Condoms are one of the widely available OTC products in pharmacy stores and general stores. It is available in different size, packages, and texture and designed for special pleasure and feel. For example, lubricated, dotted, thin, flavored, applied with local anesthetics to increase time men’s performance, Regular size , XL size etc. also, female condoms are available, too.
Female Condoms: It is also known as femidom, It is worn internally by the female partner and provides a physical barrier to prevent exposure to ejaculated semen or other body fluids.The female condom is a thin, soft, loose-fitting sheath with a flexible ring at each end. They typically come in various sizes.
There are lot of variety and brands in each of the above type. It’s really hard to make a proper choice that which one is better for you. So here we try to point out few points that will help you to choose the right size, shape, texture and cost effective condom for you. It will help you to give maximum pleasure.
Couple of points to be considered in general
Avoid storing condoms in hot places e.g. wallet, pocket. It will decrease condom’s effectiveness
Always check the expiry date before using it.
Condom Size
Which size of a condom fits you, is being decided by penis girth. You should choose the size of condom as per fit. Standard sizes of condoms are fit for four to five inches of penis girth. There are large sizes available for those whose girth is above average. For less than average sized girth, condoms may fall off during sex.
Condom Texture
Thin or Thick, Dotted, Extra dotted, ultra thin etc.
Texture of condom can be selection criteria as it affects sensation during sex. Thin textured condoms give more sensual feeling while thick are more secured from being torn apart. Ultra thin material and dotted material gives you more pleasure. Also condoms are available with vibrating ring to give additional sensation. Despite the label, all condoms that are FDA-approved are effective.
Example of brands: Kamsutra ultrathin, Moods dotted, Durex extrapleasure, Moods ultrathin, Manforce extradotted, Durex fetherlite,Kohinoor extra ribs.
Condom material:
Latex
Most of condoms manufactured and used are made of latex, or synthetic latex, and do not contain pores. This type of material is carried by a wide selection of brands. It’s the least expensive, and it’s also the most regulated type of condom. These condoms are durable and won’t rip if they are used with water-based lubricant.
Polyurethane
This is a synthetic material that is recommended for people who are allergic or sensitive to latex. These condoms are clear in color, but not as elastic as latex, and are wider than the average sized condom. The FDA says they can be used with water- or silicone-based lubricants.
Lambskin
Lambskin condoms — made of the intestine of a lamb — are the oldest type of condoms that are effective in preventing pregnancy, but not in preventing STDs or human immunodeficiency virus (HIV) transmission. These condoms also offer a more natural feel and can be used with both water-based and oil-based lube. They are more expensive and do not offer protection against infections.
Lubricated condoms:
Condoms with a water-based or silicone-based lubricant coating are intended to ease penetration and minimize friction and the risk of ripping.
Example of water based lubricated condoms brands: Durex Natural Feeling, Kamsutra smooth,
Spermicidally Lubricated
Condoms that contain spermicidal lubricant, Nonoxynol-9 (N-9), were thought to reduce sperm movement and therefore, prevent pregnancy. In 2007, the FDA issued a final notice that required manufacturers to state the chemical N-9 does not provide protection against infection from HIV (the virus that causes AIDS) or other sexually transmitted infections (STIs). N-9 can also cause irritation, small sores in people, and can actually provide the breeding grounds for HIV transmission.
Local anesthetic Lubricated
Condoms are available to claim to help in long duration of sex by locally blocking local sensation of friction and increase duration time for ejaculation. It might negatively affect person with erectile dysfunction. Also topical gel ( e.g. manforce staylong gel ) containing local anesthetics e.g. lidocaine, prilocaine are also availabe to increase climax time in men. Some herbal gels are also availabe, which contains Jyotishmati and Musk mallow (Lathakasthuri), for the same purpose e.g Himcolin gel.
Example of brands: Durex performa, Durex Pleasuremax,
Non-Lubricated
These condoms are mainly used for oral sex, and for those who have allergies or sensitivities to lubricants.
Novelty Condoms
Condoms that glow in the dark, or are flavored, are considered to be novelty condoms. According to research, flavored condoms can change the vagina’s pH and possibly lead to yeast or bacterial infection. Typically, these condoms are not recommended for vaginal or anal sex, but are deemed OK for oral sex on men. Be sure that these condoms are labeled as FDA approved to meet the agency’s standards for protection against pregnancy and STDs.
Example of flavored condoms Manforce Coffee flavor, Manforce strawberry flavor, Manforce chocolate flavor, Manforce black grapes, Kamsutra Excite Butterscotch, Durex Apple
Source: Rxcues
Find out more cool stories at http://rxcues.com/news.html
Female Condoms: It is also known as femidom, It is worn internally by the female partner and provides a physical barrier to prevent exposure to ejaculated semen or other body fluids.The female condom is a thin, soft, loose-fitting sheath with a flexible ring at each end. They typically come in various sizes.
Couple of points to be considered in general
Avoid storing condoms in hot places e.g. wallet, pocket. It will decrease condom’s effectiveness
Always check the expiry date before using it.
Condom Size
Which size of a condom fits you, is being decided by penis girth. You should choose the size of condom as per fit. Standard sizes of condoms are fit for four to five inches of penis girth. There are large sizes available for those whose girth is above average. For less than average sized girth, condoms may fall off during sex.
Condom Texture
Thin or Thick, Dotted, Extra dotted, ultra thin etc.
Texture of condom can be selection criteria as it affects sensation during sex. Thin textured condoms give more sensual feeling while thick are more secured from being torn apart. Ultra thin material and dotted material gives you more pleasure. Also condoms are available with vibrating ring to give additional sensation. Despite the label, all condoms that are FDA-approved are effective.
Example of brands: Kamsutra ultrathin, Moods dotted, Durex extrapleasure, Moods ultrathin, Manforce extradotted, Durex fetherlite,Kohinoor extra ribs.
Condom material:
Latex
Most of condoms manufactured and used are made of latex, or synthetic latex, and do not contain pores. This type of material is carried by a wide selection of brands. It’s the least expensive, and it’s also the most regulated type of condom. These condoms are durable and won’t rip if they are used with water-based lubricant.
Polyurethane
This is a synthetic material that is recommended for people who are allergic or sensitive to latex. These condoms are clear in color, but not as elastic as latex, and are wider than the average sized condom. The FDA says they can be used with water- or silicone-based lubricants.
Lambskin
Lambskin condoms — made of the intestine of a lamb — are the oldest type of condoms that are effective in preventing pregnancy, but not in preventing STDs or human immunodeficiency virus (HIV) transmission. These condoms also offer a more natural feel and can be used with both water-based and oil-based lube. They are more expensive and do not offer protection against infections.
Lubricated condoms:
Condoms with a water-based or silicone-based lubricant coating are intended to ease penetration and minimize friction and the risk of ripping.
Example of water based lubricated condoms brands: Durex Natural Feeling, Kamsutra smooth,
Spermicidally Lubricated
Condoms that contain spermicidal lubricant, Nonoxynol-9 (N-9), were thought to reduce sperm movement and therefore, prevent pregnancy. In 2007, the FDA issued a final notice that required manufacturers to state the chemical N-9 does not provide protection against infection from HIV (the virus that causes AIDS) or other sexually transmitted infections (STIs). N-9 can also cause irritation, small sores in people, and can actually provide the breeding grounds for HIV transmission.
