Wednesday 31 October 2012
The Reserve Bank of India (RBI) in its quarterly monetary policy review on Tuesday cut the Cash Reserve Ratio (CRR) by 25 basis points (bps).
The Reserve Bank of India (RBI) in its quarterly monetary policy review on Tuesday cut the Cash Reserve Ratio (CRR) by 25 basis points (bps). This is the first cut effected since April this year.
CRR - the amount of depositsthat banks must keep with the central bank - now stands at 4.25 per cent. The move is expected to inject Rs17,500 crore into the banking system.
The central bank has, however, kept the repo rate unchanged at 8 per cent.
Though inflation remains a near-time concern, RBI hinted at easing monetary policy further in the January-March quarter.
"As inflation eases further, there will be an opportunity for monetary policy to act in conjunction with fiscal and other measures to mitigate the growth risks and take theeconomy to a sustained higher growth trajectory," RBI Governor Duvvuri Subbarao said.
Headline wholesale price index inflation rose to 7.8 per cent in September . The central bank said it expects inflation to rise before easingin the final quarter of the financial year, which ends in March.
Barclays hit by fresh U.S. investigations
Following investigations in the UK over its dealings withQatari investors, Barclays saidthe Department of Justice and Securities and ExchangeCommission were probing whether its relationships withthird parties who help it win or retain business are compliant with U.S. laws.
The bank is under investigation by Britain's financial regulator and fraudprosecutor into payments to Qatari investors after it raisedbillions of pounds from the Gulf state five years ago to save it from taking a taxpayerbailout.
Barclays revealed the Financial Services Authority (FSA) investigation in July and confirmed the Serious Fraud Office had launched aprobe the following month.
Barclays also said on Wednesday the U.S. Federal Energy Regulatory Commission could be close to fining it over an investigation into the manipulation of power pricesin the western United States from late 2006 until 2008.
FERC could notify the bank of proposed penalties as early as Wednesday, and Barclays said it would"vigorously" defend this matter. The investigation was first announced in April, alleging the bank took substantial electricity market positions to move daily indexsettlements.
In March, the agency fined Constellation Energy a record $245 million over power market manipulation activities as part of a fresh crackdown on power market rigging.
New Barclays CEO Antony Jenkins, who took over at theend of July when his predecessor Bob Diamond quit after the bank admitted rigging Libor interest rates, isin the midst of a review to change culture and lift profitability, due to be unveiled in February.
Investors have made it clear they want a return on equityabove the cost of equity, higher dividends and for pay to be cut, Jenkins said. That is expected to mean theinvestment bank arm will be significantly cut back.
"While we have much to do to restore trust among stakeholders, our universal banking franchise remains strong and well positioned," he said.
The bank has fired staff, clawed back pay and taken other disciplinary action aftera "very rigorous" internal investigation into the Libor manipulation, Jenkins said. He declined to provide more specific details on how many staff it had taken actionagainst.
Barclays was fined $450 million by U.S. and UK regulators for the rate rigging. More than a dozen other banks are expected to be fined.
Disney to buy Lucasfilm for $4 billion
Disney Company agreed Tuesday to buy Lucasfilm in a stock-and-cash deal valued at $4 billion.
The deal will make Lucasfilm owner George Lucas a significant shareholder in Disney, which will pay for the film company with $2 billion cash and around 40 million shares of its stock
European Crisís affects GM earnings
GM on Wednesday posted net income of $1.8 billion, down from $2.1 billion it earned a year earlier. But the result soundly beat forecasts of analysts surveyed by Thomson Reuters. And the company said that its pretaxoperating earnings in the fourth quarter should be similar or slightly better than the final quarter of lastyearlosses in Europe soaredto $478 million from $292 million a year earlier. The company warned that its full-year losses in Europe will be between $1.5 billionand $1.8 billion, and said it won't be profitable there until the middle of the decade.
But Europe wasn't the only drag on results. Operating profits in North America fell17% to $1.8 billion. That was partly balanced by improved results in its international unit, which includes operations in China. GM once again sold more cars and trucks in China than in the United States in the period.
"While we still have a lot of work to do, especially in Europe, it is encouraging to see our results begin to reflect the discipline we arebringing to bear on the overall business," said Dan Ammann, the company's chief financial officer.
Tuesday 30 October 2012
Forstall, a senior vice president in charge of Apple's mobile operating system, iOS, will act as an adviser to CEO Tim Cook until departing some time next year, according to a news release from the company.
As the man behind the system that ran Apple's industry-changing iPhone and iPad, Forstall had beenconsidered a favorite to replace Jobs as CEO after Jobs' death last October. More recently, Apple observers pegged Forstall, 43, as the next in line behind Cook.
Along with marketing chiefPhil Schiller and design guru Jonathan Ive, Forstallanchored the company's top tier of executives, frequently speaking at Apple's heralded product unveilings to showcase the ins and outs of operating-system upgrades.
Many felt he was the most logical choice to continue Jobs' legacy of innovation at Apple, where 70% of revenue now comes from the mobile devices that iOSpowers.
"He was as close to Steve asanybody at the company," Andy Miller, former head of Apple's iAd group, told Businessweek last year."When he says stuff, people listen."
The Apple press release did not say what Forstall plans to do when he leavesthe company. Apple did not immediately respond to a message seeking further details
OTTAWA (Reuters) - Canada's parliamentary budget office on Monday maintained its forecast of 1.9 percent economic growth this year but cut its outlook for 2013 and 2014 and said it sees the Bank of Canada holding interest rates steady through the first quarter of 2015.
The PBO said it sees the federal government eliminating its budget deficit and returning to surplus in the 2015-16 fiscal year, which the government also expects.
It forecast that Canada's real gross domestic product will expand by 1.5 percent next year, down from its April forecast of 1.6 percent growth. It cut its 2014 forecast to 2.0 percent growth from 2.2 percent.
"The weakness in near-term growth pushes the economy further below its potential, resulting in an increase in the unemployment rate," the PBO said in a report.
"With inflationary pressures well contained and Consumer Price Index (CPI) inflation remaining below its 2 percent target, PBO expects the Bank of Canada to maintain its policy interest rate at 1 percent through the first quarter of 2015," it said.
The PBO released its fiscaloutlook just before the federal government was due to release its own forecasts, which are based on the average of a groupof private sector economists.
The PBO's view on centralbank interest rates, now at1.0 percent, is more dovish than most.
Most of Canada's primary dealers expect the Bank of Canada to hold off raising interest rates until late 2013 or 2014. The median forecast in a recent Reuters poll of these dealers was for a rate hike in the fourth quarter of 2013.
Saturday 27 October 2012
UBS plans to cut up to 10,000 jobs
Switzerland's biggest bank by assets will bringlarge parts of its fixed income trading business into a non-core unit leaving a reduced investment bank with equities trading, foreign exchange and advisory roles.
The non-core operation will be headed by Carsten Kengeter, current co-head of the investment bank, and will be wound down over time, two people close to the situation said.
The split will lead to another reduction in risk-weighted assets of up to SFr100bn ($107bn) and will trigger the loss of thousands of jobs in the group's back office over the next few years.
The job cuts will amountto almost a sixth of the bank's workforce of 63,500 at the end of June. They will not happen all at once and the precise number is still unclear as the exact impact on back-office functions has not yet been determined.
It comes on top of another -- still ongoing -- program announced last year to cut 3,500 jobs.
The move highlights how banks around the world are trying to adapt to a radically changed regulatory andmarket environment thathas left them with lower returns and much higher capital needs for certain business areas and national subsidiaries.
The strategy, hammered out in several executive board meetings in New York this week and set tobe announced next Tuesday, will trigger a large reduction of complexity and costs in the bank's support functions such as its information technology department.
"There were several options on the table but UBS has decided on the most radical one," one person familiar with the plan said.
The plan was devised bySergio Ermotti, who came in a chief executivelast year in the wake of an alleged rogue trading scandal that left UBS with a $2.3bn loss in the investment bank
The non-core operation will be headed by Carsten Kengeter, current co-head of the investment bank, and will be wound down over time, two people close to the situation said.
The split will lead to another reduction in risk-weighted assets of up to SFr100bn ($107bn) and will trigger the loss of thousands of jobs in the group's back office over the next few years.
The job cuts will amountto almost a sixth of the bank's workforce of 63,500 at the end of June. They will not happen all at once and the precise number is still unclear as the exact impact on back-office functions has not yet been determined.
It comes on top of another -- still ongoing -- program announced last year to cut 3,500 jobs.
The move highlights how banks around the world are trying to adapt to a radically changed regulatory andmarket environment thathas left them with lower returns and much higher capital needs for certain business areas and national subsidiaries.
The strategy, hammered out in several executive board meetings in New York this week and set tobe announced next Tuesday, will trigger a large reduction of complexity and costs in the bank's support functions such as its information technology department.
"There were several options on the table but UBS has decided on the most radical one," one person familiar with the plan said.
The plan was devised bySergio Ermotti, who came in a chief executivelast year in the wake of an alleged rogue trading scandal that left UBS with a $2.3bn loss in the investment bank
More misery in Spain as uneployment Exceeds 25%,
Though hardly a surprise, Friday's report that Spain's unemploymentrate had surpassed 25 percent was bad news for agovernment that recently trumpeted a streamlining ofits labor market rules.
The ranks of the unemployed swelled to 5.78 million people at the end of the third quarter, compared with 5.69 milliona quarter earlier and 2.6 million four years ago, when Spain's property bubble burst, the report said.
The jobs data signaled a deepening recession and raised the likelihood that Spain would again miss budget targets agreed to with other euro zone countries.
There was, however, one perversely positive elementto the report: the labor picture is so bleak that it could help Prime Minister Mariano Rajoy make the case that Germany and other lenders cannot risk imposing further austerity measures on Spain's economy in return for providing more European rescue fundingThe dire jobs report"gives Rajoy more leverage in his European negotiations and is good ammunition to ask for more time to adapt," said Federico Steinberg, an economist at the Elcano Royal Institute, a research organization in Madrid.
Mr. Rajoy, however, is alsofighting the crisis at home.Unions have called a general strike for Nov. 14, and elections in Catalonia on Nov. 25 could accelerate that region's drive toward independence.
Luis Garicano, a professor at the London School of Economics, said the government's cost of paying unemployment benefits, now almost 4 percent of gross domestic product, was unsustainable. After 20 consecutive quarters of job destruction, he said,"people see very little light at the end of the tunnel, and Spaniards are losing hope."
Fiscal year
Fiscal year – A corporation's accounting year. Due to the nature of their particular business, some companies donot use the calendar year fortheir bookkeeping. A typical example is the department store that finds December 31too early a date to close its books after the Christmas rush. For that reason many stores wind up their accounting year January 31. Their fiscal year, therefore, runs from February 1 of one year through January 31 of the next. The fiscal year of other companies may run from July 1 through the following June 30. Most companies, though, operate on a calendar year basis.
Ex-rights
Ex-rights – Without the rights. Corporations raising additional money may do so by offering their stockholders the right to subscribe to new or additional stock, usually at a discount from the prevailing market price. The buyer of a stock selling ex-rights is not entitled to the rights.
Flat income bond (FiB)
Flat income bond – This termmeans that the price at whicha bond is traded includes consideration for all unpaid accruals of interest. Bonds that are in default of interest or principal are traded flat. Income bonds that pay interest only to the extent earned are usually traded flat. All other bonds are usually dealt in "and interest," which means that the buyer pays to the seller the market price plus interestaccrued since the last payment date.
Ex-dividend
Ex-dividend – A synonym for "without dividend." The buyer of a stock selling ex-dividend does not receive the recently declared dividend. When stocks go ex-dividend, the stock tables include the symbol "x" following the name.
Floor broker
Floor broker – A member of the stock exchange who executes orders on the floor of the Exchange to buy or sell any listed securities.
Equity
Equity – The ownership interest of common and preferred stockholders in a company. Also refers to excess of value of securities over the debit balance in a margin account
Formula investing
Formula investing – An investment technique. One formula calls for the shifting of funds from common shares to preferred shares or bonds as a selected market indicator rises above a certainpredetermined point - and the return of funds to common share investments as the market average declines
Equipment trust certificate (ETC)
Equipment trust certificate – A type of security, generally issued by a railroad, to pay for new equipment. Title to the equipment, such as a locomotive, is held by a trustee until the notes are paid off. An equipment trust certificate is usually secured by a first claim on the equipment
Earnings report (ER)
Earnings report – A statement, also called an income statement, issued by a company showing its earnings or losses over a given period. The earnings report lists the income earned, expenses and the net result.
Free and open market (FaOM)
Free and open market – A market in which supply and demand are freely expressed in terms of price. Contrasts with a controlled market in which supply, demand and price may all be regulated.
Funded debt (FD)
Funded debt – Usually interest-bearing bonds or debentures of a company. Could include long-term bank loans. Does not includeshort-term loans, preferred or common stock
Friday 26 October 2012
Silvio Berlusconi sentenced to four years in prison for tax evasion .
former Italian Prime Minister Silvio Berlusconi was sentenced Friday to four years in prison for tax evasion, but is very likely to appeal the Milan court's ruling.
His trial, which also involved executives from Berlusconi's Mediaset television group and the head of a Swiss bank, concerned the purchase of TV rights for films which were then resold within the group at inflated prices.
Prosecutors said the scheme, involving about 3,000 American films, allowed those involved to avoid a major tax bill. They may have to pay a fine of up to ?10 million ($12.9 million), if the court's ruling is upheld.
Under the Italian legal system, Berlusconi and his fellow defendants have theright to appeal their sentence twice, in the appeal court and a higher court.
Also, because the case dates back to July 2006, the statute of limitations will expire next year, meaning there is a good chance that none of the defendants will serve any prison time.
Berlusconi, 76, resigned as prime minister last November amid his country's debt crisis, bringing to an apparent end an 18-year era in which he dominated Italian politics.
He had survived a series ofpolitical, corruption and sex scandals over the years,involving allegations of embezzlement, tax fraud and bribery.
He also currently faces trialon charges that he hired an underage prostitute andlater tried to pull strings to get her out of jail when shewas arrested for theft.
The woman involved in thelong-running case is the Moroccan dancer Karima elMahroug, nicknamed"Ruby the Heart-stealer."
American movie star George Clooney had been expected to appear Friday as a defense witness in thatcase but did not show up. The actor's representative said he would not now be serving as a witness for Berlusconi.
His trial, which also involved executives from Berlusconi's Mediaset television group and the head of a Swiss bank, concerned the purchase of TV rights for films which were then resold within the group at inflated prices.
Prosecutors said the scheme, involving about 3,000 American films, allowed those involved to avoid a major tax bill. They may have to pay a fine of up to ?10 million ($12.9 million), if the court's ruling is upheld.
Under the Italian legal system, Berlusconi and his fellow defendants have theright to appeal their sentence twice, in the appeal court and a higher court.
Also, because the case dates back to July 2006, the statute of limitations will expire next year, meaning there is a good chance that none of the defendants will serve any prison time.
Berlusconi, 76, resigned as prime minister last November amid his country's debt crisis, bringing to an apparent end an 18-year era in which he dominated Italian politics.
