Category: Financial News

In this category, Latest Financial News visitors can find everything that Traders-Paradise finds it is related to the educational material existing here. As the name suggests it is news but ONLY related to Traders-Paradise’s tutorials, courses, guides about trading, and investing.

Here the readers can find posts and articles about recession and how to overcome it. Many trading or investing strategies are explained here. For example, why to use open interest strategy when investing, or growth stock investing strategy.
Here, our experts and journalist are taking examples from the real-life. it is usually breaking news, and use them to explain what is the best solution for traders and investors over a given time or related to the particular event.
Also in Latest Financial News readers can find an explanation of, for example, ratios useful to measure the particular market conditions.

Also, Traders-Paradise gives you some clues on how to react to changes in the markets, no matter if it is the stock market, the Forex market, or any other.
The main aim of the Latest Financial Market News is to connect the real events with the theory. Traders-Paradise uses real-life examples to explain the theoretical rules of investing and trading.
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Traders-Paradise hopes that this category will be very useful for its visitors and that they will find it helpful.

The Race For Zero In The Brokerage Industry

by Dana M. Lang

Three online brokerage rivals, following each other, are cutting their base commissions to zero. The first was Charles Schwab with the announcement that it will stop charging commissions for the US equity, ETF and options from October 7. Only a few hours later TD Ameritrade stated that they, too, were cutting fees. And finally, two days ago October, 2 E*TRADE stated the same.

At least, very strange decisions.

Peter Crawford, Schwab’s CFO, in his blog post explained:

“Why did we take this step, and why now?

… There has been a clear pause in the so-called commission wars among the “traditional” e-brokers since the price reductions we made in 2017. At the same time, we are seeing new firms trying to enter our market – using zero or low equity commissions as a lever. We’re not feeling competitive pressure from these firms…yet. But we don’t want to fall into the trap that a myriad of other firms in a variety of industries have fallen into and wait too long to respond to new entrants. It has seemed inevitable that commissions would head towards zero, so why wait? … That’s exactly what we are doing here – we’re making these pricing changes because we believe they enhance both our value proposition and our competitive positioning, encouraging the consolidation of client assets and trades at Schwab.”

Charles Schwab has more than 12 million users and $3,7 trillion in assets.

This pricing discount is almost 6% of its total net revenue.

Crawford wrote: “… commissions per revenue trade (CPRT) have been falling for multiple years, so the potential revenue impact in coming quarters could very well be smaller, holding all else equal.”

Who else is cutting commissions to zero?

Cutting commissions is good news, but investors have to know that shares of Schwab (SCHW) fell 10% on this news.

On the other hand, investors and traders got an opportunity to trade all over the world with almost no costs. Why do I say almost? Because there is still a per-contract commission on options trades of $0.65.

The same comes from TD Ameritrade. Just like Schwab, TD Ameritrade customers will not be free of all trading costs. The per-contract commission is the same, $0.65.

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And the last in this row of less-commissions is E*TRADE. On Tuesday, almost immediately after the market closed they revealed that will cut the base commission to zero. But this brokerage went a step forward, it will reduce the options contract cost for all traders at $0.50 per contract.

These reductions in trading costs will have an impact on less active traders.

The financial impact of cut commissions

E*Trade’s commission revenue was 17.7% of its net revenue for the first 6 months, TD Ameritrade’s commission revenue was around 30%, of its net, and Schwab’s commission revenue made up 6% of total net revenue. The biggest loser here, as we can see is TD Ameritrade.

Will trading commissions be cut at all online brokers?

Some of them charge a $1 per month or have a limited zero-commission offering. But with some of them, for example, Robinhood doesn’t have a commission but if you trade more than 200 shares at once, that will cost you more than any commission paid. And don’t be worried about brokerages. They will make their revenues on the ways we can’t even imagine. Big numbers are in play.

DON’T MISS THIS: Trading With Success – A FULL guide for beginners

We are waiting for Fidelity, TradeStation, and other online brokers. What will be their response? It’s not over. We are expecting more and more brokerages to follow those examples. But keep an eye on your broker’s charges, forget the commissions.

How much interest you have to pay for your inactive cash?

Does your broker has any other offer? How much you have to pay for the assets you trade the most? By the way, this cutting has no influence on future trades.

READ THIS TOO: Trading With Signals

4th October 2019
Dow Jones Dropped More Than 300 Points, But Two Stocks Hold Gains

3 min read

The Dow Jones dropped more than 300 points after frustrating economic data stopped an early rally in the stock market on Tuesday. The stock market rally experienced a strong reversal. The rally appeared under more pressure as worsening U.S. manufacturing index activity renewed recession fears. JPMorgan Chase (JPM) dropped below a buy point, as Treasury yields declined.