Local anesthetic Lubricated
Condoms are available to claim to help in long duration of sex by locally blocking local sensation of friction and increase duration time for ejaculation. It might negatively affect person with erectile dysfunction. Also topical gel ( e.g. manforce staylong gel ) containing local anesthetics e.g. lidocaine, prilocaine are also availabe to increase climax time in men. Some herbal gels are also availabe, which contains Jyotishmati and Musk mallow (Lathakasthuri), for the same purpose e.g Himcolin gel.
Example of brands: Durex performa, Durex Pleasuremax,
Non-Lubricated
These condoms are mainly used for oral sex, and for those who have allergies or sensitivities to lubricants.
Novelty Condoms
Condoms that glow in the dark, or are flavored, are considered to be novelty condoms. According to research, flavored condoms can change the vagina’s pH and possibly lead to yeast or bacterial infection. Typically, these condoms are not recommended for vaginal or anal sex, but are deemed OK for oral sex on men. Be sure that these condoms are labeled as FDA approved to meet the agency’s standards for protection against pregnancy and STDs.
Example of flavored condoms Manforce Coffee flavor, Manforce strawberry flavor, Manforce chocolate flavor, Manforce black grapes, Kamsutra Excite Butterscotch, Durex Apple
Source: Rxcues
Find out more cool stories at http://rxcues.com/news.html
Advani, in an interview in May, said she's a childhood friend of the superstar and had been dating Khanna for the past eight years until his death. She is the niece of the former President of the Philippines, Ferdinand Marcos. Advani was a regular visitor to Khanna's bungalow and gave company to the ailing superstar.
They would be seen together, eating paani puri at a local market.
"I am great friends with Rajesh Khanna. I have known him for a very long time. I love him... who doesn't," she told Mid-Day at that time. Advani met Khanna at a shooting as a child and but grew close only until recently.
"I feel very privileged to be very-very close to him. He is a very intelligent and romantic person. We hang out. We are at home together. We do go out for dinners and go on after-dinner drives," she said. But the relationship was unique.
"We are so close. We don't want any strings attached. I think we are very happy as we are. It's a very special, sacred relationship and I truly cherish it. Unlike a normal relationship, there are no demands and expectations. This is much deeper," she said.
Khanna had said he had known Advani for 32 years. She was in school then. He is very fond of her but they are not in love. But it has all changed with Khanna's death. Advani rues the fact that Khanna’s family didn’t even allow her to be present during the last rites.
The death has hit her hard. A family member said she was not keeping well. She cried the entire day. She refuses food or water. Khanna passed away on July 18, 2012. He was 69. Advani had sent a legal notice to the superstar's family a day before he died, in a bid to ensure that she isn't evicted from his bungalow Aashirwad.
( IBN live )
Youface
When users login into YouFace, they're, well, faced with a nearly exact Facebook clone. However, there's one glaring difference ... a patriotic Uzbek-language quote from that country's president-for-life, Islam Karimov, saying that, “Our children must be stronger, smarter, and happier than we are.”
YouFace, which maintains nebulous ties to Uzbekstan's government, only attracted slightly more than 1,500 registered users in the two months during which it has been online. One place where YouFace differs from Facebook, however, is in the terms of service: YouFace's operators are given express permission to keep user data indefinitely after deletion. Another place is in functionality: Unlike Facebook users, YouFace users can see who's viewed their profile.
Renren
Facebook is a successful operation around the world. But in China, homegrown sites with close government ties dominate social networking. One of the most popular Chinese social networks is Renren, which is based closely on the Facebook template and publicly traded on the New York Stock Exchange.
One important difference at Renren (apart from omnipresent government- and self-censorship) is gamification: Renren users rack up points for nearly every action completed online, from typing messages to logging in
Sina Weibo
Weibo is Chinese for “microblog.” Sina Weibo is also the country's most popular microblogging site and has a UI that feels like an uncanny mixture of Twitter and Facebook.
The site has a user base that any social networking service would be jealous of--aproximately 300 million regular visitors to the site. Just don't try looking for Ai Weiwei on there.
Ecured
Ecured is a Cuban state-operated clone of Wikipedia. While Ecured runs on a crowdsourced model somewhat similar to its American cousin, government authorities keep close tabs on IP addresses that edit articles and strictly monitor content. Users who edit articles must be approved by government censors as well. Ecured, which launched in 2010, has over 17,000 articles including one on “Yankee imperialism.”
Unlike Wikipedia's clamorous riot of left-wing and right-wing editors locking horns in perpetual neutrality, Ecured has a somewhat consistent editorial tone: Cuban dissident Yoani Sanchez is described as a “cybermercenary” and “counterrevolutionary.”
Juggalobook
Juggalos, the Faygo soda-loving fans of rap group Insane Clown Posse, are one of the strangest and greatest youth tribes to ever arise in the United States. They also have a social network of their own: Juggalobook, “A Social Network for the Underground Family.”
Instead of “likes,” Juggalobook users give “whoop whoops!,” and status updates are “what's up, ninjas?” Friends, of course, are “homies.” While clown makeup-smeared horror rap fans might be underrepresented among the coastal elites who dominate venture capital and social media startups, Juggalobook has two things any social network would envy: a loyal user base and a robust open source API.
milSuite
Milsuite is a United States military social network suite that includes services milBook, milWiki, milTube, and milBlog--but access is restricted to active military personnel, civilian Defense Department employees, and military contractors. MilBook, a Defense Department Facebook clone, was designed to give military personnel a secure social network (and to stop servicemembers from accidentally leaking classified information on Facebook and Twitter).
The newest edition to the Milsuite family is Eureka, a proprietary Pentagon Reddit clone.
JewTube
It's not YouTube, it's JewTube. The badly-punned site is the self-proclaimed “leading video sharing site for the Jewish community and premier destination to watch and share Jewish-themed videos.” Popular videos include an Occupy Wall Street Sukkot service, “Bible Raps,” and pro-Israel television commercials. Not too Kosher, however, are the commercials for Dubai escort agencies that spam the site.
Familysearch
Familysearch.org is one of the internet's most popular genealogy sites, with a wealth of information, and an active blogging, forum, and wiki community. The site's extensive historical archives come from the Mormon Church, which owns and operates Familysearch. Church volunteers even operate a wiki phone hotline, for potential wiki volunteers new to the platform.
Little Monsters
Lady Gaga is one of the world's most popular pop stars. While she is an extremely canny businesswoman, she missed the jump on one thing: starting her own social network. California-based firm Backplane, cofounded by Gaga manager Troy Carter, jumped into the void, however, with their new Little Monsterssocial network. Participants get to “share [their] passion and creativity in a community full of art, acceptance, monsters, and Gaga.”
Draugiem
As big as Facebook and Twitter are, they sometimes can't compete with local sites. To this day, Draugiem is Latvia's biggest social network with over 1.2 million of Latvia's 2 million citizens actively using the site. While Draugiem's features are familiar to any user of Facebook, the company has used their local heft to turn into an IT dynamo--The Draugiem Group's holdings now include ecommerce sites, GPS devices, and augmented television products.
