Cuban Dual-Peso: Creating Inequality Since ’93.
Cuba Eliminates Dual-Peso System for Single Currency
By: Frehiwote Negash –
News of the Obama administration and the Cuban government restoring diplomatic ties marks the end of the 50 year standoff between the two countries and the beginning of normalized relations. In the last half century, relations between both countries have been almost non-existent dating back to the Cuban Missile Crisis. President Obama’s willingness to re-establish ties with Cuba was facilitated by the presence of President Raul Castro as leader in place of his brother, Fidel. Raul, the more progressive of the two leaders, promised reforms to the country’s 11 million citizens by opening Cuba’s doors to global investment. It marks a major shift in American foreign policy; one which embraces cooperation in light of its failed foreign policy on Cuba.
The policy is two-fold in its purpose. The ultimate goal of the US embargo was to weaken the Castro government and force regime change. In this respect, it has failed miserably. The policy’s continued support was fuelled in large part by Cuban nationals and Republicans in Florida; a state which remains an electoral battlefield. The embargo has only served to solidify communist rule in Cuba by further isolating the country. On the flip side, the policy has succeeded in decimating the Cuban economy. The embargo has cost Cuba an estimated US$1 trillion since its enforcement with President Castro demanding compensation for damages as a result of the policy. The détente does not mean that Cuba will fargo its socialist principles by embracing capitalism , but rather proceed within the current system. One major indication of these changes is the elimination of Cuba’s dual –peso system in favour for a single currency.
In order seek foreign investment and facilitate trade, Cuba has to scrap its convoluted dual-peso system which has been in operation since 1993. The system was enforced after the collapse of the Soviet Union. Without Soviet subsidies, Cuba’s GDP dropped a whopping 35{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} forcing Castro to recognize the American dollar in 1993 as a means of exchange if only to get hard cash in its coffers.
Visitors to Cuba are given convertible pesos also known as the CUCs. One CUC is equivalent one US dollar. However, Cuban citizens are paid in local pesos or CUPs, which have an exchange rate of .25 to the dollar. The system is designed to force tourists to pay a premium on items and uses the proceeds to finance necessities for its citizens. Ironically, the system has created inequality among Cubans who have access to CUCs over CUPs; an imbalance that echoes the inherent problems of capitalism. The danger with eliminating the CUP is that millions of Cubans could lose their life savings as a result of the transition.
The thawing of US-Cuban relations will accelerate the move to a single currency as Cuba prepares for the global market. The deteriorating economic situation in Venezuela, Cuba’s biggest ally in South America has forced its hand in search for new economic partners. However, it remains to be seen how the Republican dominated US congress will proceed on the embargo matter. Until then, it is in Cuba’s best interest to seek new trade partners and opportunities.
Source: Reuters Canada, Socialist Alternative, Yahoo News, Live Trading News, Vice Magazine
- Published in Blog
Fort McMurray; The next Canadian Ghost Town?
Can Fort McMurray break the ‘Boom and Bust Cycle?
By: Frehiwote Negash –
The decline of oil prices since last June has caused upheaval in the Canadian economy and world markets. From a global perspective, many countries are in dire straights with oil hovering under $50 per barrel. Major oil producing countries like Russia and OPEC member Venezuela face economic collapse with oil staying at the current price. The volatility in the Middle East with the death of King Abdullah and the presence ISIS make forecasting OPEC̕̕ s oil policy a difficult challenge. On the home front, Alberta is expected to fall $7 Billion short of its forecasted revenue. The Bank of Canada cut the national interest rate to prevent inflation and a housing downturn in light of the oil shock. The current situation has forced Alberta Premier Jim Prentice to consider an unpopular provincial sales tax. News of the federal budget potentially going into a small deficit with oil at the current price presents new challenges to the Harper government in what could be an election year. Plunging oil prices have already started to affect the labour market as oil companies like Shell and Suncor have already started laying-off workers and slashing capital budgets. In the midst of all this, Fort McMurray Mayor Melissa Blake is still hopeful of her town’s prospects. Blake states that residents are still “living life as they alwayshave.”
