The Fighting Over the Currency Issue is Likely to Get Worse

I will be in NY and Boston during the first week of February and plan to meet a number of investors there to discuss China. I believe it becomes official on February 1, but I recently joined the Hong Kong subsidiary of one of China’s top broker/dealers, Shenyin Wanguo, as their Chief Strategist, where my responsibility will be to provide research and advice to large institutional clients of the company. I will continue teaching at Peking University and doing research for the Carnegie Endowment – this new responsibility simply takes off from my existing work.
Unfortunately it will mean that my blog postings (in the future, and clearly not this one) will become shorter and perhaps more reacting to market events, but of course it also means that it will be much easier for me to travel to meet clients and friends in Asia, Europe, North America and elsewhere for more focused (and perhaps more open) discussions of China and the international economy.
For now I suspect everyone will want to discuss currencies. One of the more interesting pieces of news for me was yesterday’s Financial Times story on President Sarkozy’s finding “unacceptable” the disordered currency markets (“disorder” means a rising euro). According to the article:
Nicolas Sarkozy on Thursday stepped up his attack on global exchange rate imbalances saying “monetary disorder” had become “unacceptable”. The French president said he would make exchange rate policy an important theme of France’s presidency of the G8 and G20 forums of advanced and developing economies in 2011.
“There cannot be financial, economic and social order until we put an end to currency disorder,” he said at a conference in Paris. Mr Sarkozy has long railed against Chinese “monetary dumping” and the dominance of the dollar, but has sharpened his criticism in recent days reflecting concern in Paris that a balanced economic recovery in the eurozone could be choked off by an overvalued currency.
With a large trade deficit and with exports that are more price-sensitive than Germany’s, France feels more susceptible to exchange-rate movements than its neighbour across the Rhine. “We can’t increase the competitiveness of our businesses in Europe and have the dollar lose 50 per cent of its value against the euro,” Mr Sarkozy said. “When we produce in the eurozone and sell in the dollar zone, are we supposed to just give up selling?”
So we are sort of stuck, aren’t we? The dollar is overvalued, and it must rebalance downwards in order to force up US savings rates relative to US GDP, but since it cannot decline against Asian currencies, whose central banks intervene heavily, it must decline against the floating currencies like the euro.
But the euro is probably already overvalued against the dollar, so European manufacturers will be forced to accept the brunt of the adjustment. This will be painful for everyone in Europe, but I suspect it will be most painful for Germany, a country that is more dependent on manufacturing than the rest of the region and so who will suffer more if there is a sharp drop in demand for European manufactured goods. The fact that President Sarkozy is nonetheless making the most noise about the euro indicates that this is going to become a very popular political topic and has great demagogic appeal.
Later in the article Sarkozy was quoted as saying “You know how close I feel to the US. But this is not possible. The world has become multipolar. We must have a multi-monetary system.” As a half-French half-American I have to say I suspect that it is not likely to be easy to convince too many Americans of the truth of the first part of his statement. I think however, that although the US and the world (except perhaps export-dependent Asian countries) would be better off with a multi-monetary system, Sarkozy may be confusing issues.
The dominance of the dollar in reserve accumulation has little to do with a lack of an alternative currency and a lot to do with the inability of any country but the US to absorb the trade deficits created by export-dependent development strategies. Trade-surplus countries buy dollars because when they buy euros, they cause angry reactions from European businessmen and politicians who are uncomfortable with the impact of a rising euro on domestic manufacturing and employment. In fact, the rise of the euro against the dollar is precisely what Sarkozy claims to oppose in the first part of his statement and to support in the second part. If Asian central banks rely less on the dollar and more on the euro for their reserve accumulation, guess what will happen. Yes, the euro will rise against the dollar.


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Endowment policy cash could help cover retirement costs

Britons who have retired may want to make sure their household coffers are in as good condition as possible after a new survey has revealed the financial challenges retirees face once they leave full-time employment.

MGM Advantage said an extra £429 a year currently needs to be found by retired households whose main occupant is aged between 65 and 74. The cost of living for the average household has increased by 1.85 per cent - or £670.

Chris Radford, chief executive officer of aap, the UK's biggest buyer of endowment policies, said some of its customers who had retired had decided to sell their underperforming endowment policies so they could maintain a standard of living which they desire for their years outside of employment.

Running a retired household can prove expensive

After they have left the workforce, many Britons may want to invest time and money into ventures they previously could not enjoy because of their work hours.

However, MGM Advantage said the average annual household expenditure stands at £36,888. This drops to £23,106 when the main occupant is aged between 65 and 75.

With such high costs, maintaining a high standard of living could prove difficult if household finances are not large enough.

Commenting on the findings, Aston Goodey, sales and marketing director at MGM Advantage, said: "Many retired people have had to endure a rise in their cost of living. This, coupled with the fact that people are generally living longer is placing considerable pressure on retirement income.

Selling endowments could help cover the cost of retirement

Mr Radford, from aap, said some of its customers who had retired and who wanted to maintain a good standard of living had sold their unwanted endowment policies to help them in retirement.

He added that should aap make an offer to purchase an endowment policy, it will always pay more than the surrender value offered by the insurance company.

