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vendredi 11 juillet 2014

Union Budget 2014 could very well be a game changer for markets

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By Amit Rathi

While the Union Budget 2014 was low on big-bang announcements, but it was highly focused on smoothening out the operational irritants that impede business decision making.

The Budget aimed at creating a business-friendly environment and sending a strong signal that the government is focused on fiscal discipline.

Given the very short period within which the new government has prepared the budget, this budget will help build credibility with its pragmatic approach.

While FDI cap increase in defence and insurance was expected, the significant move in this budget was to create a funding source for infrastructure projects by exempting banks from reserve requirements on such lending.

This could be a game changer. While markets have traditionally been focused on seeking announcements on incentives for big ticket infrastructure or manufacturing investments, I believe the interesting approach in giving investment allowance for small and medium businesses on capital spending is refreshing as it recognizes that these smaller entrepreneurs are really the building blocks of our economy.

Of course, the key consistent theme across the budget was the big focus on creating an easier interface with the government and taking away the adversarial approach that had crept in.

Take for example, the advance ruling mechanism for resident tax payers or the clarification on tax treatment of gains of FPI investors with a base in India.

One area, where we believe the government could have been more aggressive, is the disinvestment target. While the idea of selling shares in PSU banks to retail investors is interesting, we would have to wait and watch the pricing on such share sales.

In several economies, such share sales have happened at significant discounts to encourage wider participation and are also seen as a transfer of tax payers' wealth back into their hands.

Overall, a good effort in a short period of time and demonstrating an extremely business and citizen-friendly approach. Hopefully, a sign of more good things to come over the coming months and years!

(The author is MD at Anand Rathi Financial Services Ltd. Views and recommendations expressed in this section are his own and do not represent those of EconomicTimes.com.)

mercredi 9 juillet 2014

How markets' global boom could end

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How the everything boom might end: The good, the bad and the ugly var mps = {}; mps.pagevars = {"instance":"cnbc.com-relaunch","cat":"Markets","id":"101822056","hierarchy":"Markets","type":"partnerstory","subtype":"marketsection","keywords":"This is my meta keywords append.","description":"This is my meta descriptions override.","slug":"every boom ending NYT 140709 EC","hline":"Markets","modified":"2014-07-09 12:50:13"}; var _comscore = _comscore || []; _comscore.push({ c1: "2", c2: "1000004" }); (function() { var s = document.createElement("script"), el = document.getElementsByTagName("script")[0]; s.async = true; s.src = (document.location.protocol == "https:" ? "https://sb" : "http://b") + ".scorecardresearch.com/beacon.js"; el.parentNode.insertBefore(s, el); })(); (function(d) { var e = d.createElement('script'); e.src = d.location.protocol + '//bounceexchange.com/tag/1021/i.js'; e.async = true; d.getElementsByTagName("head")[0].appendChild(e); }(document)); GOLoading...>> View All Results for ""

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GO HOME EDITIONNewsEconomyFinanceHealth CareReal EstateRetailWealthAutosEarningsEnergyMediaPoliticsCommentarySpecial ReportsAsiaEuropeMarketsPre-MarketsU.S.AsiaEuropeStocksCommoditiesCurrenciesBondsFundsETFsInvestingFinancial AdvisorsPersonal FinanceCNBC ExplainsPortfolioWatchlistStock ScreenerFund ScreenerTechRe/codeMobileSocial MediaEnterpriseGamingCybersecuritySmall BusinessFranchisingFinancingManagementVideoLatest VideoDigital WorkshopU.S. VideoAsia VideoEurope VideoCEO InterviewsAnalyst InterviewsFull EpisodesShowsWatch LiveCNBC U.S.CNBC Asia-PacificCNBC EuropeCNBC WorldFull EpisodesWatch LivePRORegister|Sign InMember CenterMember CenterSign OutX Markets USEUAsiaOilBondsGoldHow the everything boom might end: The good, the bad and the uglyNeil Irwin4 Hours AgoThe New York TimesSHARES

Nearly every major asset market on earth is currently expensive by historical standards. You can read more about this phenomenon — the Everything Boom, or possibly the Everything Bubble — here. But what happens now? What does this simple fact, that globally prices are high and expected returns are low, mean for the future?

The answers fit into three broad categories: the good, the bad and the ugly. Here is what each possible outcome looks like.

What global asset prices signal?

