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Pound headed for worst month since Brexit vote

October 31, 2016 by Leave a Comment

© Justin Tallis Sterling plunges to its lowest level in 168 years

Sterling has fallen more than six percent in October on speculation of a so-called ‘hard’ Brexit which would see Britain leave the single market and switch to World Trade Organization rules.

The pound has fallen every month since April, and weakened more than 17 percent against the US dollar, trading at $1.2153 as of 2:45pm GMT on Monday.

READ MORE: ‘Hard Brexit’ could lead Britain to lose up to 9.5% of GDP – leaked govt. papers

Some investors are worried a ‘hard’ Brexit will send the country into recession and boost its current account deficit, already one of the highest among developed countries.

Leaked government papers estimate a ‘hard Brexit’ could cost the UK Treasury up to £66 billion in lost tax revenue each year and cause a GDP drop of up to 9.5 percent.

“This month has all been about hard Brexit concerns coming to the forefront,” foreign exchange strategist Viraj Patel at ING in London told Bloomberg. “It’s typical for a currency trading under heightened political uncertainty to be vulnerable to new news, either good or bad, and this will be an ongoing factor until we get clarity” over the country’s future relationship with the EU, he said.

Uncertainty over Bank of England Governor Mark Carney staying on the job for his full eight year term could further undermine confidence in the sterling, experts say.

Any “unplanned or reactionary change” at the top of the Bank of England could prove “destabilizing” for an already volatile pound, according to Paresh Davdra from RationalFX.

“Whatever Carney’s announcement on his future may be, its effect will surely be felt in the pound,” Davdra told The Telegraph.

The Bank of England is expected to make its interest rate decision and publish the quarterly inflation report on Thursday. Carney may also announce a decision on his future at the central bank.

Article source: https://www.rt.com/business/364840-pound-worst-month-brexit/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

Oil prices slide with market less certain about OPEC’s production deal

October 31, 2016 by Leave a Comment

© Andrew CullenSaudi Arabia Gulf allies ready to slash oil output 4% – report

Oil prices were losing momentum on Monday, with Brent crude trading at $48.81 per barrel, and US West Texas Intermediate down at $47.96. Both benchmarks have lost almost two dollars since last Thursday.

Iraq and Nigeria have joined Iran and Libya, seeking to be excluded from OPEC’s informal agreement to reduce output. OPEC wanted to slash the group’s production to a range of 32.5 million to 33 million barrels per day.

The deal hasn’t been officially signed, and the reluctance of cartel members to participate will likely anger Saudi Arabia and its Gulf allies. While Iran, Nigeria and Libya want to restore the production hit by sanctions or conflicts, Iraq just wants to raise output.

“It might be impossible for OPEC to come to an agreement on making cuts. The best that can realistically be expected is a freeze. Iran, Libya and Nigeria will probably be allowed to raise production to pre-disruption levels,” Mark Watkins, investment manager for The Private Client Group of US Bank told Bloomberg.

“Even the official OPEC meeting might not answer all the questions we have. We’ll need additional time to evaluate compliance with the agreement and see if it has any actual impact on the market,” Tim Evans, an energy analyst at Citi Futures Perspective told the media.

© RuptlyOil prices surge as Putin says Russia ready to support OPEC production freeze or even cut

OPEC’s failure to agree within the cartel also concerns non-members.

Representatives from oil producers outside the cartel including Azerbaijan, Brazil, Kazakhstan, Mexico, Oman and Russia informally met OPEC officials in Vienna on Saturday. The non-members said they were waiting for OPEC unanimity.

“We have to agree on the real numbers,” said Kazakhstan’s Vice Minister of Energy Magsum Mirzagaliev.

“It is important that we meet once again with detailed numbers. We agreed that we have to meet in 3-4 weeks with numbers, because every country has its own opinion,” he said.

However, the meeting participants said they saw a “positive development” to reaching a formal agreement on November 30.

“There was a lot of talk and nobody managed to agree on anything. That has been pushing the market down,” said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.

Article source: https://www.rt.com/business/364830-oil-opec-production-cap/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

Markets brace for ‘black swan’ impact of US presidential election

October 31, 2016 by Leave a Comment

U.S. Democratic presidential candidate Hillary Clinton © Carlos BarriaFBI reopens Clinton investigation as new emails found ‒ Comey

“With huge uncertainty around the outcome and the consequent shape of economic and political policymaking, many asset prices are likely to see increased volatility. This, in itself, could provide a considerable headwind to growth,” analysts at the bank said in a note.

