Why is everyone talking about US bond yields? Because they may “torpedo the stockmarket”, says The Wall Street Journal. On Friday last week, fresh job data pushed the yield on the 30-year Treasury up past 5% (a psychological hurdle for the “long bond”) to 5.1%. The yield on the ten-year Treasury went up to 4.9%, its highest level since June 2002, and the Dow Jones Industrial Index lost 0.9%, closing at 11,120.04.
A total of 211,000 new jobs and an unemployment rate of 4.7% in March indicate that the labour market is moving to full employment. This has prompted investors to fear that the Federal Reserve’s widely expected May interest-rate hike from 4.75% to 5% will not necessarily be its last.
At the beginning of this year, analysts were predicting rates of 4.75% mid-year, but now they could go as high as 5.25% in June. And even if there is a pause then, towards the end of the year interest rates could go higher still.
It doesn’t matter, says Jim Paulsen of Wells Capital Management in the US. He estimates that corporate profit growth might be affected by a 6% Fed target rate, but not by 5%. Janna Sampson of OakBrook Investments is equally optimistic on long-term Treasury yields.
It was surprising that long-bond yields didn’t rise when the Federal Reserve started raising short-term rates in 2004 to cool the economy. Now they’re just “playing catch up”. “The ten-year yield would have to rise to 6% before it put a serious dampener on stocks,” says Sampson.
Strong equity returns this year add fuel to the optimists’ arguments. The Dow Jones Industrial rose 3.6% in the first quarter, the S&P 500 rose 3.5% and the Nasdaq 6.1%. Not exactly emerging-market-size returns, but impressive given rising interest rates and record oil prices, two things that have historically dragged the US market down.
What about the rest of the year? Some analysts are expecting single-digit growth; others see a further 10%-12%. Opinions on Wall Street are mixed over whether this strong first quarter is “a sign of better things to come or the best the year has to offer”, says The Business.
(MoneyWeek)
Tuesday, June 12, 2007
Warren Buffett Moving
Which currency is Warren Buffett buying now?
We have no reason to expect the long-term decline of the dollar to end any time soon although, we are experiencing a period of short-term dollar consolidation. The US$ is just below $2 against the pound and is at a thirty-year low against the Canadian dollar. Fundamentally, the accepted reason to expect ongoing dollar weakness is their trade deficit.
Their current account deficit continues to stay at around 6% of GDP and as Jim O’Neill, Global Head of Economics at Goldman Sachs said in a recently published article, it is unlikely that turning bullish on the dollar would prove to be sensible until the current account deficit is closer to 3% of GDP.
The latest chink in the dollar’s armour was the Kuwaiti announcement that they have abandoned their peg to the sliding US dollar, instead they will peg to a basket of currencies for which the dollar is expected to make up about 75-80%. Other states such as Saudi Arabia, The United Arab Emirates, Bharain, Qatar and Oman are studying the move.
Whilst some oil producers may be considering a reduction in their exposure to the US dollar, led by Kuwait, Asian economies see things differently. The financial crisis that engulfed them in 1997 largely came about as a result of their currencies being overvalued. The memory of that disastrous period is now part of their DNA and will cause them to keep their currencies weak against the US dollar.
Their actions will, in turn, inflate their money supply further, fuel global liquidity and increase the risk of inflation. If and when that becomes an issue for them, they will have no alternative but to change their policy. In the end, currency manipulation inevitably creates distortions which sooner or later the market viciously corrects - it has always been thus.
Interest rate differentials continue to weigh heavily upon currency movements. The Bank of England and the ECB are tightening to bear down on the inflationary risk and are ignoring the threat to asset bubbles. Tightening will continue unless markets crash. Bernanke expresses similar concerns about inflation but so far has not acted, probably because of fears about the vulnerable US housing market.
There is a puzzle everybody wishes they could solve, Warren Buffet has said that he has recently made a significant bet on the currency markets but without disclosing which currency nor in which direction the bet is made. The popular guess is that he is long the Japanese yen. After all, it is only a matter of time before all of that Carry Trade reverses, the consequences of which will be a very sharply escalating yen and a weakening of high interest rate currencies, such as the New Zealand dollar.