One would expect a politically savvy person like Blake to respond to crisis with optimistic platitudes. The reality is that Fort McMurray exists solely because of the oil industry and the facile argument of life being the same fails to address issues that residents have to face. In a town of 76,000 people made up of mostly migrant and temporary workers and where housing is at a premium, life has already started to change. Mayor Blake states that “Plants are still in operation, we still have jobs, we get up and go to work every day, and we spend our money just as we normally would,”. Business owners beg to differ as they have seen a decline in sales as a result of the downturn.
This isn’t the first time the residents of Fort McMurray have faced economic woes. Residents weathered the most recent downturn in 2009; one which many have called a blessing in disguise. This downturn could last longer a lot longer with companies cutting future projects and more layoffs on the horizon should oil hover at its current price. The uncertainty has forced some residents to put their homes on the market as a precautionary move. While many living in Fort McMurray believe that they can weather the storm, a sustained downturn of could see Fort McMurray become a ghost town.
Sources: Business News Network, Globe and Mail, CTV News, CBC News
- Published in Blog, Oil and Gas
Sales tax out of question for Albertans
In true Albertan style, citizens reject the proposed sales tax making it difficult for Premier Prentice to attack the budget shortfall.
Albertans reject sales tax to fill budget gap
By Andrea Janus
Source :Business News Network
Nearly three quarters of Albertans are opposed to a provincial sales tax to help fill the revenue gap left by falling oil prices, according to a new poll.
Alberta Premier Jim Prentice recently floated the idea of a sales tax to make up for a projected $7 billion budget shortfall. While no decisions have been made, and Prentice himself has said he is “not embracing” a sales tax, the idea appears wildly unpopular with voters.
In a survey of 3,184 Albertans, Mainstreet Technologies asked whether respondents approve or disapprove of a PST to balance the budget. The results showed that:
· 73 per cent of decided residents disapprove.
· 27 per cent approve.
Of those who disapprove, 53 per cent said they “strongly” disapprove, while 20 per cent “somewhat” disapprove.
When asked what type of tax increase they would favour the most in order “to raise additional revenues in the future,” only 11 per cent of decided residents favoured a provincial sales tax.
· 18 per cent favoured higher energy royalties.
· 21 per cent favoured a personal income tax increase.
· 22 per cent favoured a health care premium.
· 28 per cent favoured user fees or sin taxes.
Meanwhile, asked how the province should deal with the coming budget shortfall — cut spending, run a bigger deficit, increase borrowing, or raise taxes — 55 per cent of decided respondents said the province should cut its own spending. Only 19 per cent said “raise taxes,” 14 per cent said “bigger deficits,” while 12 per cent said “increase borrowing.”
The findings suggest Prentice has “a huge uphill battle” on his hands if he wants to move forward with a sales tax, pollster Quito Maggi told CTV Calgary.
However, the popular solution isn’t always what’s best for voters, University of Calgary political scientist Melanee Thomas said.
“It’s kind of like eating your vegetables,” Thomas told CTV. “Just because you don’t necessarily like doing it, doesn’t mean that you don’t do it, because it’s the best thing for you.”
In fact, now may be the right time for Prentice to introduce a sales tax when the political opposition is so weak. Much of the Wildrose Party caucus recently crossed the floor to join the governing Progressive Conservatives, leaving just a handful of opposition MLAs behind.
“With the absence of a viable alternative, you’ve got to wonder whether or not it’s as suicidal as some might think it would be,” Thomas said.
Economists tend to favour consumption taxes, such as sales taxes, over increases to income taxes, Todd Hirsch, chief economist at ATB Financial said Monday.
However, Maggi said that sin taxes and user fees will not bring enough in to provincial coffers to balance the budget.