A ‘black swan’ event is a metaphor used by the investment community to describe an event that comes as a surprise, such as the crash of the US housing market in 2008.

Last week, FBI Director James Comey announced plans to “take appropriate investigative steps” and review the new information concerning emails sent by Hillary Clinton via her private email server during her time as Secretary of State.

Either a victory by Republican Donald Trump or a Clinton triumph might become the biggest shock that would force investors to search for safety in government bonds, the Japanese yen and US dollars, fleeing from riskier equities and emerging markets, according to analysts.

Both presidential nominees plan to increase spending and cut taxes. The step would be bullish for stocks and bearish for fixed income. Analysts say the situation could turn out to be the blackest of black swans in this quite unpredictable election year.

“Valuations of US equities are quite high, and a Trump victory will trigger a massive selloff,” said Margaret Yang, a CMC Markets analyst as quoted by Bloomberg.

Trump’s shifting policy positions make his longer-term impact on particular sectors harder to assess. Banks, insurers and drug makers are expected to do better should a Republican win, according to analysis by US-based investment management company BlackRock. Almost all sectors of the health care industry might also benefit under Trump, the report adds.

Civil infrastructure corporations as well as military contractors would have bigger opportunities for government work with a Republican in the White House.

“Any upside will be limited if Clinton wins,” CMC’s Yang said, stressing that the market had already priced in her victory.

Finance and drug companies might become the biggest losers, Bloomberg reports. Tougher rules as well as tax changes might have a negative impact on Wall Street banks Goldman Sachs and JPMorgan, according to a report by Morgan Stanley Research.

“A potential Democratic sweep would represent one of the toughest election outcomes for banks,” the report reads.

Shares of pharmaceutical and biotech corporations “could be hit by renewed pressure to curb price increases on drugs,” according to the data from BlackRock. The analysts explain the projection by Clinton complaining about rising prices.

At the same time, Medicaid providers and hospital operators may benefit from continued Affordable Care Act subsidies, the analysts say. The Democrats’ plan to reduce dependence on fossil fuels could boost alternative energy producers.

Article source: https://www.rt.com/business/364811-clinton-probe-markets-break-down/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

Slavery is the dirty secret behind Hong Kong’s wealth

October 31, 2016 by Leave a Comment

© Peter NichollsModern slavery on rise in Britain, migrants fleeing conflict vulnerable

The Global Slavery Index 2016 suggests there are 45.8 million people trapped in modern slavery in the world. In Hong Kong that could be as many as 30,000 people.

The city with a population of more than seven million has become one of the worst places in Asia for its poor response to the problem, the report said. “Hong Kong has taken relatively limited action due to low level of recognition that modern slavery occurs,” and is performing worse than mainland China.

The proportion of people classified as slaves in Hong Kong is the ninth-highest in Asia and 32nd in the world. Mainland China was ranked lower on its proportion of slaves, due to its much larger population; it took the 14th spot in Asia. The country with the highest estimated proportion of modern slavery by population is North Korea; 1.1 million people in a population of about 25 million.

According to the human rights group Justice Center, Hong Kong urgently needs tougher laws and a “transparent plan of action” to combat the problem.

Anti-human trafficking coordinator for the group Jade Anderson said the research came as a “shock” to the people of Hong Kong.

READ MORE: Victims of modern slavery ‘lost’ in system by British police

There were major human rights abuses that went unpunished in the city, and the number of slaves could be much higher than researchers have estimated, Anderson added.

“We believe Hong Kong needs a transparent plan of action to combat human trafficking, forced labor, or slavery-like practices, and protect victims,” she said as cited by the South China Morning Post.“Hong Kong must develop more comprehensive policies and laws to protect victims.”

The government of Hong Kong has dismissed the organization’s findings, saying the picture was incomplete as it relied on information from NGOs and lacked government verification.

Article source: https://www.rt.com/business/364805-hong-kong-high-slavery/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

Making Sense of the Two Candidates’ Plans on Student Debt

October 31, 2016 by Leave a Comment

After decades of college tuition rising faster than inflation or middle-class families’ incomes, something had to give. And now looks like that moment: Expect a debate over how to fix the system of providing and paying for higher education in the 115th Congress and in the administration of the nation’s 45th president.

