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Chinas second interest rate cut

Chinas’ one year lending rate is set to decrease by 31 basis points and the deposit rate will follow with a decrease of 25 basis points. The need to cut interest rates again usually signifies a weak economy that is in need of a boost or heading into a recession. However, this is not necessarily true in the case of China. China is cutting rates to maintain a higher growth rate as opposed to coming from a brink. The downturn in Europe has caused a decrease in Chinese exports and many economists and investors believe that the property market has been overbuilt.

Many U.S. investors in China feel the Chinese markets slowing. The investor level of expectation has begun to dwindle and the impression of China being immune to the global crisis has changed. The rate cut is designed to maintain an economic growth of at least 7.5 to 8 percent. A great year of growth for the U.S. or any other developed nation is 2-4 percent. Chinas’ slowdown shouldn’t be seen as a sign of coming recession but it is a sign that China is emerging from a developing nation to a developed nation.

Even when there is income disparity and other indicators of millions still living in poverty, Chinas’ growth is evident. The Chinese central bank would like to maintain the 7.5 to 8 percent growth and that is completely understandable but as the economy is becoming more globally integrated it has evolved. The Chinese economic evolution will continue until it is in line with the same pace as Europe and the U.S.

My thoughts on Primerica

What some call a sham and a pyramid scheme seems to be a little deeper than that. It doesn't seem that any business can satisfy all of its customers nor can any business seemingly have success without people critiqing a company they have limited knowledge of. The very premise of Primerica is to help struggling individuals correct their financial planning mishaps. That's it and nothing more than that.

However, its amazing to me how many people can take that and make it into so much more than what it is. The complaints usually are that the people that work there don't have any background in finance, they ask too many questions regarding your personal finances, or that's not a real business. But these same people give the same personal finance answer to other companies who solicit over the phone and they've never asked about their background in finance. Credit card companies, online banks, and the like all require the same information as Primerica.

In regards to the pyramid scheme I ask: what business isn't? There is a hierarchy of management and payscale within every organization. The top management makes their money off of the lowest level employees daily. Primerica has helped countless people restructure their finances and get back on track in one way or another. If you need help and they are able and willing to help, don't deny yourself the opportunity.

I am not a member of Primerica because that form of finance isn't my career path but I have seen them in action and it can work if you allow it. Every business isn't out to get you but please do your due diligence before engaging anyone, whether good or bad.

The Economic Growth of New Zealand

The GDP of New Zealand grew at a rate of 1.1% in the first quarter of 2012. This is out of proportion with the rest of the developed countries who were generally flat or beginning to return to recession like levels.  The favorable weather helped with farm production output which was led by 2.3% increases in output. Fonterra Cooperative Group Ltd. announced their output was 10% higher than the year before. Manufacturing increased by 1.8%, household spending and engineering also showed significant gains.

Numbers of this nature would indicate that a global recession has ended but as soon as these numbers were released the opposite followed. The consumer confidence index dropped to its lowest level in a year. The New Zealand dollar rallies in response to the economic data but its strength will be monitored by global investors the next few days to see if the international community agrees with new negative outlook of the consumer confidence index.

Ghana's weakening currency in relation to the Euro

Establishment of a new currency is to strengthen the prospects for an economy. Ghana’s devaluing is autonomous and independent because it doesn’t rely on solvency from any other country source. The Euro carries the same premise which is to strengthen the economies it circulates in and monetizes.

The Euro has a communal effect that carries a global ripple due to its 17 country membership. Each country has different industry strengths and trading partner equivalents and each trading partner must continually evaluate the situation. Remaining cautious of the outcome due to any sudden movement s in currency valuation could easily cause developing agreements to become an economic loss for any investing country.

The economic principle of a weak currency means increased buying power reigns true however, not in every situation.  Increased buying power doesn’t mean increase in business investment at every opportunity. Countries with weak currencies must have something of incredible value to offer investors, and in todays’ age the investment of choice is commodities.  Whether its oil, gold, coffee, or natural gas it must be a product that will prove useful or in scarcity in another economy.