He had survived a series ofpolitical, corruption and sex scandals over the years,involving allegations of embezzlement, tax fraud and bribery.
He also currently faces trialon charges that he hired an underage prostitute andlater tried to pull strings to get her out of jail when shewas arrested for theft.
The woman involved in thelong-running case is the Moroccan dancer Karima elMahroug, nicknamed"Ruby the Heart-stealer."
American movie star George Clooney had been expected to appear Friday as a defense witness in thatcase but did not show up. The actor's representative said he would not now be serving as a witness for Berlusconi.
Analysts are surprised with Apple's weak margin outlook.
(Reuters) - At least three brokerages cut their price targets on Apple Inc by up to $50 a share after theiPhone maker surprised analysts by forecasting lower gross margins for the current quarter.
Apple shares edged lower 0.1 percent to$608.85 in premarket trading.
For the December quarter,Apple forecast revenue of$52 billion, below estimates of $55 billion, according to Thomson Reuters I/B/E/S. It expects margins of 36 percent, far lower than analysts' expectations of 43 percent.
Analysts focused on the decline in margins and played down the significance of a fall in iPad sales in the last quarter, as users waited for the iPad mini, and they did not expect this tocontinue.
Apple's forecast decline ingross margin, even assuming it was deliberately aiming low, still pointed to an unusualdecline, Evercore Partnersanalysts Rob Cihra and Edison Yu said in a research note. Evercore cut its price target on the stock to $775 from $800.
Nomura Equity Research said it expected production costs to rise in the current quarter, after Apple redesigned so many of its products at once.
"The iPhone 5, iPod Touch, iPod nano, iPad mini and iMac all feature new form factors and our checks with the supply chain indicate that many of these are very complex to manufacture and are likely resulting in reduced production efficiencies," Nomura analysts said in a note as they lowered their price target to $660 from $710.
Apple heads into the current quarter after refreshing almost all of its product lines, including introducing a lower-priced 7.9-inch "iPad mini" and an upgraded fourth-generation full-sized iPad.
Apple said it expects 80 percent of revenue in the current quarter to come from new products but did not increase the product prices to offset higher costs and maintain its margins.
Analysts, however, expect gross margins to recover by June next year as rising volumes trim manufacturing and component costs.
When the iPhone 4 was launched, Apple suffered a 480 basis point decline in corporate gross marginsbut it recovered entirely within two quarters, Raymond James analyst Tavis McCourt said.
He cut his price target on the stock by $30 to $700.
ORDERS OUTSTRIP SUPPLY
Apple had struggled to deliver large quantities of the iPhone 5 since its launch in late September, with waiting times stretching at times to threeweeks in some regions.
This week, AT&T Inc blamed its disappointing subscriber growth in the third quarter on a shortage of iPhone 5, highlighting its dependence on Apple.
Apple CEO Tim Cook told analysts on a conference call that there was a heavybacklog for the latest iPhone but the company had mostly worked out kinks in its supply chain.
Apple shares edged lower 0.1 percent to$608.85 in premarket trading.
For the December quarter,Apple forecast revenue of$52 billion, below estimates of $55 billion, according to Thomson Reuters I/B/E/S. It expects margins of 36 percent, far lower than analysts' expectations of 43 percent.
Analysts focused on the decline in margins and played down the significance of a fall in iPad sales in the last quarter, as users waited for the iPad mini, and they did not expect this tocontinue.
Apple's forecast decline ingross margin, even assuming it was deliberately aiming low, still pointed to an unusualdecline, Evercore Partnersanalysts Rob Cihra and Edison Yu said in a research note. Evercore cut its price target on the stock to $775 from $800.
Nomura Equity Research said it expected production costs to rise in the current quarter, after Apple redesigned so many of its products at once.
"The iPhone 5, iPod Touch, iPod nano, iPad mini and iMac all feature new form factors and our checks with the supply chain indicate that many of these are very complex to manufacture and are likely resulting in reduced production efficiencies," Nomura analysts said in a note as they lowered their price target to $660 from $710.
Apple heads into the current quarter after refreshing almost all of its product lines, including introducing a lower-priced 7.9-inch "iPad mini" and an upgraded fourth-generation full-sized iPad.
Apple said it expects 80 percent of revenue in the current quarter to come from new products but did not increase the product prices to offset higher costs and maintain its margins.
Analysts, however, expect gross margins to recover by June next year as rising volumes trim manufacturing and component costs.
When the iPhone 4 was launched, Apple suffered a 480 basis point decline in corporate gross marginsbut it recovered entirely within two quarters, Raymond James analyst Tavis McCourt said.
He cut his price target on the stock by $30 to $700.
ORDERS OUTSTRIP SUPPLY
Apple had struggled to deliver large quantities of the iPhone 5 since its launch in late September, with waiting times stretching at times to threeweeks in some regions.
This week, AT&T Inc blamed its disappointing subscriber growth in the third quarter on a shortage of iPhone 5, highlighting its dependence on Apple.
Apple CEO Tim Cook told analysts on a conference call that there was a heavybacklog for the latest iPhone but the company had mostly worked out kinks in its supply chain.
Adoboli now stands accused of two counts of fraud by abuse of position and four of false accounting.
Former UBS trader Kweku Adoboli was charged on Friday morning with two additional counts of false accounting as he took the stand to give evidence in the London trial against him.
In an unexpected twist on the 27th day of the trial at Southwark Crown Court, theCrown Prosecution Service added the two additional charges to his existing indictment.
Adoboli now stands accused of two counts of fraud by abuse of position and four of false accounting.He denies all of the charges.
The Ghanaian-born trader, 32, is alleged to have caused a $2.3bn loss at UBS last year from unauthorised trading.
The two additional counts offalse accounting against himrelate to the so-called"umbrella" - a device allegedly used by Adoboli to conceal his trading profitsand losses.
The use of the umbrella had previously formed part of the two original counts offalse accounting against Adoboli. These two counts have now been amended inorder for the two new counts to be added.
Mr Justice Keith explained this morning: "It's not to add to the allegations against Mr Adoboli. It's been inserted into the indictment in order to clarify the allegations being made."
The original counts - two of fraud and two of false accounting - now solely refer to the alleged bookingof fictitious hedges to conceal Adoboli's true risk position.
The former ETF trader is accused of having booked fictitious trades to superficially reduce the exposure to the bank from potential losses on real trades he had made.
The jury heard earlier in thetrial that Adoboli had allegedly booked real trades that exposed UBS to losses that may have risen to$12bn in the summer of 2011. He allegedly hid this exposure through fake ETF trades, the court heard.
In an unexpected twist on the 27th day of the trial at Southwark Crown Court, theCrown Prosecution Service added the two additional charges to his existing indictment.
Adoboli now stands accused of two counts of fraud by abuse of position and four of false accounting.He denies all of the charges.
The Ghanaian-born trader, 32, is alleged to have caused a $2.3bn loss at UBS last year from unauthorised trading.
The two additional counts offalse accounting against himrelate to the so-called"umbrella" - a device allegedly used by Adoboli to conceal his trading profitsand losses.
The use of the umbrella had previously formed part of the two original counts offalse accounting against Adoboli. These two counts have now been amended inorder for the two new counts to be added.
Mr Justice Keith explained this morning: "It's not to add to the allegations against Mr Adoboli. It's been inserted into the indictment in order to clarify the allegations being made."
The original counts - two of fraud and two of false accounting - now solely refer to the alleged bookingof fictitious hedges to conceal Adoboli's true risk position.
The former ETF trader is accused of having booked fictitious trades to superficially reduce the exposure to the bank from potential losses on real trades he had made.
The jury heard earlier in thetrial that Adoboli had allegedly booked real trades that exposed UBS to losses that may have risen to$12bn in the summer of 2011. He allegedly hid this exposure through fake ETF trades, the court heard.
Thursday 25 October 2012
China blocks New York Times Web site after report about PM's wealth
An explosive story on the massive wealth accumulated by the family of Prime Minister Wen Jiabao caused the Chinese government to block the Web site of the New York Times early Friday morning, just days before asensitive once-a-decade transition of power from Wen and others to a new generation of leaders.
Depreciation
Depreciation – Normally, charges against earnings to write off the cost, less salvagevalue, of an asset over its estimated useful life. It is a bookkeeping entry and doesnot represent any cash outlay nor are any funds earmarked for the purpose.
Director
Director – Person elected by shareholders to serve on the board of directors. The directors appoint the president, vice presidents, and all other operating officers. Directors decide, among other matters, if and when dividends shall be paid.
Depository Trust Company (DTC)
Depository Trust Company (DTC) – A central securities certificate depository through which members effect security deliveries between each other via computerized bookkeeping entries thereby reducing thephysical movement of stock certificates
Discretionary account (DA)
Discretionary account – An account in which the customer gives the broker orsomeone else discretion to buy and sell securities or commodities, including selection, timing, amount, and price to be paid or received.
Dollar-cost-averaging (DCA)
Dollar-cost-averaging – A system of buying securities atregular intervals with a fixeddollar amount. Under this system investors buy by the dollars' worth rather than bythe number of shares. If each investment is of the same number of dollars, payments buy more shares when the price is low and fewer when it rises. Thus temporary downswings in price benefit investors if theycontinue periodic purchases in both good and bad times, and the price at which the shares are sold is more than their average cost. Dollar-cost-averaging does not assure a profit and does not protect against loss in declining markets. Since dollar-cost-averaging involves continuous investment in securities regardless of fluctuating price levels of such securities, investors should consider their financial abilityto continue purchases through periods of low pricelevels
Debit balance (DB)
Debit balance – In a customer's margin account, that portion of the purchase price of stock, bonds or commodities that is covered by credit extended by the broker to the margin customer
Debenture
Debenture – A promissory note backed by the general credit of a company and usually not secured by a mortgage or lien on any specific property.
Dow theory (DT)
Dow theory – A theory of market analysis based upon the performance of the Dow Jones Industrial Average and transportation stock price averages. The theory says that the market is in a basic upward trend if one of these averages advances above a previous important high, accompanied or followed by a similar advance in the other. When both averages dip below previous important lows, this is regarded as confirmation of a downward trend. The Dow Jones is one type of market index
The central bank of the Philippines cut its key policy rate by 25 basis points to 3.50 percent, as expected by many economists, as low inflation gave Bangko Sentral ng Pilipinas (BSP) room to strengthen domestic activity while global economic prospects continue face considerable headwinds.
BSP described the inflationary environment as"benign," saying forecasts indicate that inflation will remain on target from this year to 2014 and the risks to inflation are balanced.
The central bank has now cut the rate on its key overnight borrowing, or reverse purchase facility, four times this year for a total reduction of 100 basis points. The overnight lending rate was also cut by 25 basis points to 5.50 percent.
The Philippine inflation rate eased to 3.6 percent inSeptember from 3.8 percent and the BSP targets annual inflation of 3-5 percent.
The central bank said it would closely monitor future price and output conditions, but did not give any further signal about the future move in interest rates.
The Philippine economyexpanded by an annual 5.9 percent in the second quarter, down from 6.4 percent in the first, and thecentral bank said the domestic economy remained strong, but"additional policy support could help ward off the risks associated with weakerexternal demand by encouraging investment and consumption."
U.S. central bank, kept its benchmark federal funds rate unchanged at 0 to 0.25 percent
The Federal Reserve, the U.S. central bank, kept its benchmark federal funds rate unchanged at 0 to 0.25 percent and repeated that it anticipates keeping rates at these"exceptionally low levels" at least through mid-2015, steps that were widely expected by financial markets.
A statement by the Federal Reserve's policy making body, the Federal Open Market Committee (FOMC), essentially mirrored its statement fromSeptember. The FOMC saidit remains concerned that without sufficient policy accommodation, economic growth might not be strong enough to generate a sustained improvement inthe labor market.
The FOMC said it would continue to increase its holdings of longer-term securities by about $85 billion each month throughthe end of this year by buying $40 billion of mortgage-backed securitiesa month, reinvesting proceeds from holdings into more agency-backed mortgage securities and extending the maturity of Treasury securities.
As last month, the only member of the FOMC to vote against the statement was Jeffrey Lacker, president of the Federal Reserve Bank of Richmond.
Kenya Commercial Bank (KCB) has recorded a 45.3 per cent increase in earnings
Kenya Commercial Bank (KCB) has recorded a 45.3 per cent increase in earnings for the nine months to September on the back of reduced inflation and its improved performance by its regional subsidiaries.
The bank on Thursday announced that net profit for the period stood at Sh9.3 billion compared to Sh6.4 billion recorded during a similar period last year.
KCB’s net interest income from customer loans also went up by 31 per cent to Sh21.7 billion an improvement from Sh16.6 billion earned in a similar period last year.
The bank, which was on Monday voted as the fifth best taxpayer in the country, announced that its regional markets earned a net profit of 680 million up from last year’s Sh430 million – a 58.1 per cent growth
The bank on Thursday announced that net profit for the period stood at Sh9.3 billion compared to Sh6.4 billion recorded during a similar period last year.
KCB’s net interest income from customer loans also went up by 31 per cent to Sh21.7 billion an improvement from Sh16.6 billion earned in a similar period last year.
The bank, which was on Monday voted as the fifth best taxpayer in the country, announced that its regional markets earned a net profit of 680 million up from last year’s Sh430 million – a 58.1 per cent growth
Capital gain or capital loss
Capital gain or capital loss – Profit or loss from the sale ofa capital asset. The capital gains provisions of the tax law are complicated. You should consult your tax advisor for specific information.
Cash flow (CF)
Cash flow – Reported net income of a corporation plusamounts charged off for depreciation, depletion, amortization, and extraordinary charges to reserves, which are bookkeeping deductions and not paid out in actual dollars and cents.
Callable
Callable – A bond issue, all or part of which may be redeemed by the issuing corporation under specified conditions before maturity. The term also applies to preferred shares that may be redeemed by the issuingcorporation
Book value (BV)
Book value – An accounting term. Book value of a stock is determined from a company's records, by adding all assets then deducting all debts and other liabilities, plus the liquidation price of any preferred issues. The sum arrived at is divided by the number of common shares outstanding and the result is book value per common share. Book value of the assets of a company or a security may have little relationship to market value.
Blue Sky Laws (BSL)
Blue Sky Laws – A popular name for laws various states have enacted to protect the public against securities frauds. The term is believedto have originated when a judge ruled that a particularstock had about the same value as a patch of blue sky.Blue Sky Laws – A popular name for laws various states have enacted to protect the public against securities frauds. The term is believedto have originated when a judge ruled that a particularstock had about the same value as a patch of blue sky.
Blue chip
Blue chip – A company known nationally for the quality and wide acceptanceof its products or services, and for its ability to make money and pay dividends.
Commercial paper (CP)
Commercial paper – Debt instruments issued by companies to meet short-term financing needs.
Bearer bond
Bearer bond – A bond that does not have the owner's name registered on the books of the issuer. Interest and principal, when due, are payable to the holder
Auditor's report
Auditor's report – Often called the accountant's opinion, it is the statement ofthe accounting firm's work and its opinion of the corporation's financial statements, especially if theyconform to the normal and generally accepted practicesof accountancy.
