4 Markets Tipped to Become the Next BRICs

Posted on May 16, 2012 by Ross Naylor

In a recent interview, Katie Koch, managing director at Goldman Sachs Asset Management, said that South Korea, Mexico, Indonesia and Turkey are the four countries that are growing at a faster rate than any other in the emerging market space.

She was speaking at the Morningstar Investment Conference, where she said the four countries, along with Brazil, Russia, India and China, will be among the ten biggest contributors to global growth in terms of GDP over the next decade.

“These are the four countries which have emerged as the next growth markets, as the BRICs did a decade ago. Each country has favourable demographics and rising productivity levels,”

Her thoughts on European countries were particularly interesting:

“We take the view that global growth in the next decade will be vastly driven by the growth markets in the emerging market space, and all of these eight countries will be among the top ten contributors to global growth, while none of the European countries will feature.”

This obviously doesn’t preclude investors from investing in European companies as many of these will have exposure to the fast growing economies listed above. It is however, worth bearing in mind when managing your portfolio.

Back in 2005 Goldman Sachs outlined the Next 11 countries which could one day potentially rival the BRIC nations in terms of GDP growth. The countries earmarked at the time were Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam.

Ross Naylor - Qualified Financial Adviser in Poland

However, Koch acknowledged a number of the countries, such as Iran, are proving to be impossible to invest in due to geopolitical tensions.

She added this is why the likes of South Korea, Mexico, Indonesia and Turkey have now emerged as the four fastest growing markets to keep an eye on over the next decade.

“These four countries have established an adequate market size and depth to achieve scale and liquidity in terms of economic growth.

Growth will be mainly led by the domestic consumer, along with commodities, and we predict within 15 years two billion more people will be added to the middle class bracket.”

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Weekly Market Review – “Greecing” the Slide in Stocks

Posted on May 13, 2012 by Ross Naylor

Experienced IFA in Poland, UK Qualified, AES International PolandLast week started badly, with disappointing US employment figures and results of elections in France and Greece spooking the markets.

This continued for most of the week, only reversing somewhat on Thursday and Friday as cheaper prices encouraged bargain hunters back into the market. Overall though, the week ended with stocks decidedly in negative territory.

The main winners from all of the volatility were US and German government bonds; with the benchmark US 10-year treasury providing a refuge even with an insanely low yield below of 1.9% and the equivalent German Bund reaching a new record level.

Greece Re-Emerges from the Shadows

The far left wing coalition in Greece came in second place as the 2 major parties that had been responsible for passing the budget cuts for bailout money deal were pummelled in the polls.

As a result, there is a new kid on the block of European politics. He is Alexis Tsipras, he is the leader of the left wing coalition and he thinks that austerity is a four letter word.

Alexis Tsipras

In the face of this, and the election of a socialist Premier in France, the Euro, which had done quite well in the face of Eurozone recession and Spanish debt worries, dropped below the 1.30 level versus the dollar.

At Least the World’s Richest Man Likes Europe

Mexican telecoms company América Móvil, owned by Carlos Slim who by some measures is the world’s richest man, announced an offer to buy a EUR3.2 Billion stake in Dutch telecoms company KPN. He plans to use KPN as a base for further expansion in Europe.

He originally made his money by buying up Mexican companies at fire sale prices during the Latin American debt crisis in 1982 and repeated the trick in Brazil in 2002. Maybe he sees similar opportunities in Europe.

China Acts

China has loosened its monetary policy in an attempt to goose economic growth after a bunch of weak economic reports.

On Saturday, their central bank reduced the amount of cash that banks need to keep in reserve. This action effectively increases the amount of money that banks are able to lend, which should result in lower interest rates and a boost in industrial production.

An announcement that Chinese inflation had dropped earlier in the week gives their government room for even more stimulus if they need it.

Did You Look Down the Back Of the Sofa Jamie?

JP Morgan boss Jamie Dimon announced that an “error” resulted in them losing USD2 Billion within the space of 6 weeks.

In the grand scheme of things, a loss of this size is not actually such a big issue for JP Morgan. However, this didn’t stop their shares being taken to the woodshed when trading opened after the announcement, dropping by 9% early on Friday.