The Institute for Supply Management’s manufacturing index declined to its lowest level previously seen in June 2009.

The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) both lost more than 1%. All sectors declined, but industrial stocks were damaged the most.
But some of the Dow Jones Index stocks made the largest gains, Apple (AAPL) and Visa (V). Apple stocks rose for 0,5% and Visa increased by 1,4%. Visa has been consolidating below the 50-day line the past three weeks after pulling back from a 184.17 buy point of a flat base.

Apple scored a new high early and gained as the market reversed. It regained a 221.47 buy point of a flat base and continues in buy range from the entry. The market uptrend is under pressure, so you must be aware that all trading is riskier now.

According to investors.com “investment banks, machinery, and telecom stocks led the downside among IBD’s 197 industry groups.” On the other side, long-term medical care, gold miners and food, and beverages were between the several groups resisting the decline.
Hexcel (HXL) fell 6% to a two-month low, retailer Boot Barn Holdings (BOOT) sank 5% in below-average volume.
Israeli medical technology company InMode (INMD) and Visa were some of the few IBD 50 stock winners with increases of 1% or more.

The point is that just one strong market session could upgrade the whole picture, but if another large sell-off occurs could freeze the stock market rally.

China trade discussions will continue next week, but there are possible risks for the weak stock market rally. Investors have been hoping for a China trade suspension of hostilities. That was the reason why the market wasn’t down on Monday.

The added uncertainty to the markets is the Trump impeachment inquiry. For now, it doesn’t make to much damage to the US stock market but investors may become more nervous because of all of that.

Is this a scary start to October?

Markets are already in bubble territory. Dow, S&P experienced the worst day in more than 5 weeks after gloomy US manufacturing report. Manufacturers quoted the US-China trade war as pressing on demand and making materials more expensive, according to the ISM.

“The disappointing data is only fanning long-standing fears of slowing global growth,” said Alec Young, managing director of global markets research at FTSE Russell.

Stocks didn’t like this data pretty much.

Investors came into Tuesday’s session, with increased emotion around the U.S.- China trade relationships hoping that it will come to an end soon.

But stocks dropped after the Institute for Supply Management (ISM) stated U.S. manufacturing activity dropped last month to its lowest level in a decade. The U.S.-China trade concerns caused that. The weak manufacturing data come from Europe too. All of that forced investors to sell equities and bought bonds.
The market recognized the ISM report as a warning the trade war is taking increasing damage to the economy.

What is next?

Yes, Dow Jones dropped but investors are waiting for data from ADP and Moody’s Analytics. They are planned for release on Friday. For investors, it is a kind of preview to the government’s monthly job report. So, we will see.

2nd October 2019
Trade War Spillover In The Stock Markets

3 min read

The U.S. Treasury announced in a Saturday statement that the administration “is not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time.” Following this news, Dow Jones futures grew a bit on Sunday evening, the same happened with S&P 500 futures and Nasdaq futures.

Only one day before, Bloomberg reported the Trump administration is thinking about limiting the exposure of US investment to China. Such a decision would have an impact on public pension funds’ exposure to China’s market and limitation for Chinese companies in main stock indexes.

The information about delisting Chinese stocks from U.S. exchanges frightened investors. The consequences of the trade war spillover were that Alibaba stock dropped 5.1%, slipping through its 50-day and 200-day moving averages. JD.com stock dropped 6% to a bit over its 200-day. Two Chinese IPOs, Pinduoduo slipped 4.2% and Huya stock 9.4% due to trade war spillover. New Oriental Education stock, dropped 6.55%, which is under its 50-day line.

Beijing described possible limitations on U.S. investments in China “the latest attempt at a decoupling,” published in Global Times on Sunday. All reports of Chinese state-owned media stated that the delisting Chinese companies from US stock exchanges would have deep impact on both, Chinese and US economies.

Don’t miss this: Trading With Success – A FULL guide for beginners

Monica Crowley’s, U.S. Treasury assistant secretary for public affairs, stated this weekend that US administration is not thinking to block Chinese companies: “We welcome investment in the United States.”

The trade war between the US and China lasts almost one year. The next round of discussions will be held one week after China’s National Holiday, 70th anniversary of the founding of the People’s Republic of China on October 1.

The Chinese economy is the second-largest in the world. Its progress in the field of artificial intelligence and chips is notable. Also, robotics, 5G, energy storage could lead China to be the most powerful in advanced technologies.

What to watch in the stock market in the week ahead?

The next few days will produce some earnings releases, which could give some individual stocks moving.

Costco

Market Cap $125.758B

Its earnings report appear this week. It looks that Costco had benefit throughout the quarter. The analysts estimated they have earnings of around $2.54 per share. Last year it was $2.36. So, the expectations are a 7.6% increase.