Common stock
Common stock – Securities that represent an ownershipinterest in a corporation. If the company has also issuedpreferred stock, both common and preferred have ownership rights. Common stockholders assume the greater risk, but generally exercise the greater control and may gain the greater award in the form of dividends and capital appreciation. The terms common stock and capital stock are often used interchangeably when the company has no preferred stock.
Conglomerate
Conglomerate – A corporation that has diversified its operations usually by acquiring enterprises in widely varied industries
Convertible
Convertible – A bond, debenture or preferred share that may be exchanged by the owner for common stock or anothersecurity, usually of the samecompany, in accordance with the terms of the issue.
Amortization
Amortization – Accounting for expenses or charges as applicable rather than as paid. Includes such practices as depreciation, depletion, write-off of intangibles, prepaid expenses and deferred charges.
Cumulative preferred
Cumulative preferred – A stock having a provision thatif one or more dividends are omitted, the omitted dividends must be paid before dividends may be paid on the company's common stock.
Wednesday 24 October 2012
Fed sticks to stimulus plan, says economy abit firmer
WASHINGTON (Reuters) - The Federal Reserve on Wednesday stuck to its plan to keep stimulating U.S. growth until the job market improves even as it acknowledged some parts ofthe economy were looking a bit better.
In a statement after a two-day meeting, the centralbank repeated its vow to keep rates near zero until mid-2015 and its pledge to keep supporting growth while the recovery strengthens.
The Fed 's policy-setting panel made no change in its plan to purchase $40 billion in mortgage-backed debt per month to push interest rates lower and spur a stronger recovery.
"The committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions," theFed said.
U.S. stocks edged lower afterthe announcement and the dollar extended gains against the euro, while Treasury bonds showed littlereaction, closing the session lower.
The central bank's statement differed little from its announcement last month in which it launched its third round of bond-buying, or quantitative easing, known asQE3, and made clear officialsstill had concerns on the recovery's strength.
Analysts said December will likely be a more eventful meeting as the Fed decides what to do when its separate Operation Twist program, in which it is buying long-term Treasury debt with proceedsfrom short-term securities, expires at the end of the year.
"Officials will likely make a decision then on whether QE3 will be extended to include Treasuries purchaseswhen Operation Twist ends at year-end," said Jim O'Sullivan, economist at High Frequency Economics."We expect it will be."
U.S. gross domestic product grew at an annual rate of just1.3 percent in the second quarter. Economists expect the pace of recovery quickened a bit in the third quarter but not by enough to put steady downward pressure on the jobless rate, which fell sharply in September but remains at anelevated 7.8 percent.
HOUSING STARTS, BUSINESS SLACKENS
The Fed noted the housing sector was continuing to gather its strength and said household spending had grown "a bit more quickly." However, it cautioned that business investment was softening.
It also nodded to a recent increase in inflation but said it was linked to higher energy prices, adding that inflation expectations have remained stable -- a sign officials think pressures will remain under wraps.
Richmond Federal Reserve Bank President Jeffrey Lacker dissented against the decision, as he has done at every meeting this year.
The central bank 's announcement came just under two weeks before the U.S. presidential election. Economists said policymakerswere likely to keep their heads down and avoid drawing any political fire.
The Fed, which has held rates close to zero since December 2008, had alreadybought $2.3 trillion in mortgage-related and government debt before it launched its latest round of stimulus.
In a statement after a two-day meeting, the centralbank repeated its vow to keep rates near zero until mid-2015 and its pledge to keep supporting growth while the recovery strengthens.
The Fed 's policy-setting panel made no change in its plan to purchase $40 billion in mortgage-backed debt per month to push interest rates lower and spur a stronger recovery.
"The committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions," theFed said.
U.S. stocks edged lower afterthe announcement and the dollar extended gains against the euro, while Treasury bonds showed littlereaction, closing the session lower.
The central bank's statement differed little from its announcement last month in which it launched its third round of bond-buying, or quantitative easing, known asQE3, and made clear officialsstill had concerns on the recovery's strength.
Analysts said December will likely be a more eventful meeting as the Fed decides what to do when its separate Operation Twist program, in which it is buying long-term Treasury debt with proceedsfrom short-term securities, expires at the end of the year.
"Officials will likely make a decision then on whether QE3 will be extended to include Treasuries purchaseswhen Operation Twist ends at year-end," said Jim O'Sullivan, economist at High Frequency Economics."We expect it will be."
U.S. gross domestic product grew at an annual rate of just1.3 percent in the second quarter. Economists expect the pace of recovery quickened a bit in the third quarter but not by enough to put steady downward pressure on the jobless rate, which fell sharply in September but remains at anelevated 7.8 percent.
HOUSING STARTS, BUSINESS SLACKENS
The Fed noted the housing sector was continuing to gather its strength and said household spending had grown "a bit more quickly." However, it cautioned that business investment was softening.
It also nodded to a recent increase in inflation but said it was linked to higher energy prices, adding that inflation expectations have remained stable -- a sign officials think pressures will remain under wraps.
Richmond Federal Reserve Bank President Jeffrey Lacker dissented against the decision, as he has done at every meeting this year.
The central bank 's announcement came just under two weeks before the U.S. presidential election. Economists said policymakerswere likely to keep their heads down and avoid drawing any political fire.
The Fed, which has held rates close to zero since December 2008, had alreadybought $2.3 trillion in mortgage-related and government debt before it launched its latest round of stimulus.
U.S. sues Bank of America for$1B for mortgage fraud
The top federal prosecutor in Manhattan sued Bank of America (BAC) for more than $1 billion on Wednesday for mortgage fraud against Fannie Mae and Freddie Mac during theyears around the financial crisis.
U.S. Attorney Preet Bharara said Countrywide Financial, which was later bought by Bank of America, churned out mortgage loans from 2007 to 2009 without making sure that borrowers could afford them.
"The fraudulent conduct alleged in today's complaint was spectacularly brazen in scope," Bharara said in a statement. He said the suit was partly to recover money that Fannie and Freddie lost from defaulted loans.
Bank of America says housing has "begun to turn"Mortgage comeback? Citigroup executive not so sureAmerican banks hit by more than a week of cyberattacks
Bank of America had no immediate comment.
Countrywide sold the loans to Fannie Mae and Freddie Mac, which were left to pay for the loans when they defaulted, according to the lawsuit. Fannie and Freddie were effectively nationalized in 2008.
Fannie and Freddie buy mortgage loans from banks, package them into securities and sell them to investors. The idea is to free up banks to make more loans. If a loandefaults, Fannie and Freddieguarantee payments to the investors.
According to the lawsuit, Fannie and Freddie don't review the loans before they purchase them. Instead, theyrely on banks' statements that the loans meet certain qualifications.
Bharara said the lawsuit was the first civil fraud suit brought by the Justice Department concerning loans that were later sold to Fannie and Freddie.
The suit also underscored how Bank of America's purchase of Countrywide in July 2008, just before the financial crisis, backfired severely.
Risky loans
Countrywide was a giant in mortgage lending, but was also known for approving exotic, even risky, loans. By 2007, as the market for subprime mortgages collapsed, Countrywide was anxious for revenue.
U.S. Attorney Preet Bharara said Countrywide Financial, which was later bought by Bank of America, churned out mortgage loans from 2007 to 2009 without making sure that borrowers could afford them.
"The fraudulent conduct alleged in today's complaint was spectacularly brazen in scope," Bharara said in a statement. He said the suit was partly to recover money that Fannie and Freddie lost from defaulted loans.
Bank of America says housing has "begun to turn"Mortgage comeback? Citigroup executive not so sureAmerican banks hit by more than a week of cyberattacks
Bank of America had no immediate comment.
Countrywide sold the loans to Fannie Mae and Freddie Mac, which were left to pay for the loans when they defaulted, according to the lawsuit. Fannie and Freddie were effectively nationalized in 2008.
Fannie and Freddie buy mortgage loans from banks, package them into securities and sell them to investors. The idea is to free up banks to make more loans. If a loandefaults, Fannie and Freddieguarantee payments to the investors.
According to the lawsuit, Fannie and Freddie don't review the loans before they purchase them. Instead, theyrely on banks' statements that the loans meet certain qualifications.
Bharara said the lawsuit was the first civil fraud suit brought by the Justice Department concerning loans that were later sold to Fannie and Freddie.
The suit also underscored how Bank of America's purchase of Countrywide in July 2008, just before the financial crisis, backfired severely.
Risky loans
Countrywide was a giant in mortgage lending, but was also known for approving exotic, even risky, loans. By 2007, as the market for subprime mortgages collapsed, Countrywide was anxious for revenue.
Repay £4.2B and serve 3years Jerome Kerviel ordered
Jerome Kerviel was told he must repay £4.2BILLION after nearly bringing down one of Europe's biggestbanks.
Kerviel, 35, was convicted in a Paris court of forgery, unauthorised computeruse and breach of trustand told to repay the mammoth damages.
He was also jailed for three years - with another two suspended.
But he sought an aquittal and had a two-year fight to clear his name, but the verdict was upheld today.
Kerviel will not go to jail immediately, and his lawyer said that they would study the possibility of a further appeal.
“We had given ourselves the goal of defending Mr Kerviel against an absolutely appalling injustice. I can tell you that we’vefailed,” Kerviel’s lawyer,David Koubbi, told journalists outside the court.
His bosses at banking giant Societe Generale said he carried out huge and risky stock trades worth £45bn without their knowledge between late 2007 and 2008.
The judge in the original case said that the trader’s acts had “damaged the world economic order”.
His former employer said he had lost the £4.2bn they are demanding back through risky trades.
During the trial Kerviel's former boss and colleagues all testified against him.
SocGen's lawyer, Jean Veil, accused Kerviel of"duplicity" for reassuring his bosses that nothing was wrong while racking up the huge losses.
And the bank's president and chief executive at the time, Daniel Bouton, called the trading scandal a"catastrophe".
French media calculated that based on his current salary of £1,700 a month as a computer consultant, itwould take him 177,536 years to pay off the damages.
Kerviel, 35, was convicted in a Paris court of forgery, unauthorised computeruse and breach of trustand told to repay the mammoth damages.
He was also jailed for three years - with another two suspended.
But he sought an aquittal and had a two-year fight to clear his name, but the verdict was upheld today.
Kerviel will not go to jail immediately, and his lawyer said that they would study the possibility of a further appeal.
“We had given ourselves the goal of defending Mr Kerviel against an absolutely appalling injustice. I can tell you that we’vefailed,” Kerviel’s lawyer,David Koubbi, told journalists outside the court.
His bosses at banking giant Societe Generale said he carried out huge and risky stock trades worth £45bn without their knowledge between late 2007 and 2008.
The judge in the original case said that the trader’s acts had “damaged the world economic order”.
His former employer said he had lost the £4.2bn they are demanding back through risky trades.
During the trial Kerviel's former boss and colleagues all testified against him.
SocGen's lawyer, Jean Veil, accused Kerviel of"duplicity" for reassuring his bosses that nothing was wrong while racking up the huge losses.
And the bank's president and chief executive at the time, Daniel Bouton, called the trading scandal a"catastrophe".
French media calculated that based on his current salary of £1,700 a month as a computer consultant, itwould take him 177,536 years to pay off the damages.
Your report is 'inaccurate' Santander tells Barclays
Santander has dismissed as “inaccurate” a researchreport by Barclays analysts that warned the Spanish lender could need to raise nearly €18bn (£14.7bn)in new capital.
The Barclays report, entitled Capital doesn’tadd up, claimed that Santander’s domestic Spanish business has a capital-loss buffer about one-fifth the sizestated by the bank’s accounts.
“While Santander reports a 10pc core Tier 1 ratio for its Spanish business, it’s more like 2pc based on the capital that is actually available to absorb domestic losses. This suggests a €15bn to €18bn capital deficitin Spain,” wrote Barclays analyst, RohithChandra-Rajan.
Mr Chandra-Rajan argued that Santander’s accounts “overstate” the ability of its Spanish business to absorb losses by including capital that is
effectively locked up in foreign subsidiaries. He claimed that capitalwould be unavailable to the parent companyshould it be hit by newlosses in its domestic operations.
The Barclays report, entitled Capital doesn’tadd up, claimed that Santander’s domestic Spanish business has a capital-loss buffer about one-fifth the sizestated by the bank’s accounts.
“While Santander reports a 10pc core Tier 1 ratio for its Spanish business, it’s more like 2pc based on the capital that is actually available to absorb domestic losses. This suggests a €15bn to €18bn capital deficitin Spain,” wrote Barclays analyst, RohithChandra-Rajan.
Mr Chandra-Rajan argued that Santander’s accounts “overstate” the ability of its Spanish business to absorb losses by including capital that is
effectively locked up in foreign subsidiaries. He claimed that capitalwould be unavailable to the parent companyshould it be hit by newlosses in its domestic operations.
three major tools the Bank uses to implement monetary policy
three major tools the Bank uses to implement monetary policy:
1. Open Market Operations: Through open market operations, the Bank buys or sells securities in the secondary market in order to achieve a desired level of Bank reserves. Alternatively, the Bank injects money into the economy through buying securities in exchange for money stock. As the law of supply and demand takes effect to determine the costof credit (interest rates) in the money market, money stock adjusts itself to the desired level. This process influences availability of money in the economy.
2. Discount window operations: The Bank, as lender of last resort, may provide secured short-term loans to commercial banks on overnight basis atpunitive rates, thus restricting banks to seek funding in the market resorting to Central Bank funds only as a last solution. The discount rate is set by the Central Bank to reflect the monetary policy objectives.
3. Reserve Requirements: TheCentral Bank is empoweredby the law to retain a certain proportion of commercial banks' depositsto be held as non-interest bearing reserves at the Central Bank. An increase in reserve requirements restricts commercial banks ability to expand bank credit and the reverse is regarded as credit easing
Price Level
Price Level - The overall level of prices of goods and services in an economy. This isused in the calculationof inflation rates.
Nominal Interest
Nominal Interest - The percent of the amount borrowed paid each year to the lender by the borrower in return for the use of the money not taking inflation into account.
Purchasing Power
Purchasing Power - The real value of a dollar. This describes the quantity of goods and services that can be purchased for a dollar, taking into account the effects of inflation.
Quantity Theory of Money
Quantity Theory of Money - The theory that says that the value of money is based on the amount of money in circulation, that is, the money supply.
Liquidity
Liquidity - The ease with which somethingof value can be exchanged for the currency of an economy.
Fiat Money
Fiat Money - Money that has no intrinsic value, that is, its only value comes from the fact that a governing body backs and regulates the currency.
Store of Value
Store of Value - A good that holds a value in such a way that its price is fairly insensitive inflation.
money
money-coins and paper currency issued by a government for payment of debts and for purchase of goods and services.
Tuesday 23 October 2012
Apple envails small iPad, (iPad Mini)
The highly-anticipated tablet computer is a smaller, cheaper version of the tech giant's popular iPad, and a fourth generation iPad.
Apple chief executive officer Tim Cook started off the event saying, ""We have some very fond memories here, and we're going to create a few more today."
But first, Apple senior vice president Phil Shiller took the stage to introduce a fourth generation iPad.
"It is a power house," Shiller said.