What is more of an issue is that JP Morgan are “supposed” to be better at managing risk than many other banks, which doesn’t really say much for those other banks.

It also gives more ammunition to those who want bank risk taking to be curtailed.

More Consolidation in Agri-Business Sector

Japanese grain trader Marubeni announced plans to buy fellow grain-trader Gavilon of the US. The deal is valued at USD5 billion and is a further sign of consolidation in this industry, coming on the back of Glencore’s deal to buy Canadian grain trader Viterra.

The driver for this consolidation is companies seeking to profit from rising trade in food commodities due to strong demand in emerging countries such as China.

Ross Naylor - Qualified Financial Adviser with AES International in Poland

Over the past decade, global trade of wheat has surged 40 per cent, corn is up nearly 25 per cent, and soybean trade is up 66 per cent, according to the US Department of Agriculture.

If you subscribe to my ezine or follow this blog regularly, you will have come across a couple of recent articles on gaining investment exposure to the agri-business sector (article 1, article 2).

WB  7th May 2012 – Market Summary

  • UK (FTSE 100): -3.3%
  • Europe (Eurofirst 300): -2.1%
  • US (S&P500): -1.2%
  • Japan (Nikkei): -2.6%
  • Brazil (Bovespa): -2%
  • Poland (WIG Index): -0.7%
  • China (FTSE Xinhua 200): -3%
  • Australia (S&P ASX 200): -2%
  • Gold: -2.9%

The Week Ahead

Eyes will turn towards Ireland as they hold a referendum at the end of May on Europe’s fiscal pact. A “No” vote could embolden France’s newly elected President as he negotiates with Germany.

Attempts to create a coalition government in Greece are likely to fail, leading to new elections in June and a game of chicken between Eurozone leaders and Greek voters. The probable message from the Eurozone will be “reject austerity and the money tap will be turned off”.

US 1st quarter earnings season continues to wind down in the coming week. Reports from Wal Mart, Target and Home Depot should give an indication as to consumer confidence as should retail sales figures which are out during the week.

Facebook is set to debut on Friday as the largest US IPO in history.

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Food for Thought (Literally): Part 2

Posted on May 9, 2012 by Ross Naylor

Ross Naylor - Qualified IFA, Representing AES International in PolandIn a previous post, I looked at the argument for gaining investment exposure to agriculture (you can find it here). This time, I want to look at HOW to gain such exposure should doing so fit within your risk parameters.

In my view, there are 4 ways to get investment exposure to agriculture.

The first is through investing in arable land. In this sector, the best opportunities lie in large scale, well run farms.  This means that individual investors will need to invest via a fund. Unfortunately, most of these funds are only open to institutional investors (pension funds and the like). The ones that are open to retail investors are generally small and very illiquid (i.e. hard to sell).

A second option would be to invest via an exchange traded fund (ETF) that holds futures contracts for a basket of agricultural commodities (corn, wheat, soya etc.). You need to be careful with this though, while ETFs are a useful tool, not all are what they seem, especially in the commodities field (Ouch!). Don’t be put off by this however; there are good ones out there.

Alternatively, you could use a managed futures fund. I will cover managed futures funds in a future post as they are an interesting investment tool in their own right. However as a brief explanation a managed futures fund trades futures contracts across all asset classes (commodities, stocks, bonds, currencies etc.). They look to exploit market trends and are able to follow those trends up and down.

Different managed futures funds have varying degrees of exposure to commodities, so you need to take a close look at their underlying holdings to make sure that they are giving you a sufficient degree of exposure to this sector.

The final, and probably simplest, option would be to invest in a fund that holds the securities of listed companies involved in things like agricultural machinery, seeds and fertilizers. The benefits of this last approach are firstly that it is the most liquid and secondly, you don’t run the risk of betting on the wrong crop.

One last word on cyclicality, all agriculture related investments are at risk if the global economy weakens in the short term. If there is a down turn, then you could see a sell off in all risk assets, including agricultural ones. As such, this may be a sector that you wish to average into over a period of time as opposed to going “all in” at once.

