Economy Archives - US Finance Review

Industrial to Information Age: The Move

At first glance it appears that we are 100% integrated in the age of technology. On closer examination however, Nadeem Shaikh writes in Harvard Business Review that we are actually faced with a widening of the “gap between technological and organizational progress.”

We must ensure that – as a community of forward-thinking individuals – we are embracing a more digital approach, shifting our focus in that area in all industries. Ignoring signals due to concerns over short-term profits is not only futile, but could ultimately “cause negative ripples throughout broader capital markets.”

Thankfully ID Finance seems to have taken this on board. The digital finance firm recently created a self-learning chatbot for MoneyMan, its online lending platform serving customers in Spain, Georgia, Russia, Poland, Kazakhstan and most recently Brazil. In just a few short weeks more than a third of their customer requests were being processed automatically through the chatbot. The way it works is by engaging new clients at the loan application stage and with registered users when they log in to their personal account, thereafter finding the data needed to ascertain loan eligibility, as well as offering recommendations of relevant products tailored to the individual’s requirements and financial prudence.

Meanwhile for those in the New York area earlier this month, the In|Vest 2017 conference was well worth attending. A perspective was provided on upcoming digital trends and strategies on wealth management and was invaluable for those in the fintech industry. There were networking opportunities as well as demos and breakout sessions.

Ultimately the message we are hearing is to not let things go on ahead of us; get involved and get learning about digital upgrades.

Weaker Loonie Luring Tourists North

Canadian Gold Maple Leaf. 1 troy ounce. Reverse. Photo by Basketbread

Despite an exchange rate that only pays 70 Canadian cents on every US dollar, Canadians will still travel to the US twice as much as Americans heading north to Canada.

That declaration comes from a study conducted by the Toronto-Dominion Bank in which economist Derek Burleton analyzed travel between the two countries. The study was focused on how the weak Canadian dollar is effecting travel between the world’s longest undefended international border.

Last year, as most Canadians know quite well, the loonie lost 16 percent of its value last year compared to the US dollar. The Toronto-Dominion Bank believes this figure should remain stable for most of this year, 2016. Therefore, all of the study’s conclusions are based on this assumption.

Burleton found that the weaker Canadian dollar has indeed persuaded Americans to head north. Total visits by Americans to Canada went up by 1.6 percent during the first 11 months of 2015, compared to the same period the year before.

“American visits to Canada are finally picking up,” Burleton said. “With a similar momentum likely to carry over in 2016, American spending in Canada is poised to rise to $9.6 billion Canadian,” Burleton said, “the highest level in over a decade.”

Canadians also will spend much more in the USA than Americans will in Canada.

“Canadian visits south will continue to overshadow American visits north, and Canadians are expected to spend in the U.S. at least double the aggregate amount that Americans will spend in Canada,” Burleton noted.

New Study Reveals ETF Risks Greatly Exaggerated

Leveraged ETFs, or exchange-traded funds, have been getting a bad rap from certain quarters of the finance world. Larry Fink of BlackRock Inc is quoted as saying that ETFs could “blow up the whole industry, while others say they are not appropriated for most investors. Also known as Geared ETFs, these funds are created to reward investors with some multiple, such as 2x or 3x, of the positive (and also negative) daily payoff of a referenced index. The two big hesitations many observers have about these investment vehicles are that they are not a good fit for investors who prefer to buy and hold their stocks over the long haul; and on the macro level, the effects these vehicles could have on markets have the potential of being destabilizing.

A new study investigating these issues asserts that these fears are most likely exaggerated. Co-authored by Ivan Ivanov and Stephen Lenkey, and entitled “Are Concerns About Leveraged ETFs Overblown?” the study concludes that the money going in and out of the funds “diminish the potential for leveraged and Inverse ETFs to exacerbate volatility.”

According to the research, the extreme ETF volatility created by the compounding effects of a factor of three ( or negative three) times the day’s return of an index can indeed make the ordinary investor sweat, the overall effect on the market, the supporting stocks and underlying index, is controlled.

