Thursday, December 31, 2015

Year behind and year ahead summarized in two words; What 2016 holds for Asia; Oil rout to continue in 2016

1 Year behind and year ahead summarized in two words (San Francisco Chronicle) Asked to sum up 2015 in two words, and to do the same for their expectations for the coming year, people around the world have this to say:

Thailand: 2015: "A mess." 2016: "Fresh start." — Korawut Lam, college student. China: 2015: "Smog, corruption." 2016: "Lower prices, safe Internet." — Chen Chen, hairdresser. Brazil: 2015: "Economic crisis." 2016: "Olympic crisis." — Meire Gomes, jewelry seller. New York: 2015: "Lousy economy." 2016: "More money." — Ronnie Boyd, who sells knickknacks and scarves on Times Square

Malaysia: 2015: "Tough life." 2016: "Better economy." — Tony Wong, businessman. Philippines: 2015: "Move on." 2016: "New house." — Jojo Moro, Typhoon Haiyan survivor. France: 2015: "Danger everywhere." 2016: "Solidarity." — Sylvie Marchal, communication expert in Paris

2 What 2016 holds for Asia (Karishma Vaswani on BBC) 2015 was the year we clocked the following: No country can grow at double digit growth forever (China). You can't just dig stuff out of the ground and sell it for ludicrously high prices forever (end of the commodities super-cycle). Cheap US money doesn't last forever (Fed pushes rates up)

Here are my calls for 2016: The great slowdown of China continues. Official growth numbers will come in at 6.5%, but real growth will much likely be far lower than that. The corruption clampdown will continue to squeeze regional budgets - and that's going to push spending and consumption down further.

The elephant emerges, but slowly and not without a few stumbles. India will be the standout performer in 2016, with growth forecast at more than 7.5%. As a net oil importer, India will benefit from low oil prices. But it's not all good news. Economic reforms in India are necessary for its current growth to turn into a structural one. The attempts to pass the GST (goods and services tax) constitutional amendment bill are still stuck in parliament over differences with the opposition Congress party.

Japan - more of the same. Japanese companies should clock slow but steady growth in 2016. A weaker Japanese yen will make exports more competitive, and as the US Fed continues to raise interest rates, the yen should become weaker. Expect more monetary stimulus in 2016 as the Bank of Japan aims to boost the country's flagging economy ahead of an upper house election next year. Japan's population is shrinking and greying, which means the labour force is too.

South East Asia - not as bad as we thought, not as good as we hoped. Some South East Asian economies which have spent the last decade benefiting from China's demand for their commodities should have used the last decade of growth to put in place economic reforms. But political interests outweighed economic ones, and that's now starting to pinch. Malaysia and Indonesia are also at risk of further currency weakness, and capital outflows as the US Fed continues to hike interest rates.

Australia - the unlucky country? Australia’s new Prime Minister Malcolm Turnbull has to navigate Australia out of the curse of the resource economy. Growth has slowed and mines are slashing jobs. Expect more mines to close. Mr Turnbull has talked about the need to transition into a creative, innovative economy and has set up a 1bn Australian dollar ($723.2m) fund to boost growth in that area.

3 Oil rout to continue in 2016 (Straits Times) Oil prices remained in a downbeat mood during their final Asian-hours trading session of 2015 after record US crude inventories reinforced concerns about a global supply glut that has pulled down prices by a third over the past year.

Crude inventories in the US rose 2.6 million barrels last week, the US Energy Information Administration said. Analysts had expected a draw of 2.5 million barrels. Crude prices held losses, with US West Texas Intermediate (WTI) crude futures trading around $36.70 per barrel on Thursday (Dec 31) and Brent around $36.60 per barrel. Both benchmarks are down by around a third over 2015.

The immediate outlook for oil prices remains bleak, with some analysts like Goldman Sachs saying prices as low as US$20 per barrel might be necessary to push enough production out of business and allow a rebalancing of the market. US bank Morgan Stanley said in its outlook for next year that "headwinds (are) growing for 2016 oil." The bank cites ongoing increases in available global supplies, despite some cuts by US shale drillers in particular, as well as a slowdown in demand as the main reasons.

Analysts estimate global crude production exceeds demand by anywhere between half a million and 2 million barrels every day. This means that even the most aggressive estimates of expected US production cuts of 500,000 bpd for 2016 would be unlikely to fully rebalance the market.

Wednesday, December 30, 2015

IMF chief sees disappointing global growth in 2016; Subsidy reform hits Saudi industry; India mobile subscribers cross 1 billion

1 IMF chief sees disappointing global growth in 2016 (The Guardian) Global economic growth will be disappointing next year and the outlook for the medium-term has also deteriorated, the head of the International Monetary Fund has warned.

The IMF managing director, Christine Lagarde, said the prospect of rising interest rates in the US and an economic slowdown in China were feeding uncertainty and a higher risk of economic vulnerability worldwide.

Added to that, growth in global trade has slowed considerably and a decline in raw material prices was posing problems for economies reliant on commodities, while many countries still had weak financial sectors as the financial risks increase in emerging markets, she said.

“All of that means global growth will be disappointing and uneven in 2016,” Lagarde said, noting that mid-term prospects had also weakened as low productivity, ageing populations and the effects of the global financial crisis dampened growth. In October, the IMF forecast that the world economy would grow by 3.6% in 2016.

The US Federal Reserve hiked interest rates for the first time in nearly a decade this month and made clear that was a tentative beginning to a “gradual” tightening cycle. There are “potential spillover effects”, with the prospect of increasing interest rates there already having contributed to higher financing costs for some borrowers, including in emerging and developing markets, Lagarde said.