“When we looked at how Albertans want the Premier to deal with the upcoming budget the most popular idea was to cut spending – but there just isn’t much to cut,” Maggi said in a statement accompanying the poll results.
“This really places the PC government and the opposition parties in a tough bind. A PST has the most potential to raise revenue, but Albertans are firmly opposed.”
Reaction on the street in Calgary was mixed on Monday. Some residents acknowledged that the government likely has little option if oil prices remain low. However, others reflected the poll’s findings of strong opposition.
“We have the Alberta advantage now,” one woman told CTV. “But I think if we put that in the province, then we’re basically the same as all the other provinces.”
- Published in Blog
Argex Titanium to Present at the 2014 Gateway Conference
MONTREAL, QC–(Marketwired – Aug 19, 2014) – Argex Titanium, Inc. (TSX: RGX), an emerging producer of high-grade titanium dioxide (TiO2) used as white pigment in paint, plastic, paper, cosmetics and other applications, has been invited to present at the 2014 Gateway Conference being held on Thursday, September 4, 2014 at the Palace Hotel in San Francisco.
Argex management is scheduled to present at 11:30 a.m. Pacific Time, with one-on-one meetings held throughout the day. Management will discuss the company’s recent transition from R&D to the initial stages of commercial production of its disruptive TiO2 manufacturing process. The presentation will also be webcast live and available for replay at www.gateway-conference.com, under the Webcast tab.
Argex management will also participate in a 10-minute video interview recorded at the conference. The interview will be hosted by popular syndicated radio personality and former investment banker, Conn Jackson. It will be posted to Gateway Conference website and the Investors section of Argex’s website shortly after the conference.
For additional information or to schedule a one-on-one meeting, log-in via the link provided in your invitation. You may also email your request to schedule@gateway-conference.com or call Chris Tyson at (949) 574-3860.
About the Gateway Conference
The Gateway Conference is designed to provide a unique gateway between influential members of the investment community and a select group of compelling publicly-traded companies. Portfolio managers, research analysts and brokers from buy-side and sell-side institutions will have the opportunity to learn about more than 60 small-cap growth companies from a number of growth industries, including technology, business services, digital media, clean-tech, consumer, Internet retail and life sciences. For more information, visit www.gateway-conference.com.
The invitation-only conference is hosted by Liolios Group, one of the nation’s top investor relations agencies, and sponsored by leading firms that service the financial community. For more information about Liolios Group, visit www.liolios.com.
About Liolios Group
Liolios Group, Inc. is a highly selective and comprehensive investor relations firm specializing in small-cap companies. The firm aims to deliver superior performance in corporate messaging and positioning, investor awareness, analyst and financial press coverage, and capital attraction. Founded in 1999, Liolios Group executives have extensive experience in finance and investments, and represent clients in a wide range of industries, including technology, digital media, consumer/internet retail, healthcare/life sciences, natural resources and business services. For more information about Liolios Group, please visit www.liolios.com.
About Argex Titanium
Argex Titanium Inc. has developed an advanced chemical process for the volume production of high grade titanium dioxide (TiO2) for use in high quality paint, plastics, cosmetics and other applications. The company’s unique proprietary process takes relatively inexpensive and plentiful source material from a variety of potential vendors, and produces TiO2 along with other valuable by-products. Argex’s process provides a significant cost and environmental advantage over current legacy TiO2 production methods. The company’s primary near term goal is to rapidly advance toward a 50,000 tonne per annum production module as a first step in its goal to transform the 5.2 million tonne per annum TiO2 industry.
