Gold Moving Upwards

c13b8ceff395be4dcec41179b88fd56eGold increased by 1% on June 1st, 2016, heading for a fifth weekly gain. It was assisted by a weaker dollar and the possibilities for more monetary policy easing, post-Brexit.

Safe-haven demand for gold stimulated a major portion of the gains as investors moved to safeguard themselves against the uneasiness in the lead up to Brexit.

Fears over the path of global growth, the Fed’s dovish outlook and retail demand had supported gold prior to Brexit.

The spot gold rate increased to a session high of $1,341.40 an ounce. It was 1.5% higher at $1,341.76.

The metal registered a gain of 8.8% in June. It has been its largest monthly increase since February. The US gold futures for the delivery in August moved up 1.4% at $1,339.

The strength in gold proved beneficial for silver. It breached the $19 an ounce level. In the past, it had breached that level in September 2014. It increased by 5% to $19.64 and traded 4.9% higher at $19.61.

In the near future, the US dollar and the dollar-denominated metals would in focus. The attention would shift from Brexit towards economic fundamentals and the US monetary policy.

Concerns pertaining to the global economy have made prospects of a rate increase in the US less likely in the near term.

A robust jobs data and favourable modifications for the June nonfarm payrolls data could boost the dollar and weaken gold and silver, at least temporarily.

The low-interest rates in the US would benefit gold since the opportunity cost of managing it reduces and the dollar normally decreases, resulting in the metal becoming inexpensive.

Societe Generale (a multinational banking and financial services firm based in France) increased its gold price forecasts due to concerns regarding the political & the economic fallout of Brexit.

It is projected that gold would be one of the key beneficiaries against the existing global economic environment. Any increase in volatility and continuing uncertainty would ensure the investors risk taking capability would be in check.

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The Future of Underwriting

iStock_000058487272_SmallAs insurers seek mega investments in their front-office competencies, several are focusing on underwriting. There is a broad agreement that the working of this function must transform if insurers have to revamp their operations. Within the function, the emphasis would move towards internal processes/specific transactions. Hence, underwriters in the future would become experts of many activities.

An increase in automation and robust analytical competencies have played a big role since they provide underwriters an opportunity to increasingly focus on high-value functions – account planning, solution development, agent partnering, and risk assessment. Again, other advanced technologies would assist in transforming the way underwriters operate, while expanding the ways they add value to the business.

Normally, underwriting has been the nerve center of the insurance sector. In fact, according to some experts, underwriting is the same as the insurance sector. The industry would not function without the capability to assess risk/price/issue policies.

In recent times, the lead to the insurance C-suite has taken place via finance. A certain amount of talent is imported from other financial services sectors. On the other hand, the availability of predictive modeling has transformed the governing rules for underwriting.

In future, underwriters would play multiple roles including: 

  • Sales
  • Decision making
  • Customer service
  • Innovation

Sales

Underwriters can utilize their ability to tap information for enhancing the value of the sales process. For instance, the insight from expert underwriters could improve the effectiveness of lead identification and qualification. It can also be used for modifying advertising campaigns. Underwriters would depend on unified marketing and sales platforms. Semantic web technology would use procedures to accumulate data to interpret information.

Decision Making

The analytic transformation that had technically changed the insurance environment in the last 10 years would expand with an effect on benefits for underwriting. Several financial models would be used by expert risk stakeholders to accomplish advanced analytics and rules-based decision making.

Interactive analytical tools will provide opportunities for scenario modeling and information visualization. Machine learning would facilitate continuous evaluation of data for determining deviations and subtleties to enhance the accuracy of models/rules.

Customer Service

As the customer experience gains significance, underwriters in the future would transform the solution across the relationships. The emphasis would be on establishing a team approach to facilitate servicing through collaborative tools.

Innovation

Underwriters must sense the beat of the market, both the insurance sector and the customers’ industry. Competitive differentiation is due to excellent relationships, risk assessment, and servicing. The insights must be transformed into products/services customized to the specific requirements of the customer.

Underwriters will increase the capabilities, mostly in analytics, relationship and utilization of modified technology. They will leverage robust models to develop unique solutions. Underwriters would assist insurers to calculate the optimal method to utilize sensor-based technologies for tracking customer exposures.

