BlackFire Finance

Human behavior flows from three main sources: desire, emotion, and knowledge.
Plato

Welcome to Blackfire Finance, dedicated to Finance, Money, Business and Most Importantly Knowledge

Stockmarket: ASX Finishes in Red for the First Time in 2017

ASX has finished in the red for the first time in 2017, due to falls in big banks, unstable oil prices and decline in investor confidence.

While brent crude strengthened by the end of the trading session to $US55.05 a barrel, fears that the OPEC-led deal to cut production might not be implemented properly by its participants diminished investor confidence.

The benchmark S&P/ASX 200 Index and the All Ordinaries Index each dropped 0.8 per cent to 5760.7 points and 5813 points respectively. Investors sold out of every sector, with banking receiving the most impact. Commonwealth Bank of Australia fell 0.5 per cent, as Westpac declined by 0.8 per cent. National Australia Bank was down 1.2 per cent and ANZ Banking Group dipped 1.5 per cent.

The US dollar also weakened as the post-election euphoria winded out. “The US dollar appears to have entered a consolidation phase since last week after a period of market optimism associated with prospective Trump policies,” NAB economist Vyanne Lai said. As a result, the Australian dollar rose 0.6 per cent to US73.72¢.

Property Market Predictions for 2017

Property prices in Sydney and Melbourne shows no sign of slowing down while prices in other cities fall, experts predicted.

Property research group SQM Research predicted that if the cash rate remains unchanged throughout the year, Sydney and Melbourne’s house prices could grow by 15 to 16 per cent.

Low interest rates will keep Sydney and Melbourne markets strong due to high income and population growth in these cities, said Moody’s economist Emily Dabbs.

“Affluent areas tend to be driven by the prosperity of local economy, and right now both Sydney and Melbourne have the fastest-growing economies in the nation,” said SQM managing director, Louis Christopher.

However, apartment prices in Sydney, Melbourne and Brisbane could fall by 15 to 20 per cent in the next two years, AMP capital chief economist Dr Shane Oliver predicted. “There’s a [supply] indigestion problem, but Sydney won’t have a supply problem for another two years,” Dr Oliver said.

On the other hand, Perth, Darwin and Adelaide’s prices are expected to continue falling due to dwindling population and high unemployment rate.

“The unemployment rate in Perth, for example, is quite high compared to the rest of the country,” said Dabbs. “That’s really hampering any income growth and making it difficult for households to pay higher prices for houses.”

Construction industry analyst BIS Shrapnel said house prices would rise in all capital cities except Perth and Darwin, and apartment prices would fall in Brisbane and Melbourne.

How Alternative Finance Can Offer A Better Banking Future

Do you know where your money is? If you immediately think of cash, then there’s a good chance you’ve just patted a pocket or looked in a purse to reassure yourself. But if you thought of your savings and investments, then there’s actually a good chance you have no idea where your money is – other than to draw the quick (and misleading) conclusion that it is “safely in the bank”.

After all, where else would it be?

We recently saw the revelation that another major bank – this time Germany’s Deutsche Bank – could collapse. According to Germany’s economy minister, Sigmar Gabriel, it “made speculation its business model”, though now claims to be the “victim of speculators”.

But there is an alternative to this banking model that isn’t based on financial speculation. Research that colleagues and I have done into economic resilience would suggest that many people might be better off investing in alternative finance and, to encourage them, the government should guarantee alternative finance investments up to a maximum of £5,000.

Finally, an alternative

The UK is the home of Europe’s rapidly-growing alternative finance (or “alt fin”) movement, which is fast becoming a major player in the financial sector. Valued at £3.2 billion in 2015, a big part of its appeal is that we can often know more precisely where our money is and what it is doing. Whereas with mainstream banks, your money is used to fund various investments, often on financial markets that you have no control over, investors in alternative finance projects tend to invest in a specific project.