TheBearClub
No, it's not what you think it is. The Bear Club is a social networking site for adult teddy bear fans. (See? It's worse.) Members set up accounts for their bears, write blog posts in the voice of their teddy bears, and take photographs of their teddy bears in exotic locals while on vacation. Teddy Bear pawtners (not owners) also use the site to find out about the latest teddy bear conventions and special events.
TrotOn
One of the great things about the internet is that there's a site and a service for everyone.Troton is a social networking service for horse and equestrian fans ... and presumably, the Romneys. Troton's active videos site allows users to trade equestrian videos and an active bulletin board community exists. There's even a horse-themed fashion blog.
Cyworld
Cyworld is a massively popular South Korean social networking site with operations in several other Asian countries. According to Burston Marsteller, Cyworld has 18 million Korean users--but the company has not been able to crack Europe or the United States. Cyworld has faced challenges as Twitter and microblogging have become much more popular in South Korea, thanks to Twitter's country-specific efforts.
( fast company)
The film was made available for censor certificate on the basis of order passed by High Court of Karnataka. Accordingly five members of Regional Censor office headed by K Nagaraj, Swami Nityananda advocates KV Dhananjaya Kumar, Ms Ragasudha plus Madan Patel - director and producer of the film watched the film at a preview theatre in Bangalore instead of the regular place where Regional Censor Office watch the film. This was purposefully to avoid any commotion.
Knowing that the film 'Satyananda' is censored at a place in Ganganagar, Sri Rishikumara Swamy dropped in without invitation. He was promptly sent out as there is no provision for any other person to watch the film. The viewing of this film is also on the court order. It would lead to contempt of court - Regional Censor officer K Nagaraj known for upright thinking not allowed any other person.
The parties of Swami Nityananda sought one week time for filing any objections. Patel plays the politician-film maker, while Chetan plays the role of Satyananda. (IndiaGlitz)
Who is Swamy Nithyananda? 34-year-old self-styled godman Swamy Nithyananda, facing arrest in an assault case, surrendered on Wednesday afternoon at the Ramanagar court near Bangalore in Karnataka. The controversial godman evaded law for three days after an FIR was lodged against him for assaulting a reporter from a TV channel who allegedly asked uncomfortable questions during a press conference. That press meet was called after Arathi Rao, an NRI based in the US, had alleged that Nithyananda had been sexually abusing her for more than five years.
Nithyananda is not new to controversies. There was massive uproar when a video of him frolicking with Kannada actress Ranjitha appeared in 2010. The incident led to a public outrage and Nithyananda had to cool his heels in jail for 53 days before he was granted bail. A CID probe into his alleged sex acts and other misdeeds is still on in Karnataka.
The Madras High Court had also issued notices against him recently after he was anointed the 293rd pontiff of one of the most ancient mutts in south India - the Madurai adeenam. The mutt weilds considerable influence over some of the wealthiest temples in Tamil Nadu. The appointment generated a huge controversy and many groups in and outside Tamil Nadu have been trying to get him removed from the mutt.
Nithyananda was known for his proximity with the RSS and other right-wing Hindu outfits. He was often seen hobnobbing with powerful Karnataka leaders like B S Yeddyurappa, Dharam Singh and Rameshwar Thakur. Bollywood actors Viveik Oberoi and Juhi Chawla were also reported to be his disciples.
When Nithyananda landed in Bangalore ten years ago, he was virtually unknown. The booming city allowed him to prosper. Within three to four years, Nithyananda had become one of this city's many godmen. He claimed to have had a vision of opening an ashram near a banyan tree. That's why, he once said, he zeroed in on Bidadi near Bangalore to open his ashram. He claimed that the original owner of that land also had the same dream, following which he gave the land to Nithyananda.
The ashram called Dhyanapeetham was opened on Jan 1, 2003. Today, there are nearly 150 permanent ashramites at Bidadi. Nithyananda also runs a gurukul at Dhyanapeetham with about 50 kids who are taught vedic chanting and martial arts. Today, he has a considerable following in southern India and his mission has branches in the US, Europe and Malaysia. The US branch is called the Life Bliss Foundation, headquartered in Los Angeles, which runs meditation courses that cost anything from 10 dollars onwards. The period ranges from one-day meditation course to year-long meditation courses.
Nithyananda's original name was Rajasekaran. Born to Arunachalam and Lokanayaki in 1978, he hails from what his followers call the spiritual town of Tiruvannamalai in Tamil Nadu. Nithyananda claims he studied up to Diploma in Mechanical Engineering from the Rajagopal Polytechnic, Gudiyattam. Nithyananda also claims to have studied yoga from the age of three and that he got spiritural enlightenment at 12. It is then that he started calling himself 'Nithyananda', which means 'eternal bliss' in Sanskrit.
Nithyananda once claimed he can levitate, i.e. float in air. He even called a press conference to exhibit this trait. However, while his devotees jumped and danced during that press conference, no one floated in the air or defied anti-gravity. It proved to be what they call a flop show. Later, a video showing him dancing at his father's funeral with his slippers on his father's dead body also appeared towards the end of 2010.
While Nithyananda's clout and power cannot be denied, what many people have not been able to understand is his source of strength. His operations are discreet and even his inner circle does not know much about his activities. However, the godman may find it extremely difficult to ride out of the current storm.
The study, from Ernst & Young and a collection of pro-business groups that includes the National Federation of Independent Business and the U.S. Chamber of Commerce, looked at the impact of raising taxes on capital gains and dividends and hiking the top two individual tax rates to 36 percent and 39.6 percent respectively. It also included the tax hikes for health-care reform.
The report found that all of the hikes combined would cause output to fall by 1.3 percent and capital stock and invetsments to fall by between 1.4 percent to 2.4 percent. It said employment “in the long run” would fall by half a percent, or by about 710,000 jobs. Wages would fall 1.8 percent.
“This report finds that these higher marginal tax rates result in a smaller economy, fewer jobs, less investment, and lower wages,” the report stated.
President Obama and his fellow Democrats have proposed extending the Bush tax cuts for everyone except those making more than $250,000 in annual income. Republicans advocate extending the tax cuts for everyone.
While the debate over taxes has been framed around wealthy Americans, the study said that flow-through businesses are also in the two top income brackets. The study said that flow-through companies employ half of the private sector work force and pay 44 percent of federal taxes.
The study said that if the tax cuts expire, the top tax rate will rise to 40.9 percent from 35 percent, while the top tax rate on dividends will rise to 44.7 percent from 15 percent and the rate for capital gains will rise to 24.7 percent from 15 percent.
( CNBC )
Should they send their green freshmen off to campus armed with a debit or credit card to learn how to handle money? Or is it better to keep firm control through the Bank of Mom and Dad?
The "correct" answer will vary by family and personal preference.
The Credit Card Act that took effect 2½ years ago made it much harder for anyone under 21 to get a card. Gone are the days of card issuers racking up scads of new customers on campus by handing out free T-shirts or rewards points for spring break.
