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Ah, the time to retire has finally arrived. It’s time to shout it from the rooftops that you have successfully reached this stepping stone of life, right? Wrong.
When the time comes to hang up your hat for the very last time and cash in on your well-deserved retirement benefits, announcing your retiring status to any and everyone is one of the last things you want to do. Here’s why:
- Your private, personal information is at risk. When filing for your retirement claim, a plethora of delicate information is on the line. Your date of birth, finance history, and, most importantly, your Social Security number are just a few of the sensitive materials necessary for filing for your retirement benefits. Due to the delicate nature of this personal information, trusting it with anyone other than your designated Social Security administrator is not advisable.
- The amount of money you receive via Social Security benefits can create envy with friends, family members, and acquaintances. Though claiming your retirement benefits is far from hitting the lottery, sharing too much information about just how much you are receiving via Social Security benefits can cause a stir amongst those you know. Say you are discussing the amount of your Social Security benefits with a friend or family member, only to discover that one of you receives a significant amount less than the other. Such knowledge can cause the lesser earning party to become envious of their higher earning pal, which creates drama and unnecessary stress in your life. To avoid such situations, keep your Social Security benefit information mum.
- When people know how much money you are receiving, they are liable to try to take advantage of your hard earned funds. Just as the people in your life may become envious of your retirement earnings, they may also see your well-deserved Social Security benefit money as an opportunity to milk you for all you are worth. It is sad to say this, but true, nonetheless. Though most of the people in your life would never even dream of taking advantage of you in your growing age, others may not be so kind. You wouldn’t happily hand over money from a paycheck that you received from busting your butt for forty hours a week to someone, so why do it with your retirement money? If you hope to avoid ever having to deal with such an unpleasant situation, simply don’t broadcast how much you’re receiving. Your finances are your business and nobody else’s, so try to keep such information under wraps.
Retirement is one of the happiest moments of our lives and there is no shame in being proud at having reached that point in your life. Be that as it may, others may see your new retirement status as an opportunity to take financial advantage of you. Protect yourself and protect your assets by trusting your precious benefit information with only those who need to know the details. You will be thankful you did.
Jim Blair offers expert advice on how to maximize your retirement benefits at SocialSecurityRetirementGuide.com
One of the biggest things attracting investors to China is massive population and economical growth. Investors must be careful when investing in chinese companies overseas because China lacks many of the regulatory departments similar to the SEC that prevents collusion and corruption in the United States. You need a blueprint before you make your fortune out east.
Luckily, there’s a wealth of investment information in books written by well known Chinese investment strategists. Here’s a list of my top 6 recommended books for investors seeking financial opportunities in mainland China.
1. A Bull in China: Investing Profitably in the World’s Greatest Market
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You’ll learn which industries offer the newest and best opportunities, from power, energy, and agriculture to tourism, water, and infrastructure.
Rogers demystifies the state policies that are driving earnings and innovation, takes the intimidation factor out of the A-shares, B-shares, and ADRs of Chinese offerings, and profiles “Red Chip” companies, such as Yantai Changyu, China’s largest winemaker, which sells a “Healthy Liquor” line mixed with herbal medicines.
Plus, if you want to export something to China yourself–or even buy land there–Rogers tells you the steps you need to take. My only takeaway is the book was written in 2008 and is a bit outdated. It’s still a great read to get educated on the basics of investment opportunities in China.
2. China’s Economic Supertrends: How China is Changing from the Inside Out to Become the World’s Next Economic Superpower
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Between now and 2018, many new opportunities exist for businesspeople, investors and individuals who want to take advantage of China’s economic transformation. Researcher and China expert Jason Inch shows you how to understand China’s economic development from a new perspective so that you can position your business, portfolio or career for the maximum return.
The author’s insights into China’s economy, its people and its political leaders have been gained through over eight years of on-the-ground experience working in China and two decades of research.
Based on discussions with CEOs, professors, politicians and entrepreneurs, this book explains why some have succeeded in China and others have not and helps you to become one of the success stories.
3. Investing in BRIC Countries: Evaluating Risk and Governance in Brazil, Russia, India, and China
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With Investing in BRIC Countries, you are equipped with the best available tool for detecting the signs of poor governance.
Edited by Standard & Poor’s® equity research and governance group, it details the group’s highly successful approach to analyzing risks in emerging economies.