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets
We have no reason to expect the long-term decline of the dollar to end any time soon although, we are experiencing a period of short-term dollar consolidation. The US$ is just below $2 against the pound and is at a thirty-year low against the Canadian dollar. Fundamentally, the accepted reason to expect ongoing dollar weakness is their trade deficit.
Their current account deficit continues to stay at around 6% of GDP and as Jim O’Neill, Global Head of Economics at Goldman Sachs said in a recently published article, it is unlikely that turning bullish on the dollar would prove to be sensible until the current account deficit is closer to 3% of GDP.
The latest chink in the dollar’s armour was the Kuwaiti announcement that they have abandoned their peg to the sliding US dollar, instead they will peg to a basket of currencies for which the dollar is expected to make up about 75-80%. Other states such as Saudi Arabia, The United Arab Emirates, Bharain, Qatar and Oman are studying the move.
Whilst some oil producers may be considering a reduction in their exposure to the US dollar, led by Kuwait, Asian economies see things differently. The financial crisis that engulfed them in 1997 largely came about as a result of their currencies being overvalued. The memory of that disastrous period is now part of their DNA and will cause them to keep their currencies weak against the US dollar.
Their actions will, in turn, inflate their money supply further, fuel global liquidity and increase the risk of inflation. If and when that becomes an issue for them, they will have no alternative but to change their policy. In the end, currency manipulation inevitably creates distortions which sooner or later the market viciously corrects - it has always been thus.
Interest rate differentials continue to weigh heavily upon currency movements. The Bank of England and the ECB are tightening to bear down on the inflationary risk and are ignoring the threat to asset bubbles. Tightening will continue unless markets crash. Bernanke expresses similar concerns about inflation but so far has not acted, probably because of fears about the vulnerable US housing market.
There is a puzzle everybody wishes they could solve, Warren Buffet has said that he has recently made a significant bet on the currency markets but without disclosing which currency nor in which direction the bet is made. The popular guess is that he is long the Japanese yen. After all, it is only a matter of time before all of that Carry Trade reverses, the consequences of which will be a very sharply escalating yen and a weakening of high interest rate currencies, such as the New Zealand dollar.
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets
payment protection
More properties were repossessed in 2006 than in any year since 2000. Why? A press release from British Insurance tells us: it is all down to “higher interest rates and first time buyers taking greater financial risks often borrowing in excess of five times their salary and opting for 25 year plus prepayment policies.” So what does the insurance company think we should do about these “disturbing” numbers? Buy fewer houses perhaps, or at least not take out such huge mortgages that we are almost guaranteed to get into trouble. Of course not. It wants us to carry on borrowing just as much money and taking just as much risk but to buy more expensive insurance from it at the sam e time. Never, says the firm’s spokesman Simon Burgess “has the need for Mortgage Payment Protection Insurance been so apparent.” Take it out and you’ll have a vital “safety net” if things go wrong.
Why banks love payment protection insurance?
Well, maybe, maybe not. Payment protection insurance (PPI) is a favourite of high street bank financial advisers and insurance salesmen across the country. Why? Simple. It is overpriced and hard to claim on, so they make an absolute fortune from selling it to you. Paymentcare estimated last year that of the £4 billion spent by borrowers on PPI every year a massive £2.5 billion is stripped out immediately in commission payments – they know they aren’t going to need it to pay claims.
The idea of PPI and MPPI - one of which you will be offered it every time you take out a mortgage, a credit card or a loan of any kind – is that if your circumstances change such that you are unable to repay your debt, the insurance will do it for you. The sales pitch will be that buying it is the sensible thing to do, that if you are made redundant, get very ill or have a serious accident you will need it.
Do you need PPI?
But even if you do need insurance you may find that PPI doesn’t fit the bill. It tends to come with a great many get-out clauses included - to the benefit of the insurer: you won’t be able to get a payout if you have a part-time not a full-time job, if you are self-employed, if you find you can’t work as a result of a health condition that was pre-existing or if you are working on a short-term contract. Many policies are also “any occupation” rather than “own occupation” meaning that they only insure you if you are incapable of working at any job rather than just at your own job.
