Financial News 08/30/2011

• Euro rescue fund vote delayed per Seeking Alpha
• NYT reports Japanese finance minister elected prime-minister
• Consumer confidence declines to April 2009 lows
• WSJ reports restrictions in China's banking policy
•  Indian economy slows to 7.7 percent

New York's Financial District

The New York Financial District in Lower Manhattan is home to places like the New York Stock Exchange (NYSE), New York Mercantile Exchange (NYMEX), the New York Federal Reserve Bank, and the Museum of American Finance. Below are some photos from New York's Financial District.

The New York Federal Reserve Bank

Wall Street

Museum of American Finance

Financial District from New York's Harbor

The Bull

When Nominal and Effective Interest Rates Are the Same

Nominal interest rates are base rates that do not include compounding such as Annual Percentage Rate (APR). Effective Interest Rates (EIR) includes compounding usually increasing the amount of interest charged. There however, some instances when both nominal and effective rates are the same.

Complete article link: http://www.ehow.com/info_10075611_can-effective-rate-nominal-rate-ever-same.html

Financial News for the Business Week Ending 08/19/2011

Financial markets were pressed by doubts perpetuated by weak economic statistics across the board. The positive benefits of negative outlooks are declines in oil price and bond yields if the demand for bonds and any coordinated financial intervention toward them outweighs the fear of credibility of issuing nations.

• Multiple downgrades of Global, and U.S. 2011 GDP 

• CPI and PPI costs increase in July 

• International 2-30yr bond yields drop 

• Gold price reaches new high over $1,800 per ounce

• WSJ questions EFSF bailout fund size and Euro credit ratings  

A key underlying issue includes a challenged global employment rate that cannot keep up with population increases per the International Labor Organization (ILO). Also, increased demand for natural resources linked to a growing global economy increases price pressure on those resources which falls back on the current challenge of developed nations to keep growing. 

The prospect of uninterrupted sustainable growth seems questionable at least, as economic pressure points continue to be tested despite increased global economic growth.

Why Credit Cards are Safer Than Debit Cards

Credit cards are more secure due to the delayed transfer of cash from bank account balances, higher regulatory requirements and stricter credit card company fraud monitoring. This is not to say debit cards aren't safe; for example, a responsible debit card holder may have less security risk than a credit card holder that takes less precautions.

Complete article link: http://www.helium.com/items/2216676-credit-and-debit-card-security

How businesses might handle unsatisfied customers

Handling customers canceling services is an opportunity to improve sales and business operations. As soon as a manager sees the numbers on cancellations, or hears about them action should be taken to 1) limit cancellations, 2) turn cancellations into marketing feedback, 3) improve business operations and sales and 4) rebuild client relationships. In order to do this well, it is important to know how to handle customers canceling services. A few techniques to handle customers who cancel services and improve sales are outlined as follows with details about how to implement them and why they work.

Fill the sales vacuum

A sales vacuum is created when the customer's service cancellation is simply honored with indifference. To fill that sales vacuum, ask the customer the reason for cancellation and provide a courteous response tailored to their feedback. For example, if the customer is unhappy with service, ask if they would like a different in house service technician, discount, free month of service etc. This fills the sales vacuum with ideas the customer may appreciate more and possibly even allow them to rethink their decision.

Obtain valuable feedback

Feedback from customers that cancel services is worth money because the same feedback would cost money to attain independently through a marketing research study. Asking a couple of pointed questions when receiving a cancellation request can help the sales person or company build an information database with which to develop new sales and operational strategies. Feedback can identify possible problems with a service, and/or useful information about the clients that cancel.

Offer an alternative

If an appealing enough alternative is offered to a client who is canceling a service, they may reconsider. Even if it means less money for the company, less money and one less cancellation is better than no money and one less client especially if there are sales and client retention benchmarks to be met. Alternatives depend on the specific reasons for the cancellation, the type of business product or service and the client's interests.

Salvage brand equity

The cancellation of service accounts is the last chance a salesperson or company may have to interact with a customer directly. Staying professional and fulfilling the customer's requests, cross selling, and implementation of cancellation programs specifically designed for service cancellations can all be helpful in salvaging brand equity. One unhappy former client could tell all their friends about "that terrible service they got from a salesperson at XYZ company", or how "that service plan is so overpriced", etc. If the customer cancels feeling good about the cancellation with the salesperson or company that's better for the service than a bad felling.

