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Otaviano Canuto on Commodity Price Cycles
Otaviano Canuto, Policy Center for the New South
Commodity prices go through extended periods during which prices are well above or below their long-term price trend. The upswing phase in super cycles results from a lag between unexpected, persistent, and upward trends in commodity demand, matched with a typically slow-moving supply. Eventually, as adequate supply becomes available and demand growth slows, the cycle enters a downswing phase.
The latest super-cycle of commodity prices, starting in the mid-90s, reaching a peak by the time of the global financial crisis, and getting to the bottom by 2015, can be seen as associated to the developments of globalization that we have already dealt with in this series. More recently, some analysts have spoken that we might be on the verge of a new cycle, super-cycle or not.
Central Banks and Climate Change
Otaviano Canuto, Policy Center for the New South
There are three major reasons for central banks to engage on climate change issues. The first is the set of – physical and transition – risks to financial stability potentially brought about by natural disasters and trends derived from climate change. Second, the potential impact of climate change shocks and trends on economic growth and inflation and, therefore, on their monetary policy decisions. Finally, the possibility of using their balance sheets and their macroprudential toolkit to favor climate mitigation.
Global Current Account Impalances
Otaviano Canuto, Policy Center for the New South
After peaking in 2007 at around 6% of world GDP, global current-account imbalances declined to 3% of world GDP in the last few years. But they have never left entirely the spotlight, albeit acquiring a different configuration from that which marked the trajectory prior to the global financial crisis (GFC).
This is not because they threaten global financial stability, but mainly because they reveal asymmetries in adjustment and post-GFC recovery between surplus and deficit economies, and because of the risk of sparking waves of trade protectionism. They also reveal the sub-par performance of the global economy in terms of foregone product and employment, i.e. a post-crisis global economic recovery below its potential.
The Benefits to Renting Commercial Real Estate
It’s not a big surprise that the real estate market is hot right now, especially in key business areas like California. This applies to both residential and commercial real estate. As we’ve seen, rental trades adjust with the times, but until the bubble bursts, you should consider your options for commercial real estate in your area available for rent.
There are many shared working spaces that can be home to your business for a while until you grow enough to be able to purchase your own commercial real estate property. Here are a few reasons as to why it could be the best option for you and your business until that time comes.
Flexibility
The world is uncertain, so it’s really important to be flexible, which is one of the major pros of leasing a commercial property. Renting office space allows you to be flexible without having to make any major commitments. If you need more space, you can seek it out, but if you need to scale back it’s easy to do that as well. If most of your staff is now working remotely, you can still have a space for them to go if they want to have a quiet place to work. Renting commercial office space can be flexible in a financial capacity as well, allowing you to pay based on space and duration.
Financially friendly
Buying office real estate can be quite expensive these days, so in real estate, “boring” is good, as is stability. The option to rent office space allows you to still have a location in a prime spot without footing a major bill for it. Renting also minimizes your financial burden, since you don’t have to pay for the other costs associated with running an office. You can then use the money you’ve saved from these costs to invest in growing other parts of your business, or creating a savings goal for eventually purchasing an office space.
Professionalism
Having a physical location for your business is huge in terms of your reliability and professional appearance. At first, you might think renting will reflect poorly on your business, but it’s a strategic plan that can help ensure a brighter future. No matter the arrangement, having office space looks more professional than meeting clients or employees in loud public places for meetings. Having a fully functioning office is the best way for your employees to focus and to show your clients and customers that you are serious about what you do, both now and in the future.
The world of real estate is difficult to navigate, and while it can be an extremely difficult task to find space that fits your exact needs, there are companies like Jeff Tabor Group that make it simple to find the right place for you and your employees. With prime, spacious locations and affordable options, there are many different opportunities for you to build your business for a successful future.
Top 8 Factors to Consider When Selecting Financial Advisors
Need a hand with setting financial goals? If so, if you’re really not alone, especially since there are almost $90 trillion of international assets under management right now. Not sure how to find an expert with financial advising experience? To tell you the truth, finding the right professional to help you handle your finances requires knowing your options. Take a look at a few factors to consider when selecting financial advisors below!
1. The Suitability Standard
If you’re looking for a financial advisor who will put your needs first, consider this. Financial advisory firms that meet the suitability standard address and disclose any “conflict of interest” they may have when representing you. On the bright side, most financial advisory firms will put this down in writing for future reference.