Costco will reveal its results on Thursday. The investors are expecting to see good news. This warehouse retailing giant has enjoyed a nice increase in customer traffic lately. In the fiscal fourth quarter, it grew 6% in the U.S. market and over its global sales.

Stitch Fix

Market Cap $1.85B

This company’s earnings release will be revealed on October 1.

Its stock has dropped more than half of its value during the past 12 months. But this online service that gives clothing services has built solid annual income growth in the past 3 years.

Client numbers rose 16.6% in the fiscal third quarter. This is, of course, assuming Stitch Fix keeps its pricing in check. The analysts estimate is calling for $0.04 per share this week. Good news for shareholders.

Constellation Brands

Market Cap $39.511B

The company’s earnings release will be public on October 3.

The company has succeeded to keep a very constant sales trend within an alcohol industry. In the last 5 years, Constellation Brands has grown its earnings from sales. Its investment in Canopy Growth was a weak move since the Canopy didn’t show some good results this year. But the company’s beer segment may show better condition. For now, that is the best part of Constellation Brands’ business.

30th September 2019
Chinese Stocks May Get Delisted From the US Market

2 min read

By Guy Avtalyon

Bloomberg published Friday that the Trump administration is analyzing to severely limit U.S. financial flows to China. They are considering to restrict the ability of federal pension funds to invest in Chinese companies. Also, severer requirements that could cause Chinese companies to delist from U.S. stock exchanges are on the table.

According to the U.S.-China Economic and Security Review Commission, 156 Chinese companies are listed on the US stock exchanges. Their entire market capitalization is above than $1 trillion.

U.S. stock markets are burning on this news.

Among Chinese companies that might be delisted are Alibaba Group, Baidu, Nio, JD.com, Tencent Holdings.

Last market reports show that Alibaba and other Chinese stocks fell on reports White House. Even though it isn’t clear what particular actions the administration considers. The Times states that White House wants to block “longstanding loopholes that have allowed Chinese companies with links to its government to take advantage of America’s financial rules to solicit funds from American investors without proper disclosure.”

Shares of Alibaba and other Chinese companies fell Friday after reports the White House is studying plans to restrict U.S. investments in China.

The stocks traded on the Nasdaq, Alibaba fell more than 5% in the last trading day last week, Baidu and JD.com fell 3.6% and 6%, NIO 13%, Huya had fallen 12%, Baidu fell 4%.

The iShares China Large-Cap ETF, fore example, China Construction Bank, and Tencent Holdings are members among others, also dropped by 1.2%.

This is actually disturbing

Capital Hill hawks want to limit US investors’ portfolio flows into China. That would have huge consequences for billions of dollars in investment in major indexes.

The options in considerations are: delisting Chinese companies from US stock exchanges and restricting Americans’ exposure to the Chinese market. Precise methods are still unknown and the plan has to be approved by President Trump. But he gave the green light to the study, as an unofficial source said.

The other step of Trump administration could be to restrict the Chinese companies included in stock indexes. Even if managed by US companies. Many Chinese companies were added to major indexes over past years and a lot of investors have access to them.

For example, Chinese companies have been added into the MSCI Inc.’s indexes since last year. Bloomberg Barclays started adding Chinese bonds to its leading Global Aggregate Bond Index in April this year.

In reply to the news, Nasdaq stated, “One critical quality of our capital markets is that we provide non-discriminatory and fair access to all eligible companies. The statutory obligation of all U.S. equity exchanges to do so creates a vibrant market that provides diverse investment opportunities for U.S. investors.”

Bottom line

The US administration is doing everything to untangle the US economically from China. Many analysts thought this move would be one that might be taken by China as part of negotiations to put more advantages on their side in this Trade War.
The decision to delist China stock from the US markets is an unusual shift. It might be too dangerous for investors to be in Chinese stocks now.

29th September 2019
Five Singapore Companies Listed by Dow Jones – Reviews

5 min read

by Guy Avtalyon

According to Business Insider “, five Singapore companies on the Dow Jones Sustainability Index 2019 Asia Pacific, and two are on the World list.”

And BusinessInsider added

“On Tuesday (September 17), five of these firms -CapitaLand, City Developments, DBS Group Holdings, Sembcorp Industries, and ComfortDelGro – saw their initiatives recognized by the Dow Jones Sustainability Index (DJSI), which is seen as a key reference point for sustainability investment globally.”

So, let’s see the inside of these Five Singapore companies.

CapitaLand Ltd.

Ticker SES(C31)
Market cap $13,198.89M

One of five Singapore companies on the Dow Jones list is CapitaLand. The main activity of this company is a real estate and consultancy services. CapitaLand Ltd. is the biggest real estate investor in Southeast Asia. It was founded in 2000 by a merger of DBS Land and Pidemco Land, two real estate investors in Singapore linked to the government. Temasek Holdings, Singapore’s wealth fund, holds an almost 40% share. CapitaLand is managed by CEO Lee Chee Koon.