Caveat – If you are considering investing in this sector, you should consult a qualified financial adviser first.

[Investing in agriculture is just one of the areas covered in my regular e-newsletter. If you would like to sign up to receive future issues, just enter your details in the bar on the right.]

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Weekly Market Review

Posted on May 7, 2012 by Ross Naylor

Experienced IFA in Poland, UK Qualified, AES International PolandLast week was generally a poor one for equity markets. Most, including the UK, US and Japan were down between 2 and 2.5%.

China was a stand out exception, clocking up a 3.35% gain. Honourable mentions also go to Brazil and Poland which also managed to eke out modest gains.

The negative performance was largely driven by disappointing employment figures from the US and worries regarding the outcome of elections in France and Greece.

Earnings Round Third Base

Just over 70% of all S&P companies have now reported first quarter earnings. So far, 69% of them have beaten expectations.

On average we have seen year-on-year growth in earnings of nearly 7%. Analysts had predicted growth of just under 1% (quite a miss).

However, while better than predicted, this quarter will be the second in a row where year-on-year earnings growth has come in below 10% and if you look at the chart below, it does seem like a downward trend.

making the most of my Generali Vision

Source: Charles Sherry, S&P

European Central Bank: Steady As She Goes

Not unexpectedly, the ECB kept the base rate at 1% at their meeting last week. What was surprising, given Eurozone weakness, was that they made no mention of the possibility of any further rate cut.

They did however say that the “door was still open” for further stimulus if necessary.

More surprising were the actions of the Australian central bank. The market was expecting them to announce a 1/4 of a percent cut in interest rates.

However, they actually came out with a 1/2 % cut. In the short term, this is negative for the Australian Dollar (AUD). However, it does look like they are trying to get ahead of the curve, which may benefit them in the longer term.

OOPS!!

Ex-Yahoo CEO Carol Bartz controversially referred to the company’s board as “doofuses” after they dispensed with her services. Now that it has come to light that the guy that they hired to replace her seems to have lied on his CV, maybe she has a point.

In the grand scheme of things, saying one has a degree in accountancy and computer science as opposed to a degree in plain old accountancy doesn’t seem like a big deal, although I guess the computer science bit could have come in handy at Yahoo. It does raise questions about the competence of the Yahoo board however, who you would have thought would have checked something like this out before appointing him.

What’s Up and What’s Not in the US

Results of 2 surveys were printed in the US last week. The first covered manufacturing and it came out on the positive side, which caught most by surprise as the regional manufacturing surveys had been weak.

Staying with manufacturing, tbe Boston Consulting Group came out and said that they were bullish on American manufacturing.

On the down side, a second survey on the service sector was more gloomy with a larger than expected drop.

WB 30th April 2012 – Market Summary

  • UK (FTSE 100): -2.1%
  • Europe (Eurofirst 300): -2.3%
  • US (S&P500): -2.4%
  • Japan (Nikkei): -2.1%
  • Brazil (Bovespa): -2.1%
  • Poland (WIG Index): +0.46%
  • China (FTSE Xinhua 200): +3.35%
  • Australia (S&P ASX 200): +0.5%
  • Gold: -1.62%

The Week Ahead

How will markets react to Francois Hollande’s victory in France? His becoming President is probably already baked into market prices. However, his anti-austerity/pro growth platform is sure to add another wrinkle to an already complex situation.

The Facebook IPO circus will begin in earnest this week. A valuation of USD85-95 Billion is expected. To put that in perspective, to justify such a valuation Facebook are going to need to grow their revenues by at least 30% EACH YEAR for the next 5 years.

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America’s trade deficit data is out on Thursday. This is viewed as a barometer for global growth. Any increase in the deficit will see analysts revising down their GDP predictions.

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Weekly Market Review: Lots of Noise, Little Movement

Posted on April 29, 2012 by Ross Naylor

Experienced IFA in Poland, UK Qualified, AES International PolandLast week was a fairly benign one for markets. Most indexes ended up in positive territory; although by less than one per cent.

The exceptions were the US S&P 500 which ended up by just under 2 per cent and Japan which actually lost ground.