Emerging market companies with debt in dollars and revenue in sinking local currencies could struggle as the Fed begins what is expected to be a series of interest rate increases. Lagarde warned that rising US interest rates and a stronger dollar could lead to companies defaulting on their payments and that this could “infect” banks and states.

But she said the risks associated with these changes could be overcome by supporting demand, maintaining financial stability and reforming structures. “Most highly developed economies, except the USA and possibly Britain, will continue to need loose monetary policy, but all countries in this category should comprehensively factor spillover effects into their decision-making,” Lagarde said.

2 Subsidy reform hits Saudi industry (Gulf News) Due to the recent energy subsidy reforms in Saudi Arabia, many companies have announced to the Saudi stock exchange that they are expecting a cut in profitability in the first quarter of 2016.

Saudi Arabia released the budget for 2016 with a predicted deficit of $87 billion, which includes reforms that cut energy subsidies. This has resulted in an increase in gasoline prices and electricity tariffs. A meagre blanket increase in water has been applied as well, and energy prices have been increased for industrial customers.

Five companies have released their expected costs following the budget announcement. Saudi Arabia Fertilizers Co (SAFCO) said the announcement has brought in an 8 per cent increase in production costs, Saudi Basic Industries Corp (SABIC) costs will increase 5 per cent, and Saudi Arabia’s Yanbu National Petrochemical Co (Yansab) said it will see an increase of 6.5 per cent. Saudi Arabia’s National Industrialisation Co (Tasnee) and Saudi Cement Co said the changes will cost them 190 million riyals (Dh186 million) and 68 million riyals respectively.

Farouk Soussa, Citi’s head of Middle Eastern economics said, “Privatisation is positive, it can create a source of funding and let the private sector do more of the heavy lifting for growth. But this is a rather inopportune moment, markets are depressed, and there could be a tussle later when the market recovers.”

3 India mobile subscribers cross 1 billion (Khaleej Times) India's mobile phone subscriber base peaked to more than 1 billion users for the first time, data released by the telecom regulator has shown, making India the only country after China to achieve that milestone.

China's subscriber base is approximately 1.2 billion users, according to the country's Bureau of Statistics. Total wireless subscribers in India, Asia's third-largest economy, rose to more than 1 billion at the end of October from 996.7 million at September-end, the data showed.

Mobile subscriptions in India have surged in recent years, helped by the launch of cheaper smartphones and record low call rates as a result of a cut throat competition among mobile phone operators to expand customer base.

Tuesday, December 29, 2015

Over a million migrants reach Europe by sea; Gulf nations embark on reform as oil plunges; A bearish case for the Indian rupee

1 Over a million migrants reach Europe by sea (Paul Adams on BBC) More than one million refugees and migrants have reached Europe by sea since the start of 2015, the United Nations refugee agency (UNHCR) says. More than 80% of the 1,000,573 people arrived in Greece, with the majority landing on Lesbos island, it said.

About 844,000 travelled to Greece from nearby Turkey. Most of the others - over 150,000 - crossed the Mediterranean from Libya to Italy. The migrant crisis is Europe's worst since World War Two. The number of sea arrivals has increased vastly since 2014, when it was recorded at slightly more than 216,000.

"Increasing numbers of refugees and migrants take their chances aboard unseaworthy boats and dinghies in a desperate bid to reach Europe," the UNHCR said. "The vast majority of those attempting this dangerous crossing are in need of international protection, fleeing war, violence and persecution in their country of origin."

About 49% of those crossing the Mediterranean Sea are from Syria, with 21% coming from Afghanistan, it added. The number of those dead or missing at sea is now at 3,735.

While the Lesbos island feels less overwhelmed than usual, thousands more people are still waiting to be registered so they can travel further into Europe. The majority travel to Germany, which has accepted a million refugees and migrants. On 21 December, the International Organization for Migration (IOM) said the total number of migrants arriving by both land and sea had reached more than 1,006,000.

2 Gulf nations embark on reform as oil plunges (Fareed Rahman in Gulf News) Gulf countries are undertaking reforms to cut subsidies and increase fuel prices as oil hovers near eleven year lows on abundant supply and slowing demand.

Bahrain will be increasing fuel prices starting from Friday. They haven’t mentioned how much the increase would be but said the new move would contribute to providing financial savings and rationalising energy consumption. Bahrain becomes the third country in the Gulf region to bring in reforms in the energy sector after UAE and Saudi Arabia.

Saudi Arabia on Monday announced that they would raise fuel prices by 50 per cent as the country posted a record $98 billion budget deficit in 2015 due to the sharp fall in oil prices. Oman which is losing revenue in a big way could be the next one in the list, analysts said.

Edward Bell, a commodity analyst at Emirates NBD, said Qatar and Kuwait are probably in a safer position. “Kuwait historically has actually had problems in under spending. It has bit of a better fiscal position to be in. Qatar again is quite similar in that respect.”

According to Bell, there is awareness among Gulf countries that they can’t bank on oil prices staying very high for protracted period of time like in 2010 to halfway through 2014. Energy subsidies represent a direct cost of 3.4 per cent of GDP for GCC governments, and petroleum accounts for about two-thirds of energy subsidies in the GCC, while electricity and natural gas together represent another third.

3 A bearish case for Indian rupee (Matein Khalid in Khaleej Times) I watch the fall of the Indian rupee to two-year lows at 66 with deep concern. The Fed rate hikes coincide with offshore money outflows from Dalal Street, the reason the Sensex was slammed to 25,000. Conventional wisdom states that RBI Governor Rajan - India's Paul Volcker - alone is sufficient to stabilise the rupee. Wrong. The Indian rupee can well fall to 74 against the US dollar in 2016. Why?