The majority of its assets are in Singapore and China. CapitaLand has plans to grow more in China.

About 80% of CapitaLand’s assets are in Singapore and China, where the company plans to expand more.

The uniqueness and power of this company lie in developing many types of real estate such as shopping centers, apartments or individual projects. But CapitaLand owns The Ascot, one of the global biggest chains of international serviced apartments. Among other business, it holds 5 publicly listed real estate investment trusts and numerous private equity funds. For example, it privatized CapitaMalls Asia and immediately delisted it from the Singapore Exchange. The explanation was, it is a part of the restructuring. Australand Property Group was the part of CapitaLand but it has been sold.

The parts of this company are in Singapore, Malaysia, and Indonesia under ticker CL SMI, China under ticker CL China, Vietnam and there is, also, CapitaLand International. The company is geographically separated. Each part is involved in the area from where operates.

The CL International part involves in Europe, the US and the Middle East, but also in Singapore, Malaysia, Indonesia, China, and Vietnam. CapitaLand headquarter is in Singapore.

You want to know: Singapore Stock Market – Why To Invest?

City Developments Limited

Ticker SES(C09)
Market cap $6,481.47M

Another one of five Singapore companies on the Dow Jones is City Developments. It is one of the biggest real estate development companies in Singapore with a long history. Its focus is on residential and hotel development. It was established in 1963 and went public the same year, its shares were listed on the Malayan Stock Exchange. Today it is listed on the Singapore Exchange. City Developments is managed by Kwek Sherman. He is a grandson of the founder of Hong Leong’s Group and heir to one of the wealthiest families in Southeast Asia, Kwek Hong Png. Hong Leong Group still holds the majority of City Developments’ shares.

Its portfolio holds large condos, retail and office complexes in Singapore and overseas. It is the majority shareholder of Millennium & Copthorne Hotels and its more than 110 hotels all over the world, which is listed in London exchange.

When Singapore’s property market was a slowdown, the company find a place for developing in Japan. At the end of 2014, it bought 16,815 sq. meters of the estate in Tokyo’s downtown to build condos. At the same time, City Developments expanded in Australia.

City Developments Ltd. is focused on property development, rental properties, and hotel operations. But there is a so-called The Others Sector part which covers clubs ownership, other investments, consultancy services, etc. The company was founded on September 7, 1963, and its headquarters is in Singapore.

DBS Group Holdings

Ticker SES(D05)
Market cap $46,913.89M

DBS Group Holdings was founded in 1968 as The Development Bank of Singapore. At first, it was a financing company for Singaporean businesses and city development projects. But the bank expanded in China and Southeast Asia and in 2003 the name was changed to DBS as it became a regional bank.

DBS Group has the largest chain of over 2300 offices and self-service ATMs. It also holds the leading role in Singapore’s banking sector.

CEO Piyush Gupta is on the head of the group since 2009. Under Gupta’s management, DBS is experiencing expansion beyond the region. It bought Societe Generale’s private banking business in Singapore and Hong Kong in 2014 for $220 million. The aim was clear, to grow its money management business to attract millionaires in Asia. DBS was also the first Singaporean bank registered in China. It was in 2007. Now DBS has offices in 10 major Chinese cities, with more than 50 offices in Hong Kong only.

DBS Group Holdings Ltd. is an investment company. It is focused on retail, small and medium-sized companies, corporate, and investment banking assistance. It works as consumer banking/wealth management, institutional banking, and treasury markets. The Treasury Markets section is all about structuring, market-making, and trading of treasury products. The company was established in 1968 and its headquarter is in Singapore.

Sembcorp Industries

Ticker SES(U96)
Market cap $2,880.48M

This is one of Singapore’s largest conglomerates. Sembcorp Industries has three main businesses: marine, utility and urban development. The marine and offshore business are handled by publicly-listed subsidiary Sembcorp Marine. Its rigs and platforms are present in almost all foreign offshore oil places all over the world.

Sembcorp has an important position in various governmental industrial park development plans in China and Vietnam. The current Group President Neil McGregor is CEO too. In 2006 with Tang in the head, Sembcorp Industries won the bid for water desalination and power plant project in the United Arab Emirates. It was its first big project in the Middle East. Temasek Holdings is its largest shareholder with about 50% ownership.

Sembcorp Industries Ltd. is an investment holding company. It is engaged in the production and supply of utility services, storage of oil products and chemicals. It operates through main sections: utilities, marine, and urban development. It is also involved in businesses relating to minting, design and construction activities, and offshore engineering. The company was established in 1998 and its headquarter is in Singapore.