What's behind today's profit taking, with Neil Irwin, The New York Times, and the "Closing Bell" panel.

The good

The most hopeful outcome for the global economy — and global asset prices — is that the low price of capital will help unleash productive new investments that create higher growth in the future — and that the economy will in effect grow into the current market valuations.

Companies could use their ability to borrow money cheaply or issue new stock on favorable terms to finance new inventions, new factories, new workers. Governments could use their ability to borrow cheaply to invest in infrastructure and education, increasing the longer-term productive capacity of the global economy. High prices for real estate in some of the most economically productive cities on earth could lead developers to put up more buildings there.

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If this future materializes, interest rates would presumably rise, meaning people who bought bonds at their current ultra-low interest rates could lose money. But that would probably happen gradually, and in the context of strong returns to stocks and other risky assets. After all, in this more prosperous future, corporate earnings would rise along with the economy.

In effect, this result would be one in which central banks' efforts to stimulate growth through cheap money policies (finally) have their desired effect, and once strong global growth arrives, everything else takes care of itself.

Read MoreWelcome to the Everything Boom, or maybe the Everything Bubble

The bad

People tend to assume that the current world of very low interest rates must be a short-term aberration. It's not necessarily so. Just ask the Japanese; 10-year government borrowing rates have been below 2 percent almost continuously for the last 15 years (they edged above that level one day in May 2006).

There are different names and explanations for it — a liquidity trap, a secular stagnation — and one of the great macroeconomic debates of our age is why this might be happening and what policy makers could or should do about it. But whatever you want to call it and whatever you believe its origins to be, the effects on the economy and markets are clear. It means continued low to nonexistent growth, low interest rates and low inflation. And the Japanese experience shows that it can persist for quite a long time.

Read MoreMarc Faber: The asset bubble has begun to burst

In other words, it could be that the era of low interest rates and low returns on investments doesn't end with an economic boom or with a collapse. It doesn't necessarily have to end at all. It may be that the world needs to buckle in for the kind of slow-growth, low-interest-rate world of the last few years for a long time to come.

The ugly

The two outcomes above appear the most likely. But we are in uncharted territory in many ways, and it is possible that the world may not work the way standard Keynesian economic models suggest it will.

In those models, for example, inflation can become a problem only when the economy is overheating. But what if the unconventional tools that central banks have used over the last half a decade have different results, causing, for example, a spike in prices even as the economy remains depressed? Then you could see bonds fall in value, but unlike in the "good" scenario above, not be accompanied by a rising economic tide.

Or, perhaps the large deficits that the United States and other countries have run during the crisis years will one day cause a crisis of confidence in advanced nations' debt. Interest rates could spike (and bonds could fall sharply in value, and probably other investments, too) not because the economy is recovering, but because of that loss of market confidence.

Read MoreBull market in its final stage: Ed Yardeni

Or maybe some external force will result in an economic downturn, which world economic policy makers would have few tools to fight after exhausting most of them over the last few years. If that happened, what would in normal times cause a mild downturn might instead bring about something more dangerous, like a new depression and market collapse.

Which of these is most likely? For the last few years, many official projections — forecasts from government agencies and bank economic research shops, for example — have tended toward the "good" outcome, predicting a full-throated expansion as being just around the corner. Many commentators, particularly on cable financial television, have predicted an "ugly" one, full of out-of-control inflation, debt crises and collapse.

But the pattern of the last few years shows that the "bad" scenario has been closest to the reality. That doesn't mean the rest of the bad script will continue in the years ahead, but it should prompt those predicting the first or third outcome to wrestle with why they have been wrong so far.

—By Neil Irwin, The New York Times

Related Topics Markets U.S. Markets World Markets Featured Markets Overview World Markets Market headlines from across the globe.

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mardi 8 juillet 2014

These Questions Could Help You Decide Whether To Rent Or Buy A Home

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man apartment balcony Justin Sullivan / Getty Images

A home is one of the biggest financial commitments most of us will ever make — so it's understandable that we might get a little stressed over what seems like a straightforward question:

Should I rent or buy?

To try and ease that anxiety, we spoke with a mortgage expert and a certified financial planner to get their take on when buying a home is in your best interest.

While there's no universal "right" answer, start your decision process by asking yourself these five questions:

Having the money for a down payment is only the first step. Next, you need to make sure you can afford to pay your mortgage … and costs like utilities, maintenance, furniture, taxes, and inevitable surprise costs like emergency replacement of the broken boiler.