India's banking crisis is slowly morphing into an external debt crisis. This was the reason the rupee was Asia's worst-performing currency in November 2015, even though crude oil collapsed 12 per cent even before the Vienna debacle. True, RBI reserves are $350 billion, well above the August 2013 "taper tantrum" levels at $275 billion. Yet these reserves are a mere 16 per cent of GDP, far below, say, Singapore's 100 per cent or Taiwan's 84 per cent of GDP.

India's foreign debt and external liabilities have risen alarmingly even as the current account deficit has narrowed to two per cent of GDP, thanks to a $60 billion crude oil import bill windfall. India's net international investments (assets liabilities) is now an alarming $370 billion, a six-fold rise since the 2008 financial crisis. Offshore hot money, short term borrowings and trade credit done is $300 billion.

India's foreign reserves are low compared to its external debt, a kiss of death for the rupee in a higher Fed rate and King Dollar milieu. India's external debt (government and private) is now a dangerous 1.45 times state reserves Short-term external debt is 25 per cent of sovereign reserves. The real sword of Damocles for the Indian rupee is the surge in private sector external borrowings, now a staggering 19 per cent of GDP.

India's private sector is leveraged and faces a short US dollar funding mismatch that will spell disaster in 2016 as King Dollar continues to rise. Indian banking's non-performing/restructured loan ratio is a shocking 11 per cent of all loans in 2015, the reason Dr Rajan ordered a hike in provisions. Private sector debt has basically doubled in the past decade.

To borrow a Churchillian metaphor, never in the history of Indian capitalism have so few owed so much to so many. Corporate leverage is at dangerous levels at a time when world trade is shrinking, $200 billion in bad loans gut the banking system and a fall in inflation has raised real borrowing costs. This is the worst possible global economic and monetary environment to have an external debt crisis.

Monday, December 28, 2015

Oil price fall swells Saudi Arabia deficit; 'Global economy will live dangerously in 2016'; Japan recovery takes a hit

1 Oil price fall swells Saudi Arabia deficit (BBC) Saudi Arabia's budget deficit soared to $98bn this year as the world's biggest oil exporter counted the cost of falling crude prices. In the first budget under King Salman, the kingdom said revenues reached 608bn riyals ($162bn), down 15% on official expectations. Spending for the year hit 975bn riyals, some 13% more than forecast.

To help make up the shortfall, the country's finance ministry said it would cut subsidies for fuel. Petrol prices could in some cases increase by as much as 50%, authorities said, although they will remain low by international standards. Diesel, electricity and water prices will also increase.

Oil prices have plunged from a five-year high of $125 a barrel in March 2012 to just $37.18 now. Saudi Arabia said that oil revenues, which make up 77% of the total revenue figure for 2015, are down 23% compared to last year.

It is the largest member of the Opec oil-producing cartel and has refused to cut output in order to raise prices in an attempt to put other producers - mainly US shale oil companies - out of business. Saudi thinks it can withstand low oil prices for longer than US producers, many of which are small, heavily-indebted firms.

Spending on military and security projects reached 20bn riyals in 2015, following its intervention in Yemen as well as action against militant group Islamic State. The majority of the increase in overall spending was on salaries to civil and military Saudi employees.

2 ‘Global economy will live dangerously in 2016’ (Larry Elliott in The Guardian) In all honesty, the future is unknowable and anybody who says otherwise is lying. So, with that caveat, here’s what I think might happen. At some point, a recovery built on booming asset prices, weak growth in earnings and rising personal debt is going to lead to another huge financial crisis - but not in the next 12 months.

Instead, 2016 will be a year of living dangerously, papering over cracks and buying time before all the old problems resurface. Here’s why. The big story of the past month has been the collapse in oil prices. This has two beneficial effects for the global economy. It provides additional spending power for households and businesses that consume energy, and it bears down on inflation.

With no sign that the oil cartel, Opec, has the political will to agree production curbs, it is quite possible that oil prices could fall below $30 a barrel in the early months of the year. So prediction number one for next year is that both inflation and interest rates will stay lower for longer than currently anticipated. The next theme of 2016 will be China. Whereas official interest rates are zero or thereabouts in the major developed countries of the west, in China they are still above 4%. This gives the People’s Bank of China scope to cut the cost of borrowing if it wants to stimulate growth.

The risk, of course, is that China cleans up the mess caused by one collapsing bubble by inflating another, which is what Alan Greenspan did in the US in the early 2000s. Here, then, is a second prediction. China will slow in 2016 but policy easing will prevent a collapse.

Over the past six years, the eurozone has shown an unerring ability to snatch defeat from the jaws of victory. Every time the crisis has appeared to be over, something nasty has happened. In 2016, that “something” could be Greece, caught in a debt and austerity trap, it could be rudderless Spain or moribund France.

The biggest immediate risk to the global economy comes from the emerging world, especially those parts of it affected by the crash in the cost of commodities. Brazil is the country to watch out for. The economy is contracting at its fastest rate since the 1930s, inflation is above 10%, the currency has collapsed and the finance minister has just resigned.

This is a case of history threatening to repeat itself, because the buildup to the 2008 crisis began on the periphery of the global economy. So, here is my final prediction: there will be no explosion in 2016, but a fuse will be lit.

3 Japan recovery takes a hit (Khaleej Times) Japan's factory output fell for the first time in three months in November and retail sales slumped, suggesting that a clear recovery in the world's third-largest economy will be delayed until early in 2016.