Forward-Looking Statements
This news release contains statements that may constitute “forward-looking information” or “forward-looking statements” within the meaning of applicable Canadian securities legislation. Forward-looking information and statements may include, among others, statements regarding future plans, costs, objectives or performance of Argex, or the assumptions underlying any of the foregoing. In this news release, words such as “may”, “would”, “could”, “will”, “likely”, “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate” and similar words and the negative form thereof are used to identify forward-looking statements. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether, or the times at or by which, such future performance will be achieved. No assurance can be given that any events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits Argex will derive. Forward-looking statements and information are based on information available at the time and/or management’s good-faith belief with respect to future events and are subject to known or unknown risks, uncertainties, assumptions and other unpredictable factors, many of which are beyond Argex’s control. These risks, uncertainties and assumptions include, but are not limited to, those described under “Risk Factors” in Argex’s Annual Information Form for the fiscal year ended December 31, 2013, which is available on SEDAR at www.sedar.com; they could cause actual events or results to differ materially from those projected in any forward-looking statements. Argex does not intend, nor does Argex undertake any obligation, to update or revise any forward-looking information or statements contained in this news release to reflect subsequent information, events or circumstances or otherwise, except if required by applicable laws.
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
Contact: Company:
Argex Titanium, Inc.
Roy Bonnell, President and Chief Executive Officer
514 843-5959
- Published in Mining
Welcome to Investing 101
Welcome to Investing 101
A simple guide for new investors from seasoned veterans on how to approach the market.
Do you have the stomach to be a stock investor?
By Kate Stalter
There are plenty of decisions to make when allocating your investment portfolio, but one of the first should be whether to buy individual stocks or mutual funds. Fund proponents cite diversification as a key benefit. With a fund, or multiple funds representing different asset classes, risk is spread among a range of securities. If one holding in a fund suffers a sharp decline, it’s offset by better performers.
On the other hand, proponents of holding single securities often like the idea of beating an index, or getting into a new or small company earlier than the crowd. Other times, stock investors like the story and prospects of a large, established company, such as Apple or Johnson & Johnson.
Some investment methodologies favor one approach over the other and have strict rules about portfolio construction. However, in practice, many portfolios contain a mix of funds and individual securities. How should individual investors decide whether to choose stocks or funds, and, if using both, how should they allocate? Professional asset managers recommend specific strategies for determining portfolio allocations. They emphasize that investors must tailor their strategies to match risk tolerance and time available for stock research.
Elyse Foster, founding principal of Harbor Financial Group in Boulder, Colorado, constructs client portfolios using mutual funds and individual securities. Her investments are selected with an eye toward how well the pieces of the puzzle fit together. When choosing funds, she recommends investors understand which areas of the market and which asset classes to include. Those choices depend on factors such as investing objective and risk tolerance.
Foster uses a combination of actively managed and index funds to achieve the desired balance, and evaluates funds using yardsticks such as expenses, management team and performance. Her portfolios also include around eight to 10 individual stocks, selected with a buy-and-hold strategy in mind. “Our criteria are that they be primarily market dominators — companies with wide moats and good, consistent, long-term management. We separate them over sectors. We might have a tech pick, a health care pick and then picks from other sectors,” she says.
Foster cautions that investors need a plan for buying and selling individual stocks. “You have to do proper research before your purchase, and you have to have a purchase methodology and a selling methodology before going in,” Foster says. “For example, you might say, ‘I’m going to sell this position when it doubles in value.’ Or use the Warren Buffett methodology, which is: The best time to sell a stock is never.”
Ramesh Gulati, founder and chief investment officer at Gulati Asset Management in Vero Beach, Florida, says for many investors, the decision to sell a stock can be more difficult than the decision to buy. “People get married to an individual stock much more easily than with a mutual fund or exchange-traded fund,” he says. “A lot of times, with funds and ETFs, selling is only done when the money is needed. With individual stocks, you have to be more savvy and understand when to cut your losses or when to say, ‘I’m not going to be too greedy. I’m going to take my profits and move on to another stock.'”
Gulati, who uses a mix of indexed ETFs and individual stocks, says investors inclined toward single stocks should begin with an allocation of 75 percent to 80 percent in ETFs. The remainder can be put into in stocks. “Invest in five different companies from five different sectors that you think are the best — things that you use and would enjoy following and keeping up to date with,” he says.