You may also find that just because you think you have a serious illness doesn’t mean your insurers will. As Angus Maciver of Prudential pointed out in The Daily Telegraph last week “suffering from any of the big three – cancer, heart attack, stroke – will feel ‘critical’ to a consumer,” but now that diseases are diagnosed so much earlier than before and treated much more quickly a diagnosis won’t necessarily trigger a payout. Even if you think you might need some kind of income insurance this is not a good one to have. Only 4% of people who take out PPI ever claim on it and 25% of those claims end up being rejected. Look at it like that and it’s not much of a ‘safety net’, is it?
You may also not need insurance at all. Note that most employers (85%) offer more than the statutory sick pay: many pay your salary for six months or so after you become ill before reassessing things so you should be able to cover any loan payments from that. Furthermore, while if you are taking out an ordinary loan odds are you won’t have much in the way of savings (or I suppose you wouldn’t need the loan), if you are thinking of a big mortgage you really should have a good six months’ worth of income in a savings account to provide for emergencies anyway.
Why you should think carefully before insuring your loans?
PPI is also outrageously expensive, particularly if you get it from one of the high street banks – they can charge up to five times the level of premiums of the discount insurance groups (www.Britishinsurance.com, is, to be fair, one of these). The banks also often have a nasty habit of ‘frontloading’ the cost of PPI. They calculate the cost of the insurance but instead of demanding a monthly premium they simply add the full amount to the value of your loan and have you pay interest on the whole lot over the term of the loan. There’s no logical reason for this. It is just a way to get more money out of you.
The Mail on Sunday last year pointed to a case where someone had borrowed £16,000 from HSBC. The insurance was calculated at £5,150 (about a third of the value of the loan!) making a total of £21,150. The borrower paid off about £6,000 of the debt in instalments and then came up with the cash to pay off the rest early, only to find that she was to get no refund on the insurance at all. Over £5,000 had disappeared for nothing. Which? magazine has warned very strongly against PPI, pointing out that it can double the cost of a £5,000 loan. So it can only be good news then that the PPI industry has now been referred to the Competition Commission for a full investigation and that the Office of Fair Trading has announced an investigation into the sale of MPPI.
It will take a while for these investigations to be completed but in the meantime it is worth thinking very carefully about insuring your loans. Or perhaps about not borrowing so much money in the first place. If you must borrow at least remember this: the UK banks are dead set on what they call cross-selling, which means always trying to sell you more than one product. Open a current account and they’ll try to sell you a credit card, take out a mortgage and they’ll have a go at pushing critical illness insurance on you, pay a bill over the phone and they’ll be selling you contents insurance. The drive to sell PPI is just one example of this. But as long as you are aware of this passion to find ever new ways to separate you and your cash you should be OK.
You can, you see, figure out for yourself if you need it or not and then just say no.
Why banks love payment protection insurance?
Well, maybe, maybe not. Payment protection insurance (PPI) is a favourite of high street bank financial advisers and insurance salesmen across the country. Why? Simple. It is overpriced and hard to claim on, so they make an absolute fortune from selling it to you. Paymentcare estimated last year that of the £4 billion spent by borrowers on PPI every year a massive £2.5 billion is stripped out immediately in commission payments – they know they aren’t going to need it to pay claims.
The idea of PPI and MPPI - one of which you will be offered it every time you take out a mortgage, a credit card or a loan of any kind – is that if your circumstances change such that you are unable to repay your debt, the insurance will do it for you. The sales pitch will be that buying it is the sensible thing to do, that if you are made redundant, get very ill or have a serious accident you will need it.
Do you need PPI?
But even if you do need insurance you may find that PPI doesn’t fit the bill. It tends to come with a great many get-out clauses included - to the benefit of the insurer: you won’t be able to get a payout if you have a part-time not a full-time job, if you are self-employed, if you find you can’t work as a result of a health condition that was pre-existing or if you are working on a short-term contract. Many policies are also “any occupation” rather than “own occupation” meaning that they only insure you if you are incapable of working at any job rather than just at your own job.
