economy

Nov
17
2010

Written by:
Shali Zhu

Small Investors and the Big Stock Market Rally

After the Federal Reserve’s announcement of a new quantitative easing program and the midterm elections, the S&P 500 Index rose 1.9% to 1221, a 23-point increase that brought the index to its highest close in over two years. And with interest rates at an all-time low and expected to remain in that position for the coming months, investors are likely to boost their returns by taking on additional risk and purchasing stocks, according to an article on the Wall Street Journal. That implies higher stock prices, and individual investors have been taking notice. In a recent report from TrimTabs Investment Research, private investors had poured $759 million into U.S. equity funds in the week leading up to the Fed’s announcement, the first time in six months that they have put more money into the U.S. market than they have taken out.

Nov
5
2010

Written by:
sachin

Reinventing America New credit options that aren't death traps

If the 2008 proved anything to anyone, it proved to America that credit, the main lubricant in the engine, can’t be taken for granted. Everything, from a [car loan](http://www.loansforcars.net.au) to business credit, has the ability to be tight. The mortgage documents scam now sweeping the country’s courts has hardly helped. That’s not exactly convenient or helpful for a nation which has funded generations on borrowing.

**The micro loan approach**

The micro loan is an unusual creature in the world of finance. It’s designed specifically to meet workable budgets, and it’s geared to help people fund businesses. Unlike the rectangular ulcer with the PIN numbers, the loan is also targeted to a function, like buying business assets. Micro loans are designed to build capital, not destroy it or provide a series of death traps for borrowers.

Oct
25
2010

Written by:
Shali Zhu

A Look at Past Currency Turmoil

Normally, college students don’t need to worry about currency exchange rates; we use money to buy everyday goods and services, not to trade in global markets. A currency war, however, would be a different issue. From hyperinflation to protectionism to global economic crisis, the possible consequences of a race to devalue would be felt close to home. With all the recent upheaval surrounding the yuan, the official currency of China, it is worth taking a look back at the currency turmoil of the past and gaining some perspective about how those concerns were dealt with on an international level.

Oct
20
2010

Written by:
Kanwar Anand

Is QE leading to an Asset Bubble in the Emerging Markets?

The global economy is steadily recovering. Unlike previous recessions, emerging market economies including China, Brazil, Russia, India and other major economies such as Australia, South Korea and Germany have led the way and strengthened the pace of the recovery. Some critics have expressed their opposition to an emerging asset bubble in these countries. The critics attribute this reasoning to the increased inflows of investment and the inflationary pressures on these countries. This article seeks to explain the impact of the financial crisis and how Quantitative Easing in the developed world may have impacted these countries.

Oct
10
2010

Written by:
Shali Zhu

Is There a Bond Bubble? Two Experts Weigh In

Ever since the recent economic downturn, investors, hoping to seek shelter from the excessive volatility in the stock market, have been flocking to seemingly safe fixed income investments. According to a recent article by Smart Money, the amount invested in bond funds in the first ten months of 2009 increased by $313 billion. Moreover, investors poured $88 billion into bonds in that October alone, an especially staggering amount when you consider the fact that this translates into investing nearly $2 million every minute. Overall, a Wall Street Journal article reports that retail investors have plowed more than $375 billion into bond funds last year and $230 billion more this year. Are these the signs of a growing bubble in the bond market?

Oct
7
2010

Written by:
Federico Bennett

Looking for change: preferably rapid, transcendence is a must

“This is a business that has been shrinking to stay alive... you cannot do that forever”
--British Airways CEO Willie Walsh, CNN Money interview, May 25th, 2010.

Given the general socioeconomic state of the last couple of years, the above phrase could have been quoted from a vast number of executives from various industries, but if we take a look at the events that have hit the airline industry in the past 10 years it fits perfectly. Terrorism, war, disease, volcanoes are some of them. It is safe to say that the airline industry is, and has been for quite some time, a very tough business. So much that in the past 3 years the global airline industry has yet to see profit. It is interesting that the words of British Airwaysʼ CEO clearly mark a distinction between past and future, the results of past decisions and policies, and what is needed from today onwards: change.

Sep
26
2010

Written by:
Shali Zhu

Deleveraging U.S. Borrowers

As the U.S. economy struggles to recover from a deep recession, many are looking for any hints that the economic situation is improving, closely watching everything from unemployment figures to productivity reports to consumer confidence. If overall debt levels can serve as an indicator of the American economic condition, however, they don’t appear to be very promising. A recent article by the Huffington Post reported that during the first two quarters of this year alone, total non-financial debt rose from an annual rate of 4.5 percent to an annual rate of 4.8 percent. At the same time, annual GDP growth is inching along at a rate of only 1.6 percent, insinuating that U.S. debt is ballooning in terms of its size as a percentage of GDP.

Sep
17
2010

Written by:
dperel

Where All the Jobs Went

With a jobless rate hovering around ten percent during what seems to be a economic recovery period, one might be tempted to ask why our economy produces profits but not jobs. As easy as it is to blame the offshoring of manufacturing for gutting the economy of job growth, it is much more productive to scrutinize another major job eliminator, corporate mergers and acquisitions. As firms consolidate, redundant jobs are shed, and more efficient corporations result. This is a natural feature of a healthy economy, yet too many mergers in a given industry hampers competition and innovation and has the incidental effect of vastly reducing employment. Since the advent of anti-trust law, regulators have been trying to find where to draw the line in terms of maximum allowable corporation size. With the dawning of the era of TBTF (too-big-to-fail) companies, we have crossed the line in the sand between an efficient economy and a parody of the free market.

Sep
15
2010

Written by:
Thomas Loeffler

America vs. China: Converging or Diverging Interests?

With China’s inhabitants representing nearly one-sixth of the world’s population, it’s no wonder their competitive edge has been in their labor workforce. For years American companies have been outsourcing production to countries like China where more affordable manufacturing costs have become profitable investments. Adding to their already competitive advantage, foreign exchange risk has rarely been a deciding factor with China because they have historically pegged the Yuan against the U.S. dollar. The announcement from the People’s Bank of China has now given American companies a reason to rethink about the costs associated with outsourcing to China; but has it given them a reason to take action? There are two lenses one can view this decision through. The optimist would believe the Chinese have loosened their policy to devalue the dollar against the Yuan in favor of both countries’ interests.

Sep
12
2010

Written by:
Kanwar Anand

A look at the key economic indicators

In order to understand the strength of our recovery, it’s important to examine the key economic indicators. Although no single indicator, considered alone, can paint the entire picture, monitoring the Business Investment, Consumer Spending, Residential Investment, Exports, Federal Government Spending & State/Local Government Spending numbers can help in better understanding the general economic climate.

Consumer spending is nearly 70 % of GDP. It is also important to understand that retail sales are just one subset of consumer spending. It includes expenses such as medical, energy & food. Discretionary & Non-Discretionary spending are the two components of consumer spending. Consumer spending rose 0.4% in August after staying flat in June, according to the Commerce Department.