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Posts Tagged ‘WSJ’

In Odd European Twist, Banks Owe Borrowers

Posted by hkarner - 14. April 2015

Date: 14-04-2015
Source: The Wall Street Journal

Subzero rates have put some lenders in an inconceivable position: paying interest to those who have borrowed money from them

Tumbling interest rates in Europe have put some banks in an inconceivable position: owing money on loans to borrowers.

At least one Spanish bank, Bankinter SA, the country’s seventh-largest lender by market value, has been paying some customers interest on mortgages by deducting that amount from the principal the borrower owes.

The problem is just one of many challenges caused by interest rates falling below zero, known as a negative interest rate. All over Europe, banks are being compelled to rebuild computer programs, update legal documents and redo spreadsheets to account for negative rates. Den Rest des Beitrags lesen »

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The Fiscal Challenge of an Aging Population

Posted by hkarner - 14. April 2015

Date: 13-04-2015
Source: The Wall Street Journal

There’s a demographic time bomb that’s about to go off. Here’s what governments should do to get their finances in order.

Global economic growth is picking up, monetary policy is still extremely loose and nowhere is there a threat that a deflationary spiral might develop. Yet the demand for expansionary fiscal policies is still prominent. Meanwhile, government deficits remain too high to bring down record levels of public debt. It’s time to change the orientation of fiscal policy to deal with public finances again and wake up to the demographic time bomb that’s about to go off.

In many developed countries, gross public debt is now higher than gross domestic product. In Japan it’s almost 250%. Greece, Italy, Portugal and Ireland are in good company with the U.S. in having public debt well above 100% of GDP. Public expenditure is often near historic highs, standing close to or above 50% of GDP. Social spending has gone up in all industrialized countries, typically by four to seven percentage points since 1990, and risks crowding out other, more productive government spending, such as investment. The high taxes and added bureaucracy of big government stifle growth and dynamism. Den Rest des Beitrags lesen »

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Saudi Arabia Maneuvers to Retain Oil Crown

Posted by hkarner - 13. April 2015

Date: 11-04-2015
Source: The Wall Street Journal

The kingdom is struggling to maintain its share of the global crude market against traditional allies in the U.S. and Persian Gulf
The kingdom’s oil exports declined 5.7% in 2014 compared with 2013.

Saudi Arabia is struggling to maintain its share of the global oil market in a contest that pits the world’s largest crude exporter against traditional allies in the U.S. and Persian Gulf.

The Saudi kingdom’s oil exports declined 5.7% in 2014 compared with 2013. Oil shipments to its fastest-expanding customer, China, reached their lowest levels since 2011 in the first two months of 2015, according to the China General Customs Administration. And its U.S. sales nearly halved in January compared with a year earlier, according to the U.S. Energy Information Administration. China and the U.S. are Saudi Arabia’s biggest importers, with 10% and 8%, respectively, of the kingdom’s production.

In China, Saudi Arabia is suffering from depressed demand and better deals being offered by its rivals in Russia, Kuwait and the United Arab Emirates. In the U.S., it faces competition from domestic shale producers whose flood of crude has helped shove down world oil prices. Den Rest des Beitrags lesen »

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Eurozone Retail Sales Fall After Four Straight Monthly Rises

Posted by hkarner - 9. April 2015

Date: 09-04-2015

Source: The Wall Street Journal

Decline in sales comes amid signs that the eurozone’s brush with deflation may be nearing its end 

Retail sales in the eurozone fell in February after four successive monthly increases, an indication that the boost to the spending power of households from lower oil prices may be waning.

The European Union’s statistics agency Wednesday said retail sales fell 0.2% from January, but were nevertheless 3.0% higher than in the same month of 2014 after strong rises since September.

The sharp decline in energy prices in the final months of last year left households with more money to spend on other goods and services, boosting consumer confidence and spending. But as oil prices have steadied in recent months, that boost has attenuated. For the first time since September, gasoline sales fell, while sales of food and drinks also declined.  Den Rest des Beitrags lesen »

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Europe’s Plunging Borrowing Costs Mark Two New Milestones

Posted by hkarner - 9. April 2015

Date: 08-04-2015
Source: The Wall Street Journal

Switzerland is first with 10-year bond at negative yield as Mexico lines up 100-year euro bond

Switzerland has become the first country to issue 10-year debt with a negative yield. Bond prices across Europe have surged this year, crushing yields for investors.