While this makes sense it can be hard to accomplish and also is often not an economic goal of the country receiving investment. Being able to attract cash strapped investors into a country where they previously haven’t invested is a gamble and considered extremely risky. While the country receiving investment is glad to have the interest and investment it would many times prefer an investment that will attract jobs to citizens of that country instead of foreign investors bringing their own workers.

The current value of the Ghanaian cedi is definitely an issue, however, it pales in comparison to the Euro. The Ghanaian cedi still has a future while the future of the Euro remains a question. For all investors who wonder about investments in Ghana please visit this website: http://www.gipcghana.com/

Guyana Strength

Countries with similar names are often confused with one each other. Guyana and Ghana are two countries with those characteristics. Guyana is a South American nation with a population of 752,000 and an economic policy that has shown growth in ways that rival other developing countries. According to the Guyana ministry of finance debt has decreased from 658% of GDP in 1991 to 47% of GDP in 2011. Stable exchange rates, lower interest rates, and inflation that has remained at levels to promote and encourage growth. FDI have reached its highest levels at $1.3 billion in 5 years. With recent stagnation in Brazil it will be interesting to see which South American country will grow to the level of growth that Brazil encountered in 2010. We will continue to monitor the economy of Guyana and its international trading.

Life insurance in developing countries

The cost of life insurance in developed countries has increased considerably in recent years. At what point will developing countries see a need or desire for this type of insurance?

Austerity simplified

Austerity is a simple (in explanation) reduction of government spending and increase of taxes. Its always easier said than done as with anything dealing with the restoration of an economy. The recent French elections are a true game changer within the eurozone and the actions of Pres. Hollande will definitely be something to watch regarding this matter.

Why Africa is more open to China than the U.S.

Understanding the difference between economic development and economic growth is essential to any economist. But understanding which countries have succeeded in recent years with that notion is even more essential. With the recent global economic downturn the U.S has been the central focus and often considered the beginning of the house of cards that caused the entire disaster. However, the downturn has stabilized from its massive drop off and economic expansion has begun in many parts of the world. The interesting economies to study are those that were relatively unaffected by the global recession and majority of those are developing countries in Sub Saharan Africa.

Sub Saharan Africa has emerged in 3 waves of independence to the present day. They include political independence, social independence, and now economic independence. Political independence began with the end of European colonization and the beginning of autonomous rule and democratic elections. While the process of full democratic elections are still evolving across the entire continent, we are aware that a fully democratic region is attainable in the near future. Social independence coincided with the political independence and will always evolve within every country globally. Being socially independent means that a citizen is not ashamed of who they are and will not allow past stereotypes to determine their future outcome.

Economic independence is a self- sustaining economy that relies on its tax base rather than foreign aid to fund its GDP. This independence has always been desired but it hasn’t come into light as a possibility until recent years. One of the main advocates for this independence is Dr. Dambisa Moyo who is the author of a book entitled “Dead Aid: Why aid is not working and how there is a better way for Africa”. In the book she exposes the future of Africa without aid and why it’s necessary many aid programs are phased out. As well as arguing for African countries to participate in the capital markets to raise government funds instead of utilizing the aid model.

Chinas’ interest in Africa isn’t a new interest because trade between the regions dates back millennia. One of the worlds’ most famous trade routes, the silk road, connected the regions over 2,000 years ago and the trade continues today in a different capacity. In recent years China has emerged as the worlds’ greatest economic success story and many African countries have taken notice due to the fact that Chinese development has lifted hundreds of millions of people out of destitute poverty and created sustainable jobs and investments for its citizens.

What has separated the U.S. from China as this economic example? The answer is development versus growth. The U.S. has been a developed country in economic terms since the industrial revolution 150 years ago. So the country as a whole hasn’t experience development in this current technological dispensation which has limited the U.S. influence in developing world. Many of these developing countries have primarily interacted with the U.S. on a basis of international aid and not necessarily investment.

China has launched a massive campaign to assist many African countries through investments in infrastructure, trade, and development. The Chinese example has promoted a way of developing to reduce poverty and increase economic lifestyles. The U.S. example has not been to reduce poverty but rather to preserve wealth. Wealth preservation can’t be attainable if it isn’t a present factor in the lives of citizens in a developing country.

