No Good Options Left - John Mauldin

The current situation in the largest world economy can well be summarized in the way John Mauldin did his latest newsletter. The conclusion is that there are no good options left and whether the path from here is controlled (evolution) or left to market (revolution) is the only question. An excellent read.

Like teenagers, we as a US polity have made a number of bad choices over the past decade. We allowed banks to overleverage and, in the case of AIG (and others), sell what were essentially naked call options of credit default swaps, based on their firm balance sheets, far in excess of their net worth; and that put our entire financial system at risk. We gave mortgages to people who could not pay them, and did so in such large amounts that we again brought down the entire world financial system to the point that only with staggering amounts of taxpayer money was it brought back from the brink of Armageddon. We assumed that home prices were not in a bubble but were a permanent fixture of ever-rising value, and we borrowed against our homes to finance what seemed like the perfect lifestyle. We did not regulate the mortgage markets. We ran large and growing government deficits. We did not save enough. We allowed rating agencies to degrade their ratings to a point where they no longer meant anything. The list is much longer, but you get the idea.

Now, we are faced with a continuing crisis and the aftermath of multiple bubbles bursting. We are left with a massive government deficit and growing public debt, record unemployment, and consumers who are desperately trying to repair their balance sheets.

If present trends are left unchecked, we will need to find $15 trillion in the next ten years, just to pay for US government debt, let alone state, county, and city debt. And perhaps some loans for business will be needed? Where can all this money come from? The answer is that it can't be found. Long before we get to 2019 there will be an upheaval in the market, forcing what could be unpleasant changes.

RBA Lifts Rate to 3.5%

Today's RBA decision was for another base point (0.25%) raise. The official cash rate in Australia is now 3.5%.
RBA lifts cash rate by 25bps to 3.5% - News - Business Spectator

Double-dip recession unlikely: ECB's Weber

A member of the governing council of the European Central Bank said that it is unlikely that the Euro zone will fall back into recession soon after exiting it. He added that there are elements pointing that the double-dip recession is not likely to happen in other major economies, either.
So it seems not only the economy is out of the woods for now but there is no immediate danger of falling back into recession in the short to medium term.

Double-dip recession unlikely: ECB's Weber - News - Business Spectator

OneDirect High Interest Saver Discontinued

OneDirect has discontinued their High Interest Saver account. Any remaining funds in the account will be transferred to the linked transactional account.

Lost Hopes

It is interesting to look back... In 2008, and a bit earlier, it was very popular to read and/or write a blog on finance. It was the time of boom, money was plentiful, and whatever you did, it only seemed possible to make money. Gearing additionally boosted already astronomical gains. Not too many were even remotely aware of what was at risk.
During that time I read a few interesting blogs, checking advice and reviews of different options. Fortunately, I never invested into things I did not understand or that sounded too much like sales pitch and no substance. And I was never a fan of astronomical gains as something always was fishy about those.
Now, looking back at one of those blogs... The person who writes it became a millionaire in 2007 or 2008. Investing, gearing, property, etc. It was all fabulous. One would expect to take advice from such a person as they had "done it". Their success was there to prove whatever they did was right. With a grain of salt, of course.
Today, one of those blogs contains the following sub-title:

I lost half a million dollars on the stock market in just twelve months! Learn how you, too can become an ex-millionaire with almost no effort!

Enough said, I think.
On the positive side - this is the typical market index loss for 2008. Staying invested will likely help. Only the ones who moved out of the market, and failed to enter back soon after February 2009, have actually lost their wealth. Most of it was inflated before 2008, anyway. Good luck and be careful what you trust.

Weak Recovery for Balkans only in 2010

According to the European Bank for Reconstruction and Development (EBRD), Balkan economies will further shrink in 2009, albeit at a slower pace. A weak recovery is expected only in 2010. However, the full consequences of the crisis are to be felt only next year as corporate bankruptcies continue and lending conditions continue to be constrained as foreign banks continue to shrink their asset exposure in the region.

Balkan Economies: Fragile Recovery in 2010 :: BalkanInsight.com

World Economic Forum's 2009 Financial Development Report

From RGE newsletter... Australia is 2nd on the world's Financial Development Index.

World Economic Forum's 2009 Financial Development Report: UK Comes First

On October 8, 2009, the World Economic Forum launched its second Financial Development Index, a rigorous, comprehensive analysis of financial systems and capital markets in 55 countries that analyzes key drivers of financial system development and economic growth in developing and developed countries. The research was led by Dr. Nouriel Roubini. Global financial centers continue to top the index, yet financial instability affected them adversely pulling down their scores relative to the 2008 report. The UK, aided by the relative strength of its banking and non-banking financial activities, claimed the index’s top spot from the U.S., which fell to the third position following Australia on account of lower financial stability scores and a weakened banking sector.

U instead of W?

Nouriel Roubini has adjusted his conclusions. Instead of W-shaped recovery, this (now) should be an U-shaped one. The news keep surprising for the better. That's why it's called a recovery, after all.

In Thoughts on Where We Are,
Nouriel clarifies the growth scenarios that make the U-shaped recovery
more likely and discusses why it is unlikely that the Fed will raise
rates any time soon.

RBA Lifts Rate to 3.25%

As some analysts expected and predicted, Reserve Bank of Australia lifted the official cash rate from 3% to 3.25%. As hinted earlier, 3% was an emergency rate and it was about time for it to change.
RBA lifts cash rate to 3.25% - News - Business Spectator

Anglo-American Crisis and European Recovery

Another great analysis and comparison between the economic realities of UK/USA vs Europe (Germany/France). Differences in economic base caused this crisis to affect mostly US and UK. European economies were not that affected and are likely to recover sooner.
A valuable read.

RGE - We Shouldn’t be Surprised by Signs of an Early European Recovery

The Roots of the Next Downturn

Robert Reich, from RGE, is analyzing the discrepancy between the stock market charts and the situation in the economy in real life. Consumer spending in USA is down to 60-65% but the government is covering for the rest, hence the jump in the economic activity and the markets. When (or if) this dries up there will be nothing holding the market indices, which may reach new lows. This is what some are predicting - a correction. But with an unknown scope.

RGE - Why the Dow is Hitting 10,000 even when Consumers Can't Buy and Business Cries "Socialism"

Salaries Survey - Bosnia, Croatia, Serbia, Slovenia

An interesting conclusions from a survey in Serbia, Bosnia, Croatia, and Slovenia. Food prices are the highest in a country that has the most agricultural industry in the surveyed group! Balkan paradox, as usual.
On the positive side, the average salaries edge higher, showing an improvement in standard of living.

Serbia Has Lowest Surveyed Salaries :: BalkanInsight.com

According to Eurostat, some food prices in Serbia are amongst the highest in the region, and are even higher than average prices in the EU.

Nonetheless, Eurostat, which monitors 36 countries, reported last month that only prices in Bulgaria, Albania and Bosnia and Herzegovina are lower than in Serbia.

Recession is over

Officials in the US called it the end of recession. Most common people still believe we are in recession. Probably because we are all humans and we still feel the bruising from the last year's crash. The unemployment is still on the rise. So, yes, it still might feel like a recession bit it is over, finally.
The recovery, however, is expected next year...

GENEVA - Global
investors are expected to scale back their activities almost 30 per
cent overall in 2009, but a recovery should begin "slowly" next year,
the UN's trade development mission says.

ASX at 4600

ASX All Ordinaries index has reached 4600. A few months back this seemed incredibly high and out of reach.