In the future, underwriting companies would emphasis on fostering new and cementing current relationships based on the creation of specific insights and formation of customized solutions with regard to customers that are easily elucidated and categorized.

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Multiple Business Loans

stacking-loansEach small business is diverse and therefore has different borrowing needs. The credit card may provide all the finance for some while others could benefit from a line of credit/invoice factoring/discounting. Others could benefit from a grouping of all three.

In other words, there are no absolute rules. However, there are definite benefits and drawbacks in securing more than one type of finance simultaneously.

Benefits of Multiple Business Loans

Flexibility is a key factor. It is usually difficult to forecast when an individual would require borrowing. Customers may change, investment opportunities could occur suddenly, an unpredicted cash flow crisis could impact any business expansion.

If an individual has to access multiple sources of funds, then the individual could react quickly instead of applying for a new loan and waiting for a decision.

This could be the variance between success or failure if the individual is dealing with an unexpected shortfall in cash.

Another benefit is in terms of choice. If an individual can access multiple sources of finance simultaneously, it would be possible for the investor to use the most beneficial business loan at the most relevant time.

In other words, it is similar to having a revolving credit, which the concerned person can use and repay whenever needed. Again, the individual can spread the debt payments, generating a streamlined cash flow, instead of making sure that there is sufficient money to cater to a single, large repayment on a fixed date every month.

If one takes a huge amount of finance and critically, use it properly, it would improve the credit score.

Drawbacks of Multiple Business Loans

Firstly, one must consider the cost. If an individual has three types of financing, it would mean three different monthly repayments and the accompanying interest charges. At times, it would be difficult to meet all the commitments and may soon be looking at liquidation.

Secondly, it is often difficult for individuals to be prudent with their spending decisions. Having borrowing available could impact the investment decisions. Business owners who are unable to prevent a new financial commitment could be in serious trouble.

All types of business credit are not similar. Hence, the level of financial understanding is critical. Having an insight into the benefits and drawbacks of the various options would be useful.

By considering the various criteria, an individual would be able to decide if multiple sources of finance would be appropriate to take the business forward.

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Multi Currency Options

f02a7ecd22f06e3a042841db11741695Multi-currency options/structures have been amalgamated into currency markets for a while. For a long time, they have been a critical aspect of the retail and investor product scenario.

Multi-currency accounts enable a person to have a base currency, while making/receiving payments in multiple currencies. The accounts are mostly held in US dollars. However, the chequebook that is given to the person would not have any currency denomination.

The base currency, which is equal to the amount of the cheque would be debited from the account in a traditional manner. Several multi-currency accounts enable a person to have an umbrella account, with holdings in a number of currencies in sub-accounts. This would add value if an investment is done across global markets and the business transaction must happen expeditiously and cost-effectively.

The use of these accounts would mitigate exposure to currency risk each time a person wants to buy shares in US dollars, Euros, sterling or yen.

The accounts are normally utilized by savvy investors, business stakeholders and expats receiving money in various currencies.

The accounts can also be used for currency speculation. This could prove to be useful to investors, especially during a period when stock markets are unpredictable. Currency fluctuations do not have any direct relationship to the fluctuations within a distinct stock market.

For any speculation, comprehending currency behavior is vital. Dollar accounts dominate the market because it is a global reserve currency. Several locations outside the US trade primarily in dollars, which includes the Middle and the Far East, several Caribbean and South American nations.

Exchange rates usually move up and down in cycles. They are steered by money flows and capital flows. Any variations in oil prices also impact currencies. Any differences in interest rate would bolster the currency. The purchasing power of the currency is also a key factor.

A robust currency denotes nations in which factors like inflation, economic management, political stability, central bank autonomy and global trade are viewed positively.

Normal supply and demand also play a significant role. Exchange rates are influenced by several reasons which include the basic demand/supply for currency, government regulations, investment scenario and interest rates.

The global movement towards controlling inflation has resulted in certain currencies becoming robust in comparison to others.

Usually, the value of a multi-currency option relies on correlations between underlying FXRs. In other words, it would not be easy to determine correlations from traditional returns since the decision on length and frequency of time series and the method to weight previous returns must be made.

An entire gamut of new strategies has come up in the multi-currency or correlation domain. Taking positions in derivatives whose payoffs are influenced by the behavior of many currency pairs concurrently had created a wealth of options for traders.