37 Photos Apple launches iPad Mini, new MacBook Pro View the Full Gallery »The fourth generation iPad features an A6X processor, 5 megapixeliSight camera, expanded LTE chipset, front-facing camera with FaceTime and 720p video capture, faster Wi-Fi, and Lightening connector. The new iPad is pricedat $499 for a 16 GB model, $629 for a 16 GB model with 4G LTE.
Shiller also introducedan iPad mini. The smaller iPad is 7.2 millimeters thick, 0.63 pounds, comes in white and slate black. The iPad mini's screen is 7.9-inches at 1,024 x768 display resolution.
Apple launched the original iPad in April 2010. The iPad has since dominated the 9-inch tablet market, with a reported 70 percent market share. Cook reported that there over 100 millioniPads have been sold.
The iPad mini starts at$329 for a 16GB Wi-Fionly model, $429 for a 32 GB model and$529 for a 64 GB model.The Wi-Fi only models will ship on Nov. 2. The iPad mini models with Wi-Fi and4G starts at $459 for 16GB, $559 for 32GB, and $659 for 64GB, and is available on Nov. 16.
Apple chief executive officer Tim Cook started off the event saying, ""We have some very fond memories here, and we're going to create a few more today."
But first, Apple senior vice president Phil Shiller took the stage to introduce a fourth generation iPad.
"It is a power house," Shiller said.
37 Photos Apple launches iPad Mini, new MacBook Pro View the Full Gallery »The fourth generation iPad features an A6X processor, 5 megapixeliSight camera, expanded LTE chipset, front-facing camera with FaceTime and 720p video capture, faster Wi-Fi, and Lightening connector. The new iPad is pricedat $499 for a 16 GB model, $629 for a 16 GB model with 4G LTE.
Shiller also introducedan iPad mini. The smaller iPad is 7.2 millimeters thick, 0.63 pounds, comes in white and slate black. The iPad mini's screen is 7.9-inches at 1,024 x768 display resolution.
Apple launched the original iPad in April 2010. The iPad has since dominated the 9-inch tablet market, with a reported 70 percent market share. Cook reported that there over 100 millioniPads have been sold.
The iPad mini starts at$329 for a 16GB Wi-Fionly model, $429 for a 32 GB model and$529 for a 64 GB model.The Wi-Fi only models will ship on Nov. 2. The iPad mini models with Wi-Fi and4G starts at $459 for 16GB, $559 for 32GB, and $659 for 64GB, and is available on Nov. 16.
$138.57 million net profit for LG Q3, keeps the positive trend going
SEOUL, Oct. 24, 2012 ?- LG Electronics (LG) today reported a solid third-quarter performance with the third consecutive quarter of positive net income and all four companies recording strong operating profits. Better-than-expected performance in the mobileand home appliance businesses helped offset a slight decline in overall year-over-year sales for the third quarter.
Third-quarter net profit ofKRW 157 billion (USD 138.57 million) with operating profit recording KRW 221 billion (USD 195.06 million) showed significant improvements from the loss in the same period
Third-quarter net profit ofKRW 157 billion (USD 138.57 million) with operating profit recording KRW 221 billion (USD 195.06 million) showed significant improvements from the loss in the same period
What is the future of BlackBerry as users embrace its rivals.
Way back in 1999, Research in Motion (RIM) revolutionised the mobile industry with BlackBerry products and services. In the corporate world, the smartphone is well known for its business-friendly messaging features, security, and reliability.
Over the years, the BlackBerry maker has experienced an exponential rise in adoption of its products.
This was clear before the company succumbed to the ripple effects of black days in its messaging service and challenges of stiff competition.
The BlackBerry subscriber base stands at 80 million globally. A substantial number of these people are loyal to older productsfrom RIM. The challenge lies ahead infuture products and how the company willadjust to trends in the smart world.
Currently, users are being lured by alternative gadgets. In the mid-range class of phones, the brand is battling with thousands of Android phones.
In the high-end category, BlackBerry faces competition from Samsung, Apple’siPhones, Nokia, and HTC.
Firms are allowing their staff to opt for their own desired brands unlike the tradition that saw BlackBerry dominate enterprise employee acquisitions.
Shrinking market share
As users switch to iPhones and Android phones, the trouble forRIM is a shrinking market share. In the recent quarterly results,the company sold 7.4 million BlackBerry smart-phones and 130,000 PlayBook tablets. The three-month period ending September saw it post a net loss of $235 million.
By selling a paltry number of tablets, the BlackBerry company seems to fall short of expectations from users. Apple andSamsung tablet sales are in millions of pieces monthly and this portrays how distant RIM is in the slate race. Besides, there is an un-avoidable competition from tablets from other device makers, especially from Asian countries.
One notable feature on BlackBerry phones that makes the gadget unique is messaging. The BlackBerry Messenger (BBM) is quite synonymous withmost BlackBerry users. In the smartphone world, the challenge for BBM lies in free-text messaging Apps.
WhatsApp was one thefirst alternatives to the messaging service offered by BlackBerry. It works perfectly on all platforms hence it’s readily available on Android, IOS, windowsphones and Nokia. TheApp has push notifications with free text, images and audiomessages.
There are several otherfree-text Apps that are a threat to the BlackBerry messaging service. Besides, Apples iMessage is more similar to the popular BlackBerry Messenger service. The iMessage service is a free text and multimedia service that only worksbetween IOS devices like iPhones and iPads.
750 million euro from bonds Nokia seeks to help power fightback
HELSINKI (Reuters) - Mobilephone maker Nokia plans to raise 750 million euros (£611.89 million) by issuing convertible bonds to bolster its cash position as it battles to claw back market share lost to Apple and Samsung.
Once the world's biggest mobile phone maker, the Finnish firm has fallen far behind Apple's iPhone and Samsung's Galaxy phones in the lucrative smartphone market, and is pinning its hopes for recovery on new models that go on sale next month.
With its net cash falling to 3.6billion euros in September from 4.2 billion in June, and its credit ratings cut to junk over the past year, analysts have said the company needs to show a turnaround in the next several months if it is to survive.
"It is a rather cheap way to get extra financing," said Evlianalyst Mikko Ervasti of the plan to issue convertible bonds, which are potentially most lucrative to investors when they are converted into shares several years afterthey are issued.
"They need buffers (and) their 2014 bond also requires financing," he added.
Nokia finished the third quarter with 3.8 billion eurosin interest-bearing liabilities, with 1.75 billion in bonds and loans maturing in 2014. The company also owns half of network equipment venture Nokia Siemens Networks, which finished thequarter with 1.4 billion eurosin liabilities.
The convertible bonds will be due in 2017 and will paya coupon between 4.25 percent and 5.00 percent. The initial price for conversion into ordinary shares is expected to be 28-33 percent above the average price of Nokia sharesbetween the launch and pricing of the offering.
At 0905 GMT, Nokia shares, which have been volatile in recent sessions, were down 5.1 percent at 2.05 euros.
LUMIA 510
Nokia's fortunes hinge on its top-of-the-range Lumia 820 and 920 models, which run on Microsoft's new Windows Phone 8 software, come in vivid colours, have high-resolution cameras, andwill hit the stores in November.
On Tuesday, the group unveiled the lower price Lumia 510, which is an update of the Lumia 610 butdoes not use the newest version of Windows software.The 510 has a larger screen and will be sold for around$199, excluding taxes and subsidies.
ING analysts welcomed the convertible bonds plan as reducing uncertainty aroundNokia's short-term debt maturities and bolstering its capital.
"It also shows that the company is taking the question marks around its credit quality seriously and iswilling to take the steps necessary to improve this," they said in a research note.
Nokia's five-year credit default swaps were trading around 2.8 percent tighter in early trading, signalling a reduction in the cost of insuring the company againstdefault.
The final terms of the convertible bonds, includingthe conversion price and maximum number of shares which may be issued upon conversion, will be announced later in the day. Trading in the bonds are due to start around October 26.
Once the world's biggest mobile phone maker, the Finnish firm has fallen far behind Apple's iPhone and Samsung's Galaxy phones in the lucrative smartphone market, and is pinning its hopes for recovery on new models that go on sale next month.
With its net cash falling to 3.6billion euros in September from 4.2 billion in June, and its credit ratings cut to junk over the past year, analysts have said the company needs to show a turnaround in the next several months if it is to survive.
"It is a rather cheap way to get extra financing," said Evlianalyst Mikko Ervasti of the plan to issue convertible bonds, which are potentially most lucrative to investors when they are converted into shares several years afterthey are issued.
"They need buffers (and) their 2014 bond also requires financing," he added.
Nokia finished the third quarter with 3.8 billion eurosin interest-bearing liabilities, with 1.75 billion in bonds and loans maturing in 2014. The company also owns half of network equipment venture Nokia Siemens Networks, which finished thequarter with 1.4 billion eurosin liabilities.
The convertible bonds will be due in 2017 and will paya coupon between 4.25 percent and 5.00 percent. The initial price for conversion into ordinary shares is expected to be 28-33 percent above the average price of Nokia sharesbetween the launch and pricing of the offering.
At 0905 GMT, Nokia shares, which have been volatile in recent sessions, were down 5.1 percent at 2.05 euros.
LUMIA 510
Nokia's fortunes hinge on its top-of-the-range Lumia 820 and 920 models, which run on Microsoft's new Windows Phone 8 software, come in vivid colours, have high-resolution cameras, andwill hit the stores in November.
On Tuesday, the group unveiled the lower price Lumia 510, which is an update of the Lumia 610 butdoes not use the newest version of Windows software.The 510 has a larger screen and will be sold for around$199, excluding taxes and subsidies.
ING analysts welcomed the convertible bonds plan as reducing uncertainty aroundNokia's short-term debt maturities and bolstering its capital.
"It also shows that the company is taking the question marks around its credit quality seriously and iswilling to take the steps necessary to improve this," they said in a research note.
Nokia's five-year credit default swaps were trading around 2.8 percent tighter in early trading, signalling a reduction in the cost of insuring the company againstdefault.
The final terms of the convertible bonds, includingthe conversion price and maximum number of shares which may be issued upon conversion, will be announced later in the day. Trading in the bonds are due to start around October 26.
Billionaire Ross Interested in Buying Spanish Bank Assets
Wilbur Ross , the billionaire who’s taken stakes in distressed U.S. and Europeanlenders, said he’s interested in Spanish banking assets as the country takes steps to resolve bad loans stemming from its real-estate bubble.
Ross’s WL Ross & Co., which holds about 10 percent of Bank of Ireland Plc. (BKIR) and teamed up with Richard Branson to buy part of Northern Rock Plc, is in talks “almost every week” with representatives of the large Spanish banks , he said in an interview in Abu Dhabi , without naming potential targets.
Ross’s WL Ross & Co., which holds about 10 percent of Bank of Ireland Plc. (BKIR) and teamed up with Richard Branson to buy part of Northern Rock Plc, is in talks “almost every week” with representatives of the large Spanish banks , he said in an interview in Abu Dhabi , without naming potential targets.
Employer Securities (ES)
Employer Securities An investment option offered by some retirement plans that generally consists of stock in the corporation sponsoring the plan for its employees
Equity Wash Restriction (EWR)
Equity Wash Restriction A provision in certain stable value or fixed income products under which transfers made from the stable value or fixed income product are required to be directed to an equity fund or other non-competing investment option of the plan for a stated period of time (usually 90 days) before those funds may be invested in any other plan-provided competing fixed income fund (such as amoney market fund)
Exchange-traded Fund (ETF)
Exchange-traded Fund (ETF) A type of investment company whose shares tradeon stock exchanges at prices determined by the market. Compare to Mutual Fund
Face Value (FV)
Face Value The amount a bond issuer is required to repay investors on the bond’s maturity date
Fixed Income Securities (FIS)
Fixed Income Securities Investments with specified payment dates and amounts,primarily bonds that pay interest. Front-end Load An upfront sales charge investors pay when they purchase mutual fund shares, generally used by the fund to compensate brokers. A front-end load reduces the amount available to purchase fund shares.
Monday 22 October 2012
world economy will be weak caterpillar says as it cuts outlook.
Caterpillar says the world's economy is weaker than it thought,and it doesn't expect growth to pick up untilthe second half of nextyear.
The company on Monday cut its 2012 revenue and profit guidance, and said next year won't be much better.
Caterpillar makes the yellow-painted excavators, heavy tractors, and other construction equipment often seen on road-building projects. It's the world'slargest maker of construction and mining equipment, and also makes engines, so its results are watched closely forsigns of where the broader economy is headed.
Where it's headed rightnow is for some weak growth, based on whatCaterpillar was saying on Monday.
It predicted worldwideeconomic growth of 2.7 percent for next year, up from the 2.5 percent growth it expects for 2012. It expects the cheap lending offered in mostcountries to continue next year, although"growth has been slow to respond," the company said.
"As a result, we are not expecting improvement in overalleconomic growth untilthe second half of 2013," the company said.
Caterpillar sells to dealers, who turn around and sell to end users like construction and mining companies.Those dealers are tryingto cut inventory, so they're ordering less equipment than customers are buying.
In response, Caterpillar said it has reduced production, resulting intemporary shutdowns and layoffs. Lower production will continue until dealer demand lines up with end user demand, Caterpillar said.
As a result, Caterpillar cut its 2012 outlook for the second time this year. Revenue is expected to grow 9.7 percent to $66 billion, after rising 41 percent in 2011. Profit is now forecast at $9 to $9.25 per share, down from aprevious forecast of$9.60 per share.
Analysts surveyed by FactSet had expected revenue of $67.2 billion, with profit of$9.41 per share.
The economy this year"has been a disappointment," Caterpillar said, with growth lower than expected in the U.S. and China, and with much of Europe in recession.
Caterpillar expects 2013 revenue to be about the same as this year, in a range of up 5percent to down 5 percent.
"We're not expecting rapid growth, and we're not predicting a global recession," Chairman and CEO Doug Oberhelman said.
The company said salesof mining gear will fallnext year. Lower prices for metals and coal, along with higher operating costs, have hurt profit margins at many mining companies, Caterpillar said. Sales of construction gear are expected to increase, and it expects improving activity in the U.S. It expects engine sales to be flat.
Profit in the third quarter rose 49 percentto almost $1.7 billion, or $2.54 per share. Thatcompares with profit of$1.14 billion, or $1.71 per share, a year earlier.Revenue rose 4.6 percent to $16.45 billion.
The results included a gain of $273 million, or 27 cents per share, from selling a majority interest in a logistics business. Analysts surveyed by FactSet had been expecting a profit of $2.21 per share, on revenue of$16.64 billion.
The company on Monday cut its 2012 revenue and profit guidance, and said next year won't be much better.
Caterpillar makes the yellow-painted excavators, heavy tractors, and other construction equipment often seen on road-building projects. It's the world'slargest maker of construction and mining equipment, and also makes engines, so its results are watched closely forsigns of where the broader economy is headed.
Where it's headed rightnow is for some weak growth, based on whatCaterpillar was saying on Monday.
It predicted worldwideeconomic growth of 2.7 percent for next year, up from the 2.5 percent growth it expects for 2012. It expects the cheap lending offered in mostcountries to continue next year, although"growth has been slow to respond," the company said.
"As a result, we are not expecting improvement in overalleconomic growth untilthe second half of 2013," the company said.