In the case of the S&P500, earnings continuing to beat expectations was the likely driver for gains (more below). In Japan,  their central bank’s decision to launch another round of Quantitative Easing (QE) may have been the cause of declines. I guess the Bank of Japan decided on this course of action because their multiple implementations of QE, going back for the last 20 years, have all worked so well! (rolls eyes).

Gold was also a gainer; it looks like speculators are starting to nibble at the lower price. The slew of negative encomic news may also have helped, as investors look for a safe haven.

Earnings Roll In and Continue to Clear a Low Hurdle

US earnings continue to exceed reduced expectations; this is causing analysts to ratchet up their conservative forecasts.

Industrial companies, including 3M and Boeing, impressed during reporting in the past week, as did Apple who posted a 94% profit increase to $11.6 billion. On the down side, UPS and Exxon were both high profile misses.

With just over 50% of the S&P500 having now reported, almost 70% of companies have beaten estimates. Guidance going forward has been muted however. Maybe this is another exercise in expectation management.

The Cat Gets Scratched

I mentioned in last week’s summary the significance of industrial equipment manufacturer Caterpillar’s results, given their exposure to construction in China.

Well the China part of their results was disappointing with sales weaker than expected. The same story came from their Brazil business which is not improving as fast as expected.

Overall though, they beat expectations and noted that there was:

“Strong global demand for most mining products and significant growth in replacement demand for products in the US.”

Not So Rosy In Europe

Some highlights (I’m not sure if that is the correct word to use) from Europe in the past week:

  • The Spanish Budget Minister, Montoro, presented a budget to parliament that contained the severest austerity measures since the nation was under rule of General Franco.
  • Britain officially went back into recession (although there is some dispute as to the accuracy of the figures).
  • Germany’s Manufacturing PMI (a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy) came in at a 33 month low. The figure for the Eurozone as a whole was equally gloomy.
  • The Dutch parliament finally agreed a new austerity budget.

Staying in Europe, this week’s Sherlock Holmes award goes to ex-Bundesbank President Ernst Welteke who states that, in hindsight, Greece wasn’t ready to join the Euro.

US Housing Prices

In the US, it was announced that New Home sales fell by 7.1% in March, to an annual pace of 328,000. Market experts had forecast an increase of 1.6%. In addition,  the time needed to clear the entire inventory supply of unsold homes increased. Finally, according to the people at S&P/CaseShiller, composite home prices fell  by 3.49% in February versus the same figures from a year ago.

On the plus side, previously released New Home sales figures for prior months were revised upwards. Additionally, Zillow Real Estate Research says that they expect the majority of US real estate markets to bottom out late this year or early next.

Why is the price of houses in America important? Remember, it was the bursting of the US real estate bubble that triggered the financial crisis in the first place.

The Fed Says…

Not a lot actually. After their meeting last week they announced that:

  • They expect growth “to remain moderate over coming quarters and then to pick up gradually”.
  • There will be no more quantitative easing (QE) for now but they are ready to act in case the economy falters.
  • They expect GDP and inflation to be a little higher than they thought last time and unemployment to be a little lower.

WB 23rd April 2012 – Market Summary

  • UK (FTSE 100): +0.09%
  • Europe (Eurofirst 300): +0.63%
  • US (S&P500): +1.8%
  • Japan (Nikkei): -0.8%
  • Brazil (Bovespa): +1.75%
  • Poland (WIG Index): +0.33%
  • China (FTSE Xinhua 200): +0.05%
  • Australia (S&P ASX 200): +0.07
  • Gold: +1.34%

The Week Ahead

In the US, things to look out for in the week ahead include consumer spending figures as well as information on manufacturing sentiment. We also have more S&P500 companies to report.

In Europe we have the French Presidential run off next Sunday. Campaign rhetoric suggests that if Hollande wins (the polls predict that he will), then he will back away from some of the tougher austerity measures. This is sure to signal more uncertainty in Europe.

[If you found this round-up useful and would like me to e-mail you a link to my market review every Monday morning, just enter your details in the bar on the right.]