From there, Gulati recommends tracking the performance of the individual stocks against the performance of index funds. If the individual stocks are outperforming the indexes, gradually shift more money away from ETFs and into single stocks. “During that time, you’re also educating yourself and getting more comfortable and confident in choosing the individual stocks,” he says.
Gabriel Wisdom, founder and managing director of American Money Management in Rancho Santa Fe, California, wrote a book on single-stock investing, “Wisdom on Value Investing: How to Profit on Fallen Angels.” However, that doesn’t mean he advocates for investing in individual stocks in every situation. “You use mutual funds when it’s just too difficult to select the stocks that are on sale, that would be attractive, and should be rewarding over time,” he says.
In particular, he cites the example of emerging markets. Not only can it be challenging for U.S. investors to properly research emerging market equities, but those stocks are often not available domestically outside of a fund. “There are times when emerging markets are extraordinary opportunities for people who have a reasonable time frame and are willing to wait two or three years,” he says. “China was on sale a couple of years ago, and last year it was one of the best-performing emerging markets. But which Chinese companies do you select? A mutual fund manager who understands that market would be worth paying for.”
Russia, where stocks are currently beaten down, is another example of a country where American investors may find opportunity, Wisdom says. Again, he recommends investing in a mutual fund or ETF rather than trying to cherry-pick companies unfamiliar to most Americans. When it comes to selecting individual equities, Wisdom’s fallen-angel approach zeros in on companies that are out of favor for various reasons. “‘Fallen angels’ is an old Wall Street term to describe stocks or bonds that have fallen from grace,” he explains.
This fall can occur because of normal business and economic cycles that cause stocks to drop across the board. Another reason would be a company-specific misstep that causes a stock-price decline. Finally, stocks may be deemed “fallen angels” after a marketwide panic, such as in 2008.
Wisdom, who is a private pilot, suggests using a checklist to verify whether a stock meets certain purchase criteria. “Every pilot has to use a checklist. There’s nowhere to pull over in the sky,” he says.
The investor’s checklist should consist of fundamental factors, such as the return on equity, profitability and debt levels. It should also include valuation metrics, such as price-to-earnings and price-to-sales ratios. “It’s not easy for an individual investor to know when a stock is cheap or when it’s expensive just based on share price,” Wisdom says. “A company selling at $100 per share can be very cheap, and a company selling for $10 a share can be very expensive. It’s all based on things such as revenue, earnings and market capitalization.”
Elyse Foster also emphasizes the need to research investments thoroughly, and adds that not everyone is suited to buying single stocks. “Individual investors need to know themselves, and know whether they’re interested in doing this research and monitoring, and whether they have the time. A really busy person may not have time to do this research,” she says. “But if you have a proclivity for it, if it’s fun and interesting for you, you can do well with individual stocks.”
Source: Yahoo Finance
- Published in Blog
TSX Composite is up 200 points as Bank of Canada cuts Interest Rates
By Josh Falle
Anybody wondering why the S&P/TSX Composite Index just jumped 200 points?
Bank of Canada, in a move last night cut interest rates. A sharp drop in oil prices has forced the Bank of Canada to cut its target overnight rate by 0.25{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce}, bringing interest rates to new historic lows of 0.75{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce}. The BoC added its bank rate is at 1.00{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} and its deposit rate is 0.50{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce}.
Many analysts predicted for them to hold current rates, but as 2015 revs up, it is proving to be a new kind of monster.
“The large decline in oil prices will weigh significantly on the Canadian economy,” the Bank of Canada said in its quarterly monetary policy report, which it also released Wednesday.
- Published in Blog
Organigram Provides Shareholder Update
OrganiGram Holdings Inc. (ACB:CSE) has provided an update to shareholders while reviewing milestones of 2014 and looking at the growth and goals of 2015.