Read this: Singapore Stock Market – Why To Invest?

ComfortDelGro Corp. Ltd.

Ticker SES(C52)
Market cap $3,852.21M

ComfortDelGro is a land transport and an investment holding company with more than 46,000 taxis, buses, and rental vehicles all over the world. It was established in 2003 with the merger of the Singaporean transport companies Comfort Group and DelGro. London’s Metroline (city bus operator) is one of ComfortDelGro’s major branches. The interesting fact about ComfortDelGro is that no shareholder holds more than 10% of shares.

Because of the limited area and population in Singapore, the company was forced to find opportunities away from this city-state. In 2013, it has bought a part of London’s FirstGroup’s bus business. In the same year, it bought the Melbourne bus operator Driver Group. Almost half of the company’s operating profit is produced from businesses in China, Australia, the U.K., Ireland, Vietnam, and Malaysia. Yang Ban Seng is managing director and group’s CEO.

ComfortDelGro is holding company which mainly invests in the ground transportation services. It is involved in several areas through separate divisions. It operates a public transportation service, which covers bus, rail, and taxi services. Bus division is also involved in operating shuttle and coach rental services, and fare collection. Taxi division is involved in operating the bureau services and advertising of it. The automotive engineering division is involved in the maintenance, manufacturing of specialized vehicles, coach assembly, collision repairs, automotive engineering services, and sale of diesel fuel. The inspection and testing division provides MOT and similar regulatory mandated vehicle testing, but also non-vehicle testing, inspections and consulting. The driving centers division is providing services for driving schools. While the car rental and leasing division is covering services of vehicle renting and leasing to customers.
The company was established in 2003 and its headquarter is in Singapore.

18th September 2019
Oil Stocks Rose After The Attack on Saudi Arabia’s Oil Facilities

2 min read

Oil stocks rose and all energy stocks rose but Wall Street fell on Monday after weekend attacks on Saudi Arabia’s oil facilities. Investors’ are concerned about this geopolitical risk and its influence on the global economy.

The attack carried oil prices up more than 20%. But easing came after many countries stated they would use crisis reserves to ensure stable supplies.

The Dow Jones Industrial Average dropped 0.52% to end at 27,076.82 points. At the same time, the S&P 500 fell 0.31% to 2,997.96. The Nasdaq Composite fell 0.28% to 8,153.54. Eight of the 11 main S&P sectors moved lower.

Also, oil futures rose10% Monday morning as a consequence of the attack. Saudi Arabia suspended 5.7 million barrels of daily production, which is more than 5% of the total production in the whole world.

Brent crude, the international benchmark, rose 10% to $66.27 in first-day trading. For example, West Texas futures increased by 10.2% to $60.44.

Oil companies and industrial stocks will benefit from new higher prices. Industrial companies that sell substances, pumps, and vehicles, processors, and sellers or auto parts companies.

As energy prices increase, investors may need to evaluate some of these energy stocks.

Oil Stocks Are Rising Which Ones to Buy

Some oil companies hit much larger gains as investors hurried to close their positions and avoid losses. For example, Carrizo Oil & Gas CRZO stock rose 19.53%, it had 39% of shares open for trading sold-short, reported FactSet. The shares climbed up 19.5% and close at $10.22. But, it is lower 62% from the 52-week intraday high of $26.67 placed in September last year.

MarketWatch published a list of energy companies in the S&P 1500 favorable to invest in now.

THE LIST IS HERE

How to determine the good one

Investors have to estimate the company’s balance sheet to reveal is it in stable financial status. Does the company have the money to satisfy its business obligations, if market conditions worsen? This is important data. Secondly, investors have to check companies leverage ratio. But the most important factor for oil investors when choosing the oil stock has to be its debt to EBITDA ratio and net debt to capital ratio.

If a company produces or uses crude oil a debt-to-EBITDA ratio should be below 2.0 times and net debt to capital ratio should be less than 30%. Although, if the company has fee-based cash flow net debt to capital ratio can be 50%.

Majority of oil companies will issue their current leverage metrics on their website so it is easy to check.

Investors should take care of the company’s liquidity.

That is money to which a company has immediate access to satisfy its financial obligations. The company must have enough cash for that purposes, a fund for several months, for example. How will you know that? Just divide a company’s declared capital budget by its cash on accounts.

An oil stock that is enough protected against a big fall in oil prices owns a stable credit rating, low leverage ratio, and much liquidity. Such companies are good investments, despite the oil prices droppings.

17th September 2019
Gold In India Is High But Tracking Global Signals

2 min read

The gold in the Indian market continued its rise with an over 1% surge today, September 16.

October gold futures values on the MCX were trading higher by Rs 491.00 or 1.31% at Rs. 38015.00 per 10gm. The silver also climbed in price by 2.4% or Rs. 1100 to Rs. 46,856 per kg.