Investing in Gold in Australia

One of the easiest ways to invest in gold in Australia must be purchasing GOLD shares on ASX. This is a trust (or an ETF, if you want) that provides exposure to the price of Gold in the world commodity markets.
As listed on ASX:

Gold Bullion Securities (GOLD)

The development of Gold Bullion Securities (ASX code GOLD) has been a joint initiative between Gold Bullion Limited and the World Gold Council. A GOLD security consists of a gold bullion share of nominal value and a beneficial interest in approximately 1/10th of one fine troy ounce of gold bullion held on trust for the holder of the security.

The gold is held in London vaults by a custodian. A trust deed establishes a separate trust for each holder of GOLD so that the holder is absolutely entitled to the gold bullion held in the vaults. Each time a holder transfers GOLD to a new holder, the beneficial interest in the gold bullion automatically transfers to the new holder.

Investors can buy GOLD securities on ASX or, if they have a minimum of $500,000 to invest, they can apply for new GOLD securities from Gold Bullion Limited. Likewise holders of GOLD securities can sell them on market, or (subject to certain conditions and fees applying) they may redeem them at any time for cash or in exchange for London Good Delivery bars.

Investors wishing to invest in the securities should familiarise themselves with full details of the investment contained in the prospectus issued by Gold Bullion Limited, including fees and conditions applying and the risk factors involved.

Prospective investors should also seek independent professional advice before making a decision to invest.

Gold Bullion Securities listed on ASX - Prospectus information

The only way is up?

Market analysis from Shane Oliver, "Sharemarket earnings & valuations post reporting season, 1/09/2009". The conclusion is that we are now in an upward moving market and there is much more left to go.

Strange how, all of a sudden, all the graphs and analysis show how the correction was not as bad and that there is a strong growth potential.

Expert Articles

Recovery Sooner than Expected?

Well, nothing new, obviously. I'd even say this was expected - that the recovery is to come sooner than expected. Good news, anyway.

ROME - A
recovery of the world economy might occur three months earlier than had
been expected, at the beginning of next year, the head of the IMF said
on Tuesday.

Bosnian Residential Real Estate Summary

Residential properties prices in Bosnia have fallen about 20% from Summer 2008 to January 2009. Further decline in prices was expected. It would be interesting to find a more recent summary and see whether the expectations were met.
The main reason for price drop is financing difficulties. The loan conditions have been stepped up by the banks and the interest rates raised.

Nekretnine365.com - Magazin o nekretninama - Cijene stanova u BiH vrtoglavo padaju!

More good news on global economic outlook

From RGE:

Global Economic Outlook: Is a Recovery in Sight?

• According to the September 2009 report, the OECD now expects that
  the global economic recovery will start earlier than previously
  anticipated but growth will remain weak through 2010. The G7 is
  expected to contract 3.7% in 2009 (better than the 4.1% contraction
  expected in June 2009), based on an improved outlook in Japan and the
  Euro area, a similar outlook for the U.S. and worse for the UK while
  Canada will continue to experience negative growth until Q4 2009.
  Emerging markets that had little exposure to the financial meltdown
  like China have significant economic momentum.

Australia on the way out of recession?

RGE reports...

Is Australia Approaching Escape Velocity Out of Recession?

• Australia extended its rebound with a 0.6% q/q, 0.6% y/y GDP growth
  (seasonally adjusted) in Q2 2009, after missing a technical recession
  by a hair (0.4% q/q, 0.4% y/y) in Q1 2009. This time, however, net exports declined and the country is still effectively in a recession, with unemployment rising, corporate profits
  sliding (-7.8% q/q in Q2), GDP growth well below potential for the
  fifth consecutive quarter, and income GDP down 1.5% q/q. Going forward,
  the economic recovery will most likely remain muted by private sector deleveraging.

Global Manufacturing Expanding

RGE writes...

Global Manufacturing Now Expanding

• Manufacturing surveys suggest that global manufacturing activity
  began expanding in August 2009 after climbing for many months due to
  stimulus and inventory adjustment. Purchasing Managers Indexes from
  some advanced economies like Japan rose above the 50 threshold in July indicating expansion, joining some emerging markets like China, India and Turkey which had risen above those levels earlier. The U.S., France and Brazil finally moved into expansion territory in August while the UK slipped back into overall contraction and countries in emerging Europe and Russia remain below the 50 threshold.

What are Bonds?

A brief and to-the-point article on Vanguard about bonds - what they are and how they work. Excellent article.

Market Update | Finance News & Commentary | Vanguard Investments Australia

ASX All Ordinaries past 4500

The Australian All Ordinaries index has passed the 4500 mark.



Australia - Stock Market Charts

Targeting stocks for income of 8% or more

There is an article at TheBull.com.au analyzing and listing a small portfolio of shares that yield 8% or more in dividend income.

STOCK	SHARE PRICE (3/8/09)	FORECAST DPS  09/10	FORECAST DIVIDEND YIELD % (09/10)	GROSSED UP YIELD % (09/10)
Westpac Bank	$22.10	$1.15	5.7	8.1
Commonwealth Bank	$43.65	$2.25	5.8	8.2
Telstra Corporation	$3.52	$0.25	7.4	10.5
Corporate Express	$3.81	$0.26	7	10
QBE Insurance	$19.61	$1.25	6.3	7.1
Westfield Group	$11.70	$0.93	8.2	8.2
Tabcorp Holdings	$24.95	$0.55	7.7	11
West Aust. Newspapers	$6.00	$0.35	8	11.4

TheBull.com.au

Interactive Index Chart

Vanguard has updated the Interactive Index Chart on 30th of June 2009. It is interesting to look at the long-term returns, putting the global financial crisis into perspective.
It is very interesting to see how cash holds on well in Australia.

Interactive Index Chart | Indexing | Knowledge Centre | Vanguard Investments Australia

The end of recession in Europe?!

LONDON -
European stock markets advanced, with London reaching a 10-month high,
after data showing an end to recession in France and Germany and better
than expected results for the Eurozone.

Exemplary Conduct

It is really encouraging to see people who have achieved a lot not practicing the greed by trying to amass more and more for no apparent reason. Warren Buffett, for example, receives a $100,000 salary for his work. Considering he is the best known investor, managing billions of dollars in funds, this does not seem much.
The next one is listed below. Eric Schmidt receives $1 annual salary for his work at Google.
Naturally, all these people have enough wealth to get them trough (and much more than that, probably) and the social effects of their decisions not to receive excessive remuneration are very positive and encouraging.

Google CEO Eric Schmidt Accepted No Salary or Stock for Apple Board Service - Mac Rumors

EURAUD Below 1.70

The EURAUD exchange rate broke back through the 1.70 level into the long-term trading range.
Australia - Currency

UBank Launches USaver

UBank, an Australian bank that had great rates on term deposits, has launched USaver - an online savings account. Currently, with the rate of 5.11% p.a., it is the highest paying savings account in Australia I know of.
USaver - UBank - A good place for money. Backed by NAB

Upswing; Investment Cycle Chart

At Oliver's Insights, today, you can read more arguments about the economic cycle being on the rebound. I will leave the power of arguments to the experts. However, remember that all the experts were there during the downturn, as well. Not too many got it right, though.
Link to the article: From bear to bull - the cyclical upswing in shares (Expert Articles).

One useful graph from the article portrays the economic/investment cycle:



The graph is unavailable at the original location but can be found in the printout of the newsletter - here.

Bull Market?!