Since the inception of OrganiGram in April, 2014, the company has been growing and developing at a very fast pace. Through this growth, there have been some tremendous achievements, which include receiving its organic certification, producing its first crops, listing of shares on the TSX Venture Exchange and completing three phases of construction. OrganiGram is excited to capitalize on these achievements and execute on the business plan.
Moving forward, the company’s shareholders, patients and partners will begin to see the results from the foundation laid in 2014. To date, the company has been extremely focused on expanding the production facility while, at the same time, working to increase production levels. These efforts will begin to provide significant product to the market in March of this year. Thereafter, the utilization of the company’s existing rooms and rooms under construction will ensure that OrganiGram is poised to meet its financial goals in 2015.
OrganiGram would like to take this opportunity to congratulate Trauma Healing Centers on the opening of its first clinic, in Halifax, N.S. OrganiGram is proud to be partnered with Trauma Healing Centers on research initiatives to assist veterans and others suffering with posttraumatic stress disorder (PTSD).
OrganiGram’s chief executive officer, Denis Arsenault, states: “Over the past few months, OrganiGram has moved into a best-in-class manufacturing facility. Our processes and systems have been developed to a point where we produce high-quality products, in an organic form, which has and will continue to exceed the requirements of our clients. While we continue to evolve and improve, our facility will begin to supply the market with an established source of product on a consistent basis. We have a superior management team in place that is not only focused on supply but also quality, efficiency and product development. The results of our efforts will not only be very profitable for the company and shareholders but most importantly will provide a rapidly increasing client base with a medicinal product that assists in a much-improved quality of life for many. The developments of the next few weeks and months will be both exciting and fruitful for our company.”
We seek Safe Harbor.
- Published in Blog
The Importance of a Media Savvy Staff
I’m sharing because every company wanting to create and maintain a good public image should make sure that their whole organization knows how to deal in the present day world of social networks and digital papertrails.
Why You Should Media Train Your Staff
By Karen Geier
Source: MarketWired – Blog
When you onboard new employees, it usually looks something like this: You give them a handout of company policies, sometimes you ask them to sign non-disclosure agreements, and, you train them on the expected ways to do their jobs.
Then you leave them to their own devices to determine how to communicate with the rest of the world.
This might not seem like a big deal at first, but as many corporations have discovered in our hyper-connected world, where normal people have their emails and correspondence leaked, you could be leaving your company vulnerable to exposing something you weren’t ready to.
The best solution? Media training.
Media training is a method of explaining how to deal with press and outsiders while maintaining the discretion of your company and reinforcing company points of views. Media training can help your team avoid gotcha moments and pitfalls in communicating information.
Social media has fundamentally changed the game for companies, and many have adapted to this new reality in their official channels. Major mistakes still happen, though less frequently than in years past. The problem is that odds are every single employee you have likely has some social media presence, and he or she may unwittingly disclose information or vent feelings about your company in a way that causes real problems for you.
How to Determine Who to Media Train
Start with the usual suspects: your executive team, sales team, and anyone who regularly is in the public eye or speaks to press. Then look to people in the company who fit these criteria (they don’t have to hit every point).
Do they:
- Work in customer care?
- Have regular dealings with outside vendors?
- Liaise regularly with contract workers or workers in satellite offices?
- Travel regularly?
- Have a blog or other social media presence they post regularly to?
- Attend conferences regularly or speak on the company’s behalf?
All of these people should be media trained.
What to Focus on When Media Training
Historically, media training was mostly about how to think on one’s feet when asked a direct question from media, and how to avoid being put on the spot by an interviewer. These are still great, indispensable skills, but your training will need to go further.
You will need to educate these teams on the basics of email disclosures, social media skills, and generally not leaving digital “paper trails.” You will need to train your staff on what to do if there is a Twitter storm surrounding your company and your team is targeted.