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Weekly Market Review: So the Bar Was Set Low, But Still…

Posted on April 23, 2012 by Ross Naylor

As mentioned last week, US earnings season is now in full flow. With more than 20% of companies now having reported, an impressive 82% have beaten expectations (for the record, typically just under 70% of companies beat the estimates when the economy is expanding).

However, there appears to be growing concern about the sustainability of these earnings. There is only so far that cost cutting can go. Earnings are also now well above their trend and, as is always the case, these things return to their mean eventually.

Ross Naylor - Qualified Financial Adviser in Poland

In addition, as I mentioned last week, the expectation bar has been set pretty low this time around with regular downwards revisions prior to the reporting season starting which has made exceeding those expectations easier.

Pain in Spain

Spain was able to auction their target maximum amount of Euro bonds last week, and while they had to sweeten the pie a bit for buyers to take a bite of the debt ridden nation’s offerings,  the fact that the whole allotment went off without a hitch, has given the Eurozone some breathing space.

France also auctioned some debt issues last week, and they too saw yields rise (i.e. they too had to pay buyers more for the risk of taking their bonds).

Good News from Germany

There was positive news out of Germany during the week, with German Business Climate (Sentiment), as measured by the think tank IFO, increasing for a 7th consecutive month during April and the latest index of German Economic Sentiment as measured by the think tank folks at ZEW increasing gradually as well.

ZEW Indicator of German Economic Sentiment

There was a super article on Germany in last week’s Financial Times if you are interested in reading more on the country. You can find it here.

Gold Continues Its Slide

The price of gold dropped a further half a percent in the past week. There was a piece in the Wall Street Journal on the subject.

In it, Jon Spall, director of precious metals sales at Barclays was asked how he saw Gold performing this year. His response:

“Basically gold is an anti-government trade. People are buying gold now because it’s an uncertainty hedge. It’s not really about inflation or deflation. What we’re seeing more of this year is the theme that central banks and governments might be getting more in control of events, so people are more relaxed. And that’s why Gold has come off a bit this year. People are hoping that’s the end of the problems.”

Anyone for a Spot of Bank Bashing?

The past week was a good week for shareholder activism. Firstly, just over half of Citigroup’s shareholders refused to back the $15m pay plan for chief executive Vikram Pandit.

This was then followed up by Barclays CEO Bob Diamond promising to forgo parts of his bonus for 2011 until Barclays has improved profitability. This came after a number of institutional investors threatened to vote against the remuneration report and against directors on the remuneration committee at the annual general meeting next week as a protest.

It’s ok, you can dry your eyes, I don’t think either will starve.

IMF Expects Good Things from Australia

Australia is expected to lead the world’s major advanced economies over the next two years, according to data released during the week by the International Monetary Fund (IMF).

Their latest World Economic Outlook predicts Australian economic growth of 3.0 and 3.5 per cent in 2012 and 2013, respectively.

And Finally…

If this weekly review were a Clint Eastwood movie, then this would definitely be “the ugly”. Argentinean President Cristina Fernandez announced last week that she was going to renationalize (steal) 51% of national oil company YPF from Spanish oil firm Repsol.

Repsol originally held  57½% of the company, with analysts estimating the value of the 51% stake that was liberated at USD5 Billion.

This action highlights one of the major risks of investing in emerging markets, especially in the resources sector, which is the greater danger of government intervention.

WB 16th April 2012 – Market Summary

  • FTSE 100: +2.1%
  • Eurofirst 300: +1.6%
  • S&P500: +0.6%
  • Nikkei: +0.4%
  • Bovesopa (Brazil): +1.2%
  • WIG Index: -1.1%
  • FTSE Xinhua 200 (China): +1.8%
  • Gold: -0.5%

The Week Ahead

Earnings season continues in the coming week. Big names reporting include Procter & Gamble, Amazon and everyone’s favourite shiny gadget purveyor, Apple. Caterpillar also report and their figures should provide a useful indicator of what is happening in China as a lot of their machinery is used in the construction industry there.

Finally, we also have big Ben Bernanke and his chums at the Federal Reserve meeting up for their regular chin wag. No one really expects much from this meeting, just more of the same old same old with any further round of quantitative easing on hold for now.