Besides this, it’s also essential to think about whether or not your firm is an RIA, or Registered Investment Advisor. That’s because they are held to a higher standard as well!
2. Upfront and Clear Fees
Let’s be honest. No one wants to work with a financial advisor who isn’t clear about their fees. That being said, figuring out the total cost of getting your portfolio together can be a difficult and confusing task.
On the other hand, finding a financial advisor you can trust means that they will be more than happy to break down all of their fees for you.
This can include everything from:
- Hourly financial planning fees
- Fees for managing your portfolio
- Other hidden fees
Once you’ve made sure that all of your financial fees are as transparent as possible, you should be good to go.
3. Accurate Performance Reports
Now that we’ve got that covered, it’s also essential that your financial advisor of choice provides accurate performance reports. That’s because user-friendly transaction and holdings reports are the keys to managing your portfolio successfully.
To get started, you must decide whether you like to receive your reports on a:
- Monthly basis
- Quarterly basis
- Semi-annual basis
We highly recommend that the more you review your financial portfolio, the better!
4. A Simple Investment Process
When you’ve found the right financial advisor for you, the next step is to ask them what their process for investments is. For instance, they may let you know which investment vehicles are products that will work in your favour.
In addition to this, your financial advisor should also let you know whether not you need to make any changes to your existing investment portfolio. Besides this, they may also ask you about your primary contact information.
In exchange, we encourage you to ask your financial advisor about their professional credentials and experience as well.
5. An Independent Custodian
Additionally, you should ask your financial advisor if they use independent custodians like:
- Charles Schwab
- Fidelity
- TD Ameritrade
In case you didn’t know, independent custodians are great for providing additional asset reviews and records aside from your financial advisor. They’re also helpful in protecting your account from any fraudulent activity!
6. Honest Offerings and Services
You should also clearly understand the level of service that your financial advisor will offer. For instance, email and ask them if financial planning is included in their initial package. Also, find out what kind of financial planning software they use and whether or not you will have access to it. Believe it or not, this can potentially make or break your deal as well.
To get the ball rolling, here are a few more questions that you should ask your financial advisor:
- Do they schedule weekly, monthly, quarterly meetings?
- How long will it take to hear back from them?
- Do they provide investment offerings for beginners?
Once you learn more about the financial services that you are looking for, picking the best financial advisor for you should be a piece of cake.
7. Events and Education
Another important thing to consider is whether your financial advisor provides any educational events. This is particularly helpful if you’re interested in learning and understanding your overall financial portfolio.
To get started, be sure to ask your financial advisory firm if they will take the time to answer any questions you may have during your regularly scheduled meetings. Also, you can ask them if they will continue to educate you on your financial portfolio as time goes on. Finally, covering complex topics such as asset management is vital to your success as well.
8. Life Transitions
Last but not least, do your best to choose a financial advisor who puts your life transitions as their top priority. This can include common event such as:
- Getting married
- Having children
- Getting divorced
- Losing loved ones
Ask your financial advisor if they have any experience dealing with customers who are going through difficult life changes.
If so, what did they do to help them? As long as you feel comfortable opening up to your advisor, you should be in a good position to put your finances in their hands!
Why Hire a Financial Advisor?
Sometimes, going through a major life event is enough to make you want to rethink your personal finances. Typically, this type of event will include some sort of major gain or loss of money.
So that’s why it’s important to seek a financial advisor if you are:
- Close to retirement age
- Receiving an inheritance
- Getting married soon
- Going through a divorce
- Lost a partner
- Helping your parents with their finances
- Unsure of how investing works
- Looking for a “second opinion”
Now that we’ve got that covered, choose your advisor wisely!
Selecting Financial Advisors Is Simple
Having a hard time finding the perfect financial advisor for you?
Here’s the thing: When it comes to selecting financial advisors, the process shouldn’t be complicated. Fortunately for you, we are here to help.
From comparing advisor fees to reading references and reviews, we’ve got everything you need to succeed. If you’re finally ready to talk to your advisor, don’t forget to read our handy guide first!
Looking for my financial and banking help?
If yes, don’t hesitate to read more of our blog right away.