You will also need to design and train your team on when and how to hand over questions to an authorized representative. These are plausible scenarios every company faces, but that good companies plan for (remember, people might not remember an ad hoc piece of advice in a high stress situation) – make sure the company’s protocols are well documented and readily available anywhere online to staff (and also, outfit your team with hard copies of these protocols that they should keep at their desk).
There is an optional module you may want to include in your media training, and that is whether you wish your employees to not disclose ties to the company online in biographies or profile information. The answer to this will be different for every company. A news station is going to have a different approach to this than an oil company.
Once you have your approved training modules, make sure you train everyone and that they sign a document indicating they have completed the training. Keep this document in their human resources folder.
Employ a Triage Plan and Messaging Matrix
It’s always better to be prepared in the moment with tools that are easy to access and use right away. For this reason, you should have two critical documents in your training modules: a triage plan, and a messaging matrix.
The triage plan tells your staff who to call when a certain situation happens, and how to properly escalate situations in flux.
A messaging matrix gives your team the written tools they can use to answer questions immediately or if a point person is not available, or to tide over press or social media until a point person is available. Consider many diverse situations to plan against. Look to real-world examples to gird against.
Media training can seem like an expensive or time-wasteful activity, but if you can save your company from ever having to employ crisis PR, or if you can prevent a situation from getting out of hand or going viral in the mainstream media, you’ve already gotten ahead of the game. It’s important to have your team aligned on messaging, and media training is a simple way of achieving this goal and making it stick with staff.
Canada’s forecast takes hit as IMF cuts global growth outlook again
As your Investor Relations firm, it is our job to keep you posted on the latest market news
By: David Parkinson
Source : Business News Network
The International Monetary Fund has again cut its forecast for both global and Canadian economic growth, as the plunge in oil prices widens the rifts in the world economy.
The IMF’s World Economic Outlook Update (WEO), unveiled in Beijing on Tuesday morning local time, forecast global growth of 3.5 percent in 2015 – slightly higher than last year’s modest 3.3-percent expansion, but down from 3.8 per cent in the IMF’s previous outlook in October. It reduced its 2016 forecast by the same amount, to 3.7 per cent from October’s 4 per cent.
This is the third successive quarterly report in which the IMF trimmed its global growth forecast for the current year.
The international financial body cut its forecast for every major economy except one: The United States. It raised its 2015 forecast for U.S. growth to 3.6 per cent from its October forecast of 3.1 percent and up strongly from 2014’s 2.4 percent. It raised its 2016 U.S. forecast to 3.3 percent from 3.0 percent.
The IMF’s growth forecast for Canada is now 2.3 percent in 2015 and 2.1 percent in 2016, down from its previous call of 2.4 percent in both years. Canada’s 2014 growth was estimated at 2.4 percent.
“Oil exporters, for which oil receipts typically contribute to a sizable share of fiscal revenues, are experiencing larger shocks in proportion to their economies,” the IMF said.
The report said the dramatic drop in oil prices should be a net positive for the world economy. However, exporters of oil and other commodities will be slowed by the sharp price declines – including many emerging-market regions that had been relied upon for strong contributions to global growth.
“Developments since the release of the October WEO have conflicting implications for the growth forecasts. On the upside, the decline in oil prices driven by supply factors … will boost global growth over the next two years or so by lifting purchasing power and private demand in oil importers,” the report said. “However, the boost from lower oil prices is expected to be more than offset by an adjustment to lower medium-term growth in most major economies other than the United States.”
“Our forecasts reflect the increasing divergence between the United States on one hand and the euro area and Japan on the other,” Olivier Blanchard, IMF economic counsellor and director of research, said in remarks prepared for a press conference in conjunction with the report’s release. The IMF noted that this divergence is widening interest rate and currency spreads (in particular, driving up the U.S. dollar and depressing the euro and Japanese yen), further complicating the economic landscape for many countries.
“At the country level, the cross currents make for a complicated picture,” he said.