After a horrible year (2008) for investments, everything seems a thing of the past nowadays. Not only we see discussions about the end of the recession and the market crash, there are now discussions on whether we have entered the new cyclical bull market.
Smart Investing with Robin Bowerman | Financial News & Commentary | Vanguard Investments Australia

Microsoft Money Discontinued

Microsoft made an announcement in June that they will discontinue Microsoft Money as of June 30, 2009. This pretty much leaves Quicken as the only decent money management desktop tool out there.
Announcement: Open Letter to MS Money Customers - Official Quicken® Blog

ASX at 4200

Wow, this has been an amazing ride up so far. The Australian market is at 4200 for both ASX All Ordinaries and ASX 200. I remember last time I wrote this heading the market charts were on the slide down and there was a brief touch during the US presidential elections. Well, it’s encouraging to see it back to this important level. Hope it stays that way in the coming months.

Entrecard has been Sold

Entrecard, a blogging community and a network with innovative advertising concept, has been sold by its founder Graham Langdon to Los Angeles based ZipRunner Inc.

State of Michael Jackson’s Finances

In an interesting article, available at Vanguard’s site, Jackson’s personal investment commentator James Stewart writes about the state of recently deceased pop celebrity. Although he earned hundreds of millions throughout his career and made good business decisions, earning assets now worth billions, his financial position at the time of his death was $500 millions in debt. This situation even made him rehearse going back to work in order to repay some of that debt. Interesting read.

Celebrity finance – lessons for all of us

$1 Australia 200 micro contract

IG Markets has just started offering a $1 micro contract size on Australia 200 market index. There are no fees on index contracts, making the total provision on trading this index at 2 points spread.
Finally a decent trading experience for beginners like me!

e-tax 2009 is out

eTax 2009 from the Australian Tax Office (ATO) is available for download from their web site.
More information on e-tax is available at E-tax essentials, while the download link is here.

The end of the crisis

RGE - Dr. Doom Has Some Good News

Nouriel Roubini, the New York University economist who accurately forecast the bursting of the housing bubble and the resulting economic contraction, has become famous for his pessimism—he has been the gloomiest of the doomsayers. Which is what makes his current outlook surprising: Roubini believes that the Obama administration’s policy makers—and especially the much-maligned Tim Geithner—have gotten a lot right. Pitfalls may still abound, but he is now projecting an end to the recession, and he sees growth ahead.

This, to me, definitely marks the end (R.I.P.) of the global financial crisis. Hopefully, we will not see anything like this during our lifetime again. This was my first experience in the markets (started in Australia in January 2009) and it has not been a pleasant one. Hopefully it gets better from now on.

DownUnder Dogs

The list of stocks with the highest dividend yields among the largest 50
companies on the Australian Stock Exchange.

AFR Smart Investor

Australia - Index Funds

Added the link to SPDRs funds’ online share registry.

Australia - Index Funds

G8 Meeting: Focusing on Exit Strategies and a New Regulatory Framework

Source: RGE

• G8 finance ministers' meeting on June 12-13 in Lecce, Italy focused on "exit strategies", plans for unwinding the fiscal and monetary stimulus extended in recent months as well as introducing a new set of common principles of international business conduct ' the Lecce framework'. The IMF, which will help on exit strategies, reportedly scaled up its forecast for 2010 growth to 2.4% from 1.9% previously

• Communique of ministers: There are signs of stabilization, including a recovery of stock markets, a decline in interest rate spreads, improved business and consumer confidence, but the situation remains uncertain and significant risks remain to economic and financial stability

Zakaria: A Capitalist Manifesto | Newsweek Business | Newsweek.com

An excellent article in the aftermath of the financial and economic crisis. The article hints at the change taking place in the world. Globalization and the effects to nations and countries. What we have are the growing pains of the globalized world. The following paragraph has a particularly striking note.

The failure of self-regulation over the past 20 years—in investment banking, accounting, rating agencies—has led inevitably to the rise of greater government regulation. This marks an important change in the Anglo-American world, away from informal rules often enforced by private actors toward the more formal bureaucratic system common in continental Europe. Perhaps the state should not set the pay of the private sector. But surely CEOs should exercise some judgment about their own compensation, and tie it far more closely to the long-term health of the company. It will still be possible to get very rich—Warren Buffett, after all, draws a salary of only $100,000.

Emphasis mine.

Zakaria: A Capitalist Manifesto | Newsweek Business | Newsweek.com

Dow Theory – Trends

There is a good summary of Dow theory about trends at Incredible Charts. Here are the basics.

Bull Trend:

Bull Trend Start and End:

Bear Trend:

Bear Trend Start and End:

More at Dow Theroy – Trends page at IncredibleCharts.

Business Spectator - World to emerge from crisis in early 2010, IMF chief

A confirmation on timing from IMF:

We expect to get out of the crisis early in 2010, especially if a clean-up of certain segments of the financial system is carried out," IMF managing director Dominique Strauss-Kahn told a conference in Morocco.

Speaking later in a panel discussion, Mr Strauss-Kahn said signs that the effects weighing down the global economy were easing would become clearer in September and October this year, with growth returning early in 2010.

As suggested elsewhere, markets tend to bottom-out six to nine months before the real economy.

Business Spectator - World to emerge from crisis in early 2010, IMF chief

Personal Foreign Exchange - XYLO

Just found another option for foreign exchange and international transfers.

Xylo (link) offers direct debit facility, competitive exchange rates, and charges $5 per international transfer. Xylo is a division of Westpac Banking Corporation.

Personal Foreign Exchange - XYLO

Business Spectator - This rally is all bull - Alan Kohler

More and more economic analysts call the bottom retrospectively, to have happened early March. Eureka Report’s panel of economists states, with 9 analysts out of 10, that market has bottomed out in the first week of March. Most now agree that we have seen the worst. Excluding further disasters, the market indices should not go lower than levels reached two and a half months ago. It is still possible, and quite likely, that market will move lower than the current levels.

This would be a typical phase 1 in the economic cycle. See the phases shown graphically - here. I believe everyone is now expecting to see a higher low, confirming that the decline has definitely ended. And not only that. The higher low would mean that growth is back in the game.

Business Spectator - This rally is all bull - Alan Kohler

Business Spectator - RBA says Aust economy will recover by Xmas

Reserve Bank of Australia governor, Glenn Stevens, stated that Australian economy will start getting better by Christmas but the recovery from recession will be slow.

Treasury forecasts predict the Australian economy will grow by 4.5 per cent from 2012. But IMF staff estimates, published in The Australian, are less upbeat, forecasting a growth pace capped at three per cent between 2012 and 2014.

Treasury's prediction of a modest 2.25 per cent growth pace for 2011 was also challenged, with the IMF expecting a more modest expansion of 1.9 per cent.

It is also suggested that the RBA would not cut the rates any further as it might rather damage the fragile confidence levels than stimulate growth further.

Business Spectator - RBA says Aust economy will recover by Xmas

Aussie Back to Long-Term Range

Australian Dollar has come back to its long-term trading range, compared to Euro. It is now quite close to its long-term average value of about 1.70 for 1 Euro.

The image below displays the EURAUD exchange rate in the last 10 years. Click the image to see a bigger version.

Unemployment Map – World

At IndexMundi, there is a world map showing unemployment per country. Sourced from CIA World Factbook.

link

Chinese Green Shoots

Many say that the global recovery will start in China and then spread elsewhere. That is where the first signs of recovery are sought and therefore the following represent surprisingly good news:

The rebound in investment and slump in exports suggest China is being pulled in two directions but there are increased signs that the stimulus package is having an effect and could lead to higher growth than previously assumed. Increasing spending to support consumption and pent-up consumer demand suggest Chinese downturn was cyclical not structural (AMP Capital)

 

Umoo – Virtual Trading

If you are not willing to trade in the real markets but are interested in trading, there are sites on the Internet that offer virtual trading, where virtual money is used to trade but real market indices are used as benchmarks. There are often competitions involved, with winners of the game round winning certain prizes or even being offered a trader position with investment institution. Some sites that offer this kind of trading practice and entertainment are ASX and Yahoo Finance. Now I have just came across one more such site: Umoo, virtual stock trading.