Identifying the importance of this array of products, advanced tools have been constructed to determine the most favorable currency and establish combination; thereby delivering its clients optimized risk profiles.

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The Impact of Dollar On Crude Prices

oil-newOil reached $50 per barrel for the first time since November 2015. Investors had expected a positive outcome from the OPEC meeting in Vienna. However, market analysts believe the event is meaningless. Nothing of consequence came out of the meeting.

Saudi Arabia and Iran did not make any progress during OPEC’s meeting. Hence, no significant announcement regarding a freeze or a cut in June was made.

It is considered that OPEC is not a cartel anymore (a cartel having influence over the supply and prices of oil). Therefore, the market has turned its attention to the Fed as a critical aspect regarding the oil price.

Higher rates of interest along with less easy money are expected to complicate the oil business.

Experts believe that those who carefully monitor the dollar movement have the maximum impact on the direction of crude prices.

An assessment of oil trading daily would reveal that everything is front-end loaded. Traders and not refiners have the major control over oil prices.

However, the exclusion for a producer with a critical impact lies with Saudi Arabia. The reason for this being the kingdom could adopt a very aggressive tactic when it comes to production in 2016.

The government in Saudi Arabia is becoming much more entrepreneurial. The policymakers are engaging in several offshore drilling joint ventures. The market is closely watching the Saudi government’s next move.

In order to offset the production from Saudi Arabia, analysts believe cheap prices are assisting to ensure the global demand is up.

There is greater balance with regard to the global oil supply. The issue is expected to aggravate around August when there would be sufficient oil to get through the period.

A surplus oil inventory could drag oil prices downward since most of the supplementary demand in the US for gasoline in 2016 is front-end loaded for July.

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The Demand for Bonds May Backfire

gold-bars-public-domainThe developed market bond yields moved lower in June 2016 as the market focused on the exit by the UK from the European Union.

The bond markets are taking into account the safe-haven demand. The underlying market risk continues to persist and is not expected to fade in the short-term.

The global markets have become extremely volatile in recent times as opinion polls in the UK have indicated that the “leave camp” would prevail in the June 23rd, 2016 referendum.

An exit would signify leaving the 28-nation EU, and solving an array of complex trade agreements that connect the country to the European bloc. The agreements were not easy to create, and they would be extremely difficult to renegotiate.

Uncertainty regarding what the U.K. would have to give up in terms of its access to the continent’s single market has bothered the markets.

Some analysts noted that even if the U.K. votes to continue in the EU, that volatility isn’t likely to pass over easily. The factors around the Brexit are going to remain for some time: the issues around trade & overregulation, the concerns around immigration, and the problems around income inequality.

A Brexit is estimated to hit the U.K. gross domestic product (GDP) by about 2 percent as it weakened the pound, increased inflation and stimulated a housing market correction. That would dent global GDP by nearly 0.1 percent.

The markets are concerned about their incapability to measure the big picture. For e.g., the very survival of Euro.

However, there are other factors that are weighing on bond yields and driving them lower. The Fed’s hiking cycle is expected to be very gradual over the next couple years.

According to Chris Weston, chief market strategist at spreadbettor IG, “A more dovish Fed is not the positive it once was and investors are saying ‘if the Fed are worried then perhaps we should be as well.”

A Japanese Government Bond (JGB) auction on June 16th, 2016 also weighed on yields. Bond prices change inversely to yields.

Declines in oil prices were also impacting bond yields. Lower oil prices result in lower bond yields since oil prices have robust correlations with inflation expectations.

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Integrating Bank Brokerage

featimage-300x300Several financial institutions differentiate between brokerage, trust, and private banking when providing service to clients. However, experts believe banks and credit unions would stand to gain by adopting an integrated service method to augment the client experience.

An extensive study has confirmed that customers prefer seamless service in a way that enables quick access to accounts.

Firms’ must overcome changing technology, consumer demands, regulatory needs and operational contingencies. Legacy systems and ineffective processes also create problems.

Active investors, as well as, active traders provide a significant opportunity for firms with aggressive growth rates in the future. There has been a substantial increase in importance for bank-brokerage integration in response to the growth in the segment.