While manufacturers expect to increase output in coming months, the weak data casts doubt on the Bank of Japan's view that an expected pick-up in exports and consumption will help jump-start growth and accelerate inflation toward its two per cent target.

Industrial output fell one per cent in November from the previous month, more than a median market forecast for a 0.6 per cent decline, data by the trade ministry showed. Separate data showed that retail sales fell one per cent in November from a year earlier, more than a median forecast for a 0.6 per cent drop, as warm weather hurt sales of winter clothing.

Japan's economy narrowly dodged recession in July-September and analysts expect only modest growth in the current quarter, as consumption and exports lack steam. Some analysts warn the economy may suffer a contraction in the October-December period if household spending remains weak in the country

Wary of soft growth, the government plans nearly $800 billion in record spending in the budget for the fiscal year that will begin on April 1. The BoJ has signalled readiness to expand stimulus if risks threaten Japan's recovery prospects. The central bank fine-tuned its stimulus programme on December 18 to ensure it can keep up or even accelerate its money-printing.

Oil and Asian stock markets fall again; UK young home ownership at record low; Cow dung patties sell online in India

1 Oil and Asian stock markets fall again (The Guardian) Shares in Europe and Asia fell on Monday in trade thinned by holidays in a number of financial centres, hit by slumping oil prices and concerns over Chinese growth and finances - two of the year’s major factors.

Prices of both Brent and US crude fell 1.8%, reversing a brief rebound that helped shares in the Middle East over the weekend, while Chinese stocks fell almost 3% after a weak batch of industrial profits data.

While most bank dealing rooms in Europe were on skeleton staffing, and London markets shut, that had repercussions for a range of assets, driving the Australian and Canadian dollars down about a third of a percent and pushing bond yields lower. Profits at Chinese industrial companies in November fell 1.4% from a year earlier, the sixth consecutive month of decline and another sign that the world’s chief engine of growth for the past decade is sputtering.

“Over-capacity and declines in producer prices are hurting the Chinese government efforts and if the government cannot come up with a solution to stop this, the picture will keep on worsening,” retail brokerage AvaTrade chief market analyst, Naeem Aslam, said.

Brent crude traded at $37.26 a barrel, just over a cent above 11-year lows hit before Christmas. The fall in oil prices has depressed inflation globally, in turn reducing long-term expectations for price growth that drive longer-dated bond yields. That tends to draw investors back into bond markets at the expense of stocks and pushes up the price of longer-dated government bonds.

2 UK young home ownership at record low (BBC) The percentage of young people in the UK who own their own home is at its joint lowest level since 1996, according to data obtained by Labour. It suggests 44.9% of 20 to 30-year-olds are homeowners - the last time it fell to this level was in 2013.

It comes as economists predict strong property price growth in 2016. The Royal Institute of Chartered Surveyors expects prices to increase by around 6%, while rents will see a 3% annual rise. The rises are being driven by demand for new homes outstripping supply, Rics said, with other experts predicting even bigger rises in certain property hotspots outside London.

Labour's figures, which include shared ownership and are based on analysis by the House of Commons Library, suggest home ownership among the young is at its joint lowest since records began in 1996.

3 Cow dung patties go on sale online in India (San Francisco Chronicle) Like consumers around the globe, Indians are flocking to the online marketplace in droves these days. But there's one unusual item flying off the virtual shelves: Online retailers say cow dung patties are selling like hot cakes.

The patties — cow poop mixed with hay and dried in the sun, made mainly by women in rural areas and used to fuel fires — have long been available in India's villages. But online retailers including Amazon and eBay are now reaching out to the country's ever-increasing urban population, feeding into the desire of older city folks to harken back to their childhood in the village.

"Cow dung cakes have been listed by multiple sellers on our platform since October and we have received several customer orders" since then, said Madhavi Kochar, an Amazon India spokeswoman. The orders come mostly from cities where it would be difficult to buy dung cakes, she said.

In India, where Hindus have long worshipped cows as sacred, cow dung cakes have been used for centuries for fires, whether for heating, cooking or Hindu rituals. Across rural India, piles of drying cow dung are ubiquitous.

Radhika Agarwal of ShopClues, a major online retailer in India, said demand for the cow dung cakes spiked during the recent Diwali festival season, a time when Hindus conduct prayer ceremonies at their homes, factories and offices. On a recent day, ShopClues' website showed that the patties had sold out.

Online retailers said people were also buying the dung cakes to light fires for ritual ceremonies to mark the beginning of the new year and for the winter festival known as Lohri, celebrated in northern India. The cakes are sold in packages that contain two to eight pieces weighing 200 grams (7 ounces) each. Prices range from 100 to 400 rupees ($1.50 to $6) per package.

Dung cakes are also used as organic manure, and some sellers are marketing them for use in kitchen gardens.

Saturday, December 26, 2015

Commodity roller-coaster not over yet; Smartphone brands face mass extinction; Finding some social 'Netiquette'

1 Commodity roller-coaster not over yet (Carmen Reinhart in Gulf News) The global commodity supercycle is hardly a new phenomenon. But the element of predictability in the path of the commodity-price cycle, like that in the course of a roller coaster, does not make its twists and turns any easier to stomach.

Since the late 18th century, there have been seven or eight booms in non-oil commodity prices, relative to the price of manufactured goods. The booms typically lasted seven to eight years, though the one that began in 1933 spanned almost two decades. That exception was sustained first by World War II and then by the post-war reconstruction of Europe and Japan, as well as rapid economic growth in the US. The most recent boom, which began in 2004 and ended in 2011, better fits the norm.