Europe’s plunging borrowing costs marked two new milestones on Wednesday, with Switzerland becoming the first country ever to issue 10-year debt that gives investors a yield under 0%, and Mexico lining up a rare deal to borrow euros that it will repay a century from now.

Bond prices across Europe have rocketed this year in response to the European Central Bank’s massive stimulus package, delivering bumper returns for existing bondholders and cheap deals for borrowers, but crushing yields for new investors. Den Rest des Beitrags lesen »

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IMF Warns (Again) of Growing Shadow-Banking Risks

Posted by hkarner - 9. April 2015

Date: 08-04-2015
Source: The Wall Street Journal

Lagarde CCChristine Lagarde, managing director of the International Monetary Fund.

Fearful that turmoil is brewing in opaque areas of the global financial system, the International Monetary Fund is renewing its call for greater oversight of the so-called shadow-banking industry.

“The evidence calls for a better supervision of institution-level risks,” the fund said Wednesday in a new assessment of the global financial system. “Currently, the oversight of the industry focuses on investor protection and disclosure, and regulators conduct little monitoring in most countries,” the fund said.

In the wake of the financial crisis, regulators around the world tightened oversight of the traditional banking sector. That bolstered the safety of one part of the financial sector.

But lending–and risks—have since migrated to the shadow-banking industry. The sector, which includes mutual funds, exchange-traded funds, hedge funds and other institutional investors, has ballooned since the financial crisis. It now has over $75 trillion in assets. Den Rest des Beitrags lesen »

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Dollar Sputters After Surge

Posted by hkarner - 7. April 2015

Date: 06-04-2015
Source: The Wall Street Journal

Some investors say U.S. currency’s biggest gains are over, as weaker data raise doubts about a Fed rate increase

A growing number of investors are betting that the U.S. Federal Reserve will put off any interest-rate increases until the end of 2015.
The dollar’s record rally, which rattled everything from the oil market to U.S. corporate earnings, is running out of gas.
Many investors remain bullish for the longer term, but some say the greenback’s biggest gains are in the rearview mirror.
The dollar’s downshift reflects heightened concerns that the U.S. economy is cooling, which were reinforced on Friday by a much weaker-than-expected jobs report. That has a growing number of investors betting the Federal Reserve will put off any interest-rate increases until the end of 2015.

Just a few months ago, many investors were thinking a Fed rate boost, which would be its first since 2006, could come as soon as June. Higher rates in the U.S. make owning the dollar more attractive. Den Rest des Beitrags lesen »

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Big Investor Involvement Could Boost Bitcoin

Posted by hkarner - 7. April 2015

Date: 06-04-2015
Source: The Wall Street Journal

Major players could reduce volatility, increase acceptance of virtual currency

Bitcoin CCBigger traders could get involved in bitcoin, potentially giving the currency a boost. People promoted bitcoin at a booth at a Las Vegas technology convention in January.

Some of the U.S.’s biggest proprietary traders and investors are testing the waters for a bigger move into bitcoin, giving a potential boost to the fledgling virtual-currency industry.

While still cautious of becoming exposed to “cryptocurrencies,” some of the firms, which trade with their own money on their own behalf, say they see potential for big profits in trading bitcoin as more investors enter the market and financial-services firms use the currency to streamline transactions.

Their involvement could help reduce volatility in the market for bitcoin, which has struggled to gain legitimacy in part because of concerns about wild swings in its price. Den Rest des Beitrags lesen »

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Investing in Stocks Against the Indexing Goliath

Posted by hkarner - 5. April 2015

Date: 04-04-2015
Source: The Wall Street Journal

Have index funds become so popular that they are ruining the financial markets for everyone else?

These autopilot portfolios, which buy and hold essentially all the securities in a market index without even trying to find the best and avoid the worst, have become the giants of the market. Index funds accounted for 35% of total assets in all stock mutual funds and exchange-traded funds at the end of 2014, up from 25% in 2010, according to Empirical Research Partners, a firm in New York.

In the past five years, estimates the investment-research firm Morningstar, investors have pulled $73.6 billion out of “active” U.S. stock funds that seek to beat the market and added $208.8 billion to index funds that seek only to match it. Den Rest des Beitrags lesen »

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