This book covers not only China, but Russia, Brazil and India as well. I think it’s a good read but doesn’t focus 100% on Chinese investing.
4. [easyazon-link asin="0470049294"]Doing Business in China For Dummies[/easyazon-link]
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This particular book gives you great insight into dealing with Chinese customs and practices to help you succeed socially and finally in China.
This authoritative, friendly guide covers all the basics, from the nuts and bolts of Chinese business and bureaucracy to negotiating with your Chinese partners.
You’ll also get the know-how you need to manage day to day, from travel tips and advice on converting money to getting past language barriers.
5. [easyazon-link asin="1438712758"]Doing Business and Investing in China Guide[/easyazon-link]
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Another comprehensive guide filling with in-depth strategies and advice on doing business and investing in China.
The book is normally out of stock on Amazon because the publisher printed a limited number of copies. However, there is 1 available as of this posting plus many more via used book dealers.
Hopefully these books on investing in china will give you some insight and guidance into profiting from the massive Chinese economy and growing GDP.
Most opportunities are satured in the west so investors must pursue other options in the south and east, mainly BRIC and Africa.
Opting to do a long term investment is one of the most gainful business ventures that a person can make. However, careful consideration of some factors in this area must always be kept in mind as while the potential for huge return profit is somewhat high, the chances of losing them are also there. In order to fully utilize the advantages and avoid financial pitfalls that are always present when it comes to investments, proper research must be conducted. Getting a financial advisor’s point of view in the case can also be helpful.
One of the smartest advices that can be given is to be cautious of “great investment tips”. Even if you heard this from a close and trusted acquaintance you should never instantly bite. It has been an undeniable truth in the world of investments that if something seems too good to be true, it usually is. But don’t take this as a reason to avoid a little risk here and there, just make sure that you have something to land if you unfortunately have the carpet yanked from out of your feet.
Once you’ve chosen an investment and the first few days seem terrible don’t back out immediately, remember that this is a long term investment and if you actually studied the investment thoroughly first and you were convinced that it’s worth it, then why fuss over a small bump on the road? You should only act to make the proper changes when the investment seems to be going sour. There’s a difference between holding on to that small glimmer of hope and holding on to what is evidently already lost.
Alternative investments are something that should also be looked at as this will expand your profits if you have a habit of investing wisely. Long term investments are considered to be a lot safer than short term investments and are highly recommended to first time investors due to its relatively low risks.
Some key facts that curious first time investors must remember however, is that because of the rules in long term investments, all your funds will not be available to you for a set amount of time. This is for the best though as letting your investment grow over time will yield the most profits. Investing in technology and the gold market for 2013 seems to be a no brainer for now,
PowerShares QQQ still holds the highest stock at the beginning stretch of 2013 but Apple is not far behind and is a potential leader this year if they are able to manage pulling back their reigns at the beginning of the financial race to the top. Most of the resurgence in technology last year was all thanks to Apple, and although the company started strong they fell a bit flat during the final months but this is not seen a s problem this year.
Trades in gold have also seen a rise last year and still shows potential to increase this year.
When it comes to investing there really is no sure way to know the results. The future always holds ambiguity when it comes to its plans and no one can decidedly know where the stock market will fall in the next couple of months. Knowing what flags to look for will also help you in deciding where the best investment option will lie in a couple of months.
Investment is always a game of chance; hence, the most proficient way to play this game is to accurately manage your risks and rewards, don’t take any unnecessary risk and you can bet to produce a rather prosperous year.
Investing in real estate can be a great choice for many businesses and individuals. While many people understand the basics of real estate investment in the United States, it can be challenging to understand how real estate investments work in other countries. The following guide explores how to invest in Chinese real estate.
It’s important to understand the differences between property rights in China and the United States. In the United States, an individual can own his or her own property. While the US government may seize land under the law of eminent domain, most homeowners don’t have anything to worry about. In the United States, capitalism is king. People are able to privately own their property and can maintain rights to it.
China is a hybrid capitalist-communist country. In China, no one own his or her property. While many people build homes every year in China, the land underneath the home is usually leased from the government. Under the terms of the lease, the government is allowed to seize the land when it wishes.