You may also find that just because you think you have a serious illness doesn’t mean your insurers will. As Angus Maciver of Prudential pointed out in The Daily Telegraph last week “suffering from any of the big three – cancer, heart attack, stroke – will feel ‘critical’ to a consumer,” but now that diseases are diagnosed so much earlier than before and treated much more quickly a diagnosis won’t necessarily trigger a payout. Even if you think you might need some kind of income insurance this is not a good one to have. Only 4% of people who take out PPI ever claim on it and 25% of those claims end up being rejected. Look at it like that and it’s not much of a ‘safety net’, is it?
You may also not need insurance at all. Note that most employers (85%) offer more than the statutory sick pay: many pay your salary for six months or so after you become ill before reassessing things so you should be able to cover any loan payments from that. Furthermore, while if you are taking out an ordinary loan odds are you won’t have much in the way of savings (or I suppose you wouldn’t need the loan), if you are thinking of a big mortgage you really should have a good six months’ worth of income in a savings account to provide for emergencies anyway.
Why you should think carefully before insuring your loans?
PPI is also outrageously expensive, particularly if you get it from one of the high street banks – they can charge up to five times the level of premiums of the discount insurance groups (www.Britishinsurance.com, is, to be fair, one of these). The banks also often have a nasty habit of ‘frontloading’ the cost of PPI. They calculate the cost of the insurance but instead of demanding a monthly premium they simply add the full amount to the value of your loan and have you pay interest on the whole lot over the term of the loan. There’s no logical reason for this. It is just a way to get more money out of you.
The Mail on Sunday last year pointed to a case where someone had borrowed £16,000 from HSBC. The insurance was calculated at £5,150 (about a third of the value of the loan!) making a total of £21,150. The borrower paid off about £6,000 of the debt in instalments and then came up with the cash to pay off the rest early, only to find that she was to get no refund on the insurance at all. Over £5,000 had disappeared for nothing. Which? magazine has warned very strongly against PPI, pointing out that it can double the cost of a £5,000 loan. So it can only be good news then that the PPI industry has now been referred to the Competition Commission for a full investigation and that the Office of Fair Trading has announced an investigation into the sale of MPPI.
It will take a while for these investigations to be completed but in the meantime it is worth thinking very carefully about insuring your loans. Or perhaps about not borrowing so much money in the first place. If you must borrow at least remember this: the UK banks are dead set on what they call cross-selling, which means always trying to sell you more than one product. Open a current account and they’ll try to sell you a credit card, take out a mortgage and they’ll have a go at pushing critical illness insurance on you, pay a bill over the phone and they’ll be selling you contents insurance. The drive to sell PPI is just one example of this. But as long as you are aware of this passion to find ever new ways to separate you and your cash you should be OK.
You can, you see, figure out for yourself if you need it or not and then just say no.
Insurance bill
How to knock 30% off your car insurance bill
I’ve heard endless complaints recently from people shocked who’ve just got their car insurance renewal notices. Last year most of them spent some time on the internet making sure they got the best possible deal.
I’ve heard endless complaints recently from people shocked who’ve just got their car insurance renewal notices. Last year most of them spent some time on the internet making sure they got the best possible deal.
But now they are finding that the cost of their policy has gone up massively – sometimes by well over 50%. And they’re shocked.
They shouldn’t be. Outraged, yes. But not shocked. No adult who has ever dealt with a financial institution of any kind should ever be remotely surprised to be hit by this kind of thing. It is standard stuff for the industry.
The aim of most banks and insurers is basically this: to lure customers in with great deals and then to exploit their apathy. Take mortgages.
You get a great deal for two years with a discount to the Standard Variable Rate or a low fixed rate. Then when the two years are up you are automatically moved over to start paying your lenders SVR which is usually about 2% above the best deals on the market. The banks’ plan? To hope you don’t notice or that if you do you never get round to doing anything about it.
The same is true of credit cards. When you switch to a new one you get an interest free period for 6 months, maybe even a year. Then when the teaser period is over, wham: you get hit with the usual whopping credit card interest rates. Instead of paying 0% you’re suddenly paying 20%.
Again, the bank has its fingers crossed that rather than bother to do the admin to move again you’ll just pay up and they’ll make good any losses they might have made on you during the interest-only period.