Make Smart Investing Choices With These UK Stock Market Tips
It’s been a tumultuous year for the UK stock market to say the least. Between Brexit and the Covid-19 pandemic, March led to some record-breaking highs and lows in the FTSE 100 due to global uncertainty. While some stock exchanges have recovered significantly, the UK stock exchange remains burdened. But it’s not all doom and gloom. There are still many ways to make smart and safe investments on the London stock exchange in 2021. We’ve put together our best stock market tips to help you know how to invest with confidence.
Knowledge is Power
We’ll start with a note for newcomers, although it could also serve as a reminder for the veterans of the exchange. Due to all the hype and chaos around the potential GME short squeeze, many new investors entered the market this year.
This is great news that more people feel empowered to invest, but it’s so important that investors have the knowledge they need to invest well.
By this, we don’t mean knowing everything there is to know about each stock and where it will go. Nobody knows this and anyone who says they do is kidding themselves. What we mean is you need to understand the terminology and mechanics of the UK stock market.
Know your terminology and particularly synonyms for all the different buzzwords. Know which companies pay dividends. Know your different market indices.
One of the most important things to understand and accept is that past performance does not guide future returns. While analysing previous share performance and market performance can give us great insight, that’s all. They don’t guarantee the future of the market or a certain stock.
The LSE Is Unique
The London Stock Exchange (LSE) is one of the largest stock exchanges in the world, with a market value of more than £2 trillion. It’s one of the oldest exchanges in the world and comes with unique benefits and risks.
We’ll start with the good news. Because of its age and stature, the LSE is a financial hub. It’s an advanced financial market.
This makes the securities market both very liquid and stable for investors. For those looking to exchange outside the New York Stock Exchange, the LSE is one of the best options.
It’s also home to some of the largest blue chip companies such as GlaxoSmithKline, Unilever and AstraZeneca. This comes with security, so investing in the LSE comes with less risk than other financial markets worldwide.
It’s not all good news though. The political risks of Britain are unique. While the entire world has been affected by the Covid-19 pandemic, only the UK has the additional risk of Brexit.
Though we’ve left and absorbed the initial hit and consequences, economic uncertainty remains. Not least, as Scotland and N.I polls both continue to show voters wish to leave the UK and rejoin the EU.
Politics aside, the UK economy is a service economy. This is common for developed countries and in good times can mean more stability. But in more volatile times, commodity prices and consumer credit changes can cause problems fast.
Much like our first point, understanding the unique risks and benefits of the LSE allows you to make safer and smarter investments long-term.
UK Stock Market Tips
This uncertainty sounds like bad news, but it isn’t that simple. For those who already invested and faced the market crash of 2020, it seems that for now, the storm is over. For those looking to invest, it’s a bargain.
Though the market has recovered a lot throughout 2020 and into the first quarter of 2021, share prices are low. Barring another global catastrophe, they’re unlikely to be this low again for a while. It’s an excellent opportunity to invest.
This is particularly true for industries worst hit by the pandemic. Share prices in the hospitality sector remain low despite government support. With the end in sight thanks to the vaccine rollout, as well as substantial support to get to the finish line, this could be a great investment as normality returns to the UK.
Stocks that have risen throughout the pandemic may also remain a good long-term investment as consumer habits change. Online businesses such as Ocado have enjoyed strong growth for obvious reasons throughout 2020.
But research suggests the new norm will remain in some aspects. 40% of UK consumers surveyed said they would continue to spend online post-pandemic.
While this is good news for online businesses, it adds additional uncertainty to an already suffering high street. This means staple stocks that were once a safe investment remain troubled into 2021.
The best investing tips we can offer are the ones that could apply to investing on any stock exchange: plan, diversify and remain calm.
Plan
Planning for the unknown can seem impossible because it is. By plan, we mean understand the risks and rewards and plan for uncertainty.
You cannot control how your investments perform, it’s the nature of the game. But you can control how you prepare your investment portfolio to prepare for market changes.
Planning can help you understand how long you’re prepared to invest for, what your objectives are and how your assets are spread. In a volatile market, this can help keep you sane and know when to sell.
Diversify Your Portfolio
In other words, don’t put all your eggs in one basket.
It can be tempting when you read analysis after analysis about some definite market changes. But it’s never definite and as Reddit has proven, experts come in all shapes and sizes.