Over the past few years, there have been thousands of cases where homeowners in China have had their land seized by the government. In most cases, land is seized to build new housing developments or industrial facilities. In many of these cases, homeowners received minimal compensation for the value of their land. Because of this, it can be challenging to invest in Chinese infrastructure.
One of the best ways to invest in Chinese infrastructure is through a large company. While not all companies are state-owned, many Chinese companies have a favorable reputation with the government. Many large companies have what is known as a “red phone.” The red phone connects the managers and industry leaders of Chinese companies with the Politburo, the ruling Chinese party. This allows companies to have privileged access to a variety of resources.
For investors, you can invest in Chinese REITs to own china real estate without the extra risk.
It’s important to make sure that any investments in China are done through a well-known company or investment group. Since many private properties are subject to seizure, it’s essential to avoid buying a piece of property that is considered low value. Under the law, the government is not required to compensate individuals if their land is seized.
While investing in China can be a challenging experience for many businesses and individuals, it can be a financially rewarding venture too. However, it’s essential to research any investment opportunity thoroughly before making any large decisions.
The mobile space continues to heat up every day. Mobile apps, mobile transactions, mobile advertising and mobile devices are playing a key role in determining the value of the next trillion dollar company.
Sometimes in order for a company to rapidly adapt and compete, acquisitions much take place and at a rapid pace.
Google made 50 acquisitions in 2011 and continues to do so in 2012. Facebook (FB - Trade) recently made plans for “massive acquisitions” this year and most in mobile. Facebook has already purchased a single mobile app company for $1 billion and plans many more.
Below are 5 companies that are well positioned as takeover targets in the area of the overall mobile Internet.
Vringo is a company that provides mobile apps and a video ringtone product platform that allows users to create, download, and share mobile entertainment content in the form of video ringtones for mobile phones; and Facetones, which allows users to create social picture ringtone and ringback content in the form of animated slideshows sourced from friends’ social networks.
In relation to a patent dispute with Google (GOOG – Trade), Vringo has received some attention based on receiving a positive Markman ruling. At that time the stock was at $3.70 per share and went to $5.45 a few days later. This was a 45% gain in 5 days driven by the favorable court ruling.
These Markman rulings determine what language the jury will hear when determining whether or not the patent has been infringed. They have a significant impact on the potential outcome, in this case of Vringo vs. Google.
A company like Google, which is used to making defensive acquisitions, will no doubt look at a company like Vringo as a potential takeover target if uncertainty continues related to this potentially significant patent ruling. A price target for a Vringo takeover could easily reach $7.00 per share.
Mobile apps are making or breaking the successful shipments of smartphones and mobile devices.
Mimvi knows this. Mimvi, also known for being “the Google of mobile search platforms” that helps people find and discover mobile apps, is succeeding in becoming the leading platform for providing search and recommendation services to the consumer and enterprise on the mobile front.
It’s essential to note that Mimvi competitors, Chomp and Quixey and now Facebook, have drawn quite a bit of attention. Chomp was recently taken over by Apple while Quixey recently raised a total of $24.2 million, part of which was raised by Google’s Eric Schmidt.
This places a valuation close to $100 million on Quixey, which in turn translate to a stock price of over $2 per share on Mimvi.
Meanwhile, Facebook, like Apple, is looking to take over companies to help its mobile app initiatives. Mimvi has also attracted top executives from Google to smartly position themselves as an attractive target.
The mobile search space is white hot and shows no signs of slowing. Just as with web based search engines, the revenue opportunity for mobile based search engines is tremendous.
This is exactly why Mimvi remains as a prime takeover target as they lead the mobile search space in terms patentable algorithms, of number of search results and relevance. A takeover price target for Mimvi could reasonably be in the $5.00 per share area.
Mikek Sytems has strategically positioned itself to be part of the mobile payments and transactions revolution. Mitek Systems offers the sale, and service of software solutions related to mobile imaging solutions and intelligent character recognition software.
It provides Mobile Deposit, a software application that allows users to remotely deposit a check using their smartphone cameras; Mobile Photo Bill Pay, a mobile bill paying application that allows users to pay their bills; Mobile ACH Enrollment, an application that enables consumers to enroll their checking accounts as funding sources for mobile payments; and MitekONE, an enterprise platform that addresses various deposit types.