"Understand what you're getting into," says certified financial planner Mary Beth Storjohann of Workable Wealth. "You have to be able to afford to purchase and maintain the property, and expect that your bills will change on a monthly basis."

Plus, she points out, you'll need to be able to pay all of the fees during the buying process. "The best thing you can do is educate yourself," she advises. "If you don't do your research, making the wrong decision to buy could really set you back financially."

Rent if: You don't have the money saved to buy and carry a home.

Buy if: You'll have the cash to cover the initial transaction, plus the ongoing costs of homeownership.

To be in a financial position that's secure enough to responsibly to buy a home, explains Mortgage Hippo CEO Valentin Saportas, you need:

Decent credit ("You don't need perfect credit or even good credit," he says, "but generally above 620 you can qualify for a conventional loan.")A stable income Moderate liabilitiesEnough cash on hand to cover down payment and closing costsLiquid assets as financial reserves

When Saportas says "financial reserves," he's talking about an emergency fund. It's not a good idea to scrounge every penny from each of your accounts for a down payment, leaving yourself without a safety net for an emergency or hobbling your retirement savings.

"I wouldn't recommend that someone without an emergency fund buy a house," cautions Storjohann. "It really sets you up for trouble when you wipe out your savings to reach this goal and don't have any money set aside."

Rent if: You can't check off one or more of the above bullet points, or if buying would completely wipe out your savings.

Buy if: You're financially secure outside of your home savings.

While buying a home is a major financial accomplishment, it's unlikely that it's the only one you ever intend to make. Storjohann remembers a client and her husband who were "really gung-ho on buying their first home." But after getting a financial plan and seeing exactly how much money they would need to lay out, they decided to postpone their purchase for another few years in order to finance their other financial goals, like starting a business.

"It's all about breaking it down into steps, and getting clear on the numbers," says Storjohann. "If you have any major life transitions coming up, you may want to hold off and see what happens." How will your home purchase affect your pursuit of your other financial goals?

Rent if: You're currently prioritizing other financial goals above homeownership.

Buy if: Homeownership is your primary financial goal, and you're both aware of and comfortable with how the cost will affect your progress towards your other goals.

This isn't a financial question, but a lifestyle one: If the sink springs a leak, the yard needs to be mowed, the door handle breaks, who deals with it? It won't be your landlord or super, Storjohann points out, so either you'll need to DIY or find the cash to hire someone.

Rent if: You want someone else to step in when things get complicated around the house.

Buy if: You don't mind dealing with the increased chores that come with being your own landlord.

Different experts have different estimates, but generally, it's recommended that a homebuyer spend at least four to five years in a home to offset the costs of buying.

But aside from the numbers, "buying a home is as much an emotional decision as it is a financial one," says Saportas. "Of course, you must crunch the numbers to determine whether buying makes financial sense, but it's just as important to feel that you're in a place in your life where buying just makes sense. It's no coincidence that most people seriously start considering buying a home when they get married and are comfortable with the idea of settling down and raising a family."

Rent if: You're unsure where you'll be in the near future.

Buy if: You expect to be in the same place for a few years and want to own your home.

lundi 7 juillet 2014

Could flexible working for all backfire?

Woman working from home Fancy working from home? Wishing you could drop down to a four-day week?


Well, don't just sit there. Ask!


From now on, providing you are a UK employee, you will have a legal right to request this, and your employer will have a legal obligation to answer.


And not just that - they will have a legal obligation to provide a valid reason if they cannot say yes.


Until now, parents of children under the age of 16, and those registered as carers for children or adults have had the right to ask for a change in work patterns that better suits their home life.

But now the same rules will apply to all employees, regardless of their dependants, provided they have worked for their employer for at least 26 weeks.


It allows them one "flexibility request" per year.

'Cost to businesses'

The government says it wants to remove the "cultural assumption" that flexible working only applies to parents or carers, and that in bringing in these changes it wants to make workplaces "fit for the 21st Century".


But employers' groups are worried things could backfire, making it harder for those more in need of flexible working, increasing the risk of discrimination claims, and adding unnecessary red tape.


"One of the main questions we're getting from our members is: will it become illegal for me to give priority to people who are parents or carers?" says John Wastnage, head of employment at the British Chambers of Commerce (BCC).

Child at a nursery The right to request flexible working previously only applied to parents or carers

"And the answer is yes.