Umoo is a virtual trading game where one can practice her trading skills and without the risk of losing money. The site offers real-time market data and various tools needed for stock market analysis. Using these is fun, entertaining, and educational even if you are not prepared to trade in the real stock market.

The description from the web site is:

UMOO is the leading fantasy stock trading game, offering the thrill and profit opportunity of the financial markets in a unique competitive format.
It's an alternative, virtual stock market contest where risk is minimal and the opportunity to win is real.
Traders pay a fee (buy-in) in order to enter a tournament of their choice, where they receive virtual money with which to build and cultivate virtual portfolios based on real-time stock market quotes in competitive trading tournaments.
The objective of the players is to earn the highest returns on their portfolios. Throughout the tournament, players are benchmarked against others in real-time; at the end of the tournament the winners are those with the highest returns relative to the other traders in the tournament. Winners receive cash prizes according to The payout structure of the tournament.
Real-time market data and a variety of information & research/reference tools are offered on the UMOO platform to help traders make informed dynamic decisions while trading. Real market trading tools are also offered, including limit and stop loss orders and the ability to sell short.
In sum, traders on UMOO can both develop and deploy trading skills for fun and profit.

Vanguard Launches ETFs in Australia

Today, May 8, 2009, Vanguard Australia will be launching a suite of exchange traded funds (ETFs) on Australian Stock Exchange (ASX). The funds to be launched today are:

ETF	ASX code	Benchmark	Fees p.a.
Vanguard Australian Shares Index ETF	VAS	S&P/ASX 300 Index	0.27 %
Vanguard All-World ex-US Share Index ETF	VEU	FTSE All-World ex-US Index	0.25 %
Vanguard US Total Market Shares Index ETF	VTS	MSCI US Broad Market Index	0.07%

The ETFs are purchased through a standard brokerage account while standard Vanguard index funds are purchased directly from Vanguard.

Rudd Government will end the private health insurance rebate | Federal Budget 2009 | News.com.au

The Government’s rebate on private health insurance payments will be waived in the new budget. However,

while the first round of tax cuts will take effect from July 1, the health insurance rebate will not be scaled back until July next year.

Rudd Government will end the private health insurance rebate | Federal Budget 2009 | News.com.au

Bosnia's Economic Outlook: IMF Agrees To 1.2 billion Euro Loan

RGE announces:

• May 5: Bosnia and the IMF agreed a 1.2 billion euro ($1.61 billion) deal over three years to lessen the impact of global economic crisis

• IMF: Measures agreed focus on fiscal consolidation and public sector wage restraint, which, in addition to ensuring stability in the short term, will also help bring public finances on a sustainable path

More ETFs in Australia: iShares

iShares is another provider, offering exchange-traded funds (ETFs). iShares is owned by Barclays Global Investors. They offer 19 ETFs covering worldwide markets and indices. The web site offers plenty of data on fund constituents and performance. Some funds are geographical regional indices while others are sector indices.

Underlying fees amount to 0.48%. Since most indices are international but hedged to Australian Dollar, there is a currency risk involved. So, the total return from any index follows not only the index performance but also the relative performance of the Australian Dollar.

iShares web site

Iraq’s Credit Default Risk Lowers

The current RGE reports state:

• Credit default risk on Iraq's debt has fallen since UAE announced plan to forgive $7 billion in Iraqi debt, the first gulf country to forgive all Iraqi debt. Credit default risk of Iraq is lower than of many US financial institutions (Reuters)

• Rumors that Kuwait may forgive outstanding debt of Iraq (compensation from Gulf War) take place in the context of a general thaw in Iraq's relations with Sunni Arab governments in the region in mid-2008. The reduction of Iraq's debt by official creditors should bring its overall external debt stock to around $50 billion. Saudi Arabia announced plans in 2008 to cancel 80% of Iraqi debt but has yet to follow through

Australian Economic Recovery Expected in Two Years

According to the news,

SYDNEY - Treasurer Wayne Swan is counting on a rapid recovery from recession within two years to get the budget back towards balance, repay the national debt, and cut the unemployment rate.

While this is still possible, it is amazing to see such expectations only a couple of months after “the end of the world” predictions. Encouraging, nonetheless.

Architecture of Australia's tax and transfer system

This document is a part of the review of Australian tax system and proposal for the reforms of it. “Architecture of Australia’s tax and transfer system” was published on 6 August 2008 (link).

Interesting sections with graphical representations of the current Government income from taxation:

• Australian Government Taxes (link)
• Australian government and state revenue powers (link)

Other documents available in the Publications list (link).

Architecture of Australia's tax and transfer system

Sign of Times

Here are a couple of quotes from Mish’s Global Economic Trend Analysis that portray where we are headed.

The first one is a quote from David Rosenberg at Merrill Lynch:

"There seems to be a lot of market chatter today about how the dramatic fiscal and monetary stimulus is going to reignite inflation. Let's get a grip. We have a real unemployment rate of nearly 16% and a capacity utilization rate that looks about to decline to 65%. There is simply too much spare capacity to absorb to be concerned about what the government is going to do except prevent an outright deflationary environment from taking hold."

 

And another one relates mainly to the US but with repercussions to the rest of the world:

No one wants to hear this but here it is without sugar coating: A long painful recovery process is in order. It may take a decade to play out. Lower home prices, lower prices on goods and services, and lower wages and benefits will all be a part of the recovery process.
In aggregate, the current generation now in high school is likely going to be the first generation in America's history with a lower standard of living than their parents for quite some time to come.

This, at the same time, may mean that the redistribution of wealth is in place. While developed countries feel it as deflation of wealth, most of the world will necessarily see it as inflation of wealth. With lots of spare industrial capacity out there, I believe this will lead to a higher standard of life, where many things will be possible. At the same time, all of them will lose on the scale of desirability. New trends will emerge later on to make up for it.

Markets Past the Worst

uncertainty measured by implied volatility on the S&P 100 – commonly known at the financial “fear factor” – has fallen back by 50 per cent, and the stock market has begun to rise. I believe growth will resume by late 2009, and the halfway point of the credit crunch may have passed.

The above seems to be the general consensus about the current situation in the markets. Even Nouriel Roubini agrees with this view, albeit with a bit different time frames. I believe the above might be true in case we see some positive surprises, whereas Roubini sees only negative surprises in the future, hence the progress is to be slower than generally thought. Well, both options are possible. That’s why they are called ‘surprises’ in the first place. However, March 6-9, 2009 seems to have been the (double) bottom of the current financial crisis.

“Too big to fail”

The latest RGE Monitor’s newsletter contains the following text:

Edward Harrison describes why Swiss bank UBS is too big to fail, but also too big to bail for tiny Switzerland. He provides concurrence to this feeling from Swiss banking expert Manuel Ammann, who in the German language press recently gave his opinions on how UBS should be structured as a result of the crisis.

This pretty much summarizes where we are with the globalization progress. There are multinational companies that are “too big to fail”. But not only that. They are now too big to save by individual countries. I assume the current coordinated multinational response to the economic crisis might bring the new way of dealing with these gigantic corporations. They have overgrown their native countries and markets and are simply too big a burden for any single individual country. And, since there are entities that are now larger than the state, the significance of states may be waning rapidly. In Europe this is more or less obvious with the advancement of the European Union. Individual countries are losing their power. I actually do hope this happens even faster and European Constitution gets up to speed with the EU development and enlargement.