A leveraged exchange fund still might not be for ordinary investors. One major issuer of ETFs, Michael Sapir explained that “the understanding in the market for these products has matured significantly,” since they first came on the market. Sapir added that geared investment risk might not be for everyone. “But institutions and financial professionals can use them to enhance return and manage risk.”

Beijing Hosts China-Israel Cooperation

At the end of last month, Liu Yandong (China’s Vice Premier) and Avigdor Lieberman (Israel’s Foreign Minister) hosted the first China-Israel Joint Committee on Innovation Cooperation in Beijing. At the meeting, a three-year action plan on cooperating in innovation was signed between the two countries on issues such as: culture, education, healthcare and technology.

In addition, the Hobart Group – founded by Professor Shlomo Ben-Haim – with the China-Israel Rehabilitation Center for Autistic Children, signed a contract with the Park and will also be operating there. The Hobart Group is a medical group with top business operations experts, engineers and scientists, working in the fields of cardiac disease, diabetes, oncology, neurology and rehabilitation. Simultaneously the China-Israel Changzhou Innovation Park was established which marks the “official start of the construction of China and Israel’s first experimental zone for innovation cooperation.”

According to an English translation of the original article:

“Li Keqiang said in his congratulatory message that scientific technology is not bound by national borders, and innovation calls for cooperation. He hopes that the China-Israel Joint Committee on Innovation Cooperation will establish tight connections between the scientists of both countries, take full advantage of various resources of innovation, strengthen innovation cooperation, and contribute to both nations’ development in innovation and benefits for the people, achieving mutually beneficial and win-win results.”

Over the last two-and-a-half years, around 25 hi-tech Israeli companies have brought their operations to the China-Israel Changzhou Innovation Park. A China-Israel Collaboration Science and Technology Innovation Fund has been established, offering “an innovative and enterprising environment for Israeli projects and talents.”

Last year at a conference leaders from both China and Israel agreed to continue with collaboration on the above-mentioned industries, signing three economic cooperation agreements. Learn more from the original article in Chinese.

US Severing Its Dependence on Oil, Domestic and Otherwise

Shepard's Flat Wind Farm, Oregon by Steve Wilson — Shepherd’s Flat Wind Farm, Oregon by Steve Wilson

According to data collected from several sources, the United States seems to be reducing its reliance not only on foreign sources for oil, but for oil all together.

A sign of the new abundance of oil which is reducing our dependence on foreign oil is the drastic decline in the price of oil since the middle of the year, falling to price which has not been seen in five years. In concert with this development is the increase in shale boom which has boosted US oil production to the most it has been in 30 years.

In spite of the ready availability of abundant, cheap oil, consumption has not gone up. Instead the US is consuming the smallest amount of oil per dollar of GDP in over forty years. Whereas the US GDP and oil consumption used to go up and down together, today they seem to move independently. The fact that they are not linked is a sign that the US is severing its dependence on oil to fuel the economy. How did that happen?

For one thing, cars are highly fuel efficient and getting better every day. As baby boomers retire, they use fuel less and less. Young people are moving into the cities where cars are used less and public transportation is used more. Renewable energy sources are becoming ever more important sources fuel.

With the increase in production and decrease in consumption, imports to the US of oil resources have declined. Today we purchase almost no oil from countries like Russia and Nigeria, and our dependence on OPEC oil has also been in decline. In addition, the US is exporting its own supplies of crude oil, skyrocketing in the middle of 2014.

Almost 90 percent of the energy consumed in 2014 was produced right at home, bringing the US closer to 100 percent energy independence.

Spotlight on India for General Motors

General Motors India has announced that it will start exporting its cars out of the country. It will sell left-hand-drive versions of its Chevrolet Beat hatchback to Chile in 2015.

Up until now, the production in India hasn’t been at capacity. Their two factories can build 282,000 cars each year, but until now they have used less than a third of their total capacity. During the fiscal year that ended in March, they sold approximately 81,000 cars in India.

Many global automakers are looking to India now to become a regional export hub, especially for small cars. They hope to take advantage of the low-cost manufacturing base there.

Ed Sayres: Fiscal Developments

Despite the fact that America encountered a recession in the early part of the 21^st century, Ed Sayres managed to turn things around for an organization in the non-profit world. The American Society for the Prevention of Cruelty to Animals (ASPCA) encountered a serious financial boom when Sayres took over as CEO and President. In fact, with him at the helm, the ASPCA jumped from a net revenue of $43 to $116million.

