Tuesday, April 30, 2013

Net Worth Update (April 2013)

Assets
Mar-13
Apr-13
Change
% change
Savings Account 1
$3,539.13
$3,029.26
($509.87)
-14.41
Savings Account 2
$1,525.66
$1,525.66
$0.00
0.00
Savings Account 3
$17,055.99
$18,567.34
$1,511.35
8.86
Investment Linked Fund
$8,550.42
$8,710.40
$159.98
1.87
Schroders Commodity Fund
$9,992.27
$9,510.86
($481.41)
-4.82
Stock Holdings
$10,140.00
$10,050.00
($90.00)
-0.89
Phillip Money Market Fund
$15,013.63
$15,020.14
$6.51
0.04
Physical cash
$1,000.00
$1,000.00
$0.00
0.00
Market Value Of BTO Flat (to be built in 2016/2017)
$750,000.00
$750,000.00
$0.00

Total Assets
$816,817.10
$817,413.66
$596.56
0.07





Liabilities




Home Loan
$617,500
$617,500
$0.00
0.00





Net Worth (including flat to be built in 2016/2017)
$199,317.10
$199,913.66
$596.56
0.30
Investible Net Worth
$66,817.10
$67,413.66
$596.56
0.89


Highlights

  • Drop in commodity fund offset the increase in cash, resulting in a slight overall increase of $595.56 in investible net worth
  • As I will be starting work full time this month, increase in cash savings from May 2013 onward should be at least $2,000 every month
  • I have dropped all my tuition classes as I no longer have the time to give tuition during weekdays due to my full time job. I might consider taking up 1 or 2 weekend tuition assignments after I have settled down in my new job.
  • Target of $70,000 by Dec 2013 will be achieved by June 2013.


Eurozone Unemployment Hits New High

Unsurprisingly, given that monetary policy within the Eurozone is being conducted by unelected and unaccountable anti inflation zealots from the ECB, unemployment levels within the Eurozone hit a record high of 12.1% in March.

The highest increases were registered in Greece (2 1.5% to 27.2% between January 2012 and January 2013), Cyprus (10.7% to 14. 2 %), Spain (24.1% to 26.7%) and Portugal (15.1% to 17.5%) .

Eurostat estimates that there are over 19 million people unemployed within the Eurozone, 3.6 million of them being under 25.

This level of unemployment is not sustainable and is a threat to democracy.

Cyprus Parliament Votes

Today the Cyprus parliament will be finally given an opportunity to vote on the bailout plan imposed on it by the IMF/EU.

Pundits expect that the bill will pass.

However, if it doesn't, the EU/IMF will simply delay the bailout until the parliament votes in favour of it.

"Democracy" in action, the EU way!

Monday, April 29, 2013

Eurozone Economic Sentiment Decreases

Unsurprisingly confidence in the Eurozone fell for a second straight month in April.

The Economic Sentiment Indicator (ESI) decreased by 1.5 points in the euro area (to 88.6) according to the European Commission's latest Business and Consumer Survey results.
"In the euro area, the ESI's decline was broad - based across all business sectors, with services witnessing the sharpest drop, while consumer confidence went up. Among the five largest euro area economies,  economic sentiment worsened significantly in Germany (- 2.3) , France (- 2.0) and Italy (- 1.9), while remaining broadly stable in the Netherlands (+0.2 ) and improving in Spain (+ 0. 9). 

The decrease in industry confidence ( - 1. 5 ) resulted from a much more negative assessment of the current level of overall order books and lower production expectations. Managers' assessment of stocks of finished products remained virtually unchanged. The past production and, to a lesser extent, the current level of export order books, which are not included in the confidence indicator, were also assessed more negatively . 

Services confidence dropped abruptly by 4.1 percentage points, driven by significantly worsened assessments of the business situation and demand over the past three months. Demand expectations deteriorated to a lesser extent. 

Consumer confidence increased by 1.2 points, based on a marked easing of unemployment expectations and slightly better expectations concerning households' future financial situation, the future general economic situation and savings over the next 12 months. Retail trade confidence decreased by one point, driven by worsened business expectations and views on the adequacy of current stocks. The assessment of the present business situation worsened only slightly. Also construction confidence decreased (- 1.3), based on weaker employment expectations and assessment s of order books. 

Financial services confidence (not included in the ESI) improved markedly (+ 5.0), fuelled by considerably better assessments of the business situation and demand over the past three months. Demand expectations improved slightly. Employment plans were revised downwards across business sectors, contrasting with the easing of consumers' unemployment expectations. Selling price expectations decreased in industry, retail trade and construction, and increased marginally in services."
According to the Telegraph, "experts" had forecast a decline to 89.3.

The pressure is now on the ECB to cut rates this Thursday. However, given that the ECB is dogmatically sticking to its anti inflation monetary policy, at the cost of millions of jobs in the Eurozone, I do not expect to see any cut in rates.