"In the old days, if you could fog a mirror could get a credit card," says Adam Levin, chairman and founder of Credit.com, a San Francisco-based company that provides information about credit products.
Under-21s can still obtain a credit card if they have a qualified co-signer or proof of sufficient income to repay the debt. And card issuers still market aggressively to college students, targeting them with pre-screened mail offers.
That makes parents, as the likeliest co-signers, more involved in the card-or-no-card decision.
Robyn Kahn Federman of Rochester, N.Y., says there's "no way" she'll let either of her two daughters have a credit card at such a financially tender age. Her daughter Sarah, who's 19 and about to start her second year of college, uses her PayPal card instead. That lets her mom fund the balance as well as see how spends her money.
"I don't think anything related to debt belongs in the hands of a college kid," says Federman, communications director of a marketing agency. "The vast majority are not experienced enough with money or cognizant enough of the risks."
Some students, though, have shown they're disciplined enough to have their own card on campus.
Scott Gamm, a junior at New York University's Stern School of Business, used his income from freelance work and blogging to obtain a Visa card and then an American Express card recently. He charges $200 or $300 on them monthly and pays every bill in full.
But he has friends who obtained three or four cards within a year and now have big debts to show for their "status symbols."
"The more credit you have access to, especially at that young age, the higher the probability you'll use that card to finance fancy clothes, restaurants and entertainment," says Gamm, 20.
With or without a credit card, payment options for students under 21 remain plentiful:
CREDIT CARD - SOLO
Credit card issuers have differing standards in determining whether an applicant under 21 has the ability to make payments. Some may say it's enough if he or she has a job and can afford the minimum monthly payment. That can take the decision out of Mom and Dad's hands.
Any student who gets a card should use it only for emergencies or otherwise pay it off immediately.
Gamm, who founded a personal finance website, HelpSaveMyDollars.com, agrees. "Students should view their credit card as a way to build strong credit via minor purchases here and there and not as a way to extend their spending habits," he says.
CREDIT CARD - CO-SIGNED
Co-signing should only be an option if the student can use a credit card responsibly, says Bill Hardekopf, who operates LowCards.com, a credit card comparison site. If so, a card with a very low limit is a good way to start building credit without undue risk.
Some students under 21 have upperclassmen, friends or siblings sign for them to avoid parental hassles. That could be a mistake for both sides. If the student can't pay, the co-signer is responsible for all the debt and the credit history of both parties will be affected.
A variant of this is to add a child as an authorized user to a parent's existing account. But if the card has a high credit limit there's the potential for greater unchecked spending.
SECURED CREDIT CARD
These cards are backed by prepaid deposits, making them more manageable as well as relatively easy to obtain. Cards that report to a credit agency can help build the student's credit score. When applying for a card, call and ask which agencies it reports to.
DEBIT CARD
If you don't think your college kid is ready for a credit card, you can opt for a debit card linked to a checking account. The downside: These cards don't help build credit scores.
You should be able to set up email or text message alerts to be notified about any transaction that goes over a certain amount.
PREPAID CARD
These cards can be readily found at pharmacies and convenience stores and bear the MasterCard, Visa or American Express logo. They work like debit cards but are not connected to checking accounts. Many can be registered online so users can review transactions and balances.
Although they are less risky in many ways, they don't come with the same protections as credit and debit cards if lost or stolen. They also can come with a wide variety of fees.
The American express prepaid card is one of the best options, according to Hardekopf, because it has fewer fees than most.
The bottom line for college students and their parents: Be very cautious before you graduate to a full-fledged credit card.
"A credit card can be a positive tool," says Levin. "It can be very helpful in building your credit but it can also be an instrument in your financial self-destruction."
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Investing with Style: A Primer
Successful equity style timing can considerably add to investment performance. So what is style investing? In this article, learn how it can be a source of added value, as well as which styles work best in various economic phases.
Style investing is concerned about investing in equity market segments that are driven by common risk factors and tries to select the appropriate style at the right stage of the business cycle. The most popular equity investment styles are: value vs. growth stocks, large caps vs. small caps, and defensive companies vs. cyclical companies. While academics have long neglected style investing, practitioners have been using these classifications for a long time. Value investing, for instance, goes as far back as Benjamin Graham and David Dodd and their investment classic "Security Analysis" (1934). Warren Buffett is probably the most famous proponent of the value approach to investing.
Cycle clock framework
Why Should Investors Be Interested in Style Investing?
Styles are among the most important return drivers in active equity portfolio management. Getting the style timing right can lead to significant outperformance relative to the overall market and could be a substantial potential source of added value. When a style is in favor, all managers of that particular style usually benefit from the tailwind, whereas the other styles languish. The figure shows our Cycle Clock framework, which indicates the styles that work best in certain phases. Obviously, this is a simplified view and need not hold at all times. However, it is a good starting point for an equity style strategy.
Russell 2000 relative to Russell 1000
Varying Performance in Different Phases
Style performance can vary substantially over time. During the technology bubble in the late nineties, for instance, growth strongly outperformed value for several years. While the fortunes eventually reversed, pure value managers suffered in the meantime and saw significant outflows of client money. The relative performance of large cap stocks relative to smaller companies was also subject to dramatic swings at times. Although over the entire period shown in the chart, small caps outperformed their larger counterparts, there were substantial reversals in between. This illustrates the danger of adopting strategies that rely on simple observations such as "small caps outperform large caps in the long run". The long run might simply be too long.
How To Select Between Different Styles
As certain styles work best in a specific phase of the business cycle, a natural starting point for determining which style works best at a certain point in time is our Global Cycle Clock. Based on a measure of the global output gap, the Cycle Clock divides the business cycle into four distinct phases: recovery, overheating, slowdown and contraction. Cyclical companies and small caps, for instance, usually outperform during recovery phases, while large caps and high-quality stocks outperform during slowdown and contraction phases.
While getting the phase in the business cycle right goes a long way in explaining a style's performance over time, there are times when factors other than the cycle dominate. During the technology bubble or the European sovereign debt crisis, some styles did not perform as the Cycle Clock had predicted. As it is only one factor, it is unlikely to catch all the relevant dimensions of a particular style's performance. In order to refine the signals of the Cycle Clock, we incorporate three additional variables into our framework: relative valuations, momentum and investors' risk appetite. By doing so, we are able to improve the accuracy of the signals (hit ratio) relative to using the Cycle Clock alone by between 1.6 and 6.6 percentage points and the average (annualized) monthly performance by between 4.5 and 16 percentage points.
An overview of the most popular equity investment styles is provided below.
Is Big Really Beautiful? Large Caps Versus Small Caps
An equity style that is based on size is usually determined by the market capitalization of the constituents. As noted, historically, small caps tended to outperform large caps. Still, there were long stretches of small cap underperformance. Often, the stocks of larger companies outperformed in more difficult market environments and when investors are more risk averse, as larger companies are, on average, more resilient to withstand economic headwinds and have easier access to financing sources than smaller companies. On the other hand, when economic growth is strong and stocks rise, small caps often outperform the overall market.