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Food For Thought (Literally): Part 1

Posted on April 19, 2012 by Ross Naylor

Ross Naylor - Qualified Financial Adviser with AES International in PolandToday I want to take a closer look at agriculture as an investment opportunity. I want to address such questions as “should you be exposed to agriculture in the first place?” and “how does one gain investment exposure to agriculture?”

To set the scene, let’s begin with some numbers:

1) There are now approximately 7 billion people in the world. The UN expects this number to grow to 8.3billion by 2030.

2) The average person consumes 2,780 kcal per day. This is expected to increase to 3,050 kcal by 2030.

3) China has to feed 20% of the world’s population with 6% of its water. The net result of this is that they are going to have to significantly increase the amount of food that they import.

If you add these numbers up, global calorie consumption will increase by 30% by 2030. That on its own is manageable. Here is the rub though, 1 calorie consumed of grain is not the same as 1 calorie of protein.

expat financial advice, offshore ifa, generali vision

While the world population continues to grow, global arable land is actually shrinking. Source - Laguna Bay Pastoral Company.

Currently, in the wealthier parts of the world, diets are dominated by protein. In developing countries they consist primarily of grain. As the poor countries get wealthier however, they will want more protein. An example of this is in China, where average annual per capita meat consumption has doubled between 1994 and 2009, although it is still a long way behind most developed countries.

This will increase overall demand for grain massively as it takes 2-3 kilograms of grain to produce 1 kilogram of chicken, about 4 kilograms of grain to produce 1 kilogram of pork and 7-8 kilograms of grain to produce 1 kilogram of beef.

Therefore, if calorie consumption grows by 30% between now and 2030, demand for grain will grow by a multiple of that.

In other words, this is all about rising living standards. The OECD predicts that the global middle class will increase by 3 billion people in the course of the next 20 years. These people will all want their fair share of KFC buckets and Big Macs. This is likely to put tremendous pressure on grain prices in years to come.

So in answer to the first question, I would say that if your risk tolerance allows, this is a sector worth looking at. I will deal with the second question of HOW to get investment exposure to agriculture in a follow up blog post next week.

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Weekly Market Review – Facebook Paid How Much??

Posted on April 16, 2012 by Ross Naylor

Exparienced IFA in Poland, UK Qualified, AES International PolandOne of the highlights of last week was Facebook announcing that they were going to pay USD1 Billion for Instagram, a company that as Jon Stewart says  “kind of ruins your pictures”.

Bearing in mind that Instagram is 18 months old, has 13 employees and no profits, this seems like a pretty high price.

It is a sign of the times however, with many companies sitting on sizeable sums of cash. Using it to fund acquisitions is one of the ways that they can put this money to work.

Alcoa kicks off Q1 earnings season on a positive note

Last week saw the start of the first quarter earnings season in the US. Alcoa were the first to report and showed a profit of 10 cents a share. While this is considerably less than the same quarter last year, it is better than estimates which predicted a loss.

The bar for this quarters numbers has been set pretty low with a number of downwards revisions already. As a result there is plenty of room for positive “surprises”.

Europe (again)

We had relative calm in Europe in Q1, but rising yields on Spanish and Italian government debt brought back fears among investors in the past week.

Ross Naylor - Qualified Financial Adviser

Chart showing increase in Spanish bond yields since second round LTRO financing

Concerns are rising that both countries may be unable to implement further rounds of austerity measures. For some this may be no bad thing as there are growing fears that, as with Greece, further austerity could make their respective situations worse, not better.

In comparison with last autumn, when the crisis was at its height, Eurozone banks are now flush with cash, thanks to EUR1 Billion in cheap loans from the European Central Bank. As a result, we haven’t yet seen the same rush to the “safety” of US Treasury Bills.

China

While China’s Q1 growth figure came in below expectations, and marked a continued slowdown, the 8.1 per cent headline figure has already been greeted with relief by some China watchers. Many of them think that China’s slowdown is either at an end or about to end.

At the end of the week, China also expanded the daily trading range that its currency (RMB) can fluctuate against the US dollar. This is an important step towards allowing the RMB to eventually float freely.