The notable increases in domestic gold price is a consequence of dropping of the rupee. It is to 71.62 per US dollar today. India imports most of its gold demand, and decrease in the price of rupee caused gold to be so expensive in the Indian markets.

The additional value of gold comes from the unstable geopolitical situation in the Middle-East.

Gold was trading higher at 1.6% ($1,512) in Singapore and silver was trading higher at 3.2% ($17.9938) per ounce. Earlier this month, gold prices hit a 6-year high of over $ 1550 per ounce in the global market.

Gold could go up in the next week because some traders are buying it feeling uncertainty because of the attack on Saudi Arabian oil facilities during the last weekend. It is the so-called “safe-haven” buying. Gold traders are also interested in Wednesday’s Fed interest rate and further monetary policy.

Anyway, the gold price is higher than ever and precious in India which is phenomena per se. So, it deserves some explanation.

Why is gold so valuable in India?

Gold is valuable as a store of value and as a raw material for jewelry and electronic industry. Did you know that a lot of Indian nationals like to hold gold more than money in the banks?

That habit has its opposing side too. Indian banks have fewer funds to lend. That’s why the credits are more expensive and companies are not so enthusiastic to invest, therefore. And there is that tricky situation, a classical Catch 22.

When there are not enough investments and economic activity, the value of deposits and savings will be low. In turn, the borrowing, which is supposed to fund new investments and economic activity will be low, thus they will stay low. Because of these conditions wages, GDP and employment will stagnate. And also, there is a great possibility for domestic currency to go lower and become weaker. It can be, at the same time, a great possibility to grow export. But gold is our subject now.

India is the biggest gold importer in the world. But the Indian government set limitations to importing gold. That caused another problem. There is great consumer demand but less supply. Hence, the price of gold goes up.

The weaker currency has many consequences.

The inflation could be higher and the capacity for repayment foreign debt could be lower.

The rupee has proceeded to decrease due to different circumstances. Besides the gold demand, the reduced growth expectations have led to a fall in the equities markets. Foreign investors had to buy rupee to be able to invest in the market and now they are selling the rupee to cash out. This is extremely strong pressure on the rupee. It looks like the fundamental changes needed in the Indian economy.

You would like to know Who are the most successful investors in India?

16th September 2019
China Will Take Your Money

2 min read

No, China will not take your money away but will accept it after having removed quotas for foreign institutional investments and consequently limits for their clients.

Almost 20 years after first opening its capital markets to foreign investments, on Tuesday, September 10 Chinese State Administration for Foreign Exchange (SAFE) has announced the removal of $300 billion caps on foreign investments under its Qualified Foreign Institutional Investment (QFII) scheme.

Foreign investments in China

Similar cap for renminbi-denominated RQFII scheme has also been removed. Combined with last week’s lowering of reserve requirement ratios by China’s central bank, this move is aimed at increasing the liquidity of Chinese financial markets. Changes to QFII and RQFII schemes will greatly simplify the investment procedures for foreign companies by removing the application for quotas process. “[F]oreign institutional investors with corresponding qualifications will only need to go through registration procedure” according to the SAFE statement.

This move is being lauded as a great improvement to the convenience of foreign investors’ participation in Chinese financial markets, and effort to make China’s bond and stock markets more widely accepted by international markets.

Analysts cautions

Many analysts are cautioning that this move will not cause a flood of off-shore investments, pointing out to the fact that only $111 billions of QFII cap was used to date. The figure which stayed, for all intents and purposes, unchanged since the cap was increased from $150 billion. According to Adrian Zuercher, head of the asset allocation for the Asia Pacific at UBS Wealth Management, “cap was an important roadblock for institutional investors which has now been removed.”

It must be said that this move is a continuation of efforts to remove red tape and ease foreign investments in financial markets. The process which started last year by removing the lock-in periods under QFII and RQFII schemes, and allowing investors to repatriate their funds at any time. Previously, funds which could be repatriated in one go were subject to very severe limits, which was a considerable obstacle for many institutional investors. With cases of repatriation approval process taking up to four months.

Positive or negative

This development comes in the atmosphere of uncertainty surrounding the US-China trade negotiations and trade war. Some analysts see it as a positive which underscores the fact that trade war has positive effects on China by accelerating its reform agenda more than was expected. Reforms geared toward giving overseas investors the same access to markets as to local players. Part of it was last January’s license approval to rating agency S&P Global for operating in China, the first such license granted to a foreign agency.

Separately, the Chinese government is allowing foreign banks and insurers to take a controlling stake in their joint ventures. Till today, JP Morgan, UBS Group, and Nomura Holdings have won approval, while Goldman Sachs and DBS Group are currently waiting on it. Also last week Deutsche Bank and BNP Paribas were given regulatory approval for underwriting debt in China.