Design a cancellation process

A cancellation process implements the above techniques systematically and usefully. For example, a cancellation process may consist of a series of steps. Each of those steps follows a methodology designed to optimize the experience for the salesperson, client and company for the purposes of client retention, marketing, customer satisfaction and improving sales and operations.

1. Receive cancellation request either by phone, email, fax, mail or in person
2. Initiate and engage customer in conversation
3. Obtain marketing feedback: Inquire about reason for cancellation
4. Fill sales vacuum: Offer response based on the reason(s)
5. Salvage brand equity: Leave customer feeling good

Re-build customer lifetime value

A customer that has canceled may reconsider a service in the future if it has improved, a problem has been solved or the reason for the cancellation has been resolved. This is why it is important to leave the customer feeling happy after the cancellation i.e. it may open the door to further opportunity in the future such as reinstating the former customer's service agreement.

After a short time has passed, contact the client one more time with a new offer, hand signed letter from the company's management or salesperson, and an appreciation for the opportunity to provide service in the past. This allows the sales person, company and client one more chance to achieve customer satisfaction, re-build customer lifetime value and improve company marketing asset value.

When to pay cash and when to use a credit card

Consumers might be better off if credit cards had the equivalent of a surgeon general's warning on it; "Warning: Use of Credit Cards may be dangerous to your financial health potentially leading to financial peonage, and bankruptcy". Instead of the warning being by the surgeon general it might be by the federal reserve chairman. The idea here is credit cards are to be used with caution.

There are several reasons why a credit card can be useful however. Since modern economies are very dependent on credit as a source of exchange, it is somewhat undeniable that credit is a financial reality. Credit cards can also protect spenders through credit dispute mechanisms and credit history statements. This financial reality can necessitate the use of credit cards in addition to the following:

• Using credit cards effectively helps build credit ratings
• Bridge financial gaps between paychecks
• Make possible a beneficial opportunity that might not have been available otherwise.

Cash is useful too, and although it is quickly becoming less and less necessary to use cash, it still can be helpful to use cash instead of credit. Moreover, although credit cards are widely accepted and cash is not always necessary, there are specific benefits associated with using cash. Some of those benefits are listed below.

• It doesn't have to be paid back unless it's from a loan.
• Cash spending can keep one on top of a budget by only spending what one has
• It's harder to trace purchases if you like privacy.
• Cash looks good, it's creative, feels nice and is less uniform than plastic. It has aesthetic appeal.

So when should one use cash and when credit? how to distinguish? The concept of a monthly time line can be useful here. By planning a monthly budget one can decide which money will be used for building and maintaining credit and which money might be used to keep one on budget.

Of course not everyone needs to use cash because more advanced budgeters have self-control. In this instance, one may not use cash at all and may even dive into the realm of micro-budgeting. An example of Micro-Budgeting is when one finds a credit card that matches his/her greatest expense to a credit card that provides rewards and incentives for those expenses i.e. airline miles, cash back, discounts, gas rebates etc. This will inevitably lower the cost for that expense making the credit card advantageous if the expense is a necessity and within budget.

The decision of how to fine tune one's use of cash and credit card is up to the individual. Each individual has different spending habits, needs, expectations etc. regarding the use of cash and credit. By considering the above concepts in mind, one may be better navigate the pros and cons of spending with cash and credit cards.

Financial News 08/15/2011

•  2011 Q2, & Q3 GDP lowered to 2% by Moody's Analytics
• Roubini recommends tax, stimulus and longer-term austerity
• Germany and France rule out Eurobond per Investment Europe
• Treasury reports $14.7 billion  decline in foreign owned Securities
• RT News reports Russian Q2 2011 GDP decline to 3.7% from Q1
• Global debt surpassed 69% of Global GDP in 2010 per the ET

Inflation as an extended source of economic stimulus is questionable

In a back issue of the New Yorker Magazine the idea of inflationary stimulus is discussed as a way to facilitate debt reduction and possible increases to consumer spending. The example given in the magazine is debt accumulated by the United States during the 1940s as it became more manageable after inflation. This is because the debt management metrics were presumably not chained to inflation, and therefore as the amount of currency within the system increased, old debts shrunk proportionally to the money supply. The subsequent paying off of such debt then increases confidence in the economy and causes its borrowing costs to decline.