Distance education in Africa: How people outside the continent can benefit

Have you ever wondered how to obtain credibility internationally before you’ve ever left your home country or just want to spice up your resume? Try distance education. In some countries it can be costly while in others in can be relatively inexpensive. Distance education might be a somewhat new to the masses of Americans with the rise of the internet but with other countries it is over a century old.

One of the worlds “mega” universities is the University of South Africa which has over 300,000 students. These students come from over 130 countries by the means of distance education. Some of you might be surprised that you’ve never heard of an institution of that size. Don’t be surprised at all because there are many places in the world that just might not be popular to the people around you or your news sources.

The University of South Africa (or UNISA for short) has several degree options to choose from and the levels of education range from undergraduate to doctoral degrees. Many in the western hemisphere are probably asking about accreditation, which is a legitimate question.  UNISA accreditation is with the South African department of education and the Council of Higher Education. UNISA is also registered with the South African Qualifications Authority. So if there is any doubt about the validity of UNISA please check with the Accreditation agencies within your respective country.

UNISA has produced many high profile alumni such as Nelson Mandela, Desmond Tutu, and Cyril Ramaphosa. So you will be in a great company upon joining UNISA.

For more information please visit the University of South Africa at: http://www.unisa.ac.za/default.html  

Meet Facebooks' competition

 www.WAYN.com

Facebooks competitor is not new to social networking but it hasnt had the chance to take off as it now has. Take a look and see what you think. There are similarities to Facebook but WAYN can maintain a close corporate free organizational structure.

Facebook IPO: Not impressive

The Facebook IPO must have been the most talked about event of the month and yet it pretty much fell flat. I was always against Facebook going public but I did expect more movement on the day of the IPO due to the sheer "excitement" of the general public. I also expected more movement based on the fact that Facebook was originally reported to be oversubscribed. With this being said I was right and wrong in the same moment.

Now that Facebook is public and will be measured under the auspices of Wall Street and away from its original  effort just to be an online social gathering. Many things will change about the networking site from the inside and the outside. The internal culture will have to fight to maintain its laid back and easy going atmosphere. While the external culture will find itself under more pressure than ever from other start-up firms looking to grasp users looking for a network with a less corporate feel.

Facebook: A $16 Billion IPO

Like many companies in Silicon Valley, Facebook has very little or no debt but yet they have a hoard of cash from operations. So, maybe Facebook is the exception because they don't necessarily have a great hoard of cash until the IPO. With $16 Billion in cash who should be concerned?

The concern should be with 1) The competition: Facebook can possibly flop or not just not live up to the expectations. 2) The competition: Facebook now has the ability to make a significant offer to acquire their company for cash. With that being said it all now remains in the hands of Facebook management. If Zuckerburg can assemble the right team to analyze the potential investment targets for his firm then and only then can Facebook have a chance for survival.

Google made their presence known through a series of acquisitions as well. Youtube, Earth Viewer (now Google Earth), and Grand Central (now known as Google Voice) have all been very positive acquistions. Technology has moved very rapidly since then and the question remains: Can Facebook purchase several homeruns just as Google has?

Its no secret that I have my doubts about the continued success of Facebook with this IPO. But Facebook could prove a lot of people wrong.

Diversify your portfolio: Invest in African Stocks

The safest investments have always been considered blue chip stocks and U.S. government securities. But in the past 5 years there has been a change in thinking due to the uncertainty of the markets and many investors have begun to look for alternative investments. The search for alternative investments led many investors to take notice of which nations maintained certain levels of stability throughout the global economic downturn. Asia and Latin America have received some investment due to their developed and modernized stock exchanges.

However, the same investors also took notice of the economic stability or rather independence of African nations. The question was raised: how do I invest in those markets? Not all investors are able to set up a business and partake from the physical transactions of business in those nations. With that being said here is one way to take part: African ADRs.

ADR stands for American Depository Receipt. It is a certificate issued by an American bank that represents a proportion of shares in a foreign company and is traded on a U.S. stock exchange. By being traded on a U.S. exchange they can be purchased through any major stock brokerage firm such as Scottrade, etrade, Fidelity, or TDameritrade.  So, diversifying your portfolio and taking advantage of the growing economies in developing countries is much easier than many people thought.