Alternative finance has been around since at least 2004, with the founding of online peer-to-peer lender, Zopa. But a far broader range of options have sprung up since the financial crisis. In our research, we found online peer-to-peer platforms that bypass the banks entirely, community share schemes that allow both direct investment in and democratic influence of a given project, and crowdfunding to support a local SME business take off. Greater transparency so that people know exactly where their money is and what it is doing is key.

Beyond this there are many different financial arrangements, all with different implications for funders and fundraisers. Peer-to-peer loans, bonds and debentures have to be repaid with interest. Community shares are regulated to keep dividend payments low, but give shareholders a say in the governance of the fundraising organisation.

Government backing?

Despite the very public loss of reputation suffered by high street banks following the financial crisis in 2007, we still seem to trust them with our money. In wondering how mainstream banks were able to return so quickly to “business as usual”, one answer is that we did too. A big reason for this might be that we didn’t know what else we could do with our money and the perceived risks of new ways of investing.

There are understandable anxieties about alternative investments at a time of significant restraints on household budgets, especially when two in five of the UK workforce have less than £100 in savings. This is why the government should step in and guarantee retail investments in alternative finance.

It’s a relatively small ask compared to the Financial Services Compensation Scheme, which is the current guarantee of cash deposited in UK-regulated accounts in banks and building societies up to a limit of £75,000 – even though such investments provide very little financial return to savers or deliver tangible social or environmental value from this money.

Alt fin tries to provide us with a way of diverting our money away from habitual patterns of economic behaviour. And it is delivering real social and environmental benefit to communities. These include renewable energy schemes, community home building, or renovating disused land into play spaces for children.

One of the banks that has been bailed out by the government since the financial crisis.
Elliott Brown, CC BY

We argue that the government should help the process of building trust in alternative finance investments by providing this maximum guarantee with the condition that investment is directed into the “real economy” and not just financial markets.

Proceed with caution

Of course, any such guarantee should be approached with caution. After all, this suggests a breaking of the “risk/return” cycle – a basic tenet of banking that with any investment comes risk – and potentially opens the way to abuse, with people making risky investments with the comfort of a government backstop.

But if we are to build a more resilient financial system, we need a far greater range of options for where to direct our money. Alternative finance is not perfect, and a growing entanglement with mainstream finance may see the sector start to resemble mainstream practices. To manage the process of truly democratising finance and providing genuine alternatives to putting our money “safely in the bank”, the Financial Conduct Authority should play a leading role as regulator.

And if a taxpayer guarantee sounds contentious, it is worth remembering that the risk/return cycle was significantly broken by the process of bailing out the banks in 2007-08. Banks, too big to fail and to jail, currently create 97% of “money” through credit, preferring to speculate on money and financial markets in the hope of creating profit, rather than investing in the “real economy”.

If the practice is good for safeguarding the hidden financial speculation of the few, why not for safeguarding the transparent material social and environmental gains for the many?

In continuing to assume the mainstream banks are the safest place to invest, we might be missing the opportunity to make our money do good by working harder for us and our communities.

The Conversation

Mark Davis, Associate Professor of Sociology, University of Leeds

This article was originally published on The Conversation. Read the original article.

News: Australia Lost Up to $4.8 Billion to Tax Dodging, Oxfam Reports

Tax dodging by Australian-based multinationals through offshore tax havens has cost Australia up to $4.8 billion in 2014, according to a new Oxfam Australia report.

The report claimed that Australia lost $4-4.8 billion in 2014 as a result of tax dodging. It also revealed that the top offshore tax havens used by Australian multinationals are Bermuda, Cayman Islands, Netherlands, Switzerland and Singapore.

The report followed the new data released by the Australian Tax Office (ATO) on Friday, which shows that 36 per cent of large companies, or 679 companies in Australia did not pay any tax in 2014-2015. McDonalds Asia-Pacific, Chevron Australia and Vodafone Hutchison are among the list of large companies that failed to pay tax.

In the report, Oxfam criticised the Federal Government’s plan to cut corporate tax further to 25 per cent in the next ten years.

“There is no winner in the race to the bottom on corporate tax,” said Muheed Jamaldeen, senior economist at Oxfam Australia.