Many are saying that the next trillion dollar company will be one that is front and center when it comes to mobile transactions. Interestingly, Mitek Systems has suffered a decrease in its stock price.
Combined with being in the right place at the right time, Mitek Systems, can be an attractive takeover target at its current levels. A target price of $8.00 per share could be in order for a company like Mitek Systems.
Augme Technologies has been described as a “Patent Gold Mine With Buyout Potential” by others in the past. Augme focuses its technology on providing strategic services and mobile marketing technology to consumer and healthcare brands.
The company offers mobile marketing, and advertising technology and services to brands, advertising agencies, media companies, and enterprise customers.
It provides AD LIFE, an interactive software-as-a-service platform for marketers, brands, and agencies to plan, create, test, deploy, and track mobile marketing programs across various mobile channels, including SMS, 2D/QR codes, mobile Web sites, advertising networks, social media, and branded applications.
The company’s patented device-detection and proprietary mobile content adaptation software provides a solution to the mobile marketing industry problem of disparate operating systems, device types, and on-screen mobile content rendering.
The revenue opportunity for a company like this is clear. Largest competitors of Augme have to make that age old decision to either buy or build.
The competitive landscape for mobile advertising is changing rapidly.
Large over-sized competitors in this area such as Microsoft, Google, Apple, Samsung or Facebook may not have enough time to innovate and build in-house mobile advertising solutions.
This is the reason Augme Technologies can be viewed as a potential takeover target. Augme is currently trading at about $1.50 per share.
A target price of $4.00 per share would not be out of the ballpark for them, considering the value of the this space.
Glu’s games are gaining traction ever quarter and their games stand to have the same opportunity for consumer adoption as some of the world’s most popular titles like Angry Birds or Draw Something.
Glu also has the potential of ousting old traditional gaming companies like EA (EA – Trade) or Take Two (TTWO – Trade). This introduces a unique and powerful value that Glu Mobile retains that could be very attractive to those companies.
Of course, at the same time, Glu remains a threat to these companies which could trigger defensive acquisitions. Mobile gaming apps are one of the most popular segments of mobile content that consumers are searching for and downloading.
Glu is certainly executing in one of the most exciting spaces since the dawn of the Internet. It can be expected that Glu Mobile will be an attractive takeover target as the mobile gaming area is one of the main reasons many consumers purchase mobile devices and tablets.
It’s clear to see the attraction that Glu Mobile holds with companies that are battling it out for consumer adoption of their devices.
Some are now considering Glu Mobile to be “The Biggest Acquisition Target In The Gaming Market” Glu Mobile is a fair target for a takeover as many are seeing and while it’s trading just over $5.00 per share, a takeover price target in the range of $8-9.00 per share seems reasonable.
Conclusion on Mobile Acquisition Takeover Targets
Diversification is important when positioning investment in takeover targets. It can be anticipated that more takeover targets will arise in the future as the mobile Internet begins to take over the lives of most every consumer on Earth.
Choosing the right personal finance money management software can be daunting in a world filled with endless choices.
In this review, I will cover Mint, the preferred money management tool for InvestorTrip staff and clients.
- Founded: 2005
- Total Members: 4 million
- Security: Uses 128-bit SSL encryption
- Cost: It is completely free!
- On the Go: Offers free mobile apps to track your money
What is Mint.com?
For the individual who is looking to keep their finances in order and even find effective ways to pay off debt; Mint.com has one of the most amazing money management software that has ever been created.
This powerful tool is not only available on your computer or laptop, but is also available in a cellphone application so that you can check your finances, add expenses and even pay bills through an easy and effective application on the go or at home.
How Does Mint.com Work?
One of the best things about Mint.com is that it’s free for all to use! It gives you power over your finances in a way that no other program has ever done before.
Your checking account, credit card spending, loans, investments and even your personal property such as your house and cars can all be set up and put into a realistic and smart budget plan within 5-10 minutes.
Once you’ve inputted all of your information you can easily see all of your balances at once, monthly spending and savings tips are available right there on your user dashboard along with all of your financial transactions, goal setting, trends, and many more.
With the easy to use iPhone or Android mobile application, you can bring it with you anywhere and have the power of your finances in the palm of your hand when you need it most.
As with any other budgeting software out there, it’s important to ask about the security of the site and how secure your personal information will be.
