused by a fear that a small group of people from one of the factions would gain too much control rather than the balance of competing interests.


Roger Ver and Jihan Wu are supporters of Bitcoin Unlimited which has been accused of trying to acquire enough control of Bitcoin that they would then make previous versions of Bitcoin incompatible. Both have denied this and called it a conspiracy.

The Ideological disagreement has become an all-out power struggle


Future Outlook:

DeSantis and other bitcoin developers have brought up the possibility of a nuclear option. They can change the Bitcoin software so that it no longer works on the hardware currently running it. It would be a catastrophe for companies that operate within the world of Bitcoin.


Peter Todd, a bitcoin protocol researcher who is aligned with DeSantis and Core. “I think the most likely scenario is that nothing will happen. I really mean nothing.”


But Eric Lombrozo, a Bitcoin Core developer, says, “I’d rather that not happen. I think it’d be dangerous for the network to go down that route. It’s basically a warpath.