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To understand that debate, it helps to step back from campaign slogans and look at the underlying economics of higher education — both the ways it has gone wrong and the various philosophical approaches to fixing it.

Start With a Simple Question

What makes education different from any other expensive thing people buy? Why is buying a college education so different from, say, buying a car?

For one, because education is the path to higher-paying work, society has decided that it’s important to help lower-income people attain it. By contrast, there’s not much case for government intervention to make sure people have access to a nice car. Also, when buying a car, it’s a lot easier to predict whether you’re getting a good deal. You can test-drive the car and read consumer reviews and pretty much know what you’re getting. With a college degree, the payoff — a more lucrative career — is distant and uncertain.

Finally, for students who must borrow to afford college, private sector lending doesn’t work as well as it does for other types of purchases. With a car loan, collateral can be repossessed if the borrower doesn’t pay. Students have only that uncertain future. If banks were willing to lend to every student who’s in need, the cost — skyscraping interest rates, loan defaults — would be too great for an economy that relies on an educated work force. So an entire structure of federally subsidized loans was created to try to fix that market failure.

Put all this together and you get a market with some weird flaws. In that sense, higher education is more like health care or housing than autos.

Interactive Graphic

Student Loan Calculator

A guide to student loans at various universities, and what it takes after graduation to repay that debt.

Think of it as a triangle. There is the student who pays tuition for an education. There is the college dispensing the education and collecting that tuition. And then there is the government — state governments, which provide part of the operating budget of public institutions, and the federal government, which provides Pell grants for low-income students and backs loans for students of all income levels.

And once you draw that triangle, the differing approaches of conservative and liberal thinkers to the problem — and the approach that a President Trump or a President Clinton might pursue — become clearer.

The Trump Approach

Mr. Trump hasn’t talked much about higher education and student debt on the campaign trail, at least until Oct. 13, when he unveiled a few details at a rally in Columbus, Ohio, that was billed as his millennial policy speech.

“Students should not be asked to pay more on their loans than they can afford,” he told a crowd bused in from campuses around the state. “The debt,” he said, “should not be an albatross around their necks for the rest of their lives.”

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To help young graduates pay off their federal loans, his plan would cap repayment at 12.5 percent of their income and eliminate remaining debt entirely after 15 years. The idea is similar in philosophy to what the Obama administration has done: That program caps debt payments at 10 percent of disposable income and any remaining debt is forgiven after 20 years.

Pundits immediately took to Twitter to frame Mr. Trump’s plan as “left of Obama” and more generous (thus potentially more costly to the government). But the devil — and the politics — is in the details, and the campaign did not respond to requests for an interview.

In Columbus, Mr. Trump also spoke in broad terms about pushing colleges to cut costs more aggressively, particularly by limiting spending on “administrative bloat.”

“There’s not enough incentive for these colleges to cut,” he said. “If the federal government is going to subsidize student loans, it has a right to expect that colleges work hard to control costs and invest their resources in their students.” One incentive: threaten to end their endowments’ tax-free status. He also wants to loosen federal regulations, reducing the cost of compliance “so that colleges can pass on the savings to students,” and he wants universities to tap more of their endowment money.

On one end, then, Mr. Trump intends to tweak the terms of student lending and use federal funds to make debt burdens more manageable; on the other end, he would use the power of the federal government to force colleges and universities to clamp down on tuition increases.

“Trump is essentially trying to deal with the effects of the student loan problem by proposing a new policy somewhat similar to what we have already,” said Mark Huelsman, a senior policy analyst at the liberal think tank Demos. “But his diagnosis of the root causes are misaligned and incorrect.”

The focus on administrative salaries, he said, neglects the bigger problem: the role that the decline in state government support, especially when measured on a spending-per-student basis, plays in the burdens facing college students. Mr. Trump has mentioned no plans to encourage states to spend more to support their public universities.

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The Clinton Approach

If Mr. Trump is attacking one linkage in the triangle of students, government and schools, Mrs. Clinton is going after the entire triangle.

Her central pledge is for students from families with an income of under $125,000 a year to be able to attend their state school tuition-free. She wants to do it with a mix of carrots and sticks: new federal resources for tuition grants, for example, but ones that would be available only in states that fund public universities at a high level — an attempt to reverse the drop in per-student state spending over the last decade.