There are many reasons why small cap stocks offer better returns than larger companies. One reason could be institutional policies that prohibit money managers from investing in stocks with a market capitalization below a certain threshold, due to a lack of liquidity. As a consequence, companies that fall below that limit get less analyst coverage and hence mispricings tend to be more pronounced, giving rise to the "smallcap- effect". Also, smaller companies usually grow faster than larger ones that often operate in saturated markets. Furthermore, smaller companies often get taken over by bigger ones trying to gain access to crucial technology or new markets, resulting in handsome gains to investors in these small cap stocks.
Cyclicals Versus Defensives
A further distinction of the equity market could be made in terms of cyclical and defensive companies. Cyclical companies are highly sensitive to the business cycle. When times are good and economic growth is strong, cyclical companies benefit disproportionately from the expansion. When the tide turns and times get tougher, however, these companies tend to suffer more than others. Companies in the materials, industrials and consumer discretionary sectors are cyclical in nature. Financial services and energy companies also exhibit cyclical traits.
Cyclical companies versus defensives and Cycle Indicator
Defensive companies, on the other hand, operate in sectors and industries that are less dependent on the economic cycle. Demand for their products is largely unaffected by the ups and downs of the economy. Defensive sectors are consumer staples, healthcare, telecom and utilities. The choice between cyclical and defensive sectors depends to a large extent on the stage in the business cycle. As soon as there are signs that a recession is on the verge of ending and an upswing is setting in, cyclical companies start to outperform the more defensive companies. The reverse pattern is observed when economic activity is rolling over.
The Value of Value Investing: Value Versus Growth
"It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price." Warren Buffett's quote succinctly summarizes the approach of value investors. Value investors focus on the "price" in the price/earnings ratio, whereas growth investors are more interested in the "earnings" part. Value investors are keen on finding undervalued companies and want to pay as little as possible for the earnings stream a firm is able to generate. Growth investors, on the other hand, are looking for companies with above-average growth prospects and are less sensitive to the price they pay for the earnings of a business.
Several studies have demonstrated that a value strategy performs better than a growth strategy in the long run. Often, this outperformance is ascribed to the value style's greater riskiness. Probably closer to the truth is the explanation that investors simply overpay for growth. If expectations (and prices) for future growth are running high, even small disappointments could lead to painful losses as the margin of safety is small. Value investors, on the other hand, are very skeptical about the value of growth due to the difficulty of its estimation. Usually, growth investing performs better during more challenging market environments, when growth is scarce. In these situations, companies that offer growth opportunities command an above-average valuation premium. Value, on the other hand, normally outperforms during upswings, when growth opportunities are abundant.
Quality Stocks – Good Company = Good Investment?
While investors often talk about "quality stocks", there is no clear-cut definition of what exactly a quality company is. However, few people would disagree that quality stocks have low leverage, show high and persistent profitability and have low sales and earnings volatility. But other factors need to be taken into consideration too, including transparent information vis-Ã -vis the investment community and the participation of key employees in the success of the company. Such companies are often large conglomerates that manufacture recognized brands and/or have an outstanding position in their markets. Whereas stocks of lower quality tend to outperform in an economic upturn, quality stocks on average outperform the market over an entire economic cycle, as they hold their value much better during cyclical downturns. Of course, even these companies cannot escape the waves of selling pressure that affect the financial markets, but their stronger balance sheets enable them to weather storms better, and in some cases to even emerge stronger from a crisis, as their weaker competitors are often driven out of the market in such situations.
MSCI World Index with and without dividends reinvested
Income Generators or High-Dividend-Yielding Stocks
This style refers to investing in companies with a tradition of paying above-average dividends and which are expected to continue to do so in the future. We thus look for well established companies generating steady revenues which translate into regular cash inflows for their shareholders. Even though many investors think of dividends as unexciting, over time their impact on performance could be rather dramatic. Whereas 100 US dollars invested in the MSCI World Index in 1973 would have grown to about 1,200 US dollars today, an equal amount invested in the same index with the dividends reinvested would have grown to almost 4,200 US dollars over the same time horizon. Including dividends, the total return would have been 3.5 times bigger. Often, the "income generators" operate in more defensive industries and produce goods and services that are needed irrespective of the prevailing business cycle. Thus, the stocks are less volatile and achieve more stable profits which allow them to pay out regular dividends. The stocks of such companies are likely to outperform the overall market in periods of economic slowdown or contraction. However, they tend to lag during recoveries.
Momentum and Contrarian – Past Performance Is (somewhat) Indicative of Future Returns
Momentum investors invest in the most popular stocks. Their strategy is to take short- to medium-term positions in stocks which exhibit positive price performance and where earnings and growth expectations are positive and rising. The best entry point for this style would be near a stock market trough, just at the beginning of a major rally. In reality, a momentum investor would have to wait until a trend is well established before investing. Ideally, investors exit the strategy at the peak of a stock market rally. Empirical research indicates that the best returns are usually achieved over a period of 6–12 months. However, momentum strategies tend to underperform over periods longer than one year as mean reversion sets in.
Why should a simple strategy such as momentum outperform? Traditional finance says high returns are justified by the style's riskiness. Behavioral finance argues that people become overly pessimistic about companies that have done badly and become overly optimistic about past winners. As these trends continue for some time, prices start to deviate from fundamentals and the losers become under- and the winners become overvalued. This mispricing, however, tends to correct itself eventually, as contrarian investors become interested. As the name implies, contrarian investors select companies which most other investors do not wish to own. Companies with the lowest momentum scores belong to the contrarian style. Thus, contrarian investors select businesses which are underpriced and show negative price momentum. In the words of John Maynard Keynes, contrarians believe that a "central principle of investment is to go contrary to general opinion, on the grounds that if everyone agreed about its merits, the investment is inevitably too dear and therefore unattractive."
( Credit Suisse )
The ATM features a large Braille keypad, high resolution screen, wide keys, headphone and external speaker to ensure the user's privacy.
The user needs to choose fewer options than in a normal ATM. Though the machine is designed for the visually impaired, it can also be used by others.
The ATM is located at the Emirates Association for the Blind headquarters in Sharjah, where visually impaired people will be trained to use the machine by a team from the bank.
The ruler of Sharjah, Sheikh Sultan bin Mohammed Al Qasimi, had recently ordered banks in the emirate to offer facilities to the blind in response to a telephone call made by Manar Al Hamadi, a blind lawyer.
The Sharjah Islamic Bank later opened a bank account for the lawyer.
-China has grown by 10% per annum over the last 30 years, bringing 500 million people out of poverty. It is now the world's second largest economy, and its largest manufacturer and exporter.
-The two key two factors behind this have been the transformations from a rural, agricultural society to an industrial, urban one and from a command based economy to a market-based one. The initial conditions for change in 1978 were near perfect , with the spark coming from agricultural reforms which included the key introduction of the household responsibility system.
-Even if China grows at a third (6.6%) of its growth rate over the last three decades (9.9%) it should become a high-income economy by 2030, even though its per capita income will be a fraction of that in advanced economies.
-"Growing up is hard to do". Many countries have rapidly developed into middle-income economies but few have made it to high-income levels.
