Brain Drain

These past few days I have been hearing about immigration reform. I will admit that I havent been following it as close as I would like to but this morning I came across an article on CNNMoney.com about America’s brain drain. According to this article, “Smart foreigners who study at U.S. universities — often at taxpayer expense through scholarships — face a tough fight after graduation if they want to stay in the country”. The article goes on to describe the situation of Shailesh Deshpande who graduated from Virginia Tech and was forced to return to India after fighting hard to stay in this country. We have been conditioned to believe that there will be an almost eternal demand for smart educated people to want to be in America. The truth is that unless we do something about the brain drain and help people like Shailesh Deshpande start out their dreams our economy will suffer. Fields in science and engineering will become even more important as the world’s population grows and ages. This will create demand for medical treatment, efficient and less wasteful construction mechanism as well as demand for fuel efficiency. The CNN article goes on to say that “He waited jobless — yet hopeful — in his hometown of Napur India for six months. By the time immigration officials announced his application had successfully reached the final stage, Deshpande had already started working as senior vice president of an Indian coal imports company. Next month, Deshpande is launching his own data analytics firm, one he wishes he would have started in the United States. “ I know I am presenting a simplistic view of things but something has to be done about the brain drain before it is too late. Click here to read full article.

Advertisements

Got Wonga ?

Up until this morning I never heard of Wonga. This company is a short-term lending company based in UK. According to BBC “The company, which is regularly attacked by its critics for its lending practices, has started offering short-term loans to customers online in South Africa, Canada, Poland and soon it will set up in Spain.Here in the UK it has now lent £2bn to more than one million customers since it started back in 2007.And last year’s launch of a business lending money to small businesses, for up to one year, is doing well, says the chief operating officer Niall Wass.” Wonga is now eyeing the United States because according to Chief Operator Neil Wass the economy is massively driven by small, privately owned businesses. Unless you really need the cash short-term lending can be an expensive way of covering your budget gap. One of those reasons is that typically short-term lenders charge a crazy amount of interest rates. According to the BBC the company has been accused of using over-aggressive debt collection methods when trying to get its money back, a few years ago, from some borrowers it had suspected of fraud. So don’t be surprised if you start hearing Wonga anytime soon around the United States but as always be very,very cautious about short-term lending. It may seem an easy way to get money but it’s also costly. Click here to read the full article.

Fear & Greed Index

Ok, this cold and snowy morning as I looked outside the window I wondered what is driving the stock market prices. As I ponder I went to CNNMoney.com and looked at the mornings financial headlines. One of those headlines was about something called the Fear and Greed Index. According to this index,

Market Momentum (Extreme Greed) 

 Safe Haven Demand (Extreme Greed)
 
Stock Price Breadth (Extreme Greed) 
 
Junk Bond Demand (Extreme Greed)
 
 Put and Call Options (Greed)
 
Market Volatility (Neutral)
 
Click here to see the full CNNMoney.com article.

Apple Looses Value

I was surprised by the news this morning that Apple is no longer the most valuable company in the world. The most valuable company in the world today is Exxon Mobil. According to BBC News The iPhone-maker’s stock fell 2.4% to $439 a share for a market value of $413bn (£261bn). Exxon’s value is currently around $418bn. Its shares have fallen almost 40% since hitting a record $702 in September.The tech giant has been hit by fears over its future growth, despite record profits.The firm said late on Wednesday it had sold more iPhones (47.8 million) and iPads (22.9 million) in the final three months of last year than in any previous quarter, but investors had expected yet more.On Thursday, about $50bn was wiped off Apple’s value after the biggest daily drop in the firm’s stock in four years.” Apple has been hit by a mix of strong competition by other mobile companies and fear about its continual growth. The pressure on apple to continue remarkable revenue growth will continue to increase.  I am not surprised Exxon Mobile has overtaken Apple. The world needs energy resources to run now more than ever in other to meed the demands of china.  Click here to read the full article.