Your finances are personal and if found in the wrong hands could be detrimental to your credit and your day-to-day spending. Mint.com uses the same security technology used by financial institutions but doesn’t give you the option to move money from different accounts.
This is essential in keeping your finances safe if your password becomes available to someone other than yourself.
Alerts give you the power to know if there is any abnormal spending or if anything seems wrong with your account.
Making sure you keep your password safe and that you have the proper virus protection and firewall on your computer or mobile device will help to ensure that there are no issues with security on your Mint.com account.
Most Popular Mint.com Supported Banks
Mint literally supports thousands of banks across the United States, however they publicly publish the most popular banking institutions online. Here they are in order:
- American Express
- Bank of America
- Chase Bank
- Fidelity Investments
- Fifth Third Bank
- ING Direct
Complaints on Mint.com
There has been word about one of Mint.com’s affiliates who are less than worthy whom made customers disappointed and uneasy about using the software.
Another issue reported with the Mint program is that there are some hidden fees within that are not disclosed when signing up; this includes a “free” credit report that requires you to set up a monthly credit monitoring account.
Mint has responded to these complaints by stating that they link to two of the largest credit monitoring bureaus because they provide value to their customers.
Linked to the Mint.com software is a person’s credit score and their credit report so that you can easily access it within your Mint software.
Since they use affiliates in order to make money, they can’t always guarantee that an affiliate will be as secure and reliable as they are, this may attribute to customers who believe that Mint.com is a scam.
Forget checkbook registers, paper statements and multiple online banking and loan accounts. You have the control to access all the information you need right there on the Mint.com software.
Adding your financial institutions is easy; and once added you can view them all in an overview by company name, category and the amount of the transaction.
One fun feature is that you can view the US spending average compared to your own spending so you know where you stand among the millions of other consumers in the US.
Categorizing your transactions is as simple as a click and can help you to organize by a specific holiday, type of item (household, food, etc); this is all possible with Mint.comand you can even make up your own categories along with using the pre-set ones as well.
Create a Budget Quickly and Easily
The Mint.com software will help you set up an automatic budget and also allows you to create your own as well.
This can be separated by category, monthly and yearly as well as the option to roll over money that was saved in the previous month.
An easy to read and follow graph gives you the power to view your expenses all at once so you know just where you stand on all of your finances.
The ability to include things into your budget once, weekly, monthly or annually makes budgeting simple and more user friendly that any other budgeting software out there today.
Track Important Trends and Save More Money
This feature from Mint.com allows you to view your finances in a number of different graphs. Whichever type of graph is easier for you to follow is available through this amazing software.
Compare your own finances monthly or even compare to the US average. Anything you need to analyze your finances is right there and simple to use.
Track Your Investments All in One Place
Mint gives you the power to track your investments all in one place. You can view the performance, value, compare and the allocation of your investments; along with the ability to get recommendations on your investments as well.
This makes saving for retirement much more possible since you can do it all in one easy to use program. Giving you options for saving on a broker and other ways to save with your investments makes Mint.com truly sensational.
Receive Timely Alerts to Avoid Costly Financial Mistakes
So you don’t have to keep checking your Mint.com software after every transaction, and so that you can know when you’re getting close to running out of money, alerts are available through the Mint software.
With low balance alerts, bill reminders, spending alerts and even when you have reached a goal, Mint.com helps you stay up-to-date with your finances without spending hours analyzing budgets and adding things up yourself.
Mint Mobile Apps for Blackberry, Android and iPhone
You can track your Mint account via any supported smartphone quickly and easily. The app works the same way as the website does.
For some in-depth mobile app reviews, check out the Mint.com iphone app review below:
and the Mint.com android app review:
Mint.com Security: Is Your Money Safe?
One of the most common questions is website security. In order to prevent serious threats, security breaches, Mint adheres to the following security protocols:
- Protect Your Assets with Bank-Level Security – Mint uses the same 128-bit encryption and physical security that banks use. Their practices are monitored and verified by TRUSTe, VeriSign and Hackersafe, and supported by RSA Security.
- Only Receive Read Only Access – Mint is a “read-only” service. You can organize and analyze your finances, but you can’t move funds between–or out of–any account using Mint. And neither can anyone else.
- Guard Your Money 25/7/365 – Mint increases your financial security through email and text alerts that notify you about any large purchases or unusual changes in your accounts and more.