-Factors like low-cost labour and easy technology adoption which caused rapid growth in these countries, disappeared when they reached middle-income status.
-As countries reach middle-income levels, the underemployed rural labour force dwindles and wages rise, eroding competitiveness and productivity growth from resource reallocation and technology catch-up. If these countries cannot increase productivity through innovation (rather than relying on foreign technology), they find themselves trapped. There are many examples of Latin American and Middle East countries which have stagnated since the 1960s and 1970s.
- The report featured a fascinating chart which classified countries as high-income if their per capita GDP, measured at purchasing-power parity, exceeds 43% of America's. It plots each country's income per person (adjusted for purchasing power) relative to that of America, both in 1960 and in 2008. If every country had caught up, they would all be in the top row.
-Of the 101 middle-income countries in 1960, only 13 passed that threshold to become high-income economies by 2008 – including Greece(?), Hong Kong, Ireland, Israel, Japan, Portugal, Korea, Spain, Singapore and Taiwan.
- For China to achieve this transformation, critical reforms need to be undertaken to ensure a smooth transition - covering land, labour, power, competition, banking, capital markets, state-owned enterprises, taxes and spending.
Fascinating report with a wealth of information and provides an insight into what are the key requirements for economies to achieve high-income status. What is particularly revealing is the list of the 13 countries which have made the transition successfully from middle-income to high-income status. Countries with world-class multinational companies like Japan, Korea, Taiwan and Israel stand out – while countries without any national champions like Greece, Spain, Portugal, and Ireland are currently floundering. (It is interesting to observe, that for all its problems, India already has a robust list of world-class multinational companies giving it the base to eventually move into a high-income status.) This will be the critical test for China over the next decade or so – whether it is able to nurture a stable of world class multinational companies which are able to successfully compete and innovate in global markets? I think they will achieve this transformation successfully as they have built a tremendous industrial infrastructure around their manufacturing base, presenting a generationally attractive buying opportunity for their stock market which has significantly lagged their economic performance over the last decade.
-The country which stands out in the above chart is Greece – contrary to current popular opinion, Greece has not always been a basket case. As The Economist blog points out:
-"Greece's per capita income was only 28% of America's in 1960, (that is very roughly where China stands today). Over the next 12 years, however, the Greek economy grew at an Olympian pace of 8% a year on average. Greece then suffered a quarter century of inflation and stagnation, before resuming its convergence after 1996. By 2008 it had caught up to 52% of America's income level"- As Paul Krugman notes-" Fifteen years ago Greece was no paradise, but it wasn't in crisis either. Unemployment was high but not catastrophic, and the nation more or less paid its way on world markets, earning enough from exports, tourism, shipping and other sources to more or less pay for its imports."
- "A balance sheet recession struck the German economy on bursting of the IT bubble, which hit Germany hard. The Nasdaq-like Neuer Markt plunged 96 per cent in value. As Germans increased savings, aggregate demand decreased. With fiscal policy somewhat constrained by the Stability and Growth Pact, the ECB had to step in.
-Germany's actual fiscal deficits modestly exceeded that threshold on several occasions, but the resulting fiscal stimulus was far from sufficient to prop up the economy. The ECB therefore took its policy rate down from 4.75% in 2001 to a postwar low of 2% in 2003 in a bid to rescue the eurozone's largest economy.
-But those ultra-low rates still had little impact on Germany, where balance sheet problems were forcing businesses and households to minimize debt. The money supply grew very slowly, and house prices continued to fall. Naturally there was only minimal inflation in wages or prices.
-The countries of southern Europe, which had not participated in the IT bubble, enjoyed strong economies and robust private sector demand for funds at the time. The ECB's 2% policy rate therefore led to sharp growth in the money supply, which in turn fueled economic expansions and housing bubbles and wage inflation.
-In other words, there would have been no need for such dramatic easing by the ECB—and hence no reason for the competitiveness gap with the rest of the eurozone to widen to current levels—if Germany had used fiscal stimulus to address its balance sheet recession.
-The creators of the Maastricht Treaty made no provision for balance sheet recessions when drawing up the document, and today's "competitiveness problem" is solely attributable to the Treaty's 3% cap on fiscal deficits, which placed unreasonable demands on ECB monetary policy during this type of recessions. The countries of southern Europe are not to blame.
2012 World Wealth Report: Passion Investments Gain in Popularity by Lauren Foster
When the 2012 "World Wealth Report" from Capgemini and RBC Wealth Management was released on Tuesday, the growth of Asian millionaires led the news because it was the first time that Asia-Pacific had more millionaires than North America. But behind the headlines were a few more interesting bits of data for private wealth managers.
According to the report, so-called "investments of passion," including art, jewelry, and memorabilia, attracted interest as substitute investments in 2011, especially among the emerging-market crowd. So if you don't know the difference between, say, a Monet and Manet, or hadn't heard that Joan Miro's 1927 work Peinture (Etoile Bleue) sold for a record US$36.9 million at a London auction this week, it may be time to brush up on some of the finer things in life — including art history — so you can keep up with your clients' interests.
Abstract
In the end, superior investing is all about mistakes . . . and about being the person who profits from them, not the one who commits them.
Mistakes are a frequent topic of discussion in our world. It's not unusual to see investors criticized for errors that resulted in poor performance. But rarely do we hear about mistakes as an indispensible component of the investment process. In short, in order for one side of a transaction to turn out to be a major success, the other side has to have been a big mistake.
In the end, superior investing is all about mistakes . . . and about being the person who profits from them, not the one who commits them.
Pervez Hoodbhoy, nuclear physicist and prominent commentator on current issues, showed the examples at a seminar in the King's College on the role of education in combating terrorism, organised by the Democracy Forum.
The examples showed by Hoodbhoy included images and text from a primer that mentioned the Urdu equivalent of A as 'Allah', B as 'bandook', T as 'takrao', J as 'jehad', H as 'hijab', Kh as 'khanjar' and Ze as 'zunoob'.
Hoodbhoy, whose presentation title was 'How education fuels terrorism in the Islamic Republic of Pakistan', also showed a college that is seen as going up in flames, containing images of things considered sinful - kites, guitar, satellite TV, carom board, chess, wine bottles and harmonium.
Examples cited by Hoodbhoy from another curriculum document for Class V students included tasks such as discussion on: 'Understand Hindu-Muslim differences and the resultant need for Pakistan', 'India's evil designs against Pakistan', 'Make speeches on shehadat and jehad'.
"There has been a sea change in Pakistan in the last six decades. The poison put into education by Gen Zia-ul-Haq was not changed by subsequent regimes. And attitudes have changed over the years, makes my country alien to me," Hoodbhoy said.
Recalling his growing up years in Karachi, he said the city was home to Hindus, Parsis and Christians: "They are all gone. The same is true of much of Pakistan. Minorities have no place in Pakistan today".
He held madarsas partly responsible for the situation, and regretted that efforts initiated during the regime of General Pervez Musharraf to reform them did not go far.
After the 2007 Lal Masjid incident, liberal voices were also less welcome in Pakistan's news media, he said. "Every attempt at education reform has failed to remove the hate material in curriculum, but there is a minority that wants change. The situation will remain in freefall, until something drastic is done to change the situation," he said.