Anecdotal evidence

I had a meeting with a client last week who develops factories across Europe for a large FMCG company. His feedback was that obtaining machinery for these factories is taking several months longer than average as the manufacturers (typically in Germany) have a sizeable backlog in orders.

This is positive news, especially as this high demand is not caused by lower prices, my client says that these have stayed firm.

WB 9th April 2012 – Market Summary

  • FTSE 100: -0.9%
  • Eurofirst 300: -2.2%
  • S&P500: -1.95%
  • Nikkei: +0.76%
  • Bovesopa (Brazil): -0.9%
  • WIG Index: +0.12%
  • FTSE Xinhua 200 (China): +2.4%
  • Gold: +0.45%

The Week Ahead

Lots of US financial groups are due to report Q1 earnings this week, including Citigroup, Goldman Sachs and Bank of America. You also have blue chips such as IBM, General Electric and McDonalds reporting.

In France, you can expect to see lots of last minute rabble  rousing from the presidential candidates as they gear up for the first round of elections on the 22nd of April.


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Thin Edge of the Wedge

Posted on April 13, 2012 by Ross Naylor

Experienced IFA in Poland, UK Qualified, AES International PolandGiven the recent debate in here Poland regarding the increasing of the state retirement age, I thought I would share some recent figures from the International Monetary Fund (IMF) on life expectancy.

The IMFs view is that governments consistently underestimate how quickly average life spans can rise, often by as much as 3 years.

They say that projections of future life expectancy are “consistently too low in each successive forecast, and errors were generally large”.

OK, 3 years doesn’t sound like a lot, but now image that everyone in your country lives for 3 years more and draws a pension for 3 years more. Who is going to pay for that?

They used the UK as an example and calculated that in such a case, the country’s public debt would rise from 76% of GDP to as much as 135% of GDP.

Put in monetary terms, that comes to an extra cost from state and public sector pensions as well as rescuing failed private sector pension schemes of GBP750 billion.

What is the conclusion that can be drawn from this? Simply that current increases in state retirement ages are only the beginning.

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March Market Review – No room for policy mistakes, says IMF

Posted on April 10, 2012 by Ross Naylor

Ross Naylor, Experienced ifa, qualified financial adviser, expat financial advice, offshore investing.Share prices rallied during the first quarter of 2012 amid hopes of a global economic recovery underpinned by renewed optimism that the Eurozone would avoid a collapse.

Early in March, investors around the world were nervous as Greece approached the deadline to secure sufficient backing for its controversial debt swap. Following the news of a favourable outcome to the bond exchange proposal, Eurozone leaders approved the latest bailout package worth €130bn while the International Monetary Fund (IMF) agreed to contribute a further €28bn to the black hole, sorry, rescue fund.

“Financial markets have become a little calmer and recent indicators point to an uptick in real economic activity, mostly in the US,” the IMF commented.

Echoing signs that US consumers are becoming more confident, the Dow Jones Industrial Average index rose by 2% during March. In the UK, the FTSE 100 index fell by 1.8% while in Japan the Nikkei 225 index rose by 3.7%. In Europe, the DAX index in Germany rose by 1.3% during the month while, the Athens General Index fell by 2% although it did rise by just over 7% for the first quarter as a whole.

“The global economy may be on the path to recovery but with not a great deal of room for manoeuvre and certainly no room for policy mistakes,” warned IMF managing director Christine Lagarde.

Meanwhile recent data from the Organization for Economic Co-operation & Development suggests that the UK and the Eurozone economies are showing some tentative indications of recovery, India and Russia are showing signs of positive momentum in growth, while the US and Japanese economies continue to improve. However, growth in Brazil and China is showing signs of slowing down.

According to a study undertaken by KPMG and the Greater Paris Investment Agency, London remains the most popular city in the world for foreign investment, followed by Shanghai, Hong Kong, Sao Paolo and New York. Moscow was in eighth place and Mumbai in 10th, reflecting the increasingly global influence of the emerging markets.

Fixed-income funds retained their position as the most popular asset class during the first quarter of 2012, according to the Investment Management Association. After four months of outflows, sales of equity funds moved into positive territory during March, however, suggesting investors may finally be growing more confident and less risk-averse

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