This isn’t to say don’t invest when the opportunity arises but spread your investments. Over the long-term, variety and patience almost always pays far more than short-term gains.
Diversifying your portfolio should be part of your planning. Researching company operations, competition and the wider industry will help you create a smart portfolio that will perform well throughout market changes.
Keep Calm and Carry On
If the last year has taught investors anything, it’s that nobody can predict the market. So remain calm.
The best investors know not to react rashly to emotion. If you spend your day keeping an eye on scoreboards it will lead to overreactions to short-term changes.
The ups and downs are all normal, so ride them out and focus on your own plans. Planning and diversification can help you avoid panic selling as you know your strategies and long-term goals.
More Financial Information
The best UK stock market tips are the age-old advice applicable for any stock market. Understand your market, plan well and diversify your portfolio. For further research, our blog offers great insight into the UK stock exchange, as well as global exchanges, so make sure to check it out.
Région Ile-de-France is the first European Sub-Sovereign to issue an ESG benchmark bond with a negative yield on the financial markets
In order to fund its annual investment programme, in particular its regional recovery plan (€6.8bn between 2020 and 2022), Région Ile-de-France issued a new €500mn public bond on 12 April 2021.
Région Ile-de-France becomes the first European Sub-Sovereign issuer to print an ESG benchmark bond with a negative yield (-0.12%).
Investors demonstrated a massive support for this transaction, despite a negative yield, highlighting their confidence into the Région Ile-de-France’s credit. Indeed, the issuance attracted up to €3.5bn of interests, i.e. 7 times the amount announced, with a total of 114 orders. As a reminder, the previous record for the Région was €1.3bn in 2018 (in comparison, the raised amount was also €500mn). This record is now exceeded by +€2.2bn.
The Région keeps on diversifying its investor base with 16 jurisdictions participating in this new transaction. France, Germany, Italy and Switzerland accounted for more than 60 % of the interests. The bonds were allocated to buy and hold investors committed to sustainable financing.
This strong success confirms the Région Ile-de-France’s position as a European leader in sustainable financing. Since 2019, the Région is committed to issuing 100% of its funding programme in sustainable format, representing 80 % of its outstanding debt versus 35 % in 2015.
This is the first transaction of the Région issued under its updated framework for Green, Social and Sustainable bond issuance, aligning with the European taxonomy. In its Second Party Opinion, Vigeo ranked the use of proceeds, the selection and evaluation process, as well as the management of funds as “best market practices”.
Région Ile-de-France is also the first European Sub-Sovereign issuer to have engaged in the alignment of its framework to the upcoming European standards, contributing to the success of the transaction.
Despite the Covid-19 related economic crisis, the Région’s financial ratios will stay on a more favorable track in 2021 compared to 2015. The current margin rate would stand at 32.1% in 2021 (vs. 20.5% in 2015). The self-financing capacity doubled compared to 2015.
At the end of 2021, the outstanding debt will be in line with the 2015 level. As a reminder, between 2004 and 2015, it increased by an average annual rate of + 10 %. At the end of 2021, the debt payback ratio should amount to c. 4.5 years, way below its late 2015 level (7.5 years).
Thanks to a tight operational expenditure control since 2016 (- €2bn in multi annual expenditures), the Région Ile-de-France was able to face the Covid-19 crisis with a solid financial position.
The Région has received the best rating possible at this time in France, in line with the Republic of France (Fitch “AA” and Moody’s “Aa2”). Fitch affirmed its rating on Friday 9 April, highlighting that: “Ile-de-France has tight control of expenditure, as reflected by a continuous decline in operating expenditure in the last years” […] “Ile-de-France’s liabilities carry little risk” […] “[its] debt payback ratio remained sound in 2020” […] “despite the impact of the pandemic” […] “In 2020, net adjusted debt declined for the third year in a row”
In March 2021, Région Ile-de-France received the Capital Finance International – CFI.co – « Best sustainability bond issuer – France » award.
Secular Stagnation and the Big Balance Sheet Economy
Otaviano Canuto, Policy Center for the New South
Private balance sheets have risen relative to GDP in advanced economies in the last decades, in tandem with a trend of decline in long-term real interest rates. Asset-driven macroeconomic cycles, along with a structural trend of rising influence of finance on income growth and distribution, have become part of the landscape. Underlying secular trends of stagnation may also be suggested, making the macroeconomic dynamics dependent on the balance sheet economy getting bigger and bigger.