For a more in-depth look on Mint’s security, online security expert Jason Owens asks the same question: Is Mint.com Safe?
Ready to Sign Up?
Signing up for Mint.com is very simple. All you need to create a new account is:
Your email address
Once you’re in you have the power to start wherever you want. Adding your financial institutions, creating your budget, setting up alerts and linking to a credit monitoring company are all within your discretion.
The easy to use and simple to understand instructions make budgeting fun, with their colorful graphs, categories and many other features give you the power to follow your budget in a customized way that fits you best.
Setting goals and reaching them will give you a sense of pride and accomplishment and really allow you to actually “see” where all your money goes rather than simply notice your money is all gone.
Mint.com Pros and Cons
As with any other company or online software out there, there are always good and bad views on the overall product or service.
With Mint, the good definitely outweighs the bad, but here you’ll find a great list to help you along with your decision.
- Easy to sign up
- Simple to use for both iPhone and Android
- Mobile ability
- Alerting capabilities help keep you in charge
- Savings tips
- Inability to plan ahead (but will most likely be available in the future)
- Auto-assigning of transactions can sometimes be incorrect
- Some affiliates might not be trustworthy
- “Free” credit report isn’t really free
Overall, this powerful tool is great for just about anyone. Giving you the ability to see all of your finances in one, easy to follow and user friendly application at home or on the go on your iPhone or Android mobile device puts you in control of your expenses.
Goal setting and budgeting make it easy to plan for your future rather than living paycheck to paycheck.
Save for your retirement or your children’s college funds, and get great savings on some of Mint.com’s affiliates who offer savings exclusive to Mint.com users.
These affiliates are how Mint makes it’s money which is why they can offer you this powerful tool for free.
Taking advantage of their programs allows them to stay free and gives you options on saving money, planning for your future and the ability to combine all your information in the same place rather than memorizing a million passwords for your different financial companies.
With online bill pay, they make it easy to get all your bills done in one place at home or on the go.
Forget about paper billing, check registers and other online software that doesn’t offer even half the features that Mint.com offers and start seeing your finances all together, categorized and in a way that you’ve never seen before.
Mint.com is the future of financial well-being and can help you to get out of debt and stay that way for good!
All stocks at some point in time will go into a period of consolidation. This is healthy as it allows the stock to digest its gains and set a new area of support from which to eventually move higher.
One long side pattern that typically yields big gains is what we call the “Right Side Of The Cup Crossover Pattern”. Let’s take a look at SNHY:
As you can see, after a nice uptrend, SNHY consolidated its gains and traded sideways tracing out the bottom of a cup formation. By trading sideways, it has created a trading range as outlined by the blue box.
The right side of the cup crossover occurs when SNHY cleared this blue box to the upside — that’s the point to initiate a long side trade as it usually signals that the stock is ready to build the right side of the cup. In this case, SNHY ran from $26 to the $33-34 range in short order. Just one or two trades like that a month will take your portfolio places.
Now let’s look at a current set-up — VHC:
Want to be alerted to set-ups like this before they trigger trades? Visit our blog site and sign up for our free newsletter to learn more and receive our free report — “How To Outperform 90% Of Wall Street With Just $500 A Week.”
World leaders routinely bog themselves down in the legislative mundane, promoting small social programs or new economic incentives for minute “Us vs. Them” political gains. However, neither Dilma Rousseff nor Alexandre Tombini are interested in petty politics, and as their terms begin, they’re ready to get things done.v
Rousseff’s Fast Start
BRIC relations, as we have seen, are generally relatively cozy. Each country knows their role in the new economic powerhouse, and each are usually “polite” enough to keep the serious public discussion to a minimum. However, this is not the case for the newly elected president Rousseff. No, Rousseff wants a serious talk about China’s currency advantage.
Rousseff believes, as do many, that an artificially low Renminbi is hurting Brazil’s exports to China. Such artificially low currency values mean an unbalanced trade benefit, one that has propelled China’s foreign currency reserves to become the fastest growing stockpile in the world.
However, she’s not stopping at China, either. Her new proposals call for a cut in spending and a cut to inflation, two actions which are generally considered to be recession creating. Rousseff, however, sees opportunity in shrinking government and controlling monetary policy, allowing for Chinese-Brazil discussions to make waves in the currency markets. A new budget and central bank president will cool otherwise crippling inflation.