Well, since these entities that are now more important than states are companies – entities in the economic sphere – this shows that this is the age of finance and economy. Whether this current financial crisis, originating in and affecting primarily the financial circles, will cause this era to end? I guess we’ll know in the next 6-12 months.

EU Funds to Support Serbia :: BalkanInsight.com

EU delegation is in Serbia, negotiating the EUR 100 million aid package.

The mission of European Commission arrives in Belgrade today for talks with Serbian officials on a financial help package worth EUR 100 million.

EU Funds to Support Serbia :: BalkanInsight.com

SSgA: SPDRS Australia - Frequently Asked Questions

Here is the summary of fees on SPDRs ETFs in Australia:

The total annual operating fees and expenses for the SPDR 50 and the SPDR 200 funds are currently capped at 0.286% pa. of the Net Asset Value of the fund, calculated and accrued on a daily basis. The total annual operating fees and expenses for the SPDR Listed Property Fund are currently capped at 0.40% pa. of the Net Asset Value of the fund, calculated and accrued on a daily basis. The cap excludes transactional fees incurred, such as brokerage and transactional fees charged by custodians and registrars. Transactional fees may therefore be charged in addition to the cap. The cap does not apply to extraordinary fees and expenses or those that were not contemplated at the date of the SPDR Product Disclosure Statement. Investors will also be liable for customary brokerage when buying, selling and redeeming units through a broker. Transaction fees are also payable for those who use the in-kind application and redemption facility. The SPDRs Product Disclosure Statement contains further information on fees and expenses.

SSgA: SPDRS Australia - Frequently Asked Questions

Vanguard to Launch ETFs in Australia

Vanguard Australia recently announced that they will launch Exchange Traded Funds (ETFs) on Australian Stock eXchange.

I am looking forward to this as I have been looking at Australian ETFs recently. Depending on your investment volume ETFs may be even better option than index funds. The costs make all the difference.

More details about these new funds will be released once regulatory and legal approvals are finalized.

Source: article at Vanguard Australia

Investing for Your Future

Great home study course about investment for beginners.

This 11-unit home study course was developed by the Cooperative Extension system for beginning investors with small dollar amounts to invest at any one time. We assumed that many readers will be investing for the first time or selecting investment products, such as a stock index fund or unit investment trust, that they have not purchased previously.

The course units were developed in a logical order. "Basic" topics such as setting goals, investment terms (e.g., diversification, dollar-cost averaging, asset allocation), and finding money to invest lay a foundation to help readers understand how and why they’re investing. You’ll also begin to understand that there’s generally a trade off between risk and reward. The more risk an investor assumes, the greater the chance of a high return, as well as the greater chance of loss.

After exploring "the basics," the course describes specific types of investments (e.g., stocks and bonds) in detail. You’ll begin to understand their characteristics, how they are purchased, and what it costs to purchase each investment. There are also units that focus specifically on tax-advantaged investments and investments that can be purchased with $1,000 or less.

Finally, Investing For Your Future concludes with additional topics of use to investors: available resources, how to select professional financial advisors, and information to help you avoid becoming a victim of investment fraud. You can choose to read the entire course, in any order that makes sense to you, or select only those topics that are of most interest. The choice is yours.

• Introduction
• Unit 1: Basic Building Blocks of Successful Financial Management
• Unit 2: Investing Basics
• Unit 3: Finding Money to Invest
• Unit 4: Ownership Investments
• Unit 5: Fixed-Income Investing
• Unit 6: Mutual Fund Investing
• Unit 7: Tax-Deferred Investments
• Unit 8: Investing Small Dollar Amounts
• Unit 9: Getting Help: Investing Resources
• Unit 10: Selecting Financial Professionals
• Unit 11: Investment Fraud

Investing for Your Future - eXtension

Australia - Currency

My first Google Web Toolkit application has been deployed. AJAX buttons on the lower currency chart allow changing the time period displayed. Check it out. It looks really neat.

EURAUD chart available below for different periods

Australia - Currency

The Day I Reached My Goal

Today should be a historical day for me. It is the day I reached my goal of financial independence, according to my definition. From this day, assuming stock market does not change and currency exchange rates remain the same, I should have enough passive income to cover for my basic expenses and hence not depend on any external conditions.

But things are not that rosy, of course. Stock market is quite volatile these days and many forecast further downside moves. The same goes for Australian Dollar, which closely matches the world markets as it is a commodity currency, basically. And, the last but not the least, my initial calculations included income at 6% return. This also remains as the great unknown as the bank cash rates are at 4% mostly and earnings on mutual funds are to drop significantly this year. But we won't know until July, at least.

Still, today, according to numbers, I have reached my target. Thanks to Australian Government's economic stimulus payment, which pushed me just over the set goal.

Rustic Furniture

Just run across a web site of a company that makes rustic furniture. I was amazed to see that such a furniture is being produced. Guess this style is coming back to fashion.

I spent quite some time just browsing through the images of wooden furniture, imagining how it would fit in my home. The shapes and colors of the furniture are excellent. They are mostly wood in various colors and that is exactly what gives it that cosy, warm feeling. I would love to have such an environment to live in. It is much more preferable to the bare, industrialized look of the modern apartments and houses. Wooden surfaces create a natural ambient which is very pleasant to look at.

I always wanted to have a Japanese-style environment, with tatami mats and shoji screens. The beds and book cases at Rustic Furniture would really fit into my imagined design. This furniture also brings back some memories of my grandparents’ house. They take me back into childhood and make me feel safe and happy.

Wish I had something like this closer, where I could go and see it live. I’m sure I’d find a few things to take back home. If you are interested, check out the Rustic Furniture web site.

Government Stimulus Payments Being Delivered

Today I have received the notice from the Australian Tax Office that the economic stimulus payment has been made into my nominated bank account. Hopefully this will help pave the way to an economic recovery in the near future.

Core-Satellite Asset Allocation Strategy

Detailed description on how to build investment portfolio. The focus in this article is the strategic asset allocation decision. Explains what is asset allocation and why is it important.

Michael Houlihan, Manager, Retail Products and Technical Services discusses strategic core-satellite asset allocation decisions

Helm

Will Euro Fall Sharply? - Update 1

Following my original question - will Euro fall sharply after April 1, 2009, here is the first update. As expected, Euro is far lower compared to Australian Dollar. It is in a descending trajectory. A typical technical analysis states that there might be support at 1.8 level but it could also go all the way to the multi-year average. Have a look at the chart... Click to see larger image.

Australia - Currency

Tabcorp Bonds Offer

Tabcorp is making a bond offer for the period of 5 years. The expected (advertised) return is 7.39%. The minimum investment is $5000. The offer provides quarterly interest payments.

I’m glad to finally see some life in Australian bond market.

Tabcorp Bonds Offer

Adoption of Euro in Eastern Europe?

Current RGE Monitor mentions the following text, written by the FT:

Accelerated Euro Adoption To Ease Eastern Europe's Woes: IMF Backs The Idea

• A confidential report, drafted by the IMF, World Bank and the EBRD to support a region-wide anti-crisis strategy, says struggling EU countries in the CEE area should switch to the Euro even without full Euro zone membership: "Without euroisation, addressing the foreign debt currency overhang would require massive domestic retrenchment in some countries, against growing political resistance" (Financial Times)

Business Spectator - RBA cuts rates by 25 basis pts to 3%

As can be seen on my Foreign Exchange page, the Australian Reserve Bank’s cash rate has been reduced to 3%.

Business Spectator - RBA cuts rates by 25 basis pts to 3%

Adgitize - A critical look | The Nexus

To shed some more light on Adgitize, at the link below is an interview with Ken Brown, and admin at Adgitize.com. It is a new service that builds upon the Entrecard model. Not a typical advertiser-publisher network but a new hybrid service that links bloggers, advertisers, and blog readers into a network.