The progress for a greater incorporated bank/brokerage model is steered basically by the evolution of the investor in the US.

The development has been slow, interrupted by internal/external factors like budget, resource and technology restrictions. The acquisition of Merrill Lynch by Bank of America led to an integration of the bank and brokerage, which resulted in the launch of Merrill Edge.

This was a distinctive milestone and implied a process towards the integration of the bank-brokerage for the institution and other stakeholders in the sector.

Modifications in existing technology in recent times have resulted in the bank-brokerage consolidation for channel growth. Consolidating online banking with online brokerage could be a technical process, which would often include modifications to sales, customer service, branding, and products among others.

However, the existing customers must not be impacted by any service disruption. The complete integration must provide a seamless option to expand the current relationship and any deviations at the time of the transition could impact the customer experience.

Bank-brokerages would focus on integrating services with a specific emphasis on distinct sign-on, real-time money transaction, and the capability to access holdings covering various accounts.

Any more assimilation would focus on integrated banking and brokerage performance metrics, pre-filled account data for easier account opening, and integrated banking-brokerage mobile apps.

Clients would prefer access to the banking and investment data expeditiously from multiple locations. The digital concept impacts many technologies, devices and channels like social media, mobile, tablets and online.

As far as online brokering is concerned, mobile trades through mobile apps have increased 100% in the recent past. For brokers providing banking and brokerage services, there is a distinct opportunity for differentiation in the mobile channel by facilitating the integration of mobile banking and mobile brokerage.

In order to be competitive, firms seeking the bank-brokerage model would have to focus on augmenting the trading platforms. Huge trading volumes and the utilization of complicated trading strategies ensure the active investor/trader is profitable across segments.

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Falling Sector Correlations – Positive News for Investors

93356036The correlations among S&P 500 sectors have dropped to the lowest level since the global financial meltdown. Though correlations may seem complicated, the development is actually excellent news for most investors.

An analysis of the last 60 trading sessions would reveal that the average correlation between the day-to-day moves of two S&P 500 sectors is around 0.47, and it was as low as 0.45 in the 60 sessions ending on June 9th, 2016.

That is significantly lower than the number’s median reading of 0.69 over the last five years and is a drastic drop from the 0.83 witnessed in October 2015. Both active and passive investors must be happy with this silent market trend.

For the active investors, who believe they can create value by overweighting certain sectors and underweighting other sectors, such results begin to make sense. For e.g., a portfolio that consists of several consumer discretionary stocks and some utilities stocks has a greater chance of performing differently in comparison to the S&P 500 in a low-correlation scenario.

The passive investors could also benefit. As correlations decrease, the advantage of variation increases since greater correlations convert into a lower degree of volatility without essentially decreasing the projected gain.

In a low-correlation environment, there’s a lesser risk that each stock one holds decreases together. Again, there’s also a lesser chance that each stock increases together, but since most investors do not like losses and like gains more, a reduced chance of the volatility that takes the portfolio higher is a useful trade-off.

According to chief market strategist Nicholas Colas, Convergex, “Five years ago the stock market went up together and everything went up together, or it went down together and everything went down together. And that was really unhealthy because it meant there was no value in diversification.”

At present, it is no longer the case. The alleged risk-on/risk-off dynamic seems to have fragmented, with a few discrete forces now affecting stocks. The main ones are the reach for yield amid dropping bond rates, the commodity comeback, and the current weakness in the U.S. dollar.

If investors select the correct force, they would be able to outperform the total market by a significant margin because of the correlation decline.

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China’s Accumulation of Debt Could Impact the Global Economy

debt-debt-trapConcerns about China, which have already triggered the global market disorder this year, have not gone away and its debt pile continues to pose risks to the global economy.

China’s overall debt touched a record 237 percent of gross domestic product (GDP) in the first quarter of 2016, an increase from 148 percent at the end of 2007.

The Chinese debt could seriously impact the Asian economies as well as the European economies. That could result in a probable negative trend, which could continue for a longer-term.

Some experts believed that any significant accumulating debt was good news for the European economies in a cyclical slowdown. However, it would be bad news for the key emerging market economies of China and Russia.

The debt was the main reason for the global financial crisis of 2007-08 and has since increased globally in relation to gross domestic product (GDP).