Over the years, Sayres has developed a reputation for growing high-performing organizations positioned for growth. As well as growing non-profit organizations, Sayres has counseled CEOs, directors, and other top executives on fiscal management, strategic planning, Board development, fundraising etc. Sayres’ approach focuses on “innovation, collaboration, transparency and accountability.” His philosophy has over the years – through both non-profit and for-profit companies – been proven effective. As well, Sayres has combined his work in both sectors, having been at the forefront of developing strategic partnerships between the ASPCA and large business corporations including Walmart, Target and CVS.

Uber Rush Hits New York

In addition to their app-oriented car service called Uber, the company has recently announced its Uber Rush. They promise to let “your packages travel like a VIP.”

Starting in Manhattan, their plan is to be like a typical courier service. The user uses an app to call up the vehicle and to get a price quote. The courier then arrives and takes the item from one point to another. The service isn’t for the purchase of items, such as a lunch. Rather, it is to take items that have already been purchased from one location to the next.

The plan with Uber is to take 20% of the price that the drivers charge. And prices appear to be in the $20-$25 range. Drivers for Uber have to be at least 23, to be properly licensed and insured and to have had a background check. Uber says that Rush will expand to other areas of New York after confirming their success with the initial testing phase.

There are a few other companies that have had success in this realm such as Ebay Now that promises to deliver products from local stores in less than 2 hours for $5 and the Postmates app that offers food and goods that will be delivered starting at $5.

Time will tell how Uber Rush will do, but it’s worth keeping in eye on as it is rolled out in New York.

Financial Tips for a College Send-Off

Starting college is an exciting and overwhelming time, and financial talks are often pushed to the sidelines in the face of packing, meeting new friends, getting used to a new campus and adjusting to a college curriculum. However, managing finances as a college freshman can be more difficult than all of the above, so setting aside some time to discuss is essential.

The Courier of Montgomery County offers 5 topics to cover in the conversation:

1. You’re spending real money. ” Understanding where tuition and other funds are coming from may inspire your child to spend more carefully,” the article explains. “Clarify that loans will have to be repaid with interest and while scholarships, grants and gifts may seem like ‘free money,’ there are expectations that they’ll be used responsibly.”

2. Budgeting for surprise costs. “Freshmen encounter many unexpected expenses like club fees, transportation costs and social dues. Tracking these – as well as any regular bills and necessary purchases – can help your child be more prepared in the future. Budgeting is essential, especially since students don’t typically have a significant source of income. Warn your son or daughter to avoid wasteful spending habits such as buying expensive lattes or disregarding ATM fees.”

3. Using credit is OK, if you do it right. “Though it may worry you to see a credit card in your child’s wallet, having knowledge about the importance of good credit and the role it plays in the future purchase of a home or vehicle can help young adults establish financial independence.”

4. Don’t try to keep up with your roommate. “No matter where your child attends college, there will be students who can afford – or who choose – to spend frivolously. Encourage your son or daughter to be conscious of their spending habits regardless of your family’s financial situation. If your child decides to splurge on a spring break trip or expensive night downtown, stress the importance of careful saving and budgeting well ahead of time to avoid ensuing debt.”

5. “We’ll help, but we expect you to be accountable.”

Toys “R” Us Reveals its First Quarter Results

Toys “R” Us, Inc., one of the largest toy stores in the world, recently released its financial report for the first quarter.

Toys “R” Us Interim Chief Executive Officer Antonio Urcelay explained: “Similar to other retailers, our soft sales in the first quarter we partially impacted by the ongoing challenges of the global economic environment and the prolonged cool weather conditions around the world. Additionally, the continued weakness in the electronics and entertainment category negatively affected revenues.

“As we look forward to the remainder of the year, we are confident in our overall strategy and are committed to investing in initiatives that focus on providing exemplary service to our customers, enhancing our omnichannel capabilities to maximize sales through all channels, expanding our global reach, including throughout China and Southeast Asia, and deepening our assortment of differentiated products.”

traducción español