This network offers an advantage to small blogs and web sites in a form of capped or limited benefits for activities that earn points. Points are capped at 100 so that very successful blogs do not overwhelm the small ones.

To summarize the features - Maximum earned is 500 points a day. Activities that earn points include writing posts on the blog, visiting advertising blogs, blog page views * number of ads shown, etc. The percentage of activities contributed to the Adgitize network is then multiplied by the revenue earned for the day and credited to the publisher's account. Funds transfer is done via PayPal for a minimum of $10 and via check for a minimum of $50.

Adgitize - A critical look | The Nexus

ASX 200 at 3700

The Australian stock market is following a lead from other world indices and is rushing upwards. It has been a remarkable advance today. Just have a look at the current ASX200 chart (daily).

Will it hold?

The good news is that the market is not going down even when some bad news come up. There is a bit of optimism there. This is the current ASX S&P 200 index chart:

The March lows are consistent with many calculations of the possible low for this current downturn. Prof. Roubini and John Mauldin have mentioned similar levels in their analysis. But, many have also said that it will get worse before it gets better. Whether "worse" meant the March lows or the effects on the real economy, where unemployment is expected to peak only in 2010 or even later, is hard to say at the moment.

Will Euro Fall Sharply

Here is a quote from Shane Oliver that supports my opinion that Euro is to fall sharply against the Australian Dollar, and soon:

An obvious concern is that by increasing the supply of US dollars, the value of the US dollar (US$) will fall. While it has fallen sharply in the last week, it is hard to see the US$ falling too far. Other countries are also undertaking quantitative easing and it is only a matter of time before the European Central Bank is forced to do the same.

Now, from technical analysis we know that a narrowing pendant is a sign of change. The EURAUD chart below presents the focus of a narrowing pendant.

This might be an indicator that Euro is to head South in the next couple of weeks. Well, if it happens as Mr. Oliver states, that could be the trigger for such an event. Another reason would be the increased risk tolerance in the markets, indicated in the last 2-week market rally worldwide.

Update: The first confirmation did not take long. See update 1.

So Many Conflicting Views

There are so many conflicting news and views out there these days. While the markets around the world have rallied about 20% in the past two weeks, the indicators are generally not that good. But, there are signs of hope, some wish-washing from the politicians and bankers and some statements that the banks are not in such a bad shape as previously thought. Or feared, to be more precise.
It is apparent that the analysts' economic outlook have always went behind the actual real numbers. So it is possible that the forecast is dark because the situation is bad. As the situation improves, the forecasts would start to improve. But, nonetheless, the previous performance tells us (almost) nothing about the future performance.

Recession in the Balkans

Balkans Feel Chill of World Recession :: BalkanInsight.com

The IMF and other lenders recently in principle agreed to lend 20
billion euro to Romania and 3 billion euro to Serbia. But while the
loans came as a relief and covers the countries' financing gap, some
analysts in Serbia have doubted their government's ability to adhere to
the rigid fiscal discipline the lenders require.
...
According to Serbia’s National Service for Employment, the number of
unemployed people has increased by 31,000 in the last four months.

...
Bosnia and Herzegovina has been harder hit still. It is yet to launch
negotiations with the IMF, but economic experts predict that the
country, especially its Bosniak (Bosnian Muslim)-Croat dominated
entity, will not be able to meet requirements and curb excessive
spending on social benefits.

As a result, several local officials predict that the
Bosniak-Croat dominated entity's budget and government will collapse
within the next five months. The IMF has predicted that GDP growth rate
in 2009 will at best remain flat.

...

Croatia's economy is also poised for a serious downturn this year,
analysts have warned, although the country’s statistic bureau still
reported a year-on-year quarterly rise of 0.2 per cent in the last
quarter.

Lafoffs in Bosnia - ArcelorMitall

ArcelorMitall in Bosnia Lays Off Workers :: BalkanInsight.com

ArcelorMitall, one of the largest employers in Bosnia, announced it will lay off about half of the 4,000 employees in Zenica smelter, due to reduced global demand. Laid-off workers will receive 55 percent of the average salary, amounting to around 200 Euros.
This is to be the single largest lay-off in Bosnia's modern history. Capitalism is striking hard, it seems.

In the last three months, Bosnia's employment bureaus have reported
that at least 15,000 people have have lost their jobs, in the country
and abroad, and have registered as newly unemployed. Economists warn
that the figure could be even higher since not all workers register
with employment bureaus.

New Service - Adgitize

Here is another ad network. It is not one of the typical advertisement agencies with an established business model. It is one of the new era advertisement / social network / bloggers network community.
The concept is interesting. I am putting it to test.
The network accepts bloggers. Bloggers earn points for certain activities which include blog postings, visiting other blogs, viewing and clicking ads, and so on. Naturally, the amount of these activities is limited to avoid excess hyper-activity. For example, clicking ads is limited per one a day.
Accumulated points are translated into cash at the end of each month. The final amount depends on the funds earned by Adgitize and distributed to all who earned points that month. The funds can be transferred via PayPal (minimum amount $10) or via check (minimum amount $50, of which $10 are fees).
As I said, I am putting it to test and will post more in April after the stats are calculated for this month. Then I'll be able to evaluate the scope of this network.

Remittances Slow for Eastern Europe

RGE - Remittances to Eastern Europe to slow dramatically

Remittances are one of the key components of the GDP for Eastern European countries. Millions of migrants moved from Eastern to Western Europe to find work. Over the past several years they were sending the remittances back home. This amounted to up to 5% of GDP in their home countries. Now, with Western European countries entering recession and depression, and currencies devaluating, the flow of funds to Eastern Europe will slow dramatically.
Not to mention already disappeared foreign investments and international aid.

Serbia Economic Outlook

$4.1billion IMF Loan Agreed, Sharp Spending Cuts Ahead

• March 26: The IMF reached a preliminary agreement with
  Serbia on a 3 billion euro ($4.1 billion) stand-by loan to help the Balkan
  nation shore up its finances during the global financial crisis. The new
  agreement will replace a $520 million stand-by loan approved in Jan 2009
  

• The IMF deal calls for drastic cuts in public spending, a
  freeze in wages, pensions and hiring in the state sector, and the introduction
  of an additional 6% tax on salaries and pensions to contain the 2009 deficit to
  3% of GDP 

Source:RGE Monitor

Bosnian GDP Growth Forecast Cut to 0%

Bosnia’s GDP Growth Forecast Cut to 0% :: BalkanInsight.com

Bosnian economy's growth forecast has been cut from 5% to 0%. Industrial production fell 11.1% in Federation (FBiH) and 5.6% in Republic of Srpska (RS). Commercial loans have been reduced by 16% in FBiH and 24% in RS. Help from IMF will be required soon.

Business Spectator - Most likely to succeed - Q&A by James Frost

A quantitative report from Citi has placed Australia at the top of the pile in relation to global markets. 

Business Spectator - Most likely to succeed - Q&A by James Frost

Forex eBooks in PDF

Forex eBooks | Forex Trading | Forex Strategy | Forex Market

Looking for a description of a narrowing pendant, which is how an EURAUD chart looks at the moment, I came across the above site. It contains loads of books related to Forex.

Peer Lending in Australia

Peer lending has taken off a few years ago, learning from micro loans industry in poorer countries. Now almost anyone can become a lender through peer lending programmes. Some sites offering the peer lending service are listed below.

• iGrin
• PeerMint
• LendingHub
• Fosik
  

I have not (yet) tried any of these services but will adjust this post if I do.