Caterpillar sells to dealers, who turn around and sell to end users like construction and mining companies.Those dealers are tryingto cut inventory, so they're ordering less equipment than customers are buying.
In response, Caterpillar said it has reduced production, resulting intemporary shutdowns and layoffs. Lower production will continue until dealer demand lines up with end user demand, Caterpillar said.
As a result, Caterpillar cut its 2012 outlook for the second time this year. Revenue is expected to grow 9.7 percent to $66 billion, after rising 41 percent in 2011. Profit is now forecast at $9 to $9.25 per share, down from aprevious forecast of$9.60 per share.
Analysts surveyed by FactSet had expected revenue of $67.2 billion, with profit of$9.41 per share.
The economy this year"has been a disappointment," Caterpillar said, with growth lower than expected in the U.S. and China, and with much of Europe in recession.
Caterpillar expects 2013 revenue to be about the same as this year, in a range of up 5percent to down 5 percent.
"We're not expecting rapid growth, and we're not predicting a global recession," Chairman and CEO Doug Oberhelman said.
The company said salesof mining gear will fallnext year. Lower prices for metals and coal, along with higher operating costs, have hurt profit margins at many mining companies, Caterpillar said. Sales of construction gear are expected to increase, and it expects improving activity in the U.S. It expects engine sales to be flat.
Profit in the third quarter rose 49 percentto almost $1.7 billion, or $2.54 per share. Thatcompares with profit of$1.14 billion, or $1.71 per share, a year earlier.Revenue rose 4.6 percent to $16.45 billion.
The results included a gain of $273 million, or 27 cents per share, from selling a majority interest in a logistics business. Analysts surveyed by FactSet had been expecting a profit of $2.21 per share, on revenue of$16.64 billion.
Ancestry.com AgreesTo Buyout By Private Equity Firm
After months of speculation about a possible buyout, Ancestry.com ( ACOM ) announced Monday that it is being purchased by an investor group led by European private equity firm Permira.
Permira and co-investors have agreed to pay $32 a share in cash for Ancestry.com, the world's leading online genealogy service. The deal is valued at $1.6 billion. The transaction represents a 41% premium over Ancestry's closing priceon June 5, the last trading day before press reports leaked that Ancestry had retained a financial adviser in connection with a possible sale of the company. Ancestrystock closed Friday at 29.18 and was up 8%, at 31.50, in early trading Monday.
Ancestry CEO Tim Sullivan and CFO Howard Hochhauser will maintain a majority of their equitystakes in the company as part of the transaction. Spectrum Equity, which owns 30% of the company's outstanding shares, alsowill remain an investor in the company.
Ancestry.com has morethan 2 million subscribers for its online family history service. Over the past 15 years, Ancestry has assembled a worldwidecollection of more than 10 billion digitized and indexed records. It has grown through acquisitions, most recently picking up companies like Archives.comand 1000memories.
"We're excited that Permira shares our commitment to keep investing in our technology and product experience to make family history easy and accessible for more and more families around the world," Sullivan said in a statement . "Their strong investment trackrecord in the technology and Internet sectors makes them a terrific adviser and partner as we take the company forward."
Ancestry expects the deal to close in early 2013, pending shareholder approvals.
Ancestry.com and Permira said the company will continueexecuting on its growth strategy and initiatives led by content acquisition and technology investment, including the company's new DNA service.
Permira and co-investors have agreed to pay $32 a share in cash for Ancestry.com, the world's leading online genealogy service. The deal is valued at $1.6 billion. The transaction represents a 41% premium over Ancestry's closing priceon June 5, the last trading day before press reports leaked that Ancestry had retained a financial adviser in connection with a possible sale of the company. Ancestrystock closed Friday at 29.18 and was up 8%, at 31.50, in early trading Monday.
Ancestry CEO Tim Sullivan and CFO Howard Hochhauser will maintain a majority of their equitystakes in the company as part of the transaction. Spectrum Equity, which owns 30% of the company's outstanding shares, alsowill remain an investor in the company.
Ancestry.com has morethan 2 million subscribers for its online family history service. Over the past 15 years, Ancestry has assembled a worldwidecollection of more than 10 billion digitized and indexed records. It has grown through acquisitions, most recently picking up companies like Archives.comand 1000memories.
"We're excited that Permira shares our commitment to keep investing in our technology and product experience to make family history easy and accessible for more and more families around the world," Sullivan said in a statement . "Their strong investment trackrecord in the technology and Internet sectors makes them a terrific adviser and partner as we take the company forward."
Ancestry expects the deal to close in early 2013, pending shareholder approvals.
Ancestry.com and Permira said the company will continueexecuting on its growth strategy and initiatives led by content acquisition and technology investment, including the company's new DNA service.
Bank of Queensland (BOQ) denies it's a takeover report
THE head of the Bank of Queensland(BOQ) has rejected speculation that his company is now a takeover target afterit posted the first loss by an Australianbank in two decades.
Chief executive Stuart Grimshaw saidthe worst was behind the bank, just days after declaring a $17 million full year loss due to $401 million in costs from unrecoverable loans.
Mr Grimshaw deniedthe bank would haveto be taken over at some point.
"No I don't think that's the case," he said.
"When we recorded a loss in the first half, that was about a $90 million after tax loss, the second half we reported a$70.3 million dollar profit."
While the Bank of Queensland was exposed to bad debts in the southeast corridor of Queensland, it still had a great future, Mr Grimshaw told ABC's Inside Business program onSunday.
"We believe we haveseen the worst.
"It won't be an instantaneous returnto like 2006 bad debt expense levels, but we believe that within the next threeyears we will return to a level similar to that."
He said the cost of deposits was increasing.
"We've actually beenable to manage both sides of the balance sheet prettywell in what's been avery tough and competitive market."
The company shed 100 management roles about four weeks ago after highlighting seven layers of people between the chief executive and customers.
"In a small bank that's just way too many," Mr Grimshawsaid.
"In Bank of Queensland Finance,and even at the bank, we have a number of people doing roles which could be better shared rather than isolated."
Mr Grimshaw confirmed the bank's funding was made up of 59 per cent deposits and 41 per cent wholesale funding.
Around 40 per cent of its business was now done outside Queensland, with 29branches in Western Australia, 35 in Victoria and 42 in NSW.
He added that the bank was not interested in being afunds manager or a large institutional bank.
"We're not going to bank every agri-business in Australia."
On Friday BOQ shares closed 11 cents, or 1.5 per cent, higher at$7.38.
Sunday 21 October 2012
"Black Monday" stock market crash, 25years later
, specifically October 19, 1987. Themorning started with stock selling and lots of it and ended with aday of historic losses. Twenty five years later,although the recent financial crisis was more severe and long-lasting, the crash of 1987 remains the single-most dramatic day of trading that most people have everexperienced on Wall Street.
That day came to be known as "Black Monday" because the Dow Jones Industrial Average plummeted 508 points, losing 22.6percent of its total value in a single session. It was the greatest percentage loss Wall Street had ever suffered on a single trading session. Despite the agonizing days of the financial crisis of 2008, those downside moves barely crack the top ten worst days for the Dow Jones Industrial Average - the 7.8 percent loss on October 15, 2008 is number nine.
What caused the crashof 1987? According toa 2006 Federal Reserve paper, a combination of circumstances made the crash possible. In the five years preceding the crash, stocks were supported by new entrants into the market (pension and 401(k) plans), which drove up prices.The Dow bottomed out at 776 in August 1982 and marched upto a high of 2,722 in August 1987.
Equities were also boosted by favorable tax treatments given to the financing of corporate buyouts, which "increased the number of companies that were potential takeover targets and pushed up their stock prices." These buyouts benefitted from lower interest rates. However,in the months leading up to the crash, interest rates were rising globally and concerns about inflation caused fears of further interest rate increases in the U.S. as well.
Two fuses were lit in the days before the crash. On Wednesday October 14, there were reports that legislation had been proposed in Congress to eliminate tax benefits associated with financing mergers, and separately, the U.S. trade deficit was revealed to be worse than expected, which caused the value of the dollar to dive and raised expectations that the Fed would increase interest rates.
Once these fuses were lit, other conditions added fuel to the fire. The increase in computer "program trading" strategies added to the magnitude of the losses, as did the impact of margin callsand the inability for investors to gather information in the chaotic environment. The combination of all these factors led to that historic and frightening day of trading. Sound familiar?
Could it happen again? Of course it could! It is almost ironic to go back readaccounts published onthe twentieth anniversary of the crash in October 2007, like this one in the Wall Street Journal:
"Some of the root causes of the 1987 crash appear to be missing today...Stocks don't look as overpriced today as they did in 1987...the Fed already has stepped in, lowering target short-term interest rates and pumping money into the banking system...Despite the continuing housing crisis and difficulties that many borrowers still face raising money, many investors believe the worst of the year's troubles are over."
Oops! So what have we learned in the 25 years since "Black Monday" and the subsequent financial crisis that started four years ago?
Cash is King : For those investors near or already in retirement, a cash cushion of 1-2 years of living expenses can reduce the urge to panic and sell at the bottom.
Planning is Queen : A thorough financial plan that contemplates both good and bad marketscan help you navigatea crash and its aftermath.
Diversification and rebalancing complete the Royal Family : Understanding your risk tolerance to build your asset allocation on a diversified basis, followed periodic rebalancing really canwork! The numbers back up the royal family and prove that using different types of assets (stocks, bonds,commodities and cash), based on your particular risk tolerance and rebalancing the allocation on a regularbasis (quarterly, semi-annually or evenannually) can help protect your money when the next crash occurs.
That day came to be known as "Black Monday" because the Dow Jones Industrial Average plummeted 508 points, losing 22.6percent of its total value in a single session. It was the greatest percentage loss Wall Street had ever suffered on a single trading session. Despite the agonizing days of the financial crisis of 2008, those downside moves barely crack the top ten worst days for the Dow Jones Industrial Average - the 7.8 percent loss on October 15, 2008 is number nine.
What caused the crashof 1987? According toa 2006 Federal Reserve paper, a combination of circumstances made the crash possible. In the five years preceding the crash, stocks were supported by new entrants into the market (pension and 401(k) plans), which drove up prices.The Dow bottomed out at 776 in August 1982 and marched upto a high of 2,722 in August 1987.
Equities were also boosted by favorable tax treatments given to the financing of corporate buyouts, which "increased the number of companies that were potential takeover targets and pushed up their stock prices." These buyouts benefitted from lower interest rates. However,in the months leading up to the crash, interest rates were rising globally and concerns about inflation caused fears of further interest rate increases in the U.S. as well.
Two fuses were lit in the days before the crash. On Wednesday October 14, there were reports that legislation had been proposed in Congress to eliminate tax benefits associated with financing mergers, and separately, the U.S. trade deficit was revealed to be worse than expected, which caused the value of the dollar to dive and raised expectations that the Fed would increase interest rates.
Once these fuses were lit, other conditions added fuel to the fire. The increase in computer "program trading" strategies added to the magnitude of the losses, as did the impact of margin callsand the inability for investors to gather information in the chaotic environment. The combination of all these factors led to that historic and frightening day of trading. Sound familiar?
Could it happen again? Of course it could! It is almost ironic to go back readaccounts published onthe twentieth anniversary of the crash in October 2007, like this one in the Wall Street Journal:
"Some of the root causes of the 1987 crash appear to be missing today...Stocks don't look as overpriced today as they did in 1987...the Fed already has stepped in, lowering target short-term interest rates and pumping money into the banking system...Despite the continuing housing crisis and difficulties that many borrowers still face raising money, many investors believe the worst of the year's troubles are over."
Oops! So what have we learned in the 25 years since "Black Monday" and the subsequent financial crisis that started four years ago?
Cash is King : For those investors near or already in retirement, a cash cushion of 1-2 years of living expenses can reduce the urge to panic and sell at the bottom.
Planning is Queen : A thorough financial plan that contemplates both good and bad marketscan help you navigatea crash and its aftermath.
Diversification and rebalancing complete the Royal Family : Understanding your risk tolerance to build your asset allocation on a diversified basis, followed periodic rebalancing really canwork! The numbers back up the royal family and prove that using different types of assets (stocks, bonds,commodities and cash), based on your particular risk tolerance and rebalancing the allocation on a regularbasis (quarterly, semi-annually or evenannually) can help protect your money when the next crash occurs.
BP Board Approves Rosneft Deal (Moscow)
BP's boardhas approved an offer from the Russian state oil company, Rosneft, to buy most of BP's business in Russia for cash and shares in Rosneft, further consolidating Russia's control of its oil industry, an executive with knowledge of thedecision said.
Under the terms of thedeal, BP would remainin Russia but - initially at least - only as a minority investor in anoil company controlled by the government of President Vladimir V. Putin. Later, BP is hoping to use this newstrategic tie with the Kremlin to drum up other business.
BP had been telegraphing its willingness to make a deal for some time, and Rosneft formally submitted an offer on Thursday to buy out BP's 50 percent of a joint venture here called TNK-BP.The board's authorization allowed BP's chief executive, Robert W. Dudley, to negotiate the final terms for BP's sale of its Russian holdings within a range of acceptable combinations of cash and shares,
Under the terms of thedeal, BP would remainin Russia but - initially at least - only as a minority investor in anoil company controlled by the government of President Vladimir V. Putin. Later, BP is hoping to use this newstrategic tie with the Kremlin to drum up other business.
BP had been telegraphing its willingness to make a deal for some time, and Rosneft formally submitted an offer on Thursday to buy out BP's 50 percent of a joint venture here called TNK-BP.The board's authorization allowed BP's chief executive, Robert W. Dudley, to negotiate the final terms for BP's sale of its Russian holdings within a range of acceptable combinations of cash and shares,
Interest rate (IR)
Interest rate(s)
The price(s) of obtaining the temporary use of money that one borrows from someoneelse who actually ownsit, normally expressed as a percentage of the amount borrowed per year. Since loans and loan repayment extendover considerable periods of time and entail more complex security arrangements than a simple cash-on-the-barrelhead exchange, interest ratesto be paid are normallyspelled out as part of a relatively complex written contract between borrower and lender.
The price(s) of obtaining the temporary use of money that one borrows from someoneelse who actually ownsit, normally expressed as a percentage of the amount borrowed per year. Since loans and loan repayment extendover considerable periods of time and entail more complex security arrangements than a simple cash-on-the-barrelhead exchange, interest ratesto be paid are normallyspelled out as part of a relatively complex written contract between borrower and lender.
Interest rate (IR)
Interest rate(s)
The price(s) of obtaining the temporary use of money that one borrows from someoneelse who actually ownsit, normally expressed as a percentage of the amount borrowed per year. Since loans and loan repayment extendover considerable periods of time and entail more complex security arrangements than a simple cash-on-the-barrelhead exchange, interest ratesto be paid are normallyspelled out as part of a relatively complex written contract between borrower and lender.
The price(s) of obtaining the temporary use of money that one borrows from someoneelse who actually ownsit, normally expressed as a percentage of the amount borrowed per year. Since loans and loan repayment extendover considerable periods of time and entail more complex security arrangements than a simple cash-on-the-barrelhead exchange, interest ratesto be paid are normallyspelled out as part of a relatively complex written contract between borrower and lender.