Commodity-price busts — with peak-to-trough declines of more than 30 per cent — have a similar duration, lasting about seven years, on average. The current bust is now in its fourth year, with non-oil commodity prices having so far fallen about 25 per cent.

The risk is that when the roller coaster careens downward, a debt crisis will derail markets. And, indeed, during commodity-price downturns, banking, currency, and sovereign debt crises tend to proliferate — and crisis avoidance becomes a hot topic for policymakers, as highlighted in the International Monetary Fund’s most recent ‘World Economic Outlook’.

The question now is what trajectory the recent crash will take. The answer lies primarily (but not exclusively) with China. If China’s economic slowdown persists the commodity downturn is likely to continue, as no other economy is capable of picking up the demand slack. The US economic expansion is likely to slow soon, as the Fed raises interest rates. And Europe’s relatively recent recovery will probably be moderate and tilted toward domestic services.

This commodity price roller-coaster ride is probably not over yet. While we cannot know for sure what will happen, it would be prudent to brace ourselves for another drop — and do what we can to avoid a crash.

2 Smartphone brands face mass extinction (Dawn) Smartphone brands are heading for extinction in 2016. The industry’s growth rate dipped below 10 per cent this year. Apple and Samsung’s high-end phones are taking most of the spoils, while upstarts like China’s Xiaomi are picking up first-time buyers. Loss-making brands from HTC to Sony may be forced to conclude the game is over.

The smartphone industry grew at a single-digit rate this year for the first time, according to data from IDC. Just two years ago, the industry was expanding at a breakneck 40pc. Demand from China — the world’s largest handset market and once the driver of growth — will be flat this year.

The slowdown suggests two things. First, the market is saturated: existing smartphone owners outnumber first-time buyers. The People’s Republic, which accounts for 30pc of global shipments, has joined North America and Western Europe to become a replacement market where sales are driven by upgrades.

That’s good news for premium handset makers like Apple and Samsung. The $600 billion iPhone maker grabbed a staggering 94pc of the industry’s profits in the three months to September, analysts at Canaccord Genuity reckon. Samsung remains the only big Android phone maker that is profitable.

Second, first-time buyers in emerging markets will power growth. Handset shipments in the Middle East and Africa rose 50pc year on year in 2015, IDC estimates. Chinese groups Xiaomi and Huawei - which catapulted to third place in shipments this year - have just entered those markets selling budget phones. Fierce battles are also playing out in India, where locals Micromax and Intex are fighting Samsung.

Those without Apple-level margins or Huawei’s scale may not survive. The loss-making HTC is already on life support as its $1.3bn cash pile dwindles. Ailing Japanese conglomerates, from Sony to Kyocera, will be under pressure to shut down unprofitable mobile units. Even smartphone pioneer BlackBerry may be forced to give up on hardware if sales of its latest model disappoint. 2016 may be the beginning of the end for many.

3 Finding some social ‘Netiquette’ (Maan Jalal in Khaleej Times) I've just finished social stalking someone I went to high school with. This is the digital age after all. The computerisation of all information, which includes our experiences, thoughts, feelings no matter how relevant or irrelevant, are documented in megabytes and pixels. Swipe, click, scroll - information is there on our literal fingertips. Everything and everyone is readily available. Maybe too available.

All of us are connected to each other somehow, in some way. We are watching each other while being watched by each other almost 24 hours a day. It's never been easier to creep on other people. Don't get me wrong, I'm not complaining for the most part. I am not, by any means, a social media snob and I am as much of a social stalker as the next person.

My point is, just because the platform is available for us to utilise, it doesn't mean the whole world needs to know what I had for breakfast, what my pet peeves are, or whether or not my child, hours away from being born, will look like me or my wife.

Social media is also the fastest evolving form of entertainment, vanity and communication there is. Stalking sensibilities are getting more advanced with each new app update. WhatsApp's last update gave us the knowledge of seeing not only when someone has received our messages but whether they have actually opened the message and read it.

One of the advantages of communicating through the written word means that there is no pressure to answer as soon as one gets a message. However what I view as common sense is breaking some digital age 'netiquette' and branded me an unreliable communicator in the digital sense. I simply don't understand why always being connected has been translated into always being available.

Whether you're a Facebook fiend, Snapchat snob, Twitter tease, Instagram influencer or a WhatsApp weirdo my advice is simple. Take it easy. Think about the value of what you're posting more than how often you are posting it. And, let's not forget people, the truth of the matter is (and I speak from experience) no one actually cares about what your posting as much as you.

Thursday, December 24, 2015

US jobless claims at 42-year low; Saudis versus frackers leads to flood of oil; What millennials want

1 US jobless claims at 42-year low (Khaleej Times) The number of Americans filing for unemployment benefits fell more than expected last week, nearing a 42-year low as labour market conditions continued to tighten. Initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 267,000 for the week ended on December 19, not far from levels last seen in late 1973, the Labour Department said.

The prior week's claims were revised to show 1,000 more applications received than previously reported. Economists had forecast claims dipping to 270,000 in the latest week. Claims have been below 300,000, a threshold associated with a buoyant labour market, for 42 consecutive weeks, the longest stretch since the early 1970s.

The unemployment rate is in a range many Federal Reserve officials see as consistent with full employment. It has dropped seven-tenths of a percentage point this year.

2 Saudis versus frackers leads to flood of oil (Nils Pratley in The Guardian) Opec’s annual tour of the horizon, a publication called World Oil Outlook, is not about predictions, says the group’s secretary general Abdalla Salem el-Badri in the introduction to this year’s edition. This is just as well since last year’s failed to inform us that the price of oil was about to halve.