The IMF projected euro zone growth of just 1.2 percent in 2015, down from 1.4 percent in the October forecast, although up from 2014’s 0.8 percent. For 2016, the IMF forecast growth at 1.4 percent, down from 1.7 percent in the earlier projection.
The agency predicted that Japan, which slipped into recession in the 2014 third quarter, would see growth of just 0.6 percent in 2015, down from its earlier forecast of 0.8 percent. It trimmed its 2016 forecast slightly, to 0.8 percent.
The IMF also warned of slower growth in China, where the government is seeking to reduce the economy’s credit exposure and reorient toward consumer growth. The agency now sees China’s growth slowing to 6.8 percent this year (down from the previously forecast 7.1 percent) and 6.3 percent next year (down from 6.8 percent), compared with 7.4 percent in 2014.
Blanchard did allow that the net benefit of lower oil prices could prove a stronger global economic stimulant than the IMF is currently anticipating.
“This decline may turn out to be a stronger ‘shot in the arm’ than is implicit in our forecasts,” he said. “Our forecasts may turn out to have been a bit too pessimistic. I very much hope so.”
- Published in Blog
Oil prices slip on record Iraq output
As your Investor Relations firm, it is our job to keep you posted on the latest market news
Oil came fell just under $50 per barrel this morning upon news of Iraq’s record output in December. The news is on top of the Goldman Sachs report issued last week that foreshadowed a rather bleak year for oil.
The small gains that were made on Friday vanished quickly today.The news on Iraq output is in line with OPEC’s position on maintaining their current production pace.
Due to securities violations by China’s 3 largest brokerage firms, the markets plunged with the Shanghai Composite Index falling as much as 8{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} at one point.
This is evidence of structural issues within the Chinese economy as brokerage firms are lending money to enable clients to purchase securities. This coupled with the government’s expected report of slower economic growth helps explains the drop on the market.
————
By Himanshu Ojha
Brent crude oil prices fell below $50 a barrel on Monday after Iraq announced record oil production and the global economic outlook darkened.
Iraqi Oil Minister Adel Abdel Mehdi said on Sunday Iraq pumped 4 million barrels per day (bpd) of oil in December, its highest ever thanks to higher output from its southern terminals and a surge in supply from the north.
Abdel Mehdi said Iraq planned to a big increase in exports from the northern city of Kirkuk and the Kurdistan region, which would increase production to 600,000 bpd from April.
Brent crude traded around $49.40 a barrel early Monday morning, down 77 cents. U.S. crude was trading down 74 cents at $47.95 a barrel.
“There’s still more supply than demand and that’s a situation that will not change in just a few weeks,” said Hans van Cleef, energy economist at ABN Amro.
Oil prices have dropped by more than half since last June as output around the world has soared while demand growth has slowed. Although the International Energy Agency (IEA) said last week a reversal in the trend was possible this year, it added that prices may fall further before rising.
Analysts said prices found some support from a drop in U.S. drilling rigs, signifying a likely fall in production in the future. But they said there was not much room for gains.
“Some positive data points helped to stabilize oil for now … Upbeat IEA comments and a falling U.S. rig count were the latest positive news. While the news was able to halt oil’s price decline, it (is) not enough to turn prices bullish,” Morgan Stanley said in a note to clients on Monday.
China, the world’s biggest energy consumer, is expected on Tuesday to report its weakest economic growth for more than two decades. Data from China’s National Bureau of Statistics showed on Sunday house prices fell for a fourth straight month.
A meeting of the European Central Bank on Thursday will likely see the launch of a government bond-buying campaign, pointing to further euro falls against the dollar as well as to downward pressure on oil prices.
“It is not hard to find evidence of increasing concerns around global economic weakness. Yield curves across the world have been flattening (longer term yields falling relative to short ones), a dynamic typically associated with expectations of weakening economic conditions,” Timera Energy said on Monday.
Source: Business News Network
- Published in Blog, Oil and Gas
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