This strategy has been suggested as a remedy for the current weak U.S. Economy by experts such as Harvard Professor Kenneth Rogoff in a PBS interview. Moreover, when a central bank prints more money or indirectly increases the money supply via open market operations, the value of equity and commodities rise. In one sense this is good if those commodities are local. However, when they are not, as in the case of imported oil, inflationary pressure serves as a financial weight or tax to consumers. In the case of inflation of equity and oil commodities, artificially inflated 401(k) values counteract consumer price increases. However, this balancing out combined with a decline in national debt could perhaps serve as an economic stabilizer by not allowing things to get worse.

When an economy has systemic issues not tied to inflation, the above measures are not as effective. Moreover, inflation that's costs are paid for by the government also cancel out lowered debt. For example, a rise in healthcare costs paid for by government services such as Medicare does little to improve an economy that has lowered its debt burden via central bank monetary policy on interest rates. Additionally, exports can rise when the value of the dollar declines. However, that's no guarantee businesses won't up prices to keep up with costs. The value of currency also declines with inflation in which case individual net worth declines with out the proper inflation protection.

Increasing inflation at a slow rate can correspond to economic expansion when the amount of real national product increases and inflation rate rises along with it. This kind of inflation is not necessarily fiscally toxic, however higher levels can be risky. For example, if inflation rises too high, confidence in national Treasury Securities can wane causing higher costs to the government. The Federal Reserve Bank takes its inflation management seriously, and monetary policy that is too loose can cause it to increase. This makes the addition of a third round of quantitative easing by the Federal Reserve Bank questionable amidst an inflation rate that has risen to approximately 3.6 percent as of June 2011 per the Bureau of Labor Statistics.

A measured amount of inflation can be helpful, and can cushion the affect of a recession. Over a prolonged period of time however, an above rate of inflation has an eroding affect where the net benefits of lower cost of national debt and increased equity values don't stop the problem they were meant to ease i.e. the economic affects of recession. This is because the expenses for consumers and government continue to rise without economic growth leasing to less overall national worth with a higher denomination of asset values. Systemic economic issues have to be dealt with while inflationary stimulus serves to make it easier. When that doesn't work, as economists and observers have noted, the affects of monetary policy decline.

Federal Euro-State Finance Ministry to be Spawned by Debt Crisis?

If as the following video states, a sovereign European Finance Ministry is formed which will have veto power over national budgets of European states such as Greece, Germany etc., states within the European Economic Community will lose ultimate control over the direction their countries' finances take. 

A central European Finance Ministry may sounds kind of New World Orderish in theme and conspiracy theorists might go so far as to say the European debt crisis was knowingly planned in order to consolidate the European central banks. This would mean debt was haphazardly issued, although the ECB would then face an inflation problem highlighted in the next video.

Both these videos highlight a problem facing the United States and Europe, namely debt. Both the Eurozone and the U.S. are losing market-share to global growth that favors developing countries. This means as the world's economic pie grows bigger, more of the increase is not going to the U.S. and Euro-Zone. Such being the case, foreign direct investment and investor capital flows toward the foreign growth areas such as China for profit leaving less collateral for debt financing which is reaching controversial levels.

This does not mean there is not enough wealth in the United States to arguably pay its debt according to Dan Alpert in The Big Picture. The debt is growing at a faster rate than some economies however. It is partly a cash-flow problem that has led to downgrades of U.S., Irish and Greek debt. In the case of the U.S. downgrade, Standard & Poor's is not saying the U.S. cannot pay its debt; rather it is questioning if it can do so flawlessly  as entitlement, and medicare spending grows among other things.

Financial News and Commentary: Week Ending 08/05/2011

An interesting week financially and economically; markets tumbled and experienced increases in volatility, economic worries fueled by European solvency and U.S. growth prospects also hazed outlooks. Few economic indicators countered worries, but unemployment dropped even though employment also dropped by 38,000 people per the Bureau of Labor Statistics.