Stabilizing effect on the Chinese economy

These moves serve the purpose of opening China’s financial markets to foreign investment. But, most likely, will also have a stabilizing effect on the Chinese economy in the state of the trade war with the US. Having in mind global trade tensions and the US imposed tariffs having a draining effect on China’s foreign currency reserves, this move could strengthen China’s balance of payment by providing an inflow of foreign currency.

You might be interested: Asian Stock Markets Perform Careful Increases

11th September 2019
The Boys Are Not All Right

3 min read

History of the Silicon Valley goes as far back to ancient 1951 when the dean of the School of Engineering at Stanford, Frederick Terman, has spearheaded the creation of the Stanford Industrial Park. Place where Stanford University was leasing the office space to nascent high-tech companies. Hewlett-Packard, General Electric, Eastman Kodak, and Lockheed were some of the very first tenants.

It was also a place where the silicon transistor was born, integrated circuits, MOSFET, the concept of the Intergalactic Computer Network, video games, and many other things without which we couldn’t imagine the modern life. Once it was a hotbed of innovation, the forefront of technological progress, today it is a shadow of its former self.

Silicon Valley today is more of a state of mind

Though the southern part of the San Francisco Bay still exists, and towns like Palo Alto, Cupertino, Menlo Park, Mountain View, Sunnyvale, and others of the Santa Clara County; Silicon Valley today is more of a state of mind than a physical place.

Back in the day, it was inhabited by people who had extraordinary talent and knowledge of everything techy and sciency, the geeks. Today, by know-it-all Bros who will from time to time get some very bright ideas.

For example to make a steel one person cigar-shaped submarine for rescuing people trapped in an underwater cave. And to pretend that it can swing around the bend in a submerged tunnel, where a U shaped bend is roughly twice the circumference of the submarine. And when subjected to the public criticism of such an “ingenious” piece of engineering, the Silicon Valley mentality demands that one hurls the most abhorrent insults at one’s critics. After all the Bro knows it all, he’s a software engineer.

We come to Elon Musk

And yes, Elon Musk is a prime example of everything that is wrong about the Silicon Valley mentality. That, born in the primordial soup of buzzwords and overhyped software applications, arrogant attitude that any problem in the world could be solved by a software engineer.

But reality has a nasty habit of rearing its ugly face. Especially when software engineers try to solve hardware problems.

For example Tesla Model 3’s rear wheel arches.

According to Sandy Munro of Munro and Associates, a manufacturing analyst company with analyzing more than 400 models of various manufacturers under their belt, they are made out of 9 separate parts which are welded, glued or riveted to each other. Other car manufacturers make this body part out of a single piece of sheet metal.

Also, Model 3 features some of the body sub-assemblies which are made out of parts joined together in several ways, welding, glueing, riveting or bolting. Sometimes using all four of them. Something which is utterly foreign to other car manufacturers, who prefer to use one joining technique throughout the sub-assemblies as such a solution keeps manufacturing costs as low as possible. Overall, Mr. Munro has suggested 227 practices which are standard for car manufacturing, and which would lower production costs of Model 3 by at least $2,000. “This body is their single biggest problem. It’s killing them.” Those are the words of manufacturing analyst, Sandy Munro.

But, why is it so?

By all appearances because Tesla has a corporate mentality characteristic for Silicon Valley. From what an observer can deduce, they prefer to hire software engineers over car engineers. While in the past five years many big engineering names from the likes of Ferrari, Mercedes, BMW, Peugeot… were poached by their competitors, none of them was snatched by Tesla.

By all appearances, Tesla is throwing software engineers at car manufacturing problems. And those boys lack the old school knowledge of car engineering and production. But they have a quite ample attitude. For example, about their Autopilot system. On the official webpage, it is described quite dubiously capable, even though featuring a warning that the Autopilot features “do not make the vehicle autonomous”.

Fake it till you make it

The system is touted as having 40x computing power of the previous system, features the Autosteer+, it is twice this and thrice that, and all “new Tesla cars have the hardware needed in the future for full self-driving in almost all circumstances”. And that is the lingo of Silicon Valley mentality, overstate everything no matter what, and curb the confusing and often misleading language just enough to satisfy the regulators. Convince the potential customers that your widget is the life-changing experience, without which their lives have no meaning.

The Silicon Valley Mentality of Boys.

Disruptiveness, insurgent, start-up, “fake it till you make” it are the epitomes of it. It’s a place where everyone can be miserable. Where working “9 to 5” means from 9 am to 5 am. Place where every CEO is the man who will fundamentally change our world and way of life with his “disruptive app”.