New Dawn

For many years the economic spotlight was on Europe and now it seems to have changed to a different continent; Latin America. The stars shining stars in Latin American economies are Brazil and Chile.  What  seems to keep Brazil going is abundance of resources and a strong support for their middle class. In the case of Brazil there is also a reverse migration; which I find very ironic. The same thing is going on with Chile. According to BBC news, “There was a time when European economists looked at Latin America with horror. Weighed down by debt, plagued by hyperinflation, and ravaged by unemployment, the region was a financial disaster zone.Those days are long gone.As the leaders of Latin America and the European Union (EU) prepare for their seventh biennial summit in the Chilean capital Santiago this weekend, the region is enjoying unprecedented stability and prosperity.The EU-Latin American relationship has been somewhat turned on its head. These days, it is the Europeans who are grappling with austerity measures, joblessness and an intractable debt crisis.” With this new stability and prosperity it would be a great time for Latin American countries to form closer economic relationships. The idea of MERCOSUR offers the chance to form closer economic relationships. What is MERCOSUR?  The Mercosur, Mercado Común del Sur (Common Market of the South) is a motivated economic integration project which includes the founding members Argentina, Brazil, Paraguay and Uruguay. In 2008, Venezuela, Chile and Bolivia became associate members. Peru, Ecuador, Colombia have uttered their enthusiasm to join the group, and Mexico has shown a growing interest.Mercosur’s core objective is to amplify the effectiveness and competitiveness of the all member economies by opening markets, promoting economic development in the structure of a globalized world, improving infrastructure and communications, making better use of available resources, preserving the environment, generating industrial complementation and coordinating macroeconomic policies.I hope that what seems to be a good opportunity for long-term stability and prosperity isn’t wasted. Click here to read the full BBC article

Bonds

What they are:

A bond is an “IOU,” certifying that you loaned money to a government or corporation and outlining the terms of repayment.

 How they work

Buyer may obtain bond at a discount. The bond has a fixed interest rate for a fixed period of time (determining how much time you can go without the money is important). When the time is up, the bond is said to have “matured” and the buyer may redeem the bond for the full face value.

 Types

 Corporate

Sold by private companies to accumulate money. If company goes bankrupt, bondholders have first claim to the assets, before stockholders.

 Municipal

Supplied by any non-federal government. Interest paid comes from taxes or from revenues from special projects. Furthermore, earned interest is exempt from federal income tax.

 Federal government

Considered the safest investment you can make. Even if U.S. government goes bankrupt, it is duty-bound to repay bonds.

There are ETF’s for these bonds. As always I advocate doing research, look for the cost of holding these bonds and when you are able to redeem them. It’s all about details.

Currency ETF

As I explained in one of my posts ETF stands for exchange-traded fund; an ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. The majority of ETFs track an index, such as a stock index or bond index. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features. I have always been interested in currency trading but the idea that I have to stick around a computer to closely follow the prices is a turn off. So I have been looking for alternatives. In this search for alternatives I came across ETF currency trading. Some currency’s that seem attractive to me are the dollar, yen, Australian Dollar and the Canadian dollar along with the Swiss currency. For a while I held the British pound in high regard and although I still think it’s an attractive currency I am suspicious about it. The reason for this feeling is the question about Britain will continue to be part of European Union. I am not sure about the consequences exactly but I doubt that it will be pretty. Which is why the American Dollar, Yen, Australian Dollar and the Canadian Dollar are my safety bets in terms of currency trading. Once I am a bit more clear about British intents in terms of their relationship with the European Union would I make a bet on the British pound. Ishares seems to have some interesting currency ETF’s. As always do your research and look for any charges that might dwindle your return.

Savings Law

The Truth in Savings Act (Federal Reserve Regulation DD)

Regulation that necessitates financial institutions to reveal the following information on savings account plans they offer:

  • Fees on deposit accounts
  • The interest rate
  • Other terms and conditions

 The annual percent yield (APY), which is the percentage rate stating the total amount

of interest that would be received on a $100 deposit based on the annual rate and frequency

of compounding for a 365-day period. Truth in Savings defines the year as 365 days rather

than 360, 366, or some other number. This law eradicates confusion caused by the more

than eight million variations of interest calculation methods previously used by financial

institutions ( which I find astounding).

 The rule of 72

 

To resolve about how many years it will take to double

your money:

72 divided by

= Years to double investment

Interest rate

you can get

 

To establish the interest rate that will double your money in a set number of years:

72 divided by

= Interest rate required

Years to

double investment

Choosing a savings account

Factors that determine the dollar yield on an account:

Interest rate (also called rate of return, or annual yield)

All money earned comes from this factor.

The following factors reduce money earned and can even turn it into a loss: Fees, charges, and penalties

  • Typically based on minimum balance requirements, or transaction fees.

 Balance requirements

  • Some accounts necessitate a definite balance before paying any interest.On money-market accounts, the majority of banks will pay different interest rates for different size
  • Balances. (Higher balance earns a higher rate.)

 Balance calculation method

  • Most calculate daily. Some use average of all daily balances.