Alexandre Tombini’s Mission Impossible
Alexandre Tombini is the new president of Banco Central do Brasil, otherwise the Bank of Brazil, or more commonly, Brazil’s central bank. Early indicators suggest Tombini is out for blood, hoping new central bank goals will help reduce internal inflation and keep Brazil on a path for growth.
The first goal is to aim lower, one that should be easily achieved. While annualized inflation of 4.5% is the bull’s eye for the government, Tombini wants to go lower, shooting for a target of roughly 2% plus or minus 2% fluctuations. Such low inflation isn’t commonly seen in the emerging markets, but in contrast to the current inflation rate of nearly 6% annually, 2% doesn’t seem so bad after all.
The “Selic” interest rate, the Brazilian benchmark, is expected to take a hike on January 18th and 19th. The rate currently rests at 10.25%
Emerging Market Austerity?
The new presidential duo looks more like developed world dignitaries than the leaders of the Latin American emerging market. However, now may be the time to prepare Brazil for a future of world leadership.
The country maintains a healthy trade surplus that will allow it to exhaust some of its pricey government debts that currently amount to roughly 40% of annual GDP. A policy implemented years earlier exchanged foreign debt obligations for currency-linked debt products, a move that saved the country billions of dollars and averted a growing trade imbalance. Later investments in infrastructure meant oil independence and made Brazil one of the greatest uses of hydroelectric power.
Wall Street would be wise to watch this new duo. Their plans, should they come to fruition, will set Brazil up for an internalized national debt, reasonable inflation rate, and real, positive economic growth while continuing the upside in the Brazilian Real. This is a pro-growth administration in an economy that, even without government intervention, was already set for explosion.
Wen Jiabao, the Chinese Premier, may have the economic quote of the year. After China’s central bank declared that it would raise the benchmark overnight interest rate by a quarter point, he commented, that “inflation expectations are more dire than inflation itself,” noting that while inflation is a concern, so too are investor expectations.
Thus far, in the non-emerging markets, it has been the fear of inflation – and not inflation itself – that is sending prices higher. In the emerging markets, at least in China, higher benchmark rates are intended to be a solution to ever rising prices in Chinese real estate. Some contend that this real estate market is indicative of a bubble, and that just like the United States, higher real estate will eventually lead to a pop.
Why the Chinese Market Won’t Pop?
To showcase this point, one country often forgotten in the world of investment will have to make a guest appearance. Canada, which may as well be an extension of the United States, neither suffered a massive real estate bubble, nor did it see any real decline in prices, even as its largest trading partner, the United States, crippled to a bursting bubble.
So what do the 2000 Canadian rise in home prices have to do with a 2010 rise in Chinese real estate prices? Not that much, but they do share a number of similarities.
Learning from Canada vs. the United States
At the height of the US real estate market, one out of four new loans was made to sub-prime borrowers. In Canada, that number hovered around 5 percent. In China, loans for property are difficult to obtain, even by the most creditworthy, and the closest China ever came to “sub-prime crisis” may have been US Treasury default fears following the Fannie and Freddie bailouts with unlimited lines of credit.
At the height of the US real estate bubble, the United States was shedding capital at roughly $50 billion per month in a growing trade deficit, while Canada enjoyed a positive trade balance all the way up to 2008. China has trade surpluses of roughly $200 billion per year, every year.
Canada maintains no reserve ratio for banks, while the US required 10% and China requires a whopping 18.5%, all the while hot money knows no difference between either China nor Canada. Both countries saw massive new foreign investment (Canada’s oil trusts and China’s consumer sector), and each country throughout its bubble had a zero or negative real interest rate policy. As for deleveraging, Chinese speculation is almost entirely in cash, where the United States, and even Canada, had at least some of their real estate runs due mostly to lending growth.
The Long Run
Is real estate a strong, pro-growth investment? No. Real estate is a boring, slowly rewarding, investment that is usually found in consumption, rather than production economies. However, with rates as low as they are, and inflation pushing higher, real estate is an attractive investment.
On the other hand, higher rates means borrowed money will have to find somewhere else to go. If this money finds itself in the stock markets, watch out. There isn’t a ceiling high enough to hold that explosion.