Similarly, Mrs. Clinton’s proposal includes financial penalties for universities that fail to trim costs, reduce tuition and ensure students are able to get good jobs. She wants a contribution from the third corner of the triangle as well, expecting students to work 10 hours a week as part of the debt-free college calculations.

“The problem of rising costs has deep roots,” said Jacob Leibenluft, a senior policy adviser to Mrs. Clinton’s campaign. “We need both new funding and new measures of accountability. Most of all, we need everybody to be part of the solution.”

But every government policy can have unintended consequences. For example, incentives put in place to reward schools that have high graduation rates might, paradoxically, cause schools to refuse admission to lower-income students who are more likely to drop out — and who most need a college education to lift themselves into the middle class.

Beth Akers, a senior fellow at the conservative-leaning Manhattan Institute, raised an additional concern: “We could design a free tuition regime in which the federal government said, ‘We’ll pay your tuition at a public college,’ but then states would have a huge incentive to reduce the money they put into their own institutions.”

To some extent, Mrs. Clinton’s approach echoes the Obama administration’s health care overhaul: In trying to keep existing institutions intact and minimize the financial cost, it ends up being quite complex and creates risks of miscalibration. Incentives for states to increase funding could be too generous, leading to cost overruns, or not generous enough, undermining the goal: to improve the ability of Americans to get an education debt-free.

To conservatives, the proposals amount to excessive confidence in the ability of the federal government to micromanage the sprawling higher education system. “This has kind of been the theme from the left on federal higher education policy, which is: We can make everything better if we just get the formula right,” said Jason D. Delisle, a resident fellow at the conservative American Enterprise Institute.

There’s a similar argument from the left: that a simpler, blunter federal program to reduce college costs, while more expensive for taxpayers, would prove more effective and longer lasting. To carry forward the Obamacare metaphor, it’s the equivalent of arguing that a single-payer health system — one where the government funds all health care — would be better than the current, complex system involving private insurers.

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“We’ve had a certain style on the left of doing this sort of policy for a very long time, and I think she’s still kind of caught in the old mode,” said Sara Goldrick-Rab, a professor of higher education at Temple University and author of “Paying the Price,” a new book about college costs and financial aid. Mrs. Clinton’s approach focuses so much on targeting aid carefully that it could be less effective at reducing costs for everyone.

For a voter deciding between Mr. Trump and Mrs. Clinton based only on how they would approach student debt, the differences are stark. Both set goals of using federal policy to reduce debt burdens for future students, but they adopt different philosophies of government to get there.

Do you think that colleges and universities have become bloated spendthrifts and that the government should deploy a set of threats to force cost cutting? Or do you think that states should shoulder more responsibility, and that greater federal control can encourage them, and their colleges, to fix the problem?

Whatever the outcome, as long as student debt levels keep rising, so will the political pressure around the issue. Whether meaningful legislation results, of course, is a different question.

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Article source: http://www.nytimes.com/2016/11/06/education/edlife/presidential-candidates-on-student-debt-in-college.html?partner=rss&emc=rss

Filed Under: Economy News

Volkswagen expects to lose 25,000 jobs

October 31, 2016 by Leave a Comment

An American flag flies next to a Volkswagen car dealership in San Diego, California © Mike BlakeVolkswagen’s record US settlement over ‘Dieselgate’ scandal approved

As vehicles with electric motors are made of fewer components than vehicles with combustion engines, “we will need fewer employees in the long-term”, said VW Group Chief Human Resources Officer Karlheinz Blessing.

According to the HR chief, the global scandal over VW cheating emission tests isn’t the main factor behind the planned job cuts, but “now the pressure to act, however, is greater.”

Volkswagen will pay as much as $15.3 billion after admitting it cheated on US diesel emissions tests for years. The German car maker has agreed to buy back vehicles from consumers and invest in cleaner technologies. VW will pay up to $2.7 billion over three years to enable the US government to replace old buses, bringing the fine closer to the $18 billion VW had prepared to cover costs of the scandal.

Rush hour traffic fills an avenue leading up to the Arc de Triomphe which is seen through a small-particle haze at Neuilly-sur-Seine, Western Paris © Charles PlatiauVolkswagen least polluting diesel car brand in Europe, study shows

Blessing added that the board plans no compulsory redundancies, “but we will reduce a number of employees.” VW expects up to 25,000 staff to be cut over the next decade as older workers retire.