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Cohen takes national stage on arts and cultural policy

State Sen. Richard Cohen has landed on the national stage where arts and cultural policy matters are concerned.

President Barack Obama today named Cohen, DFL-St. Paul, to the President’s Committee on Arts and Humanities (PCAH). Cohen, along with other new committee members announced today, will be sworn in by Vice President Joe Biden.

Other new PCAH members include world-renowned cellist Yo-Yo Ma and Sarah Jessica Parker, the actress who starred in the television show Sex and the City.

Cohen has been an ardent arts supporter at the state Legislature during his seven terms in the Senate. He successfully pushed to have arts and cultural projects included in the dedicated sales tax increase amendment that was approved by Minnesota voters last November.

Cohen also supported Obama’s presidential candidacy early on when many Minnesota Democrats were supporting Hillary Clinton’s bid for the nomination.

The PCAH has been around since 1982. The group advances the White House’s arts and humanities objectives by working with the National Endowment for the Arts, the National Endowment for the Humanities and the Institute of Museum and Library Services.


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Coping with a sudden endowment shortfall

The Financial Ombudsman Service is bracing itself for a rise in complaints about with-profits mortgage endowment policies over the next couple of years.

In 2012, it will be a quarter of a century since banks and building societies really started pushing endowment mortgages on the back of a (then) soaring housing market. As the typical mortgage lasts for 25 years, there will be possibly hundreds of thousands of endowments maturing.

Unless the fortunes of the stock market are totally transformed in the next year or two, the majority are likely to leave their holders disappointed, at best with a much smaller surplus over their mortgage than they were originally led to believe and at worst with the policy proceeds proving woefully inadequate to meet the mortgage debt.



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Corp Bond Sales,Fed Meeting Keep Investors Busy

A bevy of corporate bond sales, Berkshire Hathaway Inc.'s (BRKA, BRKB) takeover of railroad operator Burlington Northern Santa Fe Corp. (BNI) and the start of the Federal Reserve monetary policy meeting kept credit markets busy Tuesday.

The Fed is due to release a statement Wednesday afternoon on the latest outlook on inflation and the economy. The focus is likely to be on any change in wording on the Fed's exit strategy to unwind the massive stimulus as the economy heals.

Many portfolio managers, worried about the impact of the Federal Reserve's removal of its market props, already are turning their ...



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What is an Endowment Sale?

An endowment sale is a transaction that takes place when an endowment policyholder decides to sell the policy. An endowment policy buyer is the entity who purchases the endowment, usually a company that specializes in making this type of purchase. An endowment policy is a regular savings or investment plan combined with life insurance in a single policy. If the owner dies before the policy reaches maturity, the endowment policy life insurance company pays out a specified amount of money.
There are a number of ways an endowment sale can take place. First, an endowment sale can be handled personally, with the policy owner contacting an endowment purchasing company. This type of endowment sale is fairly easy to complete, and most financial advisors will walk the policyholder through the process.
Another way to complete an endowment sale is at an endowment auction, or through what is referred to as a market maker. A market maker is a window through which endowment policy traders can make offers to purchase policies. It is akin to the stock market, but on a much smaller and calmer level. In this type of endowment sale, the policy trader can farm out the policy and get a better price by offering it in the open market.
There are two primary types of endowment policies: unit linked and with profits. A unit linked endowment policy involves monthly premiums that are invested into units. The value of this policy can fluctuate depending on the performance of the investment.
If there is strong economic growth, a unit linked endowment policy is the best option. If the market is down, however, so is the value of the endowment. The current value of the policy has an impact on the outcome of the endowment sale.
The more traditional endowment policy is the with profits variety. This type has a guaranteed value and will never go below a specific amount. This is the safer route for those not willing to take a risk with the unit linked policy.
Cashing in an endowment policy is a major decision. There are many alternatives to an endowment sale that are worth exploring before taking such a big step. Most individuals seek an endowment sale because of drastic changes in their circumstances, such as divorce or a change in mortgage arrangements. More recently, a low maturity projection by the endowment policy issuer has become another reason to carry out an endowment sale.

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Sell My Endowment

So you think you want to sell your endowment policy? Thats a big step - maybe you should consider your options before you dispose of a policy which you may have had for many, many years. After all most people who have endowments got them in the 1980's where they became particularly popular in the UK because of their tax treatment and, in particular, the high inflation of the time. So much has changed in the intervening decades. Read on too take a look at endowments and decide what are the best options for you, your mortgage and your your endowment policy.


Whether you are going to sell your endowment or not you should make a well-informed decision not a hasty one as this could have big implications for your financial future.
In this article I am going to look at what endowments are all about, what they issues with endowments are in today's markets, your selling options for endowments, and other options if you decide not to sell.

First off lets start at the basics what is an endowment policy? An endowment policy is basically a retirement investment and life insurance policy rolled into one. The general idea was that a home owner took out an interest-only mortgage on their property and this capital was invested in the stock market. The owner made lower repayments than with a regular mortgage because they weren't repaying capital. Instead the stock market returns on their investment was supposed to repay the mortgage at the end of a set number of years - usually 25.

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