• ISM manufacturing and service sector indicators decline
• Recession fears enter financial dialogue
• Major stock indexes break downside 200 day moving average
• Spanish, Italian and Portuguese bond yields raise repayment doubts
• Sweet Crude Oil price drops below $90 per barrel
• Japanese government sells $8.8 billion worth of Yen
• BLS reports .1 percent drop in unemployment

The European Central Bank stemmed concerns on Friday when it requested Italy work toward putting its fiscal house in order in exchange for bond purchases per the Wall Street Journal. This puts increasing pressure on performing Eurozone nations to foot the bill, but if Italy follows through it could be a positive development. However, some U.S economic indicators seem questionable, one of which is the trade balance which indicates increased imports over exports meaning more capital is flowing out of the country than in.

U.S. Trade Deficit, 2001-2011

Source: Bureau of Economic Analysis

After all corporate profits have been strong, but are also declining according to The Fiscal Times reporting on Bureau of Economic Analysis data. That may change in the second half of 2011, but it also may not. Economic expansion is still occurring albeit at a snails pace, just .805 percent annualized based on Q1-Q2 2011 government estimates. It looks as though GDP is under pressure to perform. 

Types of Group Home Grants

Grants are structured to accommodate the goals of the issuer. These goals differ between foundations, government funding, private endowments and corporations. Before applying for a grant it is a good idea to know these grant objectives and distribution practices.

Complete article link: http://smallbusiness.chron.com/types-grants-used-start-group-home-16673.html

2011 Global GDP Overestimated by World Bank

A look at the World Bank's estimates for international GDP rates accents the overestimate of U.S. GDP made by the Commerce Department in the first quarter of 2011. Originally believed to be 1.9 percent, the revised estimate is .4 percent. As a result financial firms such as J.P. Morgan and others have adjusted their 2011 GDP rates downward per the International Business Times. The adjusted U.S. rates range between 1.7-2 percent, .6-.9 percent lower than the World Bank estimate as of August 2011.

Japan, the Eurozone and China, all large economies have smaller than expected GDPs for 2011. These economies plus the U.S. Economy account for more than 50 percent of global GDP meaning for every 1 percent drop in GDP in these areas, the global GDP drops 50 basis points or half a percent. Moreover, for every 1 percent drop in U.S. GDP a corresponding fifth to quarter percent or 20-25 basis point drop in Global GDP is estimated.

The World Bank estimates global GDP for 2011 of 3.2 percent, with corresponding GDPs of 9.3, 2.6, 1.7 and .1 for the four largest economic areas. The Singapore Business Review quotes Credit Suisse as downgrading Chinese GDP to 8.8 percent due to inflationary pressure and tighter monetary policy. The Association of Three Leading Eurozone Economic Groups claims the Eurozone will experience 2011 GDP growth of .47 percent, or 1.2 percent less than the World Bank's estimate.

Collectively, .2 percent less global GDP from the U.S., .24 less from the Eurozone, and .075 less from China adds up to .515 or half a percent assuming approximate percentage shares of GDP of 20 percent, 20 percent and 15 percent respectively. Based on the World Bank estimate of 3.2 percent Global GDP growth, that would mark it down to 2.7 percent.

That's not terrible, but for those countries relying heavily on Global GDP expansion the economic affect will be proporitionally larger. These variables also constantly change with increases and decreases to the price of oil, international events and with methods of calculation. That being the case, any estimate of Global GDP is not set it stone.

Why U.S. Unemployment Data is Skewed

Of over 300 million Americans, approximately 100 million or one-third are gainfully employed. This includes 1.13 million non-civilian personnel and 98.5 million in active civilian labor force participation.

What skews the data is that unemployment statistics are based on the total labor force of 153.4 million per the Bureau of Labor Statistics and not the labor force participation rate of roughly 100 million. Such being the case, unemployment statistics include non-participatory civilian labor when calculating unemployment percentages.

Moreover,  if active civilian and non-civilian labor force figures are used, the 14.1 million unemployed becomes more like 14.1 percent and the 24.79 million U-6 alternative measure makes unemployment closer to 25 percent.