6 Common Online Banking Mistakes and How to Avoid Them
In recent years, online banking has continued to grow as banks offer more and more online and mobile banking services. In fact, 73% of banking customers use online banking at least once a month. Similarly, 59% use mobile banking at least once a month.
With this rapid rise in popularity comes some concerns for bank account holders. Luckily, it is easy to avoid the most common online banking mistakes. We’ll take a look at what to keep an eye on and how you can make online banking a breeze.
1. Login Safety Mistakes
One of the most common banking mistakes is not having adequate safety measures set for online banking services. You should never use auto-login features. This can make it too easy for someone else to access your account.
Instead, use a password or biometrics login on your phone. If possible, you should also use two-factor authentication to ensure additional safety.
It’s also important to choose a unique username and password, one that you do not use anywhere else. Your bank may be taking strict online security measures but other websites you use may not.
If a hacker finds out your password on another website and then learns that you have used it in multiple places, they could have easy access to everything, including your bank account. For similar reasons, you should also change your password regularly, so if a security breach does occur your account is not at risk for long.
Speaking of passwords, it is imperative that your bank account password is very strong. Use a mixture of uppercase and lowercase letters, symbols, and numbers. Make sure it’s not easy to guess either.
2. Unsecure Online Access
How you access your online bank account is also important. This is particularly true if you plan on accessing your online bank in public or through a device you don’t own.
Don’t bank on public wi-fi if you can avoid it. You also shouldn’t use public computers. Even if you log out completely, hackers can still record keystrokes to gain access to your accounts.
When using your bank’s website, make sure the web address includes “https://”. The “s” is important as it indicates that there are extra security features protecting you.
If you want to download your bank’s app, make sure it is the official one. Download it via iTunes or Google Play. You may even be able to download it through your bank’s website. Either way, make sure your phone is also protected with a strong password too.
3. Not Checking Banking Activity
Another common online banking mistake is not frequently checking your online banking activity. If fraudulent activity occurs, it’s important to catch it early so you can talk to your bank and rectify any issues.
But in order to do that, you need to actively be aware of what is going on within your account. Online and mobile banking make it easy to view your recent activity. Simply look through your transactions once a month to make sure everything is how it should be.
If you notice anything is off, you should then immediately get in touch with your bank. Doing this does not take a lot of time and could prevent you from having to deal with much larger problems down the road.
Additional online banking services can make staying on top of your account even easier. Many banks allow you to enrol in email, text, or push alerts that are triggered by certain activities. These could include unusual activity, balance thresholds, or transactions meeting certain criteria.
These options are usually available in your profile or through the security features section of the website. Signing up for these options lets you know about problems with your account between times when you check on it. This can help you keep an eye out for anything unusual.
4. Handling Mobile Deposited Checks
Being able to remotely deposit checks can save you a lot of time. But, it’s important that you handle mobile check deposits correctly.
Instead of throwing the check away as soon as you deposit it, keep it for two weeks. It takes a few days for the check to clear. If there is a problem reading the check, you’ll have proof of the correct amount. Afterwards, be sure to shred the check, instead of only throwing it in the trash.
5. Mistakes When Making Online Payments
Online payments make it easy to send money to others and pay bills. But, you need to be very careful when doing these actions.
If you are scheduling a payment, make sure the date is correct. Sending it too late could cause late fees if it’s a bill. Also double-check the amount you enter. Even a slight change in decimal can make a huge difference.
Finally, be sure you follow through with the payment. Online banking portals may have multiple steps. Follow through and make sure you end up with a confirmation page or email. Otherwise, you could owe late fees for your bills if the payment isn’t fully completed.
6. Sending and Receiving Money
If you send money to another person or account, be sure to double-check their details very carefully. If the details are wrong, you could send the money to a different person or business. This is very difficult to correct as the other person would need to approve returning the money.
If you expect to receive money from someone else, also make sure the details you give them are correct. Otherwise, you may not receive the money you are expecting. This can be difficult to fix too if the person accidentally sends it to someone else.
Avoid Online Banking Mistakes
Online banking is an important part of modern financial management. This is why avoiding common online banking mistakes is so important. Taking these measures can save time, money, and a lot of potential heartache.
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