Here’s a list of African ADRs:

http://topforeignstocks.com/foreign-adrs-list/the-full-list-of-south-african-adrs/

Here’s a full list of global ADRs:

http://topforeignstocks.com/foreign-adrs-list/

Why the Facebook IPO will hurt the economy

This post will take a turn from previous posts in general on this blog but it is absolutely relevant to business, finance, and economics. While everyone else is chiming in on their opinions of the worlds’ greatest addition in the new century so will I. The Facebook IPO is a great mistake and opportunity wrapped into one.

Facebook is the beginning of a new age post-recession internet bubble. I have a background in finance and I’m still trying to understand the valuation of Facebook. I’ve seen a few numbers on the company but I won’t be certain of the numbers until the company officially goes public. A valuation of $95 billion on revenues of less than $4 billion is very hard to believe. As with any highly anticipated IPO the first few days would cause the stock price to skyrocket and any untrained investor would try to buy the stock because Facebook is popular. Facebook is a “celebrity stock” and doesn’t have the fundamentals of Google. Google was a popular stock but not a celebrity primarily because Google was in a new but proven sector. Google also had diversified streams of income which allowed the company to be more than just a search engine.

Facebooks’ recent acquisition of Instagram raises even more concerns because of the valuation. Instagram had no revenue but a purchase price of $1 billion is strikingly similar to the Facebook craze. My honest opinion is that this is the beginning of another bubble in the market that the world can’t afford at this time or anytime in the future. However, now that Facebook would be subject to the likes and domain of Wall Street we will see if they can survive beyond the “like” of the general public.

With Facebook being a public company with few hard assets and now at the mercy of financial engineers, quants, and analysts (yes, I’m included) we will see their future in a different light. Possibly the market would realize a valuation that high doesn’t coincide with their numbers. This is great for other tech firms who are looking for their big break in the marketplace. Facebook has had a great run and can still be saved if the income streams are diversified and backed by additional hard assets. If not, it’s possible to see Facebook in the same shadows as MySpace. 

JPMorgans $2 Billion loss: the aftermath

This loss still has me a little puzzled because the full details haven't been disclosed to the public yet. But the fact that people are already resigning says that it's pretty bad. The real issue that has caught my attention is the discussion that has followed concerning financial regulation. Is regulation really the answer?

President Obama recently stated that JPMorgan is one of the most well managed banks in the U.S. If thats the case then what happened? The trade itself was based on a hedge of the current markets. So my speculation is that it was a hedge against the Eurozone or the energy markets. Regulation has nothing to do with the success or failure of any trade in this nature.

Many firms hedge their investments in multiple forms and JPMorgan isn't any different. The $2 Billion trading loss doesn't match with the overall $17.5 Billion loss that includes the investors loss in the stock of JPMorgan. In other words a segment of behavioral finance comes into play with this situation.

The $2 Billion loss will not cause JPMorgan to fold like BearStearns nor will it cause them to have to be acquired by another firm. The general public has become so fearful in recent years with losses in the financial industry that any abnormality can transpire into panic. JPMorgan is a well managed and compliant company that will be around for years to come this is not the end. So, no bailout is needed nor has one been requested.

Death of the Eurozone

The introduction of the Eurozone in 1999 brought much speculation that this was the beginning of a great economic consensus unseen since World War II. The beginnings seemed promising with more countries continuing to join the monetary union with hopes of connecting themselves with the prosperity they have witnessed their European counterparts enjoy. With so many countries relying on the goods and services of each other, the Euro made sense.

However, as with a deck of cards we’ve globally witnessed what can happen when one country in a union has an independent thinking central bank. The independent mindset is expected due to the fact that each country has separate needs and responsibilities. Somewhere in that process the thought for what could possibly become of that entire monetary union went unnoticed.

Now with Portugal, Ireland, Spain, Greece, and possibly Italy on the brinks will this union cease to exist? If those were the only factors at hand then my guess would have to be no. But with the recent elections in France it’s hard to say where the new austerity measures will go from here. Sarkozy and Merkel forged a very good working relationship although; some would argue that it wasn’t perfect. It was however, a relationship that sought after results to maintain the status of the Euro and most important of all to work towards the progress of the European economies.