3rd September 2019
LUPA Stocks – Four Stocks Funded by Venture Capital

4 min read

LUPA stocks are Lyft, Uber, Pinterest, and Airbnb stocks. This makes LUPA nickname. The other nickname for these stocks is PAUL stocks. Some of them are already publicly traded but some are waiting to be in the coming future, for example, Airbnb. The common thing for all of them is that they all are companies funded by venture capital and private capital. They have become well-established brands and widely recognized businesses. The other common thing is that all of them enjoy users’ support, but profits have been mysteriously absent.

LYFT

Lyft went public in March this year. In August its shares dropped 30% compared to their $72 initial IPO price. But there’s good news too, as not everything is bad for Lyft.

Several days ago, actually one week ago, Guggenheim Capital declared it’s improving Lyft’s shares advisory from neutral to buy. At the same time, they announced a targeted price is at $60 which is a 19% increase.

The main reason behind is calming down of the price war with Uber.

Uber is expanding its business to several new fields like food delivery in the domestic market, but more importantly, Uber is expanding its operations internationally. So, the price war with Lyft now seems pretty much tricky. Uber is making loses in these parallel business and has to cover them somehow. The price war with Lyft is exhausting and without the expected result. Moreover, Uber has to earn money in the domestic market to cover losses caused by international competition and the intention to expand the business. It likely went about it too early.

The consequence is that Uber has to raise its prices for ride-sharing if they want more cash. That is an opportunity for Lyft to do the same.

Lyft is still an unprofitable company. Its share price is five times its annual sales. But Guggenheim claims that it is the question of the day when Lyft will start to earn profits from its business. Lyft is targeting a valuation of $21-23 billion. Fidelity Capital Markets holds about 7% of the Lyft’s non-public shares.

Uber Is part of LUPA stocks

Uber is Lyft’s main rival in the ride-sharing industry. The last decade was pretty eventful for them. This ride-sharing app is funded by venture capital. Their first appearance on the market was under the name UberCab in 2009. They expanded their business internationally and now they have food delivery, trucking, and scooter rental included domestically. Uber is one of the biggest tech IPOs and became publicly traded since May 2019.

The early investors made millions, maybe even billions of dollars since the company came into the stock exchange. Anyway, their investment is increased in value.

This somewhat controversial company has many challenges. Uber market cap on August 30, 2019, was $55.69B.

Honestly Uber, which is not posting profits, is an overvalued company.

In Jun this year, Uber predicts that the value of its initial public offering will be from $44 to $50 per share. That would mean a valuation of up to $91 billion. But it is lower than $100 billion what was prior expected. Still, Uber is one of the highest offerings in history.

Uber has another problem. Their attitude toward drivers was the subject of many scatting news reports and even strikes.

Drivers have complained about their pay. The criticism of unfair labor practices has caused a public resentment toward the company.

Shares of Uber were at $33.96 in mid-August, which was the lowest since the stock’s appearance in May. And Uber shares continued to slip and the shares dropped below $36.

Pinterest is one of LUPA stocks

Pinterest, another one among LUPA stocks, is a popular photo-sharing social-media online platform.

The company claims that it has 250 million active users every month. The company started to be publicly traded in April this year and its stock price registered more than 28% rise on its first day of trading. The company’s stock started trading at $23.75, above the initial offering price of $19 and finished the day at $24.40 in April this year.

It will anyway be tough for this social media company to be able to be a real rival of Twitter or Facebook. However, Pinterest management has reaffirmed a much less competitive path to growth than its rivals.

Their market cap is $18.68 billion and stocks are traded at $34.42 in August this year.

Airbnb is LUPA stock

The company was launched in 2008 and probably surpassed the founders’ expectations.

This popular short-term apartment rental platform has upset the whole travel industry. For example, the best example of how huge it can be is the case of New York. This city has limited Airbnb’s ability to operate. The powerful lobbying forces from the hotel industry caused that.

This service has long been in the spotlight for an IPO. Now it looks the Airbnb is reading for its market debut. The company declared they made “substantially more” than $1 billion in revenue in the 3rd quarter of 2018. Some experts claim that the company’s profitability makes it a top candidate for the direct listing.

It looks that the Airbnb can be the next big play. And their IPO may happen in 2020.

Bottom line

These four companies are among the most important ‘unicorns’. All of these LUPA stocks are startup companies valued at more than $1 billion. LUPA stocks are interesting to investors who are currently willing to reward tech businesses that lose money. They already did so with Amazon or Netflix in their beginnings. LUPA has been able to develop their businesses with the support of venture capital and private investments. But the public markets are not so welcoming to them at the moment. The stock prices show that. Still, they are worth investing. Maybe now more than ever as their current low prices suggest large raises in the future. And the future currently belongs to the tech companies.

2nd September 2019