The arrival of sub-$40-a-barrel oil has caused more than a few members of the cartel to splutter about the need to cut production to force prices higher. So far, Saudi Arabia isn’t listening. The strategy is to keep pumping, apparently in the hope of forcing the US shale industry – whose impact Opec underestimated as late as 2011 – to curb production.

Non-Saudi members may therefore be alarmed that even the organisation’s own economists don’t exactly envisage US shale producers being forced to their knees. On one hand, they note that production growth for so-called tight crude in the US and Canada has started to slow with cuts in investment. On the other, they say “the most prolific zones within some plays can break even at levels below 2015 prices”.

Indeed, the projections show North American tight oil volumes increasing from 4.4m barrels a day at present to 5.2m barrels in 2020. From a Saudi perspective, that forecast could be taken as yet another reason to keep pumping to protect Opec’s share of the market.

One of these years, lower levels of investment, which always follow lower prices, could produce a spike in prices and the report, rightly, warns of the danger. It suggests $10tn (£6.7tn) of investment will be needed between now and 2040 and that the “right signals” – meaning higher prices – will be required.

But a spike in 2016? That is hard to imagine while Opec’s members squabble before the Saudis get their way.

3 What millennials want (Financial Times/Gulf News) House prices, ambition and over-involved parents. These are a few of the reasons that millennials, born after the early 1980s, are seeking advice from coaches of their own generation, who have had the same experiences.

London-based Alice Stapleton, 33, says many clients cite her youth as one reason they want to work with her. “I know what it’s like to be part of their generation and understand the pressures and challenges,” she says.

Sarah Vermunt in Toronto is an organisational psychologist turned careers coach. She offers the “careergasm” — through online courses and traditional one-to-one coaching — which promises to give her clients a “warm hug and a kick in the [rear]”. She sees her clients’ frustrations rooted in their high expectations. “This group have grown up being told the world is their oyster and they can have pretty much anything if they put their mind to it.”

What makes this generation different, say the coaches, is that clients’ employers are less willing to invest in their long-term development, which puts the onus on the individual. At the same time, many young people feel uncertain about making decisions for themselves, because their parents have been very involved in their lives.

Clients can also feel in the shadow of their parents, particularly if unable to get a toe on the housing ladder while also swamped by debt from their university education. Stapleton puts it like this: “We think we should be achieving what our parents did by that age — married with kids and a house by the age of 30. We set these goals and feel disappointed when we realise we’re nowhere near those milestones.”

Ashley Stahl, a “Gen Y” (another term for millennial) coach who worked at the Pentagon before switching to coaching, says the recession brought home to those entering the workforce that there was no such thing as company loyalty. She believes those in their 20s and 30s yearn for work that expresses their personality or creativity, rather than merely providing a means to an end.

London-based millennial coach Laura Ahnemann, originally from Germany, says it also compounds loneliness. “They have 500 Facebook friends but still feel isolated. They are on Snapchat and Instant Messenger but they don’t talk properly. They miss the human connection.”

Wednesday, December 23, 2015

UK growth forecast cut; Security, economy top priorities for Saudi Arabia in 2016; Oil fall and income redistribution

1 UK growth forecast cut (Larry Elliott in The Guardian) George Osborne has received a second pre-Christmas setback after official figures showing a stuttering performance by the economy in the months following the general election put the government’s 2015 growth forecast at risk.

Following much worse than expected borrowing figures on Tuesday, the Office for National Statistics pared back its estimate for gross domestic product in the third quarter of the year - and said activity had also been weaker in the previous three months.

The ONS originally said growth in the three months to September was 0.5%, but said new data showing a sharper slowdown in the UK’s dominant service sector had resulted in the estimate being cut to 0.4%. With growth in the second quarter also revised down – from 0.7% to 0.5% – the annual rise in GDP in the year to the end of September has been trimmed from 2.3% to 2.1%.

News of the GDP slowdown followed Tuesday’s ONS figures, which cast doubt on whether the chancellor would be able to meet his deficit-reduction target for the 2015-16 financial year. The government borrowed 10% more in November 2015 than it did in the same month of 2014 and in the first eight months of the year borrowed almost £67bn, only £2bn less than the forecast for the year as a whole.

2 Security, economy top priorities for Saudi Arabia in 2016 (San Francisco Chronicle) Saudi Arabia's monarch has said that security and economic development remain the country's top priorities for the coming year as low oil prices keep decreasing the kingdom's revenue.

In a two-minute speech, King Salman outlined his domestic and foreign policies, which he said are aimed at serving Arab and Islamic causes as well as fighting terrorism. Since assuming the throne in January after the death of his half-brother King Abdullah, former defense minister Salman has made security his foremost concern.

Two months into Salman's reign, he launched an offensive into Yemen against Iranian-backed Shiite rebels, known as Houthis, who had overrun the capital and other cities in the country, forcing the president and the internationally-recognized government to flee for several months to Saudi Arabia.

In April, he set a new course for the monarchy's future, recasting the line of succession and naming his nephew, Interior Minister Mohammed bin Nayef, as his successor. His 30-year-old son, Mohammed bin Salman, was appointed defense minister and second-in-line to the throne.

Efforts to diversify the kingdom's economy took on greater urgency as the price of oil — the backbone of Saudi economy — fell by around half since mid-2014. The king stressed the importance of continued investments in health care, education, housing, employment and transportation.