Management and labor leaders will meet to discuss the company’s cost cuts before a November 18 meeting of the supervisory board to approve future spending plans.

The talks with unions may fail, as workers insist VW should invest in its own battery production.

According to Blessing, VW is considering the possibility but no decision has yet been made.

“If 30 percent of the value creation will be in the battery system in the future, it is right to consider whether we will step in and to what extent. We cannot leave that to others. How deeply we will engage is a matter we will discuss as part of the future pact,” he said.

Article source: https://www.rt.com/business/364794-volkswagen-job-cuts-carmaker/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

‘China on European shopping tour’: German minister warns of Beijing’s takeovers of EU companies

October 29, 2016 by Leave a Comment

“China itself is going on a shopping tour here with a long list of interesting companies – with the clear intention of acquiring strategically important key technologies,” the German official wrote in a guest column for Die Welt newspaper, as cited by Reuters.

© Wolfgang RattayUS intel agencies behind Berlin’s U-turn on Chinese takeover of German firm – report

The minister said the EU should review its policies towards the eastern trade partner, having accused Beijing of “foul play.” Gabriel claimed China obstructs direct investments into its companies from European partners and applies “discriminatory requirements” to foreign takeovers.

The German government can only block takeovers with potential risks to energy security, defense or financial stability, Reuters reported. The economy minister, who is also the country’s vice chancellor and leader of the Social Democratic Party, has curbed some latest takeovers of German technology companies by China.

Yet, so far in 2016, 47 deals worth a total of €10.3 billion ($11.3 billion) have been secured by Chinese investors “shopping” in Germany, according to Thomson Reuters data. The numbers show a steep increase from 2015, when 29 deals worth a combined €263 million were inked.

READ MORE: World trade growth weakest since 2009 financial crisis – WTO 

The trend has so disturbed the German official that he has warned Beijing might not gain important World Trade Organization (WTO) “market economy status.” China expects to be granted the status after its 15 years of WTO membership this year, but the German politician said in an interview with national media it “has to act accordingly.”

Article source: https://www.rt.com/business/364709-germany-china-european-takeovers/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

Public Sacrifice: Even Math Teachers Are at a Loss to Understand Annuities

October 28, 2016 by Leave a Comment

Ms. Lindert was following the lead of her sister, a fellow teacher. Her sister trusted the agent, who appears on the 68-page list of brokers working in the Los Angeles Unified School District. The recommendation seemed like a logical option to Ms. Lindert, who has a master’s degree in dance but considers the world of finance entirely alien.

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She took the agent’s word over the years, including in 2015, when he told her to transfer her money from one so-called fixed indexed annuity, purchased in 2007 through the Life Insurance Company of the Southwest, to another, from the same insurer, to qualify for a bonus.

It “seemed like a good way to make more money,” said Ms. Lindert, who started teaching when she was 53 and said she hoped to retire next year. For now, she teaches five classes a day, three days a week, to elementary schoolchildren at three schools. She brings her own speakers, drums, scarves and an iPod with 400 hours of music, along with a light lunch.

Ms. Lindert later found out that her purchase was also a good way for brokers to make more money. The first contract she was sold yielded an 11 percent commission, while the most recent pays another 7 percent to the broker, according to 2016 data from Wink AnnuitySpecs, an annuity analysis tool.

Certain types of annuities can serve as a useful retirement tool for some savers seeking a stream of guaranteed income. But many teachers already receive pensions providing a steady income base.

The type of annuity in Ms. Lindert’s account, a so-called fixed index annuity, is particularly complex. In theory, these are appealing: They provide a guaranteed minimum interest rate; they let investors participate in the market’s gains up to a certain ceiling; and they promise that buyers will not lose money when the market dives.

Ms. Lindert could have asked her fellow teachers in the math department for advice, though she probably would not have received any solid answers. When Patty Hill, an algebra teacher in Austin, looked over Ms. Lindert’s latest contract from the Life Insurance Company of the Southwest for The New York Times, she was just as befuddled. And downright angry.

“The document is filled with jargon, but at the same time, it is mathematically ambiguous,” said Ms. Hill, who recently received the Presidential Award for Excellence in Mathematics and Science Teaching, a prestigious award bestowed by the White House in August. “It is not being transparent there that is infuriating to me as a mathematician.”