The advocacy group said that tax incentives are ineffective to encourage payment due to the lack of parliamentary and public scrutiny.

“As a result, tax incentives are often ineffective and have become associated with abuse and corruption,” the report said.

“Tax revenues are needed to fund public goods and services, which contribute to the reduction of poverty and to the development of social and economic infrastructure.

“It is crucial that the Australian Government modifies current legislation so that multinational companies that function in or from Australia report publicly on their incomes, employees, profits earned and taxes paid in every country in which they operate.”

Dr Helen Szoke, chief executive at Oxfam Australia said the federal government should take action to make companies “pay their fair share”.

“The Federal Government must act swiftly and can no longer ignore the need for laws that will force big companies to publicly report on their incomes, taxes paid, profits and employees in every country in which they operate,” she said.

If you are an employer and looking to get a police check report for employees you can use National Crime check. They provide quick online police checks and offer bulk checks for staffing.

stock market

What is Stock Market, and Should You Join?

It is a popular new year resolution, but investing in a stock market could indeed be an overwhelming decision for beginners – is it the right choice, and how can you get profits out of it? Here are a few explainers to help you start.

What is a stock market?

Investopedia defines stock as “a share in the ownership of a company”. Stock market acts as a platform where buyers and sellers exchange securities, such as shares and derivatives.

The price of stocks changes according to current demand and supply level. Depending on your investment goals, you could hold shares for a few weeks (swing trading) or buy and sell quickly after a day or less (intraday trading).

Is stock market right for you?

If you are risk-averse, probably not. The dynamic of stock market involves constant changes, and it would suit you only if you are comfortable with a level of risk.

Stock markets also work best for patient investors, whose judgments are not easily clouded by fear or greed. Sometimes it is best for investors to hold rather than quickly sell in hopes of great returns, which could induce panic and trigger bad decisions. Investors should also research the company properly before buying in instead of depending on big names. By learning about the company, investors will be able to analyse and expect changes in the market better.

 

For more information, head to ABC, Investopedia, and the Economic Times.

Stock Market Tip: Use Google Trends

What a curious thing the stock market is; so powerful, yet so flighty. Like a school of sardines, it moves as one, changing direction nimbly when danger looms or advantage beckons. What it will do next has always been difficult to predict.

But what if you could now – using nothing more than a free, public online tool?

Research published today in Nature Scientific Reports finds that Google search behaviour is not only a clear indicator of movements in the market; it also gives insight into the likely future behaviour of economic actors:

These warning signs in search volume data could have been exploited in the construction of profitable trading strategies.

Mind reading from data mining

Stock market prediction is so difficult, says Warwick Business School researcher and first author Tobias Preis, due to “herding behaviour”.

Investors are influenced by the collective thinking of others in the market, as well as their own personal reasons, so trading patterns in one week are nearly useless for predicting what will happen the following week.

Knowledge is power … and may be highly profitable.
MyEyeSees

To predict the market, Preis says, you need to know what is going through people’s minds before they make their financial decisions – and one way to do this is to see the words they Google.

Data mining tools such as Google Trends and Google Correlate are putting powerful analytical toolkits into the hands of investors keen to parlay a small advantage into a large gain.

As a point in principle, the price of stock in Apple Inc. is seen to positively correlate with search volume, in this recent article from the Harvard Business School.

Twitter feeds are also showing promise as sources of strategic investor information.

This was demonstrated in spectacular form on Tuesday when the hacked Associated Press Twitter account reported two explosions in the White House with US President Barack Obama injured.

Twitter

Associated Press immediately corrected the tweet, but the Dow Jones Industrial Average dropped 143 points in a “flash crash”.

And while the market recovered within minutes, the crash showed just how intertwined Twitter and the stock market are.

Previous work by German economists Dimpfl and Jank looked at whether internet search queries could predict stock market volatility.

They concluded that daily search query data gives clear insight into people’s interest in the market as a whole.

Investors are more active with their queries during times of strong market movement.