Salman also said the country is committed to diversifying the kingdom's sources of income and decreasing its dependence on oil. The 2016 budget is expected to be announced next week, with investors eyeing closely to see if cuts are made and to which sectors. The International Monetary Fund estimates that Saudi Arabia will post a budget deficit of more than 20 percent of gross domestic product this year, or amounting to anywhere between $100 billion to $150 billion.

3 Oil fall and income redistribution (Andrew Walker on BBC) The fall in oil prices in the last 18 months is a large-scale international redistribution of income, from sellers to buyers. We have looked at the impact on some of the losers, the oil exporters. But what about the winners i.e. the oil importers?

A fall in the oil price is often seen as similar in its effects to a tax cut for consumers. It means they have more to spend on other goods and services, some of which will be produced by businesses in the same country. It also reduces costs for businesses that use oil products - which means any that have goods to transport, plus the petrochemical industry which makes plastics, fertilisers, synthetic fabrics and much more using raw material made from refined oil.

It also helps any that spend a lot on the goods and services produced by these industries - farmers, for example. Take the eurozone. In the two years before the big price fall the region's economy contracted. Last year it grew and is doing so again this year, though admittedly not robustly. The fall in the oil price is not the only factor, but it surely helped.

There's another benefit from cheaper oil. Many countries subsidise fuel. The International Energy Agency estimates that in 2014 global subsidies for fossil fuels were worth almost $500bn. Of that, some $267bn went on fuels made from oil. Cheaper oil means that governments can cut subsidies while consumers pay unchanged prices.

That's the upside. But even for net oil importers there's a downside. Take the US. It is a net importer but the beneficial impact is not quite as pronounced as it would have been a decade ago. The reason: the rise of shale oil. It means that US dependence on foreign oil has declined markedly. In 2005 the US met 35% of its own crude oil needs. Last year the figure was 61%. The rise of shale oil means there is a larger chunk of the American economy that is vulnerable to the effects of cheaper oil.

As long as it's just energy prices that are falling, it's not a major problem. But central bankers are wary of what they call second round effects - if prices and pay agreements start to reflect an expectation that inflation is going to be very low or even below zero. That can lead to a damaging spiral of falling prices or deflation.

For the most part then cheaper oil is a benefit in most countries. But some - the oil exporters - are exceptions to that rule. And for the rest there can be some less appealing side effects that warrant careful scrutiny.

Monday, December 21, 2015

China leaders flag more stimulus; Oil falls to 11-year low; Record loss, job cuts at Toshiba

1 China leaders flag more stimulus (Straits Times) China's leaders signaled they will take further steps to support growth, including widening the fiscal deficit and stimulating the housing market, to put a floor under the economy's slowdown.

While the leadership also endorsed structural reforms and reining in China's increasing reliance on credit, the macroeconomic policy statements indicated concern about letting the economy's expansion slow too much.

The government's annual growth target is typically set at the gathering, though not announced. President Xi Jinping has previously suggested the nation must meet a minimum annual average growth pace of 6.5 percent through 2020. The growth target this year was for a rate of about 7 per cent. Even meeting that, China would see its weakest expansion since 1990.

Officials also pledged assistance for rural residents seeking to buy homes in urban areas and encouraged cheaper residential prices, which would help shrink a glut of unsold properties. Monetary policy flexibility has been a theme in recent months as China's central bank moves toward creating what it calls an interest-rate corridor to guide borrowing costs, away from the old model of setting lending and deposit rates directly.

The People's Bank of China recently surveyed banks on the possibility and potential impact of removing its benchmark deposit and lending rates, people familiar with the matter said. The latest round of economic data showed signs the economy is stabilizing after policy makers unleashed several rounds of monetary and fiscal stimulus. Industrial output climbed 6.2 per cent in November from a year earlier, while retail sales gained 11.2 per cent for the best reading of 2015.

2 Oil falls to 11-year low (Sean Farrell in The Guardian) Oil has fallen to an 11-year low as traders took fright at the prospect of a glut caused by fresh supplies that will outstrip global demand. Brent crude prices dropped almost 2% to as low as $36.17 a barrel, the lowest since July 2004 and weaker than during the worst of the financial crisis. The price fell to $36.20 on Christmas Eve 2008 as the global economy headed for recession following the collapse of Lehman Brothers.

The price of the global benchmark nudged back up to $36.42 but prices were still below those of the previous trading day. Global production is hovering around a record high and the market faces fresh supplies from Iran as western sanctions are lifted and Iran seeks to win back customers from Saudi Arabia and Russia. Extra supplies are also looming from the US, where stockpiles are growing as extra drilling rigs are put into operation.

Oil prices have fallen by more than two thirds since summer 2014 as demand has slowed with the global economy and higher production in the US and elsewhere has increased supplies. Prices revived partly in May but have almost halved since. US West Texas Intermediate (WTI) futures, which show the value of the US benchmark, fell 36 cents to $34.37 a barrel, close to last week’s 2015 lows.

Moody’s, the credit rating agency, slashed its 2016 Brent crude price forecast by $10 a barrel to $43 last week, highlighting excess supply and the re-entry of Iran to the global market. Some analysts are gloomier, predicting prices falling to near $20 a barrel.

Opec said this month it had no plans to rein in production. The Saudi-dominated bloc has pumped out hundreds of thousands of unwanted crude each day in an effort to hold on to its share of the market and force US shale producers out of business.

Russian production has hit a post-Soviet record and the number of rigs deployed in the US rose for the first time in five weeks last week by 17 to 541, according to industry figures supplied by the driller Baker Hughes. Last week’s increase in US interest rates has also put pressure on oil prices by strengthening the dollar and reducing the dollar price of commodities.