Law of diminishing returns (LoDR)
Sometimes also referred to as the law ofvariable proportions , this "law" is really a generalization economists make about the nature of technology when it is possible to combine the same factors of production in a number of different proportions to make the same product. The law states:
When increasing amounts of one factor of production are employed in production along with a fixed amount of some other production factor, after some point, the resulting increases in output of product become smaller and smaller.
(That is, first the marginal returns to successive small increases in the variable factor of production turn down, and then eventually the overall average returns per unit of the variable input start decreasing.) Since the law assumes that the available quantity of atleast one factor of production is fixed at agiven level and that technological knowledge does not change during the relevant period, the lawof diminishing returns normally translates intoa statement about the short-run choice of production possibilities facing a firm (since in the longer run it is virtually always possiblefor the firm to acquire more of the temporarily "fixed" factor -- building an additional factory building, buying additional land, installing additional machines of the same kind, installing newer and more advanced machinery, and so on.
When increasing amounts of one factor of production are employed in production along with a fixed amount of some other production factor, after some point, the resulting increases in output of product become smaller and smaller.
(That is, first the marginal returns to successive small increases in the variable factor of production turn down, and then eventually the overall average returns per unit of the variable input start decreasing.) Since the law assumes that the available quantity of atleast one factor of production is fixed at agiven level and that technological knowledge does not change during the relevant period, the lawof diminishing returns normally translates intoa statement about the short-run choice of production possibilities facing a firm (since in the longer run it is virtually always possiblefor the firm to acquire more of the temporarily "fixed" factor -- building an additional factory building, buying additional land, installing additional machines of the same kind, installing newer and more advanced machinery, and so on.
Monetary policy (MP)
Monetary policy
That part of the government's economic policy whichtries to control the size of the total stock of money (and other highly liquid financial assets that are close substitutes for money) available in the national economy in order to achieve policyobjectives that are often partly contradictory: controlling the rate of increase in the general price level ( inflation ), speeding up or slowingthe overall rate of economic growth (mainly by affecting the interest rates that constitute such a large share of suppliers' costs for new investment butpartly by influencing consumer demand through the availabilityof consumer credit andmortgage money), managing the level of unemployment (stimulating or retarding total demandfor goods and services by manipulating the amount of money in the hands of consumersand investors), or influencing the exchange rates at which the national currency trades for other foreign currencies (mainly by pushing domestic interest rates above or below foreign interest rates in order to attract or discourage foreign savings from entering or leaving domestic financial markets).
That part of the government's economic policy whichtries to control the size of the total stock of money (and other highly liquid financial assets that are close substitutes for money) available in the national economy in order to achieve policyobjectives that are often partly contradictory: controlling the rate of increase in the general price level ( inflation ), speeding up or slowingthe overall rate of economic growth (mainly by affecting the interest rates that constitute such a large share of suppliers' costs for new investment butpartly by influencing consumer demand through the availabilityof consumer credit andmortgage money), managing the level of unemployment (stimulating or retarding total demandfor goods and services by manipulating the amount of money in the hands of consumersand investors), or influencing the exchange rates at which the national currency trades for other foreign currencies (mainly by pushing domestic interest rates above or below foreign interest rates in order to attract or discourage foreign savings from entering or leaving domestic financial markets).
National debt (NB)
National debt
As usually defined, this denotes the total sum of the outstanding debtobligations of a country's central government. (But occasionally writers may use the term somewhat more broadly to refer to the total indebtedness of all levels of government, including regional and local governments, and sometimes also the indebtedness of government owned business entities such aslocal transit and communications systems or nationalized industries as well.) The national debt represents the accumulated total of all the government budget deficits of past years, less the accumulated total of all the government budget surpluses of past years.
As usually defined, this denotes the total sum of the outstanding debtobligations of a country's central government. (But occasionally writers may use the term somewhat more broadly to refer to the total indebtedness of all levels of government, including regional and local governments, and sometimes also the indebtedness of government owned business entities such aslocal transit and communications systems or nationalized industries as well.) The national debt represents the accumulated total of all the government budget deficits of past years, less the accumulated total of all the government budget surpluses of past years.
Phillips curve (PC)
Phillips curve
In the late 1950s, the British economist A.W. Phillips demonstrated an inverse statistical association between annual changes in average wage rates andthe rate of unemployment . When the annual wage growth rates and unemployment rates for Great Britain for each of the years from 1861 to 1957 were plotted as points on a two-dimensional graph,they rather neatly approximated a shallow hyperbola-shaped curve convex to the origin of the graph. That is, in years when unemployment rates were low, averagemoney wages tended to grow rapidly; but in years when unemployment rates were high, average money wages tended to grow little or even to decline. Other economists soon repeated Phillips's procedures with similardata from a number ofother industrialized countries and mostly found similar statistical relationships.
At the time, many Keynesian economists reasoned from this finding as follows: Because unemployment rates and wage increase rates are inversely related, the traditional government goals of maintaining both low inflation and low unemployment would seem to be inconsistent. Because wages are such a large share of the costs of production, rapid increases in average wages are bound to push up the general price level.
In the late 1950s, the British economist A.W. Phillips demonstrated an inverse statistical association between annual changes in average wage rates andthe rate of unemployment . When the annual wage growth rates and unemployment rates for Great Britain for each of the years from 1861 to 1957 were plotted as points on a two-dimensional graph,they rather neatly approximated a shallow hyperbola-shaped curve convex to the origin of the graph. That is, in years when unemployment rates were low, averagemoney wages tended to grow rapidly; but in years when unemployment rates were high, average money wages tended to grow little or even to decline. Other economists soon repeated Phillips's procedures with similardata from a number ofother industrialized countries and mostly found similar statistical relationships.
At the time, many Keynesian economists reasoned from this finding as follows: Because unemployment rates and wage increase rates are inversely related, the traditional government goals of maintaining both low inflation and low unemployment would seem to be inconsistent. Because wages are such a large share of the costs of production, rapid increases in average wages are bound to push up the general price level.
Fiscal policy (FP)
Fiscal policy
That part of government policy which is concerned with raising revenue through taxation and with deciding on the amounts and purposes of government spending. Keynesian economic theorists believe that government can, and should, regulate the overall pace of activity in the national economy through fiscal policy, principallyby deliberately having government borrow to spend more than it takes in (running a budget deficit ) to increase total demand for goods and services in times of high unemployment and economic slowdown (the deficit being created either by cutting taxes or by increasing spending or both). Similarly, Keynesian theorists would advocate havinggovernment spend less than it takes in (running a budget surplus ) to cool down the national economy when too great an expansion of total demand has pushed production to its physical limits and threatens to bring on excessive inflation .
That part of government policy which is concerned with raising revenue through taxation and with deciding on the amounts and purposes of government spending. Keynesian economic theorists believe that government can, and should, regulate the overall pace of activity in the national economy through fiscal policy, principallyby deliberately having government borrow to spend more than it takes in (running a budget deficit ) to increase total demand for goods and services in times of high unemployment and economic slowdown (the deficit being created either by cutting taxes or by increasing spending or both). Similarly, Keynesian theorists would advocate havinggovernment spend less than it takes in (running a budget surplus ) to cool down the national economy when too great an expansion of total demand has pushed production to its physical limits and threatens to bring on excessive inflation .
GDP; Gross Domestic Product
Gross Domestic Product (GDP)
An estimate of the total money value of all the final goods and servicesproduced in a given one-year period using the factors of production located within a particular country's borders
An estimate of the total money value of all the final goods and servicesproduced in a given one-year period using the factors of production located within a particular country's borders
GDP; Gross Domestic Product
Gross Domestic Product (GDP)
An estimate of the total money value of all the final goods and servicesproduced in a given one-year period using the factors of production located within a particular country's borders
An estimate of the total money value of all the final goods and servicesproduced in a given one-year period using the factors of production located within a particular country's borders
GNP; Gross National Product
Gross National Product (GNP)
An estimate of the total money value of all the final goods and servicesproduced in a given one-year period by the factors of production owned by a particular country's residents. ("Final" goods and services means goods and services sold or otherwise provided to their final consumers --that is, to avoid doublecounting, the value of steel sold to GM to make a car is not added separately into the GNP or GDP totals because its value is already included when we add in the final sales price of the car tothe customer.)
An estimate of the total money value of all the final goods and servicesproduced in a given one-year period by the factors of production owned by a particular country's residents. ("Final" goods and services means goods and services sold or otherwise provided to their final consumers --that is, to avoid doublecounting, the value of steel sold to GM to make a car is not added separately into the GNP or GDP totals because its value is already included when we add in the final sales price of the car tothe customer.)
Growth theory
Growth theory
The part of economic theory that seeks to explain (and hopes to predict) the rate at which a country's economy will grow over time. Economic growth is usually measured as the annualpercentage rate of growth in one or another of the country's major national income accounting aggregates,such as Gross National Product or Gross Domestic Product (almost always with appropriate statistical adjustments to discountthe potentially misleading effects of price inflation). Just about any country's economy will show sizable year-to-year and quarter-to-quarter fluctuations in its economic growth rate, but economic growth theorists tend to concentrate their efforts on analyzing and explaining the smaller variations in thelonger-term trend or average rate of economic growth over periods of a decade or more. They leave explanation of the shorter-term fluctuations around thelonger-term trend to specialists in business cycle theory because investigation has shownthat the predominant influences on short-term growth rates seemto differ in important ways from the determinants of an economy's long term average growth performance. It might also be added that the political effects of variations in long rangeeconomic growth ratestend to be substantiallydifferent from the political effects of the booms and busts of thebusiness cycle.
The short term ups anddowns of the business cycle have dramatic effects on popular perceptions of the country's economic well-being. In a recession, hundreds of thousands or even millions of people maybecome unemployed and suffer dramatic declines in their incomes for the duration of the crisis -- usually for a period of somewhere between sixmonths and one-and-a-half years before more normal economic conditions return again. Yet over the long haul, even rather small increases or decreases in the trend rate of economicgrowth will have muchmore profound and enduring effects on economic production and hence on the material living standards of the population.
The part of economic theory that seeks to explain (and hopes to predict) the rate at which a country's economy will grow over time. Economic growth is usually measured as the annualpercentage rate of growth in one or another of the country's major national income accounting aggregates,such as Gross National Product or Gross Domestic Product (almost always with appropriate statistical adjustments to discountthe potentially misleading effects of price inflation). Just about any country's economy will show sizable year-to-year and quarter-to-quarter fluctuations in its economic growth rate, but economic growth theorists tend to concentrate their efforts on analyzing and explaining the smaller variations in thelonger-term trend or average rate of economic growth over periods of a decade or more. They leave explanation of the shorter-term fluctuations around thelonger-term trend to specialists in business cycle theory because investigation has shownthat the predominant influences on short-term growth rates seemto differ in important ways from the determinants of an economy's long term average growth performance. It might also be added that the political effects of variations in long rangeeconomic growth ratestend to be substantiallydifferent from the political effects of the booms and busts of thebusiness cycle.
The short term ups anddowns of the business cycle have dramatic effects on popular perceptions of the country's economic well-being. In a recession, hundreds of thousands or even millions of people maybecome unemployed and suffer dramatic declines in their incomes for the duration of the crisis -- usually for a period of somewhere between sixmonths and one-and-a-half years before more normal economic conditions return again. Yet over the long haul, even rather small increases or decreases in the trend rate of economicgrowth will have muchmore profound and enduring effects on economic production and hence on the material living standards of the population.
Incentive
Incentive
Something that provides a motive for aperson to choose a particular course of action. Organized cooperative activities ina social setting -- such as cooperation for the purpose of economic production -- depends upon each of the participants having some sort of incentive to behave in the required cooperative fashion. Different societies (and even different organizations within the same society) vary considerably in the nature of the incentive systems upon which they characteristically rely to organize their common projects.
Incentives may be classified according to a number of different schemes, but one of the more useful classifications subdivides incentives into three general types: moral incentives,coercive incentives andremunerative incentives.
Something that provides a motive for aperson to choose a particular course of action. Organized cooperative activities ina social setting -- such as cooperation for the purpose of economic production -- depends upon each of the participants having some sort of incentive to behave in the required cooperative fashion. Different societies (and even different organizations within the same society) vary considerably in the nature of the incentive systems upon which they characteristically rely to organize their common projects.
Incentives may be classified according to a number of different schemes, but one of the more useful classifications subdivides incentives into three general types: moral incentives,coercive incentives andremunerative incentives.
Saturday 20 October 2012
Annual Rate of Return
Annual Rate of Return The annual rate of gain or loss on an investment expressed as a percentage.
Asset Allocation
Asset Allocation; The diversification of investments among several asset classes, such as stocks, bonds, and short-term investments (e.g., cash equivalents). Proper asset allocation may limit risk and increase opportunities.
Average Portfolio Maturity (APM)
Average Portfolio Maturity The average maturity of all the bonds in a bond fund’s portfolio.
Brokerage Window
Brokerage Window An investment option giving plan participants and beneficiaries the ability to setup self-directed brokerage accounts to select investments beyond those designated by a retirement plan
Capital Appreciation Fund (CAF)
Capital Appreciation Fund An investment fund that seeks growth in share prices by investing primarily in stocks whose share prices areexpected to rise. Capital Gain Any gain realized from the sale of a capital asset.
Capital Loss
Capital Loss; The loss in the value of an investment, calculated by the difference between the purchase price and the net sale price.
Certificates of Deposit (CDs)
Certificates of Deposit (CDs) Money deposited in a financial institution for a set period of time at a specified interest rate. The risk of losing principal with CDs issued by federally insured institutions is very low.
Closed-end Fund
Closed-end Fund A type of investment company that does not continuously offer new shares for sale but instead sells a fixed number of shares at one time in the initial public offering (IPO). After a fund’s IPO, its shares typically trade on a secondary market, such as the New York Stock Exchange. Legally known as a “closed-end company.”
Company Stock Fund (CSF)
Company Stock Fund; A fund that invests primarily in employer securities and may also maintain a cash position for liquidity purposes. Competing Funds An investment fund that is identified by the investment manager of another fund and is subject to special rulesrelating to an investor’s ability to buy and sell investments between the two funds. See Equity Wash Restriction
Compound Interest [CI]
Compound Interest; Interest earned not only on the original investment but on its accrued earnings as well. Conservative An investment approach thataccepts lower rewards in return for potentially lower risks.
Corporate Bond [CB]
Corporate Bond; A bond issued by a corporation, rather than by a government. The credit risk for a corporate bond is based on the repayment ability of the company that issued the bond. Credit Risk The risk that a bond issuer will default, meaning not repay principal or interest to the investor as promised. Credit risk is also known as"default risk." Current Yield The current rate of return of an investment calculated by dividing its expected incomepayments by its current market price. Custodian A person or entity (e.g., bank, trust company, or other organization) responsible for holding financial assets.
[FRS] Federal Reserve System
Federal Reserve System
The central bank for the United States banking system and the institution that holds the primary responsibility for the making and execution of American monetary policies. Its bank notes circulate today as the United States' everydaypaper currency. (Metal coins, however, are issued by the United States Treasury Department, not by theFederal Reserve.)