There seems to be an issue with peer lending in Australia since none of the above web sites are actually operational. They are all in beta testing or initial phases of operation.

First Paid Post

Using PayPerPost I have done the test with the first submitted paid post. The advertiser on the site asked for a post of 100 words on the topic of real estate. They are a realestate agent in the US and wanted to have the link to their site in the post. So, having not written anything about realestate for a while, this was a nice opportunity without a conflict of interest. I refreshed the view on realestate generally and included a link to their web site in the post. The post is here.
After submitting it, the initial response from payperpost.com was a denial of the post submission because my blog did not include a disclosure policy. After creating and posting one (here), the post was approved. I am still waiting for the payment and will post after it arrives. The payout is after 28 days. When that happens, this method of online earnings will become proven.
Check my page on Online Business to see more on my experiment of finding whether the online business stories are a myth or not.

Rally Goes On for the 2nd Day

"Wall St: Dow Jones up 3.46%, S&P up 4.07%" - These are the current titles. Based on a small downgrade for GE and retail spending that fell less than expected, the stock market rally is continuing.
Now, the question is which analysts to believe. As usual, the time will only tell. If Roubini is right, this is just another bear market rally that might even go on for several months. The push comes from government interventions but, ultimately, the markets will go back down because the world is in a bad shape.
On the other side of the coin, miss the initial recovery and miss the most of it. In the last two to three days the markets are up about 10% already.
It is sad, though, to see the spectacular numbers on the upwards and know that the real amounts are only a fraction of the losses sustained earlier. Ten percent rise today was only a 8-9% fall yesterday.

Disclosure Policy

This policy is valid from 11 March 2009


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 This blog does not contain any content which might present a conflict of interest.


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JPMorgan CEO sees "modest signs" of recovery

JPMorgan CEO sees modest signs of recovery | U.S. | Reuters

WASHINGTON (Reuters) - JPMorgan Chase & Co Chief Executive Jamie Dimon said on Wednesday he sees "modest signs" of an economic recovery and endorsed a plan to create a U.S. systemic risk regulator.

Rally, Growth, etc.

Fed chief Ben Bernanke sees recession over this year | The Australian

Right after my last post about the current market rally (see chart below to get the sense of it) the news confirm how a rally develops. If the good news keep coming, including the euphoria that comes along, it is very easy to visualize how markets may rush on the upside just as easy as they did in the downside.



Now, in the news linked above, Ben Bernanke, the US Fed chief, states that if the US banking system stabilizes the recession should end later this year and fairly strong growth should return in 2010!
He also added that he does not expect deflation. The real work is now on fixing the international financial markets and regulations so that a similar collapse does not repeat in the future.
The statements above were given in his speech given at the Council of Foreign Relations. As we can see, the focus slowly shifts to fixing the financial system, meaning that a lot of what needed to be done has been done. Now we are to look into the results. And the most amazing thing is that not only we can see the forecasts of the end of the current recession but also comeback of growth.

Market Rally Staging

Australian Stock Market Charts - NetQuote
There's a new (bear) market rally going. In the past couple of days there have been predictions of one. Mr.Roubini said there is a large bear market (suckers) rally coming that might extend over several months. The stimulus packages are bound to lift the market up, although artificially. There is a lot of cash on the sides. Cash rates are closing on zero worldwide and that makes cash owners uneasy. Markets are at a depressed state and there are different views on the bottom of the current markets. Whichever way we look at, the worst predictions are that we are about a 25% away from the bottom. The more optimistic views have been all beaten recently, of course.
It is possible that markets are bound to go up from this point. There is a lot of talk about the future of the financial markets worldwide and that will really decide on whether there are conditions for the real growth to come from. Enormous amounts of government debt created recently plus enormous amounts of corporate and private debt that has to be cleared soon still pose a huge question mark on the real economic recovery.
Well, it is very hard to distinguish between the "noise" - the news that just state the obvious - and the ones that are actually saying something about the future.
If you're market superstitious - this is March, the month in which a huge turnarounds happen. So, let's wait and see.
I save/invest in small bits and pieces, as described in my investment tips for the bear market.

Property Market

I haven't examined property markets in a while, except the one in Serbia. But, property is getting more and more attractive investment option in Australia at the moment, too. This probably is true globally. The reasoning behind getting into the property market now is that

• interest rates are lower for paying off the property loan, and attractive rates can be fixed for some time,
  
• interest rates on savings are lower making savings less attractive,
• stock markets are in free-fall, making them a no-no at the moment
• property offers a cash-flow, which provides some security in the economic downturn
• property prices are lower than they were a few months ago
  

All these reasons make sense. The thing that makes this option work is to find a property that lost more of its value than other, similar ones. Either locking the current interest rate or waiting a few months to see whether the rates will go lower also adds the benefits.

In Australia, the First Home-owner Grant Bonus is still valid. This means that the Government is giving away A$21,000 to first-time home owners instead of standard A$14,000. It is a significant boost in case you do not have a property ownership already. Many have used this opportunity in the past few months, which was indicated in the statistics of the number of grants issued recently.

I reckon the situation in the U.S. is much more drastic than in other areas. Some properties are being advertised on eBay for as low as $1. Now, that is an investment. Of course, such a property requires travel, most probably. Maybe some renovation. But, it can also be sold through agents without ever seeing the property live. If looking for an agent in the U.S., check Real Property Management.

Although one of my primary goals is to own a home, no matter how small, it appears to be very hard to reach it. So, for the moment, it remains a dream, still. :)

Finance - Current Cash Rates

Foreign Currency Exchange page now displays official cash rates set by central banks. Initially, I posted European Central Bank and Reserve Bank of Australia rates.

Credit and Growth

In Business Spectator - Living on borrowed stock - Alan Kohler states:

As we are now learning for the umpteenth time, the lending of money – AKA the credit creation process – is necessary for economic growth.

We know that because credit creation has now stopped because too much money had been lent simply to buy land instead of productive assets, thereby temporarily and artificially inflating the price of land and then dissolving bank capital as prices fell. As a result, economic activity has now stopped as well.

A simple, but effective, description of the current economic environment.

Bonus Payments Coming Up

Tax Office to start making tax bonus payments from April

Australian Tax Office is starting to send bonus payments to taxpayers starting early April. Payments of $900 will be sent to taxpayers who submitted their 2007-2008 tax return. This is a part of financial stimulus pushed by the Government.
Now, since there is only short time left to update financial details, the bank account update process is done by phone. The deadline for information update is mid-March, which is the end of next week. Address can be updated online, through a form. Link to that form is available at the link above.

Now, I tried to update my bank account details through the phone system. ATO will use whichever way was submitted with the tax return. So I wanted to switch from one bank to another and happily called 1300 686 636 after I found out it was an automated system. Thought everything is going to be done quickly since it's only numeric data I need to update. Hence, no worries - it is a great idea to have it updated over the phone.
But NO! The phone system is a voice recognition one. Oh, my God. Shivers went down my spine. But, alright, I thought, it must be good since they are going live with it. And so it started... Blah blah blah, I was saying my details for check-up and then one of the digits was recognized wrongly. At validation I said "No" but the system went on as if everything was alright. So I hung up and called again. This time I decided to keep the mouth shut and use the phone digits to type in the number. I found about this option only after the system could not understand what I said previously. Cool. Finally some stupid-old mechanical system that actually works.
Now, everything went well while it was only numerical details I needed to check. But, whoa, the system asked for my name. !#!#%@#%@#$% My last name is not even pronounceable in English. So the fun started. I never even got to my last name. The system could not recognize even my first name - which is Alen. It spelled Glen, Hellen, and these other names on and on. After a while the system got tired of me and put me through to a live person. Finally, everything was done within two minutes. Amen.