3 Record loss, job cuts at Toshiba (Gulf News) Toshiba Corp. forecast a record 550 billion yen ($4.5 billion) loss and will cut more jobs and restructure businesses that include chips, televisions, personal computers and home appliances following a long-running accounting scandal.

The projected net loss for this fiscal year includes 260 billion yen in taxes because of a reversal of deferred income-tax assets, it said in a statement. The forecast doesn’t include possible impairment of goodwill and fixed assets at the company’s nuclear power systems business because Toshiba is still checking that, it said.

Toshiba is trying to recover from an accounting scandal that padded profits for almost seven years by halting development and sales of TVs outside Japan, cutting costs at its PC and home appliances businesses and considering alliances with third parties. Job cuts at these segments amount to about 30 per cent of the lifestyle division’s workforce.

The company will end consignment of design and manufacturing to outside vendors for its PC business, while concentrating on business-to-business sales and focusing the consumer portion of the segment to the Japan and US markets. Product platforms will be reduced to less than one-third of the current number, the company said.

Toshiba’s Indonesia TV plant will be sold to China’s Skyworth for an estimated 3 billion yen, the Tokyo-based company said. Plans also include accounting training, corporate governance reviews, management seminars and an evaluation system for the president and chief executive officer.

In addition to workforce cuts in the lifestyle business, the company will reduce its corporate division by 1,000 people and chip operations by 2,800 workers. Toshiba had about 198,700 employees as of March 31, the lowest since at least 2009.

Sunday, December 20, 2015

Why oil price slump hasn't kickstarted global economy; The global impact of Fed rate rise; Malls lose some luster as holiday sales go online

1 Why oil price slump hasn’t kickstarted global economy (Kenneth Rogoff in The Guardian) One of the biggest economic surprises of 2015 is that the stunning drop in global oil prices did not deliver a bigger boost to global growth. Most macroeconomic models suggest that the impact on global growth has been less than expected – perhaps 0.5% of global GDP.

A decline in oil prices is to some extent a zero-sum game, with producers losing and consumers gaining. The usual thinking is that lower prices stimulate global demand, because consumers are likely to spend most of the windfall, whereas producers typically adjust by cutting back savings.

In 2015, though, this behavioural difference has been less pronounced than usual. One reason is that emerging market energy importers have a much larger global economic footprint than they did in the 1980s, and their approach to oil markets is much more interventionist than in the advanced countries.

Countries such as India and China stabilise retail energy markets through government-financed subsidies to keep price down for consumers. The costs of these subsidies had become quite massive as oil prices peaked, and many countries were already looking hard for ways to cut back. Thus, as oil prices have fallen, emerging market governments have taken advantage of the opportunity to reduce the fiscal subsidies.

At the same time, many oil exporters are being forced to scale back expenditure plans in the face of sharply falling revenues. Even Saudi Arabia, despite its vast oil and financial reserves, has come under strain, owing to a rapidly rising population and higher military spending associated with conflicts in the Middle East.

Also restraining growth is a sharp decline in energy-related investment. After years of rapid growth, global investment in oil production and exploration has fallen by $150bn in 2015. Eventually, this will feed back into prices, but only slowly and gradually: futures markets have oil prices rising to $60 a barrel only by 2020.

In short, oil prices were not quite as consequential for global growth in 2015 as seemed likely at the beginning of the year. And strong reserve positions and relatively conservative macroeconomic policies have enabled most major producers to weather enormous fiscal stress so far, without falling into crisis. But next year could be different, and not in a good way – especially for producers.

2 The global impact of Fed rate rise (Kamal Ahmed on BBC) After nearly a decade of what has been, essentially, a global economic effort - and experiment - to save the world from financial calamity, the Federal Reserve, the central bank to the world's largest economy, has decided, finally, to try a touch of "normalisation".

I'm not sure anyone thought that, eight years on, we would still be in a near zero interest rate world. Or, in cases such as the eurozone, a negative interest rate world. The financial crisis - a banking crisis which so damaged confidence and put the world in "risk-off" mode - more fundamentally damaged the global economy than many initially predicted.

Now the Federal Reserve has moved interest rates up a small notch. When America stirs, the rest of the world takes notice. Rising US interest rates could mean higher debt repayments for emerging market governments and businesses - as the amount owed is denominated in dollars.

And with higher interest rates in America, investment capital will be encouraged across the Atlantic and away from Asia in the hunt for better returns. That could affect Europe as well.

On the upside, the stronger dollar which has followed the rise might be good for European and Asian economies as it means exports to America are cheaper. Savers who have seen years of very low interest rates are likely to heave a sigh of relief as, finally, the world starts approaching economic normality.

3 Malls lose some luster as holiday sales go online (San Francisco Chronicle) More often shoppers in the US are making the decision to sit on their couches rather than head to stores this holiday season. Online sales growth so far this holiday season is surpassing growth in sales at physical stores, according to First Data, which analyzed online and in-store payments from Oct. 31 through Monday.

Sales growth for stores is up 2 percent, while online sales rose 4.6 percent, according to First Data. Total spending, including sales in both physical stores and online, climbed 2.4 percent, stronger than the 1.8 percent growth during the same period last year.

While physical stores still account for the majority of spending, the uneven growth between buying at locations and on websites signals the continuation of a big shift in how US consumers are shopping.

The overall shift to online spending is largely due to more retailers working to improve their websites and offer speedier delivery on orders placed online. As a result, shoppers, who increasingly are looking for convenience, are spending more of their holiday budgets online.