The Federal Reserve System represents an almost unique hybrid or blending of elements of governmental power with elements of private ownership and control. Because the authors of the 1913 legislation that set up the Federal Reserve System felt that it was vital to insulate monetary policy from"undue" pressure and influence by partisan politicians obsessed with their own short-range re-election prospects, the Federal Reserve was set up along the lines of an independent regulatorycommission -- not as just one more agency of the Executive Branch that would be under the direction of the President and supervised closely by Congress. The private banking community was also given a major role in the running of the Federal Reserve System that continues to give banking interests privileged access to the process by which the US government's monetary policy is made.
The Federal Reserve System's highest decision-making body is its Board of Governors , which consists of seven members. Members of the Fed's Board of Governors are nominated for their positions by the President of the United States and then must be confirmed by a majority vote of the Senate before taking office. The members ofthe Federal Reserve's Board of Governors serve very long terms (fourteen years), and, once appointed and confirmed, they may not be removed from office by either President or Congress (except through a cumbersome process ofimpeachment by Congress for serious violations of the criminal law). People selected for appointment to the Board of Governors have nearly always been professional bankers, executives of Wall Street brokerage houses, or, occasionally,professional economists.
The central bank for the United States banking system and the institution that holds the primary responsibility for the making and execution of American monetary policies. Its bank notes circulate today as the United States' everydaypaper currency. (Metal coins, however, are issued by the United States Treasury Department, not by theFederal Reserve.)
The Federal Reserve System represents an almost unique hybrid or blending of elements of governmental power with elements of private ownership and control. Because the authors of the 1913 legislation that set up the Federal Reserve System felt that it was vital to insulate monetary policy from"undue" pressure and influence by partisan politicians obsessed with their own short-range re-election prospects, the Federal Reserve was set up along the lines of an independent regulatorycommission -- not as just one more agency of the Executive Branch that would be under the direction of the President and supervised closely by Congress. The private banking community was also given a major role in the running of the Federal Reserve System that continues to give banking interests privileged access to the process by which the US government's monetary policy is made.
The Federal Reserve System's highest decision-making body is its Board of Governors , which consists of seven members. Members of the Fed's Board of Governors are nominated for their positions by the President of the United States and then must be confirmed by a majority vote of the Senate before taking office. The members ofthe Federal Reserve's Board of Governors serve very long terms (fourteen years), and, once appointed and confirmed, they may not be removed from office by either President or Congress (except through a cumbersome process ofimpeachment by Congress for serious violations of the criminal law). People selected for appointment to the Board of Governors have nearly always been professional bankers, executives of Wall Street brokerage houses, or, occasionally,professional economists.
Growth theory
Growth theory
The part of economic theory that seeks to explain (and hopes to predict) the rate at which a country's economy will grow over time. Economic growth is usually measured as the annualpercentage rate of growth in one or another of the country's major national income accounting aggregates,such as Gross National Product or Gross Domestic Product (almost always with appropriate statistical adjustments to discountthe potentially misleading effects of price inflation). Just about any country's economy will show sizable year-to-year and quarter-to-quarter fluctuations in its economic growth rate, but economic growth theorists tend to concentrate their efforts on analyzing and explaining the smaller variations in thelonger-term trend or average rate of economic growth over periods of a decade or more. They leave explanation of the shorter-term fluctuations around thelonger-term trend to specialists in business cycle theory because investigation has shownthat the predominant influences on short-term growth rates seemto differ in important ways from the determinants of an economy's long term average growth performance. It might also be added that the political effects of variations in long rangeeconomic growth ratestend to be substantiallydifferent from the political effects of the booms and busts of thebusiness cycle.
The short term ups anddowns of the business cycle have dramatic effects on popular perceptions of the country's economic well-being. In a recession, hundreds of thousands or even millions of people maybecome unemployed and suffer dramatic declines in their incomes for the duration of the crisis -- usually for a period of somewhere between sixmonths and one-and-a-half years before more normal economic conditions return again. Yet over the long haul, even rather small increases or decreases in the trend rate of economicgrowth will have muchmore profound and enduring effects on economic production and hence on the material living standards of the population.
The part of economic theory that seeks to explain (and hopes to predict) the rate at which a country's economy will grow over time. Economic growth is usually measured as the annualpercentage rate of growth in one or another of the country's major national income accounting aggregates,such as Gross National Product or Gross Domestic Product (almost always with appropriate statistical adjustments to discountthe potentially misleading effects of price inflation). Just about any country's economy will show sizable year-to-year and quarter-to-quarter fluctuations in its economic growth rate, but economic growth theorists tend to concentrate their efforts on analyzing and explaining the smaller variations in thelonger-term trend or average rate of economic growth over periods of a decade or more. They leave explanation of the shorter-term fluctuations around thelonger-term trend to specialists in business cycle theory because investigation has shownthat the predominant influences on short-term growth rates seemto differ in important ways from the determinants of an economy's long term average growth performance. It might also be added that the political effects of variations in long rangeeconomic growth ratestend to be substantiallydifferent from the political effects of the booms and busts of thebusiness cycle.
The short term ups anddowns of the business cycle have dramatic effects on popular perceptions of the country's economic well-being. In a recession, hundreds of thousands or even millions of people maybecome unemployed and suffer dramatic declines in their incomes for the duration of the crisis -- usually for a period of somewhere between sixmonths and one-and-a-half years before more normal economic conditions return again. Yet over the long haul, even rather small increases or decreases in the trend rate of economicgrowth will have muchmore profound and enduring effects on economic production and hence on the material living standards of the population.
Capitalism
Capitalism ..
A form of economic order characterized by private ownership of the means of production and the freedom of private owners to use, buy andsell their property or services on the market at voluntarily agreed prices and terms, with only minimal interference with such transactions by the state or other authoritative third parties.
A form of economic order characterized by private ownership of the means of production and the freedom of private owners to use, buy andsell their property or services on the market at voluntarily agreed prices and terms, with only minimal interference with such transactions by the state or other authoritative third parties.
Budget deficit
The amount by which total government spending is more than government income during a specified period; the amount of money which the government has to raise by borrowing or currency emission in order to make up for the shortfall in tax revenues.
(ATM) Automated Teller Machine .
A machine, activated by a magnetically encoded card or othermedium, that can process a variety of banking transactions. These include accepting deposits and loan payments, providing withdrawals,and transferring funds between accounts.
Bank Statement:
Bank Statement:
Periodically the bank provides a statement of a customer's deposit account. It shows all deposits made, all checks paid, and other debits posted during the period (usually one month), as well as the current balance.
Periodically the bank provides a statement of a customer's deposit account. It shows all deposits made, all checks paid, and other debits posted during the period (usually one month), as well as the current balance.
Bankruptcy:
Bankruptcy:
The legal proceedingsby which the affairs ofa bankrupt person are turned over to a trustee or receiver for administration under the bankruptcy laws. There are two types ofbankruptcy:
*. Involuntary bankruptcy-one or more creditors of an insolvent debtor file a petition having thedebtor declared bankrupt.
*. Voluntary bankruptcy-the debtor files a petitionclaiming inability to meet financial obligations and willingness to be declared bankrupt.
The legal proceedingsby which the affairs ofa bankrupt person are turned over to a trustee or receiver for administration under the bankruptcy laws. There are two types ofbankruptcy:
*. Involuntary bankruptcy-one or more creditors of an insolvent debtor file a petition having thedebtor declared bankrupt.
*. Voluntary bankruptcy-the debtor files a petitionclaiming inability to meet financial obligations and willingness to be declared bankrupt.
return on capital employed (ROCE)
A fundamental financial performance measure. A percentage figure representing profit before interest against the money thatis invested in the business. (profit before interest and tax, divided by capital employed, x 100 to produce percentage figure.)
return on investment
Another fundamental financial and business performance measure. This term means different things to different people (often depending on perspective and what isactually being judged) so it's important to clarify understanding ifinterpretation has serious implications. Many business managers and owners use the term in a general sense as a means of assessing the merit of an investment or business decision. 'Return' generally means profit before tax,but clarify this with theperson using the term -profit depends on various circumstances, not least the accounting conventions used in the business. In this sense most CEO's and business owners regard ROI as the ultimate measure of any business or any businessproposition, after all it'swhat most business is aimed at producing - maximum return on investment, otherise you might as well put your money in a bank savings account. Strictly speaking ReturnOn Investment is defined as:
Profits derived as a proportion of and directly attributable to cost or 'book value' of an asset, liability or activity, net of depreciation.
Profits derived as a proportion of and directly attributable to cost or 'book value' of an asset, liability or activity, net of depreciation.
German Banking Sector not out of danger moodys says
The debt ratings agency Moody's Investors Service provided a reminder Friday that the vaunted German economy has a major weakness: its banking system.
In a report, Moody's warned that German banks suffer from meager profits, rising risk and insufficient reserves to absorb losses. The rating agency reaffirmed the negative outlook it has assigned to German banks since 2008.
The poor state of German banks seems surprising considering that the country's economy has heldup fairly well to the euro zone crisis. In addition, German banks benefit from the country's status as a haven from the turmoil and are able to borrow money atmuch lower rates than counterparts in other European countries. There isno real estate bubble and households are not over-indebted.
German banks did, however, invest heavily in countries like Spain and Italy before the crisis, because they could earn more profits there than at home. Four years after the financial crisis began, they remain exposed to problemsin those countries, Moody's said.
In addition, Moody's said, Germany still has too many banks in relation to the size of the country. The oversupply pushes down lending rates and profits.
"Intense competition and low interest rates are causing margin pressure that will likely further erodealready-weak bank revenues and profits," Moody's said in a statement early Friday.
The combination of low profits and high leverage"will make it difficult for many German banks to copewith major (unforeseen) losses," Moody's said.
In a report, Moody's warned that German banks suffer from meager profits, rising risk and insufficient reserves to absorb losses. The rating agency reaffirmed the negative outlook it has assigned to German banks since 2008.
The poor state of German banks seems surprising considering that the country's economy has heldup fairly well to the euro zone crisis. In addition, German banks benefit from the country's status as a haven from the turmoil and are able to borrow money atmuch lower rates than counterparts in other European countries. There isno real estate bubble and households are not over-indebted.
German banks did, however, invest heavily in countries like Spain and Italy before the crisis, because they could earn more profits there than at home. Four years after the financial crisis began, they remain exposed to problemsin those countries, Moody's said.
In addition, Moody's said, Germany still has too many banks in relation to the size of the country. The oversupply pushes down lending rates and profits.
"Intense competition and low interest rates are causing margin pressure that will likely further erodealready-weak bank revenues and profits," Moody's said in a statement early Friday.
The combination of low profits and high leverage"will make it difficult for many German banks to copewith major (unforeseen) losses," Moody's said.
Thursday 18 October 2012
EU leaders agree on bank oversight
Leaders of the European Union in Brussels have agreed Thursday to a dealfor a eurozone-wide banking supervisor in 2013 that is designed to help prevent future catastrophic bank failures that could threaten the monetary union.
The agreement sets the stage for development of a legal framework to allowthe European Central Bank to give emergency funds to ailing banks directly without going through national governments -- bailouts which, in turn, have required bailouts for the nations themselves, as was seen in Greece and Ireland.
The move is necessary to"break the vicious circle between banks and sovereigns," said European Council President Herman Van Rompuy in a press conference early Friday."Next hurdle to set up a single supervisory mechanism to prevent banking risks and cross-border contagion from emerging ... built with the integrity of the single market in mind."
The leaders set a goal of approving the legislative framework by January 1, with the new supervisory mechanism "operational inthe course of 2013," Van Rompuy said.
The group also released a statement on the progress of Greece toward meeting budget cuts required to qualify for the next roundof bailout payments, applauding "the determination of the Greek government to deliver on its commitments" and"remarkable efforts by theGreek people" while underlining the need for continued fiscal reform.
"This is necessary in order to bring about a more competitive private sector, private investment and an effective public sector," read a statement from the European leaders. "These conditions will allow Greece to achieve renewed growth and will ensure its future in the euro area."
Greece is one of 17 nations united under the single euro currency. Its debt woes sparked an existential crisis for the eurozone, underlining thegulf between monetary unity and fiscal unity among its members. The Brussels summit aims to help bridge that gap with banking sector reforms and more integrated budget policies.
"Without a stable monetary union there cannot be a stable European Union therefore the goal is to make the euro fully stable economically, financially and also politically," Van Rompuy said.
Athens must cut $17 billion from its budget in order to receive the next$41 billon tranche of bailout money it needs to keep from defaulting. Thetroika of the European Central Bank, International Monetary Fund and the European Commission overseeing the bailout left Athens for the Brussels summit without an agreement in place.
The summit started Thursday as tens of thousands of people rallied across Greece to protest further tough austerity measures, [and] as a general strike shut down much of the country's transportation network. Clashes broke out in Athens after protesters threw stones and bottles at police. Greece is in its fifth year ofrecession and has seen its unemployment rate soar to more than 25%.
The agreement sets the stage for development of a legal framework to allowthe European Central Bank to give emergency funds to ailing banks directly without going through national governments -- bailouts which, in turn, have required bailouts for the nations themselves, as was seen in Greece and Ireland.
The move is necessary to"break the vicious circle between banks and sovereigns," said European Council President Herman Van Rompuy in a press conference early Friday."Next hurdle to set up a single supervisory mechanism to prevent banking risks and cross-border contagion from emerging ... built with the integrity of the single market in mind."
The leaders set a goal of approving the legislative framework by January 1, with the new supervisory mechanism "operational inthe course of 2013," Van Rompuy said.
The group also released a statement on the progress of Greece toward meeting budget cuts required to qualify for the next roundof bailout payments, applauding "the determination of the Greek government to deliver on its commitments" and"remarkable efforts by theGreek people" while underlining the need for continued fiscal reform.
"This is necessary in order to bring about a more competitive private sector, private investment and an effective public sector," read a statement from the European leaders. "These conditions will allow Greece to achieve renewed growth and will ensure its future in the euro area."
Greece is one of 17 nations united under the single euro currency. Its debt woes sparked an existential crisis for the eurozone, underlining thegulf between monetary unity and fiscal unity among its members. The Brussels summit aims to help bridge that gap with banking sector reforms and more integrated budget policies.
"Without a stable monetary union there cannot be a stable European Union therefore the goal is to make the euro fully stable economically, financially and also politically," Van Rompuy said.
Athens must cut $17 billion from its budget in order to receive the next$41 billon tranche of bailout money it needs to keep from defaulting. Thetroika of the European Central Bank, International Monetary Fund and the European Commission overseeing the bailout left Athens for the Brussels summit without an agreement in place.
The summit started Thursday as tens of thousands of people rallied across Greece to protest further tough austerity measures, [and] as a general strike shut down much of the country's transportation network. Clashes broke out in Athens after protesters threw stones and bottles at police. Greece is in its fifth year ofrecession and has seen its unemployment rate soar to more than 25%.
Apple loses UK tablet design appeal versus Samsung
Apple has lost its appeal against a UK ruling that Samsung had not infringed its design rights.
A judge at the High Court inLondon had originally ruledin July that the look of Samsung's Galaxy Tab computers was not too similarto designs registered in connection with the iPad.