Economic Indicators

I have gathered some key economic indicators that help in analyzing the current state of affairs in the world economy. The indicators include Baltic Dry Index, VIX (the fear indicator), Oil price, Gold price. There are additional links to Libor rate and the U.S. Bureau of Statistics, where the additional indicators are available for the US.

The indicators are very valuable and the page is accessible from the index page of the Finance Site or from the link below:

Economic Indicators

Aid Denied for Eastern Europe

RGE writes:

At a March 1 EU summit, leaders made a new commitment to the single market - a response to concerns that any protectionist moves to prop up national industries would undermine EU unity - suggested a joint plan to deal with toxic assets is working and pledged support to CEE/SEE countries on a case-by-case basis but rejected pleas for a 180b euros ($230b) aid package for eastern Europe.

As the economy tanks further the development of events is getting more and more interesting to watch.

Australian skilled workers to lose jobs: survey

The research, conducted by KPMG Econtech for specialist employment services group Clarius, forecasts the Australian unemployment to reach 6.1% by mid-2010. Oversupply of skilled workers could be between 35,000 and 50,000.

Australian federal government expects unemployment to rise to 7% by mid next year (2010) from 4.8% in February 2009.

The demand is uneven across industries. In the December quarter last year there was 39,000 unfilled professional positions in building and engineering, accounting and auditing, healthcare and computing and 60,000 in trades such as construction, automotive trades and metalworkers..

Business Spectator - Skilled workers to lose jobs: survey

Novi Sad Real Estate Prices in January 2009

The article (in Serbian) about the house prices in Novi Sad, Serbia. Published in January 2009. States that the residential real estate prices are 10% lower compared to prices at the end of November 2008. The following prices are as of 2009-01-21 and compare to the prices from 2008-11-23, given in parenthesis.

Centar, Bulevar oslobodenja - 1367 EUR/m2 (1516 EUR/m2)
(uzorak od 20 stanova, prosecna kvadratura stana: 43.35m2)

Grbavica, ul. Brace Ribnikar  - 1358 EUR/m2 (1472 EUR/m2)
(uzorak od 21 stan, prosecna kvadratura stana: 42m2)

Sajmište,ul. Cara Dušana - 1208,24 EUR/m2 (1378 EUR/m2)

(uzorak od 26 stanova, prosecna kvadratura stana: 42m2)

Nova Detelinara - 1208,46 EUR/m2 (1314 EUR/m2)
(uzorak od 36 stanova, prosecna kvadratura stana: 40m2)

Salajka,Podbara - 1208,28 EUR/m2 (1321 EUR/m2)
(uzorak od 21 stan, prosecna kvadratura stana: 40.2m2)

Liman - 1291 EUR/m2 (1452EUR/m2)
(uzorak od 14 stanova, prosecna kvadratura stana: 43.60m2)

Novo Naselje - 1190 EUR/m2 (1256 EUR/m2)
(uzorak od 12 stanova, prosecna kvadratura stana: 46.4m2)

Železnicka stanica - 1150 EUR/m2 (1327 EUR/m2)
(uzorak od 12 stanova, prosecna kvadratura stana: 43m2)

Cene | Investgrad

Update an Serbia's IMF Deal

From Vecernje Novosti:

According to preliminary estimates, Serbia’s fiscal gap in the revised 2009 budget will be about 1.2 billion euro, or some 3 percent of the gross domestic product, double than it was planned. The International Monetary Fund says Serbia has to cut  spending significantly if it wants an additional IMF deal.

MEB Term Deposit - Loyalty Bonus

A small term deposit with Members Equity Bank is close to maturity date and MEB has sent a notification letter. They are offering a loyalty bonus if the term deposit is renewed.
If the term deposit is renewed for the same period (3 months) the bonus will be 0.50% on top of the current interest rate.
If the deposit is renewed for a different period (6, 9, 12 months) the bonus will be 0.75% on top of the current interest rate.
This is very good considering their interest rates are already higher than other banks'. It is also a nice feature to offer and experience since I have not had similar cases before. Thumbs up.

Eastern European Forecast

An RGE's analysis of the Eastern Europe does not leave a lot of reason for enthusiasm about the region's future.
Almost all countries will report economic contraction in 2009. The recently high-flying Baltic countries will even post double-digit contraction this year.
The main reasons for region's ill faith are collapsing exports and drying-up of capital inflow. Main destination for exports from Eastern European countries was the EU market, which is now in recession. Exports also contributed up to 80-90% of the GDP in some countries. Capital inflow contributed to region's growth over the previous years.

According to the Institute of International Finance, net private capital flows to Emerging Europe are projected to fall from an estimated $254 billion in 2008 to $30 billion in 2009. Whether or not this is formally considered a ‘sudden stop’ of capital, it will necessitate a very painful adjustment process.

Also, days of easy credit flows were accompanied by rising external imbalances in trade. In Romania, Bulgaria and the Baltics this reached double-digit values. So the forecast for the region is a crisis similar to late 1990s crisis in Asia. The danger for the rest of the world is that this crisis could spill outward into other regions. High involvement of the Western European banks in the region makes it possible for the spread of contagion outwards.
Eastern European banks, at the same time, can expect a high percentage of non-performing loans, considering the high amount of foreign-currency loans issued and the weakening local currencies. And, as all the banks are now linked by their external parents/owners, the whole region's stability depends on their weakest members.
To combat these conditions, government institutions have pretty limited options available. Many other, besides Latvia and Hungary, will probably require IMF help in the process. Last week, EU leaders called for doubling of IMF resources to $500 billion.

Apart from this, it is worth noting that the situation in EU, from which the help is expected in containing the crisis. Russia is the second largest borrower from the EU banks. Russia also has a $100 billion debt that requires financing this year. EU banks also have an EUR 30 billion exposure to Ukraine which, in turn, has a $46 billion in foreign debt due this year. At the same time, devaluation of the local currency undermines repayments of this debt.

What is scary are the potential political consequences of these conditions. Quote:
The series of riots that erupted in Bulgaria, Lithuania and Latvia in January, followed by Latvia’s government collapse last week, raise concerns that Eastern European countries may experience a period of deep destabilization and social strife as the economic crisis deepens and unemployment rates soar. The recent wave of popular unrest was not isolated to Eastern Europe. Ireland, Iceland, France, the UK and Greece also experienced street protests, but many Eastern European governments seem more vulnerable as they have limited policy options to address the crisis and little or no room for fiscal stimulus due to budgetary or financing constrains. Deeply unpopular austerity measures including slashed public wages, tax hikes and curbs on social spending will keep fanning public discontent in the Baltic states, Hungary and Romania. Dissatisfaction linked to the economic woes will be amplified in the countries where governments have been weakened by high-profile corruption and fraud scandals (Latvia, Lithuania, Hungary, Romania and Bulgaria). The political forces most likely to benefit from public disaffection are those running on the populist platforms, which could disrupt efforts to battle the effects of the economic crisis. Latvia could be a case in point, as there are growing concerns that the coming election campaign might suspend the fiscal austerity measures required by the IMF bail-out package. Two other political hotspots that are at risk of early elections are Romania and Estonia, while Bulgarian national elections are due in mid-2009.

If the above materializes and nationalist parties win the public sentiment, this could put a halt on reforms being conducted in the whole region. Some are questioning the EU integration needs. Eastern European economies might also be hit by some protectionist measures undertaken by Western European economies. Unemployment in Western Europe will also turn the tide in worker migration. This will result in many workers moving back to their home countries while the inflow of funds sent home also dries up, adding to the pressure of social discontent there.

This will definitely be an interesting year to follow through.