Like Preis, they found a rise in investor attention is followed by a period of heightened market volatility.

This was also supported by a group of European researchers who, when studying the American stock exchange NASDAQ-100, found:

Query volumes anticipate in many cases peaks of trading by one day or more.

In other words, there is a correlation between trading volumes of NASDAQ-100 stocks and the volumes of queries related to the same stocks.

The advantage of using real-time data analytics is, of course, that it tells you what is happening right now.

Conventional channels for market data involve lags of several days. Google’s Research Blog notes that

Google Trends … provide a real time report on query volume, while economic data is typically released several days after the close of the month.

Given this time lag, it is not implausible that Google queries in a category like “Automotive/Vehicle Shopping” during the first few weeks of March may help predict what actual March automotive sales will be like when the official data is released halfway through April.

This work is detailed in the paper Predicting the Present with Google Trends.

So how do I make my millions?

The work done so far indicates that using tools such as Google Trends and Yahoo! can yield real-time insight into market sentiment, and that this information can be used strategically to devise profitable trading strategies.

 

What is needed, though, is finer granularity.

If investors could drill down further into the data to discern daily or hourly trends they might well be able to predict a rise or fall in stock prices.

It could also give people warning of impending crises.

With increasing volumes of data on the internet, there is a clear need for tools that can mine this data and be a window into the zeitgeist.

Google Trends, with its access to search data from the most popular search engine, is probably the most powerful such tool currently available.

And if you’re looking for a safe bet, it is highly likely we will see a lot more action in this field in the years ahead.

The Conversation

David Tuffley, Lecturer in Applied Ethics & Socio-Technical Studies, Griffith University

This article was originally published on The Conversation. Read the original article.

Divest for Our Future

What is Fossil Fuel Divestment, and Should You Join the Movement?

As more and more Australians support climate change action, fossil fuel divestment has become a highlight in environmental campaigns throughout the country. It is seen as a part of ethical investment that could help bring positive change to society and environment. But what is fossil fuel divestment, and how can you get involved?

Definition and purpose

According to climate organisation 350, divestment is “the opposite of an investment – it simply means getting rid of stocks, bonds, or investment funds that are unethical or morally ambiguous.” Emma Howard of the Guardian wrote that the global fossil fuel divestment movement is about “asking institutions to move their money out of oil, coal and gas companies for both moral and financial reasons. These institutions include universities, religious institutions, pension funds, local authorities and charitable foundations.”

350 believes it is not enough to demand a halt on infrastructure projects, such as building new pipelines or coal mines. “We need to loosen the grip that coal, oil and gas companies have on our government and financial markets, so that we have a chance of living on a planet that looks something like the one we live on now,” said the organisation in its Fossil Free website.

“It’s time to go right at the root of the problem–the fossil fuel companies themselves–and make sure they hear us in terms they might understand, like their share price.”

Why should you divest?

Australia’s energy sector still has not considered its impacts on environment, according to Daniel Gocher, head of research at Market Forces.

“Not only is Australia’s energy sector largely ignoring the Paris Agreement, nor planning for its implications, but they’re also projecting “long life growth”, as though there is no possibility that their business models could be disrupted,” said Gocher.

“Most Australian investors, including the vast majority of our super funds, have eschewed the fossil fuel divestment movement, which exceeds a staggering $3.5 trillion globally, preferring to remain invested in energy companies and use their influence as shareholders to change them from within.”

However, from a business perspective, clean energy could be more competitive today. Many experts believe that renewable energy, such as wind and solar, could now be more profitable than coal, thanks to cheaper technologies and government incentives in the US.

Furthermore, 350 argues that fossil fuel investments are “very risky”, with “disasters like Exxon Valdez, the BP oil spill, along with massive fluctuations in supply and demand of coal, oil and gas” making energy markets volatile.

Therefore, fossil fuel divestment is not only ethical and beneficial for the society and environment, but it is also potentially more profitable, as you can shift your money to other, more stable sectors.

To get involved, you can start a campaign for your institutions’ divestment, or divest your money as well.