Stressing on the need for pluralism and secularism in education, former Indian diplomat G Parthasarathy said tensions began when education did not foster respect for diversity and for other religions.
There was more to terrorism than education, because some of the recent perpetrators were well educated, he said. "The most important part of education is that diversity should be cherished, that unity does not mean uniformity."
Other speakers included King's College experts Professor Jack Spence from the Department of War Studies and Shiraz Maher from the International Centre for the Study of Radicalisation.
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| Broker |
Here are 10 critical factors you'll want to consider:
1. Not look for Discounts always- Consider starting out with a full-service broker. They are often best for novice investors who may still need to build confidence and knowledge of the markets. As you become a more sophisticated investor, you can graduate into investing more of your money yourself.
2. Availability - Try hitting the company's website at different times throughout the day, especially during peak trading hours. Watch how fast their site loads and check some of the links to ensure there are no technical difficulties.
3. Alternatives - Although we all love the net, we can't always be at our computers. Check to see what other options the firm offers for placing trades. Other alternatives may include touch-tone telephone trades, faxing ordering, or doing it the low-tech way - talking to a broker over the phone. Word to the wise: make sure you take note of the prices for these alternatives; they will often be more expensive than an online trade.
4. Research the broker - What are others saying about the brokerage? Just as you should do your research before buying a stock, you should find out as much as possible about your broker. Gomez.com is a great place to find unbiased evaluations. Some other brokers, see links
5. Price - Remember the saying you get what you pay for. As with anything you buy, the price may be indicative of the quality. Don't open an account with a broker simply because they offer the lowest commission cost. Advertised rates for companies vary between zero and $40 per trade, with the average around $20. There may be fine print in the ad, specifying which services the advertised rate will actually entitle you to. In most cases there will be higher fees for limit orders, options and those trades over the phone with your broker. You might find that the advertised commission rate may not apply to the type of trade you want to execute.
6. Minimum Deposit - See how much of an initial deposit the firm requires for opening your account. Beware of high minimum balances: some companies require as much as $10,000 to start. This might be fine for some investors, but not others compare minimum deposits here
.
7. Product Selection - When choosing a brokerage, most people are probably thinking primarily about buying stocks. Remember there are also many investment alternatives that aren't necessarily offered by every company. This includes CDs, municipal bonds, futures, options and even gold/silver certificates. Many brokerages also offer other financial services, such as checking accounts and credit cards.
8. Customer Service - There is nothing more exasperating than sitting on hold for 20 minutes waiting to get help. Before you open an account, call the company's help desk with a fake question to test how long it takes to get a response.
9. Return on Cash - You are likely to always have some cash in your brokerage account. Some brokerages will offer 3-5% interest on this money, while others won't offer you a thing. Phone or email the brokerage to find out what they offer. In fact, this is a good question to ask while you're testing their customer service!
10. Extras - Be on the lookout for extra goodies offered by brokerages to people thinking of opening an account. Don't base your decision entirely on the $100 in free trades, but do keep this in mind.
With a click of the mouse, from just about anywhere in the world, you can buy and sell stocks using an online broker. The right tools for the trade are key to every successful venture. Finding success in the market begins with choosing the right broker.
Below are some recommendations see links
1. Not look for Discounts always- Consider starting out with a full-service broker. They are often best for novice investors who may still need to build confidence and knowledge of the markets. As you become a more sophisticated investor, you can graduate into investing more of your money yourself.
2. Availability - Try hitting the company's website at different times throughout the day, especially during peak trading hours. Watch how fast their site loads and check some of the links to ensure there are no technical difficulties.
3. Alternatives - Although we all love the net, we can't always be at our computers. Check to see what other options the firm offers for placing trades. Other alternatives may include touch-tone telephone trades, faxing ordering, or doing it the low-tech way - talking to a broker over the phone. Word to the wise: make sure you take note of the prices for these alternatives; they will often be more expensive than an online trade.
4. Research the broker - What are others saying about the brokerage? Just as you should do your research before buying a stock, you should find out as much as possible about your broker. Gomez.com is a great place to find unbiased evaluations. Some other brokers, see links
5. Price - Remember the saying you get what you pay for. As with anything you buy, the price may be indicative of the quality. Don't open an account with a broker simply because they offer the lowest commission cost. Advertised rates for companies vary between zero and $40 per trade, with the average around $20. There may be fine print in the ad, specifying which services the advertised rate will actually entitle you to. In most cases there will be higher fees for limit orders, options and those trades over the phone with your broker. You might find that the advertised commission rate may not apply to the type of trade you want to execute.
6. Minimum Deposit - See how much of an initial deposit the firm requires for opening your account. Beware of high minimum balances: some companies require as much as $10,000 to start. This might be fine for some investors, but not others compare minimum deposits here
.
7. Product Selection - When choosing a brokerage, most people are probably thinking primarily about buying stocks. Remember there are also many investment alternatives that aren't necessarily offered by every company. This includes CDs, municipal bonds, futures, options and even gold/silver certificates. Many brokerages also offer other financial services, such as checking accounts and credit cards.
8. Customer Service - There is nothing more exasperating than sitting on hold for 20 minutes waiting to get help. Before you open an account, call the company's help desk with a fake question to test how long it takes to get a response.
9. Return on Cash - You are likely to always have some cash in your brokerage account. Some brokerages will offer 3-5% interest on this money, while others won't offer you a thing. Phone or email the brokerage to find out what they offer. In fact, this is a good question to ask while you're testing their customer service!
10. Extras - Be on the lookout for extra goodies offered by brokerages to people thinking of opening an account. Don't base your decision entirely on the $100 in free trades, but do keep this in mind.
With a click of the mouse, from just about anywhere in the world, you can buy and sell stocks using an online broker. The right tools for the trade are key to every successful venture. Finding success in the market begins with choosing the right broker.
Below are some recommendations see links
To summarise:
-Lewis maps out how he joined Salomon Brothers in the mid-eighties purely by chance , and how that experience sowed the seeds for his literary ambitions, commencing with the publishing of his best-selling book Liar's Poker which sold a million copies, making him a successful author at the age of 28.
-While the world eulogised his writing skills, Lewis knew that what was more critical to his success was a series of chance events, illustrating that "success is always rationalised" and that people typically don't like to hear that success is due to luck – especially successful people.
-In his book "Moneyball" he showed that the poorest professional baseball team (Oakland A's) was winning as many game as its richest team – the Yankees. This is because the rich teams did not understand who were the best players, and were routinely misvaluing them because they were not taking into account the role of luck in baseball success.
-The message from the "Moneyball" story were at two levels – from a practical aspect, it was about finding value by analyzing better data and exploiting market inefficiencies. At a deeper level, it was about luck being the critical component in determining life's outcomes.
-A recent experiment conducted at Berkeley University was very informative – a group of six students was broken into two groups of three students and a person was arbitrarily appointed to be the leader of the group. They were then assigned some complicated moral problems to solve. Every thirty minutes the experiment was interrupted and four cookies were brought into the room for the group to eat. The process was then restarted.