Saturday, April 27, 2013

Cyprus To Maintain Capital Controls

In a remarkably unsurprising development, Cyprus has decided to maintain capital controls during the summer.

The Eurozone finance ministers and ECB will of course be delighted, as this will enable them to continue to crow that there there has been no bank run in Cyprus.

My sympathies to the people of Cyprus, it will be a long hot summer!

Friday, April 26, 2013

The Pain In Spain

Unsurprisingly Spain has had to delay reaching it budget deficit reduction targets by two years, to 2016.

Additionally, it foresees its unemployment rate as being 27.1% in 2013 and 26.7% in 2014.

At what stage will the Europhiles wake up and realise that levels of unemployment such as these are not sustainable in a Western democracy without there being serious blowback?

The above figures are of course subject to revision!

Thursday, April 25, 2013

UK Avoids Triple Dipper

In a small ray of sunshine, the Office for National Statistics (ONS) reports that Britain's economy grew by 0.3% in Q1 of this year; thus the UK has avoided entering its third technical recession by the skin of its teeth.

The 0.3% rate of growth even managed to be larger than the 0.1% predicted by economists.

However, before people break open the Bollinger, it should be remembered that 0.3% is not exactly "stellar" and that China is feeling very sorry for itself having "only" managed to grow by 7.7%!

However, as I always say, never rely on ONS statistics they are out of date and will be revised upwards/downwards in due course.

Tuesday, April 23, 2013

Banks Delay PPI Claims

In March I noted that the financial ombudsman service (FOS) was taking on 2,000 new PPI complaint cases a day, with numbers rising at "unprecedented" rates.

I went on to note that it was clear that the banks were trying to delay payouts:
"Needless to say, as the number of referrals to the FOS rises, so does the length of time it takes for the ombudsman to make a determination. It seems that the delays are also increasing because some companies are causing unnecessary delays.

Natalie Ceeney, chief financial ombudsman, is quoted by the BBC:
"As the complaint levels show no sign of slowing, consumers are increasingly having to wait longer to get their complaints sorted - with many businesses still continuing to cause unnecessary delays.
Where businesses have shown a real commitment to better customer service and diligent complaints handling - including actively engaging with the ombudsman - cases are resolved more quickly and easily, to the benefit of everyone."
None of this is surprising, those who were sold PPI will see this as an opportunity to try to obtain a refund (irrespective of whether they were mis-sold PPI or not) and the banks will do everything they can to try to reduce the costs of the claims.

That being said, had the banks not incentivised their staff to sell policies that were in many cases clearly inappropriate to people who didn't need them/couldn't claim on them when they needed to, then this entire mess could have been avoided.

The greed of the banks is now being repaid by the perspective that the banks' customers have that there is "free" money to be made.
As the old saying goes, "what goes around, comes around".
A claims management company, Emcas, has now also said that banks are rejecting around a third of claims from customers. Ironically, as per the Telegraph, the Financial Ombudsman Service (FOS), which deals with complaints rejected by the banks, is upholding the majority of PPI claims.

Why such an anomaly?

A cynic would argue that the banks are trying to slow things down in the hope that those claiming simply give up.

Needless to say the British Bankers' Association denies that banks were deliberately turning down legitimate claims in the hope that they would avoid having to pay up.

Make of that what you will.

Irrespective of what obstacles (real and imaginary) are put in your way by the banks, do not give up; if rejected by the bank make a claim direct to the FOS, do not use a claims management company (which will charge you a percentage of any compensation that you receive).

Monday, April 22, 2013

Fitch Downgrades UK

Last week Fitch downgraded the UK to AA+ owing to a weakened economic outlook.

This follows on from Moody's downgrade in February. The BBC quote Fitch as saying that the downgrade:
"Primarily reflects a weaker economic and fiscal outlook".
However, it has placed the UK's outlook as being "stable"; ie it does not expect to downgrade the UK again in the foreseeable future.

As to whether austerity is the corset means of bringing about growth, only time will tell.

Saturday, April 20, 2013

Better To Be An Academically Uninclined Female In Singapore?

Jack and Jane were the best of friends in secondary school. Jack had always been the smarter guy who scored all As for his exams while Jane would be struggling to get just a B grade. Jack scored 8 points for O'Levels while Jane scored 20. As expected, Jack got into a top junior college while Jane enrolled at a polytechnic. Few years later, Jack achieved distinctions for his A'level exams and got accepted into a local university while Jane managed to earn her diploma and enrolled to a part-time private university programme. 

Fast forward a few years, Jack finally graduated from the local university and began looking for a job. He secured a job interview and when he arrived at the office in a tailored suit , he saw Jane. Jane was one of the interviewers. What happened?