Car insurance is no different. It’s a hugely competitive market and all the providers are desperate to get themselves on to the best buy tables in the newspapers and on the internet. To do this and so as to get new clients in they slash their prices – often down to levels that make them no money at all – for the first year you are with them. Then when renewal time comes around they just hike the price and hope for the best.
If you can’t summon up the energy to change insurers they’ll make a killing on your new premium and recoup the losses they made on you in year one. And if you can, at least they’ll stop losing money on your overly cheap policy.
The solution to this is obvious – eternal vigilance. Never just pay up when you get your renewal notice. Instead, when it arrives or even before (the insurers often send them out quite late in the day in order to give you as little time as possible to respond before the next direct debit goes out) go straight to the price comparison sites on the internet (www.confused.com and www.insuresupermarket.com are good)
Put in your details and find out what the best deals are. Then go back to your current insurer and ask them to meet it or beat it. If they can’t or won’t, just move providers: doing so will not only give the pleasure of thwarting your current issuer’s plan but should also cut your bill by an average of about 30%.
If even after this you are paying more than you would like for your insurance (and prices have been going up across the board thanks to general inflation and to the rise in uninsured drivers), you need to approach things from a different angle.
For starters, make sure you never agree to pay for your insurance in monthly instalments – this is just asking to be ripped off: on average it costs about 20% more to pay for insurance monthly than it does to pay for it all in one go. Given that most credit cards charge interest rates below 20% this means you’d actually be better off paying for your insurance on your credit card and then paying that off over the year! Who’d have thought there’d be something out there so expensive that it would make a credit card look like value?
The next thing to bear in mind is that insurance is all about risk. The higher risk the industry perceives you as being the higher your premium is going to be. So to cut your costs you need to be seen as low risk.
This means keeping your car off the street, fitting an alarm or an immobilizer, driving carefully (the more speeding tickets you get the more your insurance is going to cost) and picking a car with a reasonably small engine (to your insurer anything sporty just spells danger).
Being a woman or adding a woman to your policy as a named driver also helps. Whatever the male population might like to think the truth is that we have fewer accidents than men and are lower risk for it….
Making Money Online With A Website Without Selling
Creating a website to generate income online is one of the most common methods these days. You can earn money from a website by:
a) Marketing your own merchandises/products and services.
b) Joining affiliate programs to promoting other companies products or merchandises.
c) Participating in Google AdSense Publisher Program to start generating AdSense commission from your website.
Option (a) & (b) require a lot of time, effort and advanced Internet marketing knowledge before you start generate profit from your site. The third choice is much simple and faster to profit online with a website. To launch an AdSense campaign you must first sign up to become a publisher of Google AdSense program. You are going to submit your website for review when applying an AdSense account.
The first step of building a website is deciding the content of your website, your content can be related to any subjects as long as they comply with AdSense program policies. Google AdSense policies can be found at https://www.google.com/adsense/policies. Your interest, hobby, past experience and area of expertise may help you decide what topic or subject you are going to write. You can provide helpful content like advice, educational articles and so on to others on your website if you are an expert at something. If you like to travel you may write about the places and countries you have visited and share your traveling experience and tips in your website.
There are plenty of online companies providing web design service but it is expensive using the service of a web design company. Hiring a web designer to build a website via freelance marketplace like guru.com is much cheaper than using a company. However this is still not the most effective way to cut your cost to minimum. The cheapest way to create a website is by using a free web development tool or software. There are getting more and more free web development tools on the Internet and I recommend Bluevoda website builder. You can download Bluevoda website Builder at http://www.vodahost.com/partner/idevaffiliate.php?id=2662_1_3_9. Bluevoda allows user to create websites without technical knowledge. Users can create almost any kinds of website with little limitation. Create websites using Bluevoda is free. You only pay for the domain name and website hosting.
After you finish designing your website, it is time to publish it on Internet and promote your
website to earn AdSense revenue. There are a number of ways to promote your website to bring traffic (visitors) to your site.