-Incredibly, the person arbitrarily appointed the leader consistently ate the fourth cookie – and with a lot of gusto. The leader performed no special task and was randomly appointed just thirty minutes earlier, but still felt he deserved the extra cookie. The experiment provides an insight into the issue of Wall Street bonuses and CEO pay.
-It also has a lesson for the young graduates of Princeton University, as they have been given the extra cookie and will be given even more over time. It would then be easy to fall into the trap that they start believing they deserve the extra cookie. But they will be happier, and the world better off, if they at least pretend that they don't deserve the cookie, and realise that they owe a debt to the unlucky.
A refreshingly honest and thought provoking piece! As the work of Nobel winning psychologist Daniel Kahneman and others convincingly demonstrates, we are constantly undervaluing the role of luck in our lives – and treating our successes with more humility would go a long way in making society (and our minds) more peaceful!
Looking at the year-to-date performances of the major equity markets around the world leads to some surprising observations – after the Nasdaq (up 9.72%), the second best performing market is India (up 8.2%) – despite all the negative news on India! China (up 3.7%) ties at fourth. So our year-end theme of "reversal of fortunes" for 2012 seems to be intact!
We are entering into an important period for global financial markets, with the Greek and French elections this Sunday, the Fed meetings on the 19th and 20th, culminating in the euro summit on June 29th &29th. The scope for supportive policy action has moved higher significantly as this comment from Goldman summarises (they estimate a 75% chance of Fed easing at their meeting):
At the same time the Financial Conditions Index has shown a substantial tightening.
The chart below shows the Fed's easing probability as a function of GSFCI, which puts the probability for the next FOMC meeting at around 75%.
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| Greece Exits Euro |
Economists estimate that volatile markets and business uncertainty over the fate of Greece and the policy course in Europe is already shaving anywhere from one tenth to one half a percentage point from U.S. 2012 gross domestic product growth.
In a Reuters poll last week, U.S. GDP was forecast on average at 2.3 percent for 2012 and 2.4 percent for 2013.
The direct hit to growth comes through trade. U.S. exports to the European Union account for 19 percent of total exports, and those to the euro zone represent 13 percent of the total. But when calculated in terms of GDP, the share is tiny—only 1.3 percent of total output.
The indirect effects are another matter. Europe in 2010 accounted for 25 percent of world trade, according to Deutsche Bank. Europe also is the biggest trading partner for China and the United States. Loss of this market would ripple worldwide and slow global growth.
The other indirect impact is through the financial sector.
If Greece were to leave the euro zone, it would raise questions about the survival of monetary union and trigger turmoil in markets. Business investment would stall, banks would pull back on credit, and lost wealth as equity prices fall would cause consumers to slow their spending. Commodity prices would plunge, helping importers but hurting growth in export economies.
The extent of the damage would depend upon how quickly global policymakers could stop the rout and stabilize markets.
Following is a look at three scenarios for the euro zone and the likely impact on the U.S. economy.
Euro Zone Stumbles Along
SCENARIO: Greece elects a government on June 17 that continues implementing the EU/IMF bailout program, possibly with some softened conditions. Greece stays in the monetary union for now. Spain recapitalizes its banks, possibly with some EU help. ECB liquidity injections and EU-wide guarantees help stabilize the big French and German banks to insulate them and the broader financial markets from further damage. Bouts of market uncertainty continue in the months and years ahead, but gradually EU integration advances.
IMPACT: Ongoing volatility in financial markets and slow-to-mildly negative euro zone growth would continue acting like a low-grade fever weakening U.S. growth. This already is the baseline scenario for most analysts' forecasts. TD Economics said it has marked down its 2012 outlook for 2.0 percent growth by about a quarter to half a percentage point because of Europe. IHS Global Insight has trimmed about one tenth of a point from its 2.2 percent forecast for this year.
Greece Leaves Euro Zone
SCENARIO: An anti-austerity government takes power in Greece and rejects the bailout terms. The EU and IMF stop lending Greece money. Athens runs out of cash, defaults on its debt and starts printing its own currency to pay bills. Its banking system collapses. The European Union has had time to draw up contingency plans and succeeds in preventing the currency exit and debt default by Greece from pulling down Spain, Italy and Portugal and manages to stabilize its banking sector quickly. The Federal Reserve may help provide market liquidity through new FX swaps with Europe andquantitative easing.
IMPACT: Greece accounts for only 2 percent of euro zone GDP and U.S. exports to Greece are negligible. So too is U.S. credit exposure. U.S. money market funds have largely moved away from investing in Europe. Greece owes the private sector $70 billion, but mostly that is to German and French banks, according to the Institute of International Finance. The bulk of its $460 billion in external debt is held by the European Central Bank, the European Union and the International Monetary Fund.
Hence the direct impact of a default and euro exit by Greece on the U.S. economy would be quite small, as long it were contained - but that is a big "if." Once one country leaves, market focus would switch to other deeply indebted countries - Spain, Portugal, Ireland and even Italy. European policymakers would need to sling a safety net under these countries and big EU banks to prevent the contagion from spreading and imperiling the euro zone.
The immediate shock of a Greek exit probably would shave half a percentage point from U.S. GDP in the quarter when it happened and soften growth in the subsequent quarter, said Craig Alexander, chief economist at TD Economics. But if managed smoothly, a Greek exit could cause a burst of optimism that the euro zone woes are over and strengthen U.S. output subsequently, he said.
Nariman Behravesh, chief economist at IHS Global Insight, said his firm is about to change its baseline forecast to a managed Greece exit, probably early next year. He expects to cut its U.S. GDP forecast for 2013 of 2.4 percent by two to three tenths of a percentage point.
Messy Greek Exit, Damage Spreads
SCENARIO: Greece crashes out of the euro. Yields skyrocket for Spanish and Italian bonds locking them out of the government debt markets. Spanish and Italian depositors withdraw cash in panic over the possibility of their countries leaving the euro zone, too. Global equity markets sink. Investors pile into U.S. markets as a safe haven. The U.S. dollar soars as the euro plunges. European banks face funding shortages as investors shun the euro zone and the banking system seizes up. Global markets become chaotic.
IMPACT: This is the nightmare scenario. The economic impact in the United States would be felt through trade, financial linkages and business and consumer confidence. The size depends upon how quickly policymakers could stabilize the situation and whether any big financial institution whipsawed by a rapid repricing of assets is in danger of collapsing.
At the very least, shockwaves through financial markets would cause a downward jolt to the U.S. economy, immediately erasing at least half a percentage point from growth in that quarter.
If Europe's banking system shuts down, violent shudders through global financial markets would equal or surpass those seen when Lehman Brothers collapsed in 2008. Banks are better capitalized today than four years ago and therefore better able to weather the storm. But with interest rates near zero and governments fiscally stretched, advanced economies this time around would have fewer tools to offset the hit to growth.
At the very least, the U.S. and global economy would fall back into recession, and some economists warn it would be far deeper and more dangerous than the one of 2007-2009. The U.S. Fed would be almost certain to embark on a fresh round of bond buying, known as quantitative easing, to keep financial markets highly liquid and hold interest rates low.