It is proven time and time again that academic performance does not always guarantee career success. All things being equal, is the light at the end of the tunnel brighter for an academically uninclined female in Singapore? Females in Singapore have a 2 year advantage over guys who served NS. In addition to the shorter duration of a private university course compared to a local university's, private universities also offer part time degree courses, allowing students to take up a full time job in the day and gain valuable working experience while beefing up his/her resume. 

The timelines below show a clearer view of the opportunity costs of serving National Service and taking up a full time university programme :

JC To Full-Time Local University Route
Female
Male - Jack
Age 12
PSLE
PSLE
Age 16
O'Level
O'Level
Age 18
A'Level
A'Level
Age 19
Start of University Year 1 (June)
Army
Age 20
Start of University Year 2
Army
Age 21
Start of University Year 3
Start of University Year 1 (June)
Age 22
Start of University Year 4
Start of University Year 2
Age 23
End of University Year 4 (June)
Start of University Year 3
Age 24
First year of work @ $33600/year
Start of University Year 4
Age 25
2nd year of work @ $36000/year
End of University Year 4 (June)
Total Salary earned by age 25
$69,600.00
$0.00
Amt saved @ 20% savings rate
$13,920.00
$0.00



Diploma to Part-Time Private University Route
Female - Jane
Male
Age 12
PSLE
PSLE
Age 16
O'Level
O'Level
Age 18
Polytechnic 2nd year
Polytechnic 2nd year
Age 19
Earned diploma
Earned diploma
Age 20
Part Time Degree + Full Time Work @ $26400/year
Army
Age 21
Part Time Degree + Full Time Work @ $27720/year
Army
Age 22
Part Time Degree + Full Time Work @ $29106/year
Part Time Degree + Full Time Work @ $26400/year
Age 23
Full time work @ $31200/year
Part Time Degree + Full Time Work @ $27720/year
Age 24
Full time work @ $32760/year
Part Time Degree + Full Time Work @ $29106/year
Age 25
Full Time work @ $34398/year
Full time work @ $31200/year
Total Salary earned by age 25
$181,584.00
$31,200.00
Amt saved @ 20% savings rate
$36,317.00
$6,240.00

Assumptions have to be made as there are too many variations. As such, I came up with the following non-exhaustive list of assumptions for the tables above :
  • No part-time job and no money saved in the 2 years of army, 3 years of diploma and 4 years of  local university
  • No year-end bonus
  • Annual salary increment of 5%
  • Salary of full time job after diploma = $2200/month or $26400/year
  • Salary of full time job after part time private university = $2600/month or $31200/year
  • Salary of full time job after full time local university = $2800/month or $33600/year
  • Full time job is in private sector : Male with NS same pay as female of the same rank in the company 
  • Private University : 3 year course
  • Local University : 4 year course
  • Total tuition fees for Private & Local University assumed to be the same

In addition to the salary earned and amount saved, Jane has already accumulated 6 years of full-time working experience at the time when Jack graduated from a local university. When will Jack be able catch up?

Monday, April 15, 2013

China's 7.7% Growth Not Too Shabby!

China's GDP grew by 7.7% in Q1 2013, down from 7.9% in Q4 2012.

Were this any other country such a rate of growth would be considered to be excellent.

However, analysts have programmed themselves to expect ever improved levels of growth in China; thus many have been disappointed by the figures.

The reality is that exceptional levels of growth, such as this, cannot continue indefinitely. Given the size of China and its economy, growth in excess of 7% isn't too shabby at all.

The doom sayers need to calm down and take a more measured view.

Friday, April 12, 2013

Wheels Fall Off Cyprus Bailout Agreement

It seems that the wheels are falling off the Cyprus bailout deal.

The cost of the rescue has risen from Euro17.5BN to Euro23BN, but Germany remains adamant that the size of the bailout will not increase. 

Meanwhile the BBC reports that Cyprus president Nicos Anastasiades has said that he will appeal for extra assistance from the European Union, even though he claims he does not want more money.

What does he want?

Help from EU to reduce the burden of the conditions to make the bailout possible.

In other words Cyprus is trying to renegotiate the terms of the bailout, ie the wheels have fallen off the agreement!

Thursday, April 11, 2013

The Voice of The People of The Eurozone


This one pensioner from Ireland sums up the feelings of the people of the Eurozone towards thier political and financial "elite".

Wednesday, April 10, 2013

Crosby Damage Limitation

Sir James Crosby et al are now on a damage limitation exercise, albeit one that is portrayed as being contrition and repentance.

Sir James has asked to have his knighthood removed, and has offered to give up 30% of his £580K per annum pension.

The Telegraph quotes him saying that he was "deeply sorry for what happened at HBOS and the ensuing consequences for former colleagues, shareholders, taxpayers and society in general”.

Andry Hornby, who succeeded Crosby in HBOS in 2006, is under pressure to do something similar.