For more information about divesting and starting a campaign, go to these websites: Investor Group on Climate Change; 350; Market Forces; and the Australia Institute.

Oil rig

News: Investors Expect Oil Selloff Should OPEC Deal Collapse

As tensions arise between OPEC countries in the runup to the November 30 meeting, investors are preparing for the worst and expecting a fall in energy stocks should a deal fail to be clinched.

On Monday crude price fell by 0.3 per cent to $US47.1 per barrel, and energy stocks declined by 1.8 per cent.

Iran and Iraq have reportedly persisted on higher output numbers, according to unnamed sources.

“We hope we (will) have agreement,” said Jabar Ali al-Luaibi, Iraq’s Oil Minister on Monday upon arriving in Vienna for the talk. “We will cooperate with OPEC members to reach agreement acceptable to all.”

Experts expect oil selloff should OPEC fail to reach a deal. “People know if OPEC doesn’t do a deal, all the short-term drivers for the oil price will be off the table,” said Romano Sala Tenna, portfolio manager at Katana Asset Management.

Collapse in talks could send crude prices below $US40, said Fadel Gheit, managing director of oil and gas research at Oppenheimer & Co.

Others are more optimistic. There is a chance that OPEC could agree to cut production by more than 500,000 barrels, said Helima Croft, RBC Capital Markets’ global head of commodity strategy.

“OPEC’s leadership is cognizant of the risks posed by failing to reach a deal,” Croft wrote in a report. Should a deal be reached, Croft said oil prices could climb back to $US55 per barrel.

The Organisation of the Petroleum Exporting Countries will meet on Wednesday, November 30 in Vienna to establish the terms of its first production cut in eight years.

Commonwealth Bank

News: CBA Deposit Interest Rates Cuts Hit Savers

Commonwealth Bank (CBA) has cut a range of term deposit interest rates for the second time since August.

The bank blamed the cuts, which took effect last week, on changes in credit markets and the globally low- interest rate.

The rate cuts apply to six-term deposit products, spanning from three months to five years, by 5 to 15 basis points.

“The reason we have made changes to interest rates on some deposit accounts is due to the record-low interest rate environment, changes in underlying funding costs in local and international funding markets, and competitive conditions that affect the interest rates we are able to pay,” said Clive van Horen, executive general manager of retail products and strategy at CBA.

In August, CBA raised deposit rates and marketed it as a win for savers after the Australia’s big four banks passed on half of the Reserve Bank of Australia’s rate cuts to mortgage holders.

CBA reversed these cuts in September, and ANZ, NAB, and Westpac followed suit in October.

Stockmarket: Major US Indexes Close on Record Highs

All three major US stock indexes have closed on record highs on Monday night, following a rise in commodity and technology shares.

S&P energy index jumped 2.2 per cent, while .SPLRCT technology index rose 1.1 per cent.

Facebook increased 4 per cent to $US121.77 after announcing a $6-billion share buyback program on Friday.

LifeLock rose 14.7 per cent to $US23.18 following Symantec’s announcement to purchase the company for $US2.3 billion.

Applied Micro Circuits also increased 11.7 per cent after Macom Tech announced a $US770 million takeover of the company.

Oil prices have risen after Iran and Russia indicated that an OPEC deal could be reached in a Vienna meeting next week.

 

Markets at 8:40am (AEDT):

  • ASX SPI 200 futures +0.7pc to 5,393
  • AUD: 73.65 US cents, 69.31 euro cents, 59.00 British pence, 81.62 Japanese yen, $NZ1.0429
  • US: Dow Jones +0.47pc at 18,957, S&P500 +0.75pc at 2,198, NASDAQ +0.89pc at 5,369
  • Europe: FTSE +0.03pc at 6,778, DAX +0.19pc at 10,685, Eurostoxx +0.29pc at 325
  • Commodities: Brent oil +4.8pc at $US49.11/barrel, spot gold +0.41pc at $US1,213.20/ounce, iron ore -$US2.00 at $US70.50/tonne