The Bank for International Settlements warned that any spiralling debt could have disastrous consequences for the overall health of the global economy.

Global debt surpassed $135 trillion towards the end of 2015, an increase from under $110 trillion towards the end of 2007.

In the developed economies at the centre of the crisis, certain private-sector deleveraging has happened, although public-sector debt has increased gradually.

But the most disturbing development has been the sharp rise in private-sector debt in other places, particularly in many emerging market economies, including the biggest, the main engines of international growth post-crisis.

Several economists believe that China’s debt pile was the one that posted the most risk to the global economy.

However, market experts struck a positive note on global debt. Defaults and crises are part of a business cycle. There would be more crisis going forward, but they would be addressed and resolved.

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Types of Insurance You Need

wiki-financial-planning-insurance-and-types-of-insuranceLife is full of challenges and throws various unexpected situation on us. Protecting us from those challenges is the most important step that helps in creating a strong financial security as well. The best way to protect the future’s uncertainty is through insurance. Getting the right kind of insurance will go a long way toward helping you to protect your family, income and your assets. It also safeguards you against the perils of the unknown and help you financially, if you’re unable to pay from your pocket to overcome the loss, such as the medical costs of a serious illness, an accident, or damage through natural disasters.

Insurance is a complex business. Choosing the right kind according to your need may be difficult. There are a number of insurance available and with so many options, it can be difficult to decide which insurance policy you really require. Getting the right insurance policy done always depends upon your present specific situation. Aspects like health condition, family income, lifestyle, children, etc. are a few points to consider when purchasing the insurance portfolio. There are though, five types of insurances that most industry experts recommend: life, health, property, auto and long-term disability. Each one is very important to your financial future security and covers a specific facet of your life.

Life Insurance: This is one of the most important type of insurance policy, if you have a family that is financially dependent on you. If your children, spouse, or parents would face financial hardship after you, life insurance policy will protect them. Think about how much money you earn each year and buy a policy that will replace that money. As per most of the industry experts, a life insurance policy should cover atleast 5 – 10 times of your total annual income to cover all the living expenses, such as child care, education, taxes, loans, etc.

Health Insurance: The increasing expense of medical care is a good reason, enough to purchase a health insurance policy. Even a normal health check-up can result in heavy bills. More serious health issues that require a hospital stay, and a surgery or an operation can increase your financial burden. Especially, in today’s time, where new diseases are emerging and demands expensive treatment, it becomes a must to take a health insurance plan. If you are in the service industry, always check with your employer, whether they are providing the family health insurance coverage or not. If not, it’s must to get one today itself.

Property Insurance: Whether you own a house, have a home loan or a renter’s, you must maintain some type of property insurance that protects your possessions in case of burglary, fire, or any natural disaster. This will save you from the expense of repairing the damage that are too costly or impossible to pay from your pocket. Many people don’t give it much importance, but trust, it’s must. A property policy is hardly $15 – $20 per month and is easily affordable.

Auto Insurance: This insurance is another a must-have. In fact, it is illegal to drive without some form of auto coverage. Accidents can’t be predicted and can result in heavy bills. Having no auto insurance could possibly cost you everything you own, to repair your own damage, to cover against other events like theft, accident or other problems. Purchase an auto insurance plan depending on the value of your vehicle and your region’s or state’s requirement.

Long-term Disability Insurance: This is the one insurance most people do not think about, and hence, rarely purchased. However, according to the Social Security Administration, 3 in 10 labour’s entering the workforce will be unable to work, or will become disabled before they reach the retirement age. This insurance helps when you hurt yourself and are unable to work for an extended period of time or never. It supports the income you would have earned. This type of insurance is mainly depending on your job profile. For example, if you have a kind of administrative or desk job, the insurance premium would be really low. But, if you are in the manufacturing or construction sector, the insurance coverage would be highly expensive.

The five options listed above are all insurances that are essential and everyone should own these insurances. Though getting an insurance policy is costly and certainly takes a lot of your money, but being without it could lead to financial disaster. These policies usually come in a wide variety of forms and sizes and have many different benefits, features, and prices. Purchase them carefully, take expert advice, talk to the agent and read the policies to ensure that you understand the cost and the coverage. Make sure the insurance plan that you take are suitable or meeting your requirements and protects you and the people around you or close to you.

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