Susan Jennings, senior counsel at the National Life Group, the annuity issuer’s parent company, defended its materials, saying she believed the interest rate methodology was laid out clearly. The insurer provided a copy of another disclosure — which she said agents give to all customers when they apply for the product — that is shorter and simpler, and together with the other documents, provides a more complete picture.

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Still, how do investors know whether the product is appropriate for them?

Craig McCann, a former economist for the Securities and Exchange Commission, has built a computer model that is intended to make those calculations. He has employed close to a dozen people with Ph.D.s in math to dissect indexed annuity products as part of his firm’s work, which provides analyses for regulators and litigators representing investors. He said it took years for his team to master them.

“No agent selling these or investors buying these has the foggiest idea of how these work,” said Mr. McCann, who reviewed Ms. Lindert’s contracts.

But indexed annuities have to make sense for at least some investors, right? Perhaps for the incredibly risk averse? “No,” he said, without hesitation. “Never.”

Though it appears that investors have some exposure to the stock market, he says many are left with a return they could have achieved with a supersafe bond portfolio, without paying an obscured 2.5 to 3 percent annual fee charged by the annuity provider. “They are all Rube Goldberg machines,” he said.

In her case, Ms. Lindert was advised to annuitize her first contract — which paid a minimum interest rate of 3 percent — and direct the stream of income into the new annuity, which paid a minimum of 1 percent. The other investment options provided were also far less generous — shockingly so, Mr. McCann added. “This switch is really awful,” he said. “It’s really good for the insurance company. But it’s really bad for the investor.”

The new policy did include a so-called guaranteed lifetime withdrawal benefit — for an additional fee of 0.7 percent annually — which promises a certain level of lifetime income. But Mr. McCann said his analysis found that the new policy was still less valuable than the first.

Patty Hill, who teaches algebra at Kealing Middle School in Austin, Tex., became angry after reviewing a colleague’s annuity contract. “It is not being transparent there that is infuriating to me as a mathematician,” she said. Ilana Panich-Linsman for The New York Times

Then, there’s the matter of surrender charges. Ms. Lindert would have owed a penalty for 15 years after signing her original contract — set on a sliding scale starting at 14 percent — if she wanted to withdraw more than 10 percent of her account’s “accumulation” value. The policy she bought last year, also issued by Life Insurance Company of the Southwest, has a nine-year surrender period, with a penalty fee starting at 8.25 percent.

Ms. Jennings of the National Life Group — who also serves on the National Tax-Deferred Savings Association’s government affairs committee — said that less expensive alternatives recommended by many financial planners did not meet the needs of risk-averse investors as well as annuities did. “Bond funds and portfolios do not guarantee principal,” she said, “and in a rising interest rate market can lose money.”

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The American Council of Life Insurers, a trade group that represents annuity issuers and life insurers, echoed that point, noting that guarantees come at a cost so insurers can make good on their promises.

“Annuities are among the most highly regulated products,” Jack Dolan, a spokesman for the group, said, “with disclosure being a key consumer protection.”

The proliferation of annuities in 403(b) plans is largely a matter of history. When Congress introduced them in 1958, they were viewed as supplemental pensions for teachers, and the only permissible investments were annuities, according to tax experts and consultants. The plans themselves, named for a section of the tax code, were called “tax-sheltered annuity arrangements.” Mutual funds were not available in 403(b) plans until 1974.

Slightly more than half of all 403(b) assets, approaching $900 billion, have been invested in fixed annuities — which promise either a minimum rate of annual growth or interest based on changes in a market index. Another 25 percent were in variable annuities that invest in mutual funds, according to Investment Company Institute data as of March. The remaining 23 percent were invested in traditional mutual funds.

In contrast, about 60 percent of 401(k) assets, which totaled $4.75 trillion, were invested in mutual funds, with only a small share in variable annuities. Despite the risks from short-term market declines, a diversified mix of stock and bond funds is generally less costly and provides a significantly greater return over time.

Ms. Lindert ultimately opted for mutual funds, after severing ties with her broker last year and meeting Steve Schullo, a retired teacher and 403(b) advocate. He told her about her district’s 457(b) plan, another type of tax-deferred account available to those who work for public schools and local governments.

Under that plan, run by TIAA, she has access to low-cost Vanguard funds. She chose to redirect her new contributions into one that invests up to 65 percent in bonds, with the remainder in stocks.

But most of her money is still tied up in four annuities that she does not understand.