He said at the time that Samsung's devices were not as "cool" because they lacked Apple's "extreme simplicity".
Apple still needs to run ads saying Samsung had not infringed its rights.
The US firm had previously been ordered to place a notice to that effect - with a link to the original judgement - on its website and place other adverts in the Daily Mail, Financial Times, T3 Magazine and other publications to "correctthe damaging impression" that Samsung was a copycat.
The appeal judges decided not to overturn the decision on the basis that a related Apple design-rights battle inthe German courts risked causing confusion in consumers' minds.
"The acknowledgment must come from the horse's mouth," they said. "Nothing short of that will be sure to do the job completely."
However, they added that the move need not "clutter" Apple's homepage as it would only have to add a link entitled"Samsung/Apple judgement" for a one-monthperiod.
A spokeswoman for Samsungsaid it welcomed the latest ruling.
"We continue to believe that Apple was not the first to design a tablet with a rectangular shape and rounded corners and that the origins of Apple's registered design features can be found in numerous examples of prior art.
"Should Apple continue to make excessive legal claims in other countries based on such generic designs, innovation in the industry could be harmed and consumer choice unduly limited."
Apple declined to comment.It can still appeal to the UK Supreme Court, otherwise the ruling applies across the European Union.
Registered design
Three judges were involved in the Court of Appeal review of the case.
Apple had reasserted its claim saying that the front face and overall shape of thetablets was the most important factor - rather thanthe overall design - because users would spend most of their time looking at a tablet's screen and holding it
A judge at the High Court inLondon had originally ruledin July that the look of Samsung's Galaxy Tab computers was not too similarto designs registered in connection with the iPad.
He said at the time that Samsung's devices were not as "cool" because they lacked Apple's "extreme simplicity".
Apple still needs to run ads saying Samsung had not infringed its rights.
The US firm had previously been ordered to place a notice to that effect - with a link to the original judgement - on its website and place other adverts in the Daily Mail, Financial Times, T3 Magazine and other publications to "correctthe damaging impression" that Samsung was a copycat.
The appeal judges decided not to overturn the decision on the basis that a related Apple design-rights battle inthe German courts risked causing confusion in consumers' minds.
"The acknowledgment must come from the horse's mouth," they said. "Nothing short of that will be sure to do the job completely."
However, they added that the move need not "clutter" Apple's homepage as it would only have to add a link entitled"Samsung/Apple judgement" for a one-monthperiod.
A spokeswoman for Samsungsaid it welcomed the latest ruling.
"We continue to believe that Apple was not the first to design a tablet with a rectangular shape and rounded corners and that the origins of Apple's registered design features can be found in numerous examples of prior art.
"Should Apple continue to make excessive legal claims in other countries based on such generic designs, innovation in the industry could be harmed and consumer choice unduly limited."
Apple declined to comment.It can still appeal to the UK Supreme Court, otherwise the ruling applies across the European Union.
Registered design
Three judges were involved in the Court of Appeal review of the case.
Apple had reasserted its claim saying that the front face and overall shape of thetablets was the most important factor - rather thanthe overall design - because users would spend most of their time looking at a tablet's screen and holding it
Citigroup's new chief executive Michael Corbat will be paid 10pc less than his predecessor Vikram Pandit
Mr Corbat, who was named chief executive on Tuesday after Mr Pandit's shock exit , will be paid a basic salary of$1.5m (£920,000), Citi said.
That compares with the$1.67m in base salary that Mr Pandit received last year. Citi has yet to disclose the potential size of a possible bonus for Mr Corbat, who received total compensation of $9m in 2010.
Mr Pandit's total compensation last year was$15m, a sum which alongside a multi-million dollar retention bonus, provoked a revolt from the bank's shareholders in April .
Citi had already paid Mr Pandit $7m of the $15m in cash, with the rest due to be paid in shares. Mr Pandit is expected to receive the remaining sum as long as he does not work for a major competitor over the next three years
That compares with the$1.67m in base salary that Mr Pandit received last year. Citi has yet to disclose the potential size of a possible bonus for Mr Corbat, who received total compensation of $9m in 2010.
Mr Pandit's total compensation last year was$15m, a sum which alongside a multi-million dollar retention bonus, provoked a revolt from the bank's shareholders in April .
Citi had already paid Mr Pandit $7m of the $15m in cash, with the rest due to be paid in shares. Mr Pandit is expected to receive the remaining sum as long as he does not work for a major competitor over the next three years
Man arrested in Federal Reserve terror plot
Federal authorities running a sting operation arrested a 21-year-old Bangladeshi man, who came to the U.S. on a student visa and was allegedly planning to blow up the Federal Reserve Bank of New York with what he believed was a 1,000-pound bomb, officials said.
Quazi Mohammad Rezwanul Ahsan Nafis was detained Wednesday after an alleged attempt to detonate the device, which was inert and partof an elaborate investigation by federal authorities and NYPD detectives.
Prosecutors say Nafis wasapparently motivated byal Qaeda and traveled tothe United States in January under the pretext of attending college in Missouri in order carry out "a terrorist attack on U.S. soil" and to recruit members to form a terrorist cell.
Accused 9/11 mastermind says U.S. tortured in name of national security
It's not clear whether Nafis maintained al Qaeda ties, but authorities say he apparently claimed that the plot was his own, and that it was his sole motivation for the U.S. trip.
One of the people Nafis apparently contacted was an FBI source to whom he proposed multiple targets, including a high-ranking U.S. officialas well as the New York Stock Exchange, authorities said.
At one point, the suspectcontemplated President Barack Obama as a target, but that idea never progressed, a U.S. official with knowledge of the investigation said.
While the details surrounding the suspected plot remain murky, prosecutors say Nafis indicated that he wanted to "destroy America" by going after the nation's financial institutions and ultimately settled on thelandmark bank.
The undercover agent, authorities say, also provided 20 bags of 50 pounds each of purported explosives to Nafis, who then stored the material in a warehouse in preparation for the strike.
They say Nafis further divulged a "Plan B" thatinvolved carrying out a suicide attack should police thwart his initial effort.
PepsiCo Inc. (PEP) says its net income dipped 5 percent in the third quarter,
PepsiCo Inc. (PEP) says its net income dipped 5 percent in the third quarter, as the food and beverage maker worked to turn aroundits business and bolsterits flagship brands.
The company stood by its guidance for theyear, however, and profit came in above Wall Street expectations.
PepsiCo says it earned$1.9 billion, or $1.21 per share, for the period. That's compared with $2 billion, or $1.25 per share, a year ago. Earnings from core operations were $1.20 per share, better than the $1.16 per share analysts expected.
Revenue fell 5 percentto $16.65 billion, partly because of unfavorable currency exchange rates and the refranchising of itsbusiness in China and Mexico. That was shortof the $16.96 billion Wall Street expected.
Wednesday 17 October 2012
Bank of America reported a slim quarterly profit
Bank of America reported a slim quarterly profit on Wednesday, a small success for the bank after doling out huge payments to settle claims it misled investors about its takeover of Merrill Lynch during the financial crisis.
The bank reported$340 million in net income, a 95 percent drop from the $6.23 billion profit it posted in the period a year earlier. The results amounted to zero cents per diluted share,compared with 56 cents last year.
The bank's revenue also dropped 28 percent, to $20.6 billion. The top and bottom line figures reinforced concerns that Bank of America, the nation's second-largest by assets after JPMorgan Chase, had struggled to shed the legacy of the 2008 crisis.
I.B.M. delivered a mixed and somewhat unsettling quarterly performance
I.B.M. delivered a mixed and somewhat unsettling quarterly performance on Tuesday. Profits barely exceeded Wall Street's expectations, while revenue fell well below.
The results, analysts said, were unlikely to reassure investors concerned about the global outlook for technology spending. In a conference call with analysts, Mark Loughridge, I.B.M.'s chief financial officer, said the revenue shortfall came from a slowdown in business, especially in September, in certain markets including the United States, where revenue fell 5 percent.
"It was surprisingly disappointing," said A. M. Sacconaghi, an analyst at Sanford C. Bernstein. "All the businesses were light."
In after-hours trading, I.B.M. shares fell $7.10 a share, or 3.4 percent, to $203.90. In the regular session, the company's stock price rose 1 percent, or$2.07 a share, to close at $211.00 a share.I.B.M. Squeezes Out a Profit as Its Revenue Declines
I.B.M. is the world's largest supplier of information technology - computer hardware, software and services -to corporations and governments. So the company's results are watched as a gauge oftechnology spending trends.
But I.B.M., more than other computer companies in the corporate market, has steadily shifted its business in recent yearsto software and services. As a result, an estimated 40 percent of the company's revenue and 60 percent of its profits come from steady subscriptionlike businesses, mainly software license fees and services contracts. That means I.B.M. is more insulated from industry cycles than most other technologysuppliers.
I.B.M. has also shed hardware businesses with low profit margins including personal computers and disk drives.
capital employed
The value of all resources available to the company, typically comprising share capital, retained profits and reserves, long-term loans and deferred taxation. Viewed from the other side of the balance sheet, capital employed comprises fixed assets, investments and the net investment in working capital (current assets less current liabilities). In other words: the total long-term funds invested in or lent to the business and used by it in carrying out its operations
dividend
A dividend is a payment made per share, to a company's shareholders by acompany, based on the profits of the year, but not necessarily all of the profits, arrived at by the directors and voted at the company's annual general meeting. A company can choose to pay adividend from reserves following a loss-making year,and conversely a company can choose to pay no dividend after a profit-making year, depending on what is believed to be in the best interests of the company. Keeping shareholders happy and committed to their investment is always an issue in deciding dividend payments. Along with the increase in value of a stock orshare, the annual dividend provides the shareholder with a return on the shareholding investment
'free on board
The FOB (Free On Board) abbreviation is an import/export term relating to the point at which responsibility for goods passes from seller (exporter) to buyer (importer). It's in this listing because it's commonly misunderstood and also has potentially significant financial implications. FOB meant originally (and depending on the context stills generally means) that the seller is liable for the goods and is responsible for all costs of transport, insurance, etc., until and including the goods being loaded at the (nominated FOB) port. An importing buyer would typically ask for the FOB price, (which is now now often linked to a port name, eg., FOB Hamburg or FOB Vancouver), knowing that this price is 'free' or inclusiveof all costs and liabilities of getting the goods from the seller to the port and on board the craft or vessel. Logically FOB also meant and still means that the seller is liable for any loss or damage up to the point that the goods are loaded onto the vessel at the FOB port, and that thereafter the buyerassumes responsibility for thegoods and the costs of transport and the liability. From the seller's point of view an FOB price must therefore include/recover his costs of transport from factory or warehouse, insurance and loading, because the seller is unable to charge these costs as extras once the FOB price has been stated. The FOB expression originates particularly from the meaning that the buyer is free of liability and costs of transport up to the point thatthe goods are loaded on board the ship. In modern times FOB also applies to freight for export by aircraft from airports. In recent yearsthe term has come to be used in slightly different ways, even to the extent thatother interpretations are placed on the acronym, mostcommonly 'Freight On Board', which is technically incorrect. While technically incorrect also, terms such as 'FOB Destination' have entered into common use, meaning that the insurance liability and costs of transportation and responsibility for the goods are the seller's until the goods are delivered to the buyer's stipulated delivery destination. If in doubt ask exactly what the other person means by FOB because the applications have broadened. While liability and responsibility forgoods passes from seller to buyer at the point that goodsare agreed to be FOB, the FOB principle does not correlate to payment terms, which is a matter for separatenegotiation. FOB is a mechanism for agreeing price and transport responsibility, not for agreeing payment terms. In summary: FOB (Free On Board), used alone, originally meant that the transportation cost and liability for exported goods was with the seller until the goods were loaded onto the ship (at the port of exportation); nowadays FOB (Free On Board or the distorted interpretation 'Freight On Board') has a wider usage - the principle is the same, ie., seller has liability for goods, insurance and costs of transport until the goods are loaded (or delivered), but the point at which goods are 'FOB' is no longer likely to be just the port of export - it can be anyplace that it suits the buyer to stipulate. So, if you are an exporter, beware of buyers stipulating 'FOB destination' - it means the exporter is liable for the goods and paystransport costs up until delivery to the customer.
Bank Insurance Fund
A unit of the FDIC that provides insurance protections for banks that arenot classified as a savings and loan association. As with all FDIC protection, the BIF provides coverage of up to$250,000 per customer account for insolvent banks. The BIF was created as a result of the savings and loan meltdown in the late eighties.
'Bad Debt Reserve'
An account set aside by a company to account for and offset losses that arise as a result of defaults from futures loans. This figure maybe calculated based on historical norms or other known information about therelative safety of the debt.
Also known as a "loss reserve".
Also known as a "loss reserve".
New survey: Popularity of Mobile Banking Jumps
A new survey by the American Bankers Association shows a sharp increase in the popularity of mobile banking, driven mainly by customers in the 18 to 34-year-old age group. The survey of 1,000 U.S. adults, conducted Aug. 2-6, 2012, by Ipsos Public Affairs, an independent market research firm, revealed that while the Internet remains the most popular banking method, mobile banking is now preferred by 6 percent of customers, a 100 percent increase from 2010, and by 15 percent of 18-34 year olds, also known as “millennials.”
This is the fourth year in a row that customers have named the Internet as their favorite way of conducting their banking business, with 39 percent of respondents saying it is the method they use most often to manage their bank accounts.
The second most popular way to bank — visiting a branch — continued its downward trend to 18 percent.
“The survey results show consumers have a clear preference for the speed and convenience that come with Internet and mobile banking,” said Nessa Feddis, ABA senior counsel and retail banking expert. “However, banks are committed to serving the needs of all customers regardless of which method they prefer,” she added.
The survey’s margin of error is +/- 3.1 percent.
When asked “Which method do you use most often to manage your bank account(s),” customers responded as follows:
*. Internet Banking (laptop orPC) – 39 percent (36 percent in 2010)
*. Branches – 18 percent (25percent in 2010)
*. ATMs – 12 percent (15 percent in 2010)
*. Mail – 8 percent (8 percent in 2010)
*. Telephone - 9 percent (6 percent in 2010)
*. Mobile (cell phone, Blackberry, PDA, I-Pad, etc.) – 6 percent (3 percentin 2010)
“These results show customers are embracing new technologies that make managing a bank account simpler, easier and more convenient but that doesn’t mean that the traditional bank branch is going anywhere,” said Feddis.
“Branch design may evolve as a result of declining foot traffic. However, we know that nothing replaces humaninteraction and that’s why branches will never disappear,” she added.
Online banking first became the most preferred banking method in 2009 with 25 percent of customers namingit as their favorite. Previously,visiting a branch was the most popular method, followed by ATMs.
About the Survey
These are some of the findings of an Ipsos poll conducted Aug. 2-6, 2012. For the survey, a national sample of 1,000 adults aged 18 and older were interviewed by telephone. Weighting was employed to balance demographics and ensure that the sample's composition reflects that of the universe. A survey with an un-weighted probability sample of this size and a 100 percent response rate wouldhave an estimated margin of error of +/- 3.1 percentage points 19 times out of 20 of what the results would have been if the entire populationof adults aged 18 and older in the United States had been polled. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.
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