"A lot of our members already offer flexible working anyway, often informally, so this change is unnecessary and it could just push up time and cost to businesses," he says.

'Negative dynamic'

The Federation of Small Businesses (FSB), while encouraging flexible working, is worried that this change in the law is sending the wrong message to workers.


"While the new procedure is designed to be light-touch, inevitably it will entail additional administration that the smallest of businesses will have to learn and may struggle to apply," says FSB chairman, John Allan.

Continue reading the main story Part-time workingFlexi-time - scope to change work hours outside of "core" business periodsJob-sharingWorking from home or remotelyCompressed hours - for example, fitting a five-day week into four daysTerm-time working - paid or unpaid leave during school holidaysAnnual hours - agreed hours split into "set" and "reserve" shifts, worked as demand dictates"Where requests are declined, our experience shows 'the right to request' can introduce an unwelcome negative dynamic into the workplace."


That "negative dynamic" could be exacerbated when an employer is faced with multiple, conflicting requests.


The UK's leading business lobby, the Confederation of British Industry (CBI), says it has called for better guidance on what employers should do in this situation.


And when the BCC asked for clarification, the response was to "put the names in a hat", says Mr Wastnage.


"That's no way to run a business," he adds.


"I think there's a risk that some businesses will take a view that they're not going to accept any requests because of the risk of discrimination."

Litigation concerns

That risk of discrimination, say employers' groups, leads to the risk of costly employment tribunals, should workers not get their way or feel hard done by.


The conciliation service, Acas, is not expecting the change to generate a flood of new cases, bearing in mind a tribunal's potential risks and rewards.


"I don't think many employees will risk their work relationship for the sake of eight weeks' pay compensation," says Steve Williams, Acas head of equality services.

Courtroom There are fears the changes could lead to more employment tribunal cases

"It's only a right to ask, and it's certainly not a right to have - and this is a key element."


Nevertheless, the government has estimated the change could bring up to 150 extra tribunal cases every year, each costing employers an average of £5,900.


That would be an increase of more than 50% on the 277 tribunal cases brought for these reasons in 2010-11.


It is, however, a tiny fraction of the 190,000 claims taken to tribunal in 2012.

Culture change

A spokesman for the Department for Business, Innovation and Skills, says: "We want these reforms to bring about a culture change in Britain's workplaces.

Continue reading the main story Burden of additional costsInability to reorganise work among existing staffInability to recruit additional staffDetrimental impact on qualityDetrimental impact on performanceDetrimental effect on ability to meet customer demandInsufficient work for the periods the employee proposes to workPlanned structural change to the business

Source: Acas draft guidelines

"Family-friendly policies and economic growth can go hand in hand. Flexible working really can help employers boost productivity and profits."


In its impact assessment on the rollout of flexible working to all employees, the government estimates that in its first 10 years the new policy will bring overall economic benefits of about £475m.


Most of that, it thinks, will come from increased productivity, lower labour turnover, and reduced absenteeism.


It could be particularly helpful, the government says, for workers who might need to look after grandchildren, or those who want to take part in voluntary work.


And then there are the potential knock-on positive effects - the chance to further reduce unemployment, or the theory that a better work-life balance will improve employees' health.


The change would apply to more than 10 million employees, and the government estimates it would lead to the agreement of more than 60,000 new flexible working arrangements every year.


But according to snapshots of the existing workforce, many employers' doors are already very much open to flexible working requests.

Evolution not revolution

About 96% of firms already offer some form of flexibility - from British Gas to Marks and Spencer - according to a 2012 survey from the Chartered Institute of Personnel and Development (CIPD).


Moreover, almost two-thirds already provide a right to request it.

Office building According to the CIPD, 96% of employers already offer flexible working

Perhaps not surprisingly, the smaller the company, the less likely they are to be quite so accommodating, but not by much - about 90% of smaller firms offer flexible working, according to the CIPD survey.


"This is an evolutionary thing, not a revolution," says Steve Williams of Acas.


"The challenge is making sure managers making these decisions actually get them right, and that they don't approve without thinking, otherwise you'll get a workplace that isn't functional."


The extension to the flexible working rules comes alongside the introduction of "parental leave" which, from next April, will combine maternity and paternity arrangements into one package.


Working couples will have the option to share up to 50 weeks' leave and 37 weeks' pay in the first year of their child's life.