All very well, maybe but will it be enough to avoid further investigations/retribution?


Wednesday, April 3, 2013

Farewell The FSA - You Won't Be Missed!

At long last the hapless FSA has been disbanded, and replaced by a three pronged system of governance (dare I say "Tripartite"?). As per the FT, the three prongs are:

1 The Prudential Regulation Authority, an arm of the Bank of England headed by Andrew Bailey, will supervise 1,700 banks, insurers and large investment firms.

2 The Financial Conduct Authority, an independent agency led by Martin Wheatley, will supervise behaviour at the same firms and have sole responsibility for 25,000 more, most of them brokers, investment advisers and money managers. The FCA’s multifaceted task includes protecting investors, policing the markets and promoting competition.

3 Mr Wheatley and Mr Bailey will also sit on the third new UK regulator, the Financial Policy Committee, a consensual body charged with spotting and disarming broad threats to financial stability.

Let's see how this all works then!

Tuesday, April 2, 2013

The Eurozone Isn't Working - Unemployment Now 19M


The level of unemployment in the Eurozone in February hit a new record at 19M (12%). The highest rates being in Greece and Spain, both at 26% and Portugal at 17%.

The figures for youth unemployment are truly shocking; Greece 58 .4% in December 2012, Spain 55.7 %, Portugal 38.2% and Italy 37.8 %.

It's time that people faced facts, the Eurozone simply isn't working!

Monday, April 1, 2013

Who Ate All The Pies? - Cyprus Cashflows Pre "Bailout"




RT reports the following:
"A company owned by in-laws of Cypriot President Nicos Anastasiades wired €21 million from Laiki Bank to London days before the Eurogroup’s crisis-triggering levy proposal, claims a Cypriot newspaper. The president demands an investigation.

During two days, 12 and 13 of March, the company A.Loutsios & Sons Ltd., co-owned by Loutsios John, the husband of Nikos Anastasiadis’ daughter, Elsa, took five promissory notes worth €21 million from Laiki Bank. The money was then transferred to London, reported Cypriot newspaper Haravgi, affiliated to the communist-rooted AKEL party.

The withdrawal was fulfilled just three days before the Eurogroup meeting when euro finance ministers agreed a 10 billion euro ($13 billion) bailout for Cyprus.

The company, however, has firmly denied the reports.

The newspaper recalls that Cyprus Finance Minister, Michalis Sarris, publicly admitted that the government was aware in advance about the Eurogroup’s intentions to impose a “haircut” on bank deposits of more than 100,000 euros.

Spokesman of AKEL, Stavros Evagorou, has called on the investigation committee to check the information regarding money withdrawal by Anastasiades’ family members as well as other reports about money transfer from the country on the eve of the Eurogroups’ levy decision.

Responding to the allegations, President Anastasiades called the publication an “attempt to defame companies or people linked to my family”.

“[This] is nothing but an attempt to distract people from the liability of those who led the country to a state of bankruptcy,” Anastasiades said.

The president stressed that no one, including himself, will walk free from the on-going investigations looking into responsibility for the crisis that has engulfed the Cypriot economy.

Moreover, Anastasiades assured that when the investigative committee assembled on Tuesday, he would request that its members look into this particular case."
In related news, Cyprus News reports that "700millions fled the country between 1-15 march 2013".

Protothema.gr reports the following:
"Four pages with the names of some 132 companies and individuals who withdrew the bulk of their deposits in euros, dollars and rubles kept in local banks reveals protothema.gr.

Transfers of money totaling causes vertigo made within 15 days, namely the period from 1st until March 15, 2013. On Friday, March 15 at the Eurogroup meeting which decided formally levy, as has been called the "haircut", on deposits of companies and individuals in all banks in Cyprus. These 132 companies and individuals seem to have "inside" information about impending single taxation of deposits in Cypriot banks so it proved as the elements contained in lists, in most cases, they withdrew all their deposits in Euro, dollars and rubles, which moved to other banks outside Cyprus, which apparently considered a "safe harbor."

The disclosure of the list, which shows that the outflow of deposits from local banks other financial institutions outside Cyprus became massively creates reasonable suspicion that some had inside information about the decisions taken by the other 16 eurozone countries in exchange for funding deficits of the economy.

Apart from the huge moral issue raised, the government of Nikos Anastasiadis is heavily exposed, since in some cases, those who took huge funds from abroad are relatives of the President of the Republic, as the company Loutsios & Sons ltd owned by father of groom Nikos Anastasiadis, who three days before the decision to "haircut" deposits transferred to a British bank 21 million euros!

Read the lists with the names of all companies and individuals who withdrew their deposits from Cyprus during the period from 1st until March 15.

The first column are names of companies and individuals in the second record of the amounts withdrawn in the third column refers to the account balance of the People, the currency in the fourth and the fifth and last column refers to the date of transfer.
"