More in the Public Sacrifice Series

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Article source: http://www.nytimes.com/2016/10/29/your-money/403b-teachers-annuities.html?partner=rss&emc=rss

Filed Under: Your Money

Bitcoin set for best week since June on strong Chinese demand

October 28, 2016 by Leave a Comment

Bitcoin rose almost nine percent through the week and was trading at $688.40 as of 14:17 GMT on Friday. That’s the biggest gain since June when its value rose with the UK’s vote to leave the European Union. Investors turned to the digital currency as a safe haven from the British pound.

With the yuan hitting a six-year low against the US dollar on Monday, Chinese investors rushed to buy bitcoin. Experts say the Chinese are using the digital currency as a way to circumvent capital controls.

© Jim Urquhart $72mn cryptocurrency exchange hack triggers Bitcoin price collapse

“There is a premium in bitcoin pricing in China as a hedge against the yuan,” Jack Liu, the Hong Kong-based chief strategy officer at OKCoin told Bloomberg. “Strength is likely to carry into year-end.”

China accounts for about 90 percent of all bitcoin trading on exchanges. The country has strict capital controls, which makes it difficult for the Chinese to convert the yuan into foreign currency, and limits the amount of cash investors can move abroad.

READ MORE: US to auction $1.6mn in bitcoin seized from various black markets

Some analysts say the price of bitcoin will continue to rise as more devaluations are expected from the Chinese government.

Bitcoin could rise above $700 before the end of the year due to the strong Chinese demand and unexpected events, such as Donald Trump winning the US presidency, according to Aurélien Menant, chief executive officer of Gatecoin in Hong Kong.

“The outcome of the US elections is likely to have an impact, as would the consequence of a Fed rate hike,” said Menant. “Further yuan devaluation and interest among Chinese investors will continue the momentum,” he added.

The price of bitcoin plunged to as low as $408 in August after the hacking of the Hong Kong-based digital currency exchange Bitfinex. Over $72 million worth of bitcoin were stolen following a cyber-attack on the company’s systems.

Article source: https://www.rt.com/business/364562-bitcoin-biggest-weekly-rise/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Filed Under: Global Business

Portugal calls German finance minister ‘pyromaniac’ for his austerity affection

October 28, 2016 by Leave a Comment

© Yannis BehrakisAthens seeks southern alliance against EU austerity policy

According to Schaeuble, the country had been successful until socialists came to power in 2015, declaring they would “not respect what the former government had agreed.”

Portugal’s socialist leader was quick to respond.

“As everyone knows, the German finance minister is a pyromaniac who tries to present himself as a firefighter. His compatriots do not think like him,” Cesar told news radio TSF, referring to German businesses investing in the country.

“They understand the Portuguese economy has potential, that political and social stability is a factor that they value, and that Portugal is in a position to make progress with our policy,” added Cesar.

The ruling socialist party has cut taxes for the poorer class and reduced austerity measures implemented by its predecessors in return for a €78 billion bailout during 2011-2014.

Last week, Lisbon said it will re-open some public services in rural areas that were shut down to save money.

A man uses an ATM machine at a Caixa Geral Depositos branch in downtown Lisbon, Portugal. © Rafael MarchantePortugal to bail out its biggest bank to the tune of €5bn

“It is possible and necessary to continue to boost family incomes, through pensions, salaries and taxes,” said Prime Minister Antonio Costa in October.

Costa dismissed Schaeuble’s comments, saying he “pays attention mainly to Germans who know Portugal, and as a result, know what they are talking about.”

“I usually only talk about what I know and I never talk about other countries about which I know nothing, based on prejudices,” he added.

After posting the EU’s third-biggest budget deficit of 4.4 percent last year, Portugal sees the budget hole shrinking to 2.4 percent this year and 1.6 percent in 2017.

The government aims to curb the deficit by increasing taxes on alcohol and tobacco, high-value real estate, vehicles and vacation rentals as well as introducing a “sugar tax” on sodas.

Schaeuble is known for his hard-line views on austerity. During negotiations over Greece’s €86 billion bailout, the Greek Avgi (The Dawn) newspaper published a cartoon, depicting him in Nazi uniform, with the caption “we insist on soap from your fat,” and “we are discussing fertilizer from your ashes.” Berlin condemned the publication.

Article source: https://www.rt.com/business/364560-portugal-schaeuble-austerity-pyromaniac/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

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