Pay-per-click (PPC) Advertising
Pay-per-click (PPC) advertising companies let you advertise your website on search engines using keywords-bidding system. When a visitor enters a keyword you bid on in search engines to find something, the visitor will see your ad and if the visitor clicks your ad, you will be charged based on the amount you bid. The two most common PPC advertising programs are Google Adwords and Yahoo Search Marketing but they are quite expensive to advertise with due to tough competition in the keywords-bidding system. You might encounter the problem of your PPC cost higher than your AdSense revenue and lead to a loss. Luckily, there are low cost alternatives such as Bidvertiser.com, searchfeed.com, Bidclix.com and so on. These PPC companies allow you to drive instant targeted visitors to your site with less than $0.15 per visitor.
Provide free content
Creating articles and sending them to content websites like online article directories is a no cost way to gain further exposure for your website. You will promote your website and get traffic by writing about yourself and your website with a live link points to your website in the author’s bio of each article published on content websites.
RSS advertising
RSS advertising is another free method to increase your website’s traffic. There are people reading information and news online using RSS readers or news aggregators. This has created another opportunities for webmasters to boost the websites traffic. By creating your own RSS file and submitting it to search engines and RSS directories, the links to the content in your website will appear in front of those who read information using news aggregators and as a result driving free visitors to your website.
a) Marketing your own merchandises/products and services.
b) Joining affiliate programs to promoting other companies products or merchandises.
c) Participating in Google AdSense Publisher Program to start generating AdSense commission from your website.
Option (a) & (b) require a lot of time, effort and advanced Internet marketing knowledge before you start generate profit from your site. The third choice is much simple and faster to profit online with a website. To launch an AdSense campaign you must first sign up to become a publisher of Google AdSense program. You are going to submit your website for review when applying an AdSense account.
The first step of building a website is deciding the content of your website, your content can be related to any subjects as long as they comply with AdSense program policies. Google AdSense policies can be found at https://www.google.com/adsense/policies. Your interest, hobby, past experience and area of expertise may help you decide what topic or subject you are going to write. You can provide helpful content like advice, educational articles and so on to others on your website if you are an expert at something. If you like to travel you may write about the places and countries you have visited and share your traveling experience and tips in your website.
There are plenty of online companies providing web design service but it is expensive using the service of a web design company. Hiring a web designer to build a website via freelance marketplace like guru.com is much cheaper than using a company. However this is still not the most effective way to cut your cost to minimum. The cheapest way to create a website is by using a free web development tool or software. There are getting more and more free web development tools on the Internet and I recommend Bluevoda website builder. You can download Bluevoda website Builder at http://www.vodahost.com/partner/idevaffiliate.php?id=2662_1_3_9. Bluevoda allows user to create websites without technical knowledge. Users can create almost any kinds of website with little limitation. Create websites using Bluevoda is free. You only pay for the domain name and website hosting.
After you finish designing your website, it is time to publish it on Internet and promote your
website to earn AdSense revenue. There are a number of ways to promote your website to bring traffic (visitors) to your site.Pay-per-click (PPC) Advertising
Pay-per-click (PPC) advertising companies let you advertise your website on search engines using keywords-bidding system. When a visitor enters a keyword you bid on in search engines to find something, the visitor will see your ad and if the visitor clicks your ad, you will be charged based on the amount you bid. The two most common PPC advertising programs are Google Adwords and Yahoo Search Marketing but they are quite expensive to advertise with due to tough competition in the keywords-bidding system. You might encounter the problem of your PPC cost higher than your AdSense revenue and lead to a loss. Luckily, there are low cost alternatives such as Bidvertiser.com, searchfeed.com, Bidclix.com and so on. These PPC companies allow you to drive instant targeted visitors to your site with less than $0.15 per visitor.
Provide free content
Creating articles and sending them to content websites like online article directories is a no cost way to gain further exposure for your website. You will promote your website and get traffic by writing about yourself and your website with a live link points to your website in the author’s bio of each article published on content websites.
RSS advertising
RSS advertising is another free method to increase your website’s traffic. There are people reading information and news online using RSS readers or news aggregators. This has created another opportunities for webmasters to boost the websites traffic. By creating your own RSS file and submitting it to search engines and RSS directories, the links to the content in your website will appear in front of those who read information using news aggregators and as a result driving free visitors to your website.
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