Factories are cutting expansion plans just as the Fed sees stronger growth
Tucked away in last week's report on industrial production from the Federal Reserve was an important piece of news: Manufacturers, miners and utility companies don't seem as optimistic as monetary policy makers are that 2015 will be a markedly better year for the economy.
Industrial producers are scaling back their expansion plans for this year even as Fed officials forecast faster economic growth. Since less investment is often interpreted as diminishing confidence for future demand, the two outlooks are a little hard to square.
Industrial companies will raise capacity by 1.8 percent in 2015, the smallest increase since 2011, after boosting it 3.1 percent in 2014, the Fed said in its Feb. 18 release on production.
The central bank's projections are based on an amalgam of information from trade associations and its own forecasts. They are carried out separately from the economic forecasting process undertaken by staff for the central bank's Federal Open Market Committee.
The projections are important nonetheless because they provide a clue to companies' capital spending plans, a key component of gross domestic product. Such outlays by industrial companies accounted for more than a third of business investment in 2013, according to the Census Bureau.
The slowdown in expansion plans is surprising in that companies are running their factories and plants closer to full capacity than before. Those facilities operated at 79.4 percent of capacity in January, up from 78.1 percent a year earlier, based on data from the central bank.
The steepest reduction in spending intentions is coming in the mining industry, which includes oil producers sideswiped by tumbling prices. Miners will raise capacity by 3.3 percent in 2015, after expanding it 9.2 percent in 2014, the Fed said.
Manufacturers also are scaling back their expansion plans, expecting a 1.7 percent advance this year, the smallest since 2011, from a 2.2 percent gain in 2014. So too are utilities, to a 0.3 percent increase from a 1 percent rise in 2014.
Most Fed policy makers are forecasting that economic growth will accelerate, not decelerate, this year, to 2.6 to 3 percent, from 2.5 percent in 2014, according to material released by the central bank on Dec. 17. Judging by the estimates of capacity that central bank staffers came up with, the policy makers might well have to curb that enthusiasm in the future.
Investment advisers should act in their customers’ best interests, President Obama says. Here's how they don't, and how it can hurt you.
Right now, only some advisers are fiduciaries, required to put their clients’ needs first, while many brokers and advisers need only to recommend “suitable” financial products. On Monday, the White House said it would support a plan to change that.
Wall Street industry groups warn that new rules could raise costs and thus make advice unaffordable to many middle-income Americans. It’s not clear what the final administration proposal will look like—Labor Secretary Thomas Perez says it will be “very different” from previous proposals. But the goal is to end biased advice that the administration estimates costs investors $17 billion a year.
Here are five ways that, under current law, advisers can put their clients at a disadvantage:
401(k)-IRA rollovers
For many workers with a 401(k) who are approaching retirement, the best option is to do nothing. Their employers offer 401(k) plans with low fees and great investment choices. There’s no reason to move the money to an individual retirement account, or IRA. But as Bloomberg’s John Hechinger reported last year, investment firms push workers to do just that. For example, federal employees are urged to shift assets into IRAs with fees that are 20 times as high as those in the Federal Thrift Savings Plan.
Load fees
When customers buy a mutual fund from a broker, they’re still often charged a front-load fee—a one-time fee that can swallow up more than 5 percent of their money before it’s invested. The proceeds from load fees help compensate advisers for their time, though there are often far more efficient ways to get advice. More and more investors are asking for no-load mutual funds, but the Investment Company Institute estimates that $630 billion in load funds were sold in 2013, the latest data available. That was up 19 percent from 2012 and the most since 2008.
Opaque fees
While you might notice a 5 percent load fee, many other commissions charged by advisers are hard to spot. For example, a “12b-1 fee” can be tacked on to a fund’s expenses every year, with the proceeds often going to an adviser years after he or she sold the fund. Most of these charges should be disclosed somewhere, but it can be very difficult for clients to add up all the various ways an adviser is making money off them.
Active fund bias
In many investment categories, low-fee index funds have historically performed better than actively managed mutual funds. But when an adviser meets a client with lots of assets in index funds, he or she often urges the client to reallocate into higher-fee funds. When mystery shoppers visited advisers for a 2012 study, 85 percent were told to ditch their diversified, low-fee portfolios.
Poor performance
Commissions, including load fees and 12b-1 fees, give advisers an incentive to recommend certain investment products over others. Firms can also give advisers bonuses for steering client money into the firms’ own funds. The result of this biased advice is that investment performance suffers, academic studies show—and not just because fees eat into returns. A 2014 study compared self-directed investors with clients who received advice with conflicts of interest. The self-directed investors performed an average of 1.25 percentage points better annually. A 2009 study found that direct-sold funds beat broker-sold funds by 0.14 to 0.9 percentage point per year, even disregarding the broker funds' higher fees. Over time, that performance gap can cost you thousands, or tens of thousands, of dollars.
Millennial have been succumbed to one of the greatest recession in the history of the man kind in recent decade and as a result Millennial still live with double cross attitude towards risk taking compared to former.
Below is a one of best articles i came over cross in the net.
Four Ways Millennials Are Still Scarred From the Recession
You should read this if you're a young person
Young U.S. workers still face some long-lasting effects of the financial crash
With the U.S. economy gaining steam, employers are finally hiring -- and those benefits have spread to most corners of the job market. Even America's young adults, who bore the brunt of the downturn, are starting to regain their economic footing.
That doesn't mean all is well for millennials, especially those who entered the workforce when things were at their worst. Improvements in the headline statistics mask some of the longer-lasting effects of the recession. Here are some of the scars that recession graduates may bear for a long time to come.
They may never make as much money
When you're desperate for a paycheck, you take whatever you can get. During periods of economic turmoil marked by high unemployment, job-seekers are more likely to take roles at lower paying companies, because that's what's available to them, according to a National Bureau of Economic Research paper by Yale Economist Lisa Khan. The pool of talent is bigger and more competitive, allowing employers to cut salaries.
A depressed starting salary could mean less income for decades, Khan's research showed. Setting a low bar on your payscale to begin your career makes it harder to climb the ladder. Another study found the initial losses in income endured by new graduates entering the labor force during a downturn are significant and persist for 8-10 years. It also means your annual raise could be incrementally smaller for years thereafter, eroding your lifetime earnings.
They're not leaving their low-pay jobs
Of course, you could change jobs when a more lucrative opportunity comes along, as that's often the best way to get a meaningful salary bump. The quits rate, which shows the willingness of workers to leave their jobs, held at 1.9 percent in December for all U.S. workers. Even six years into the recovery, that's still down from the pre-recession average of 2.1 percent.
Looking at job tenure, millennials were more likely than older generations to hold onto their jobs early in their career, the Washington Post reported, citing Census data. Jobs were hard to come by during the slump, and now young people may be too scared to let them go.
What's more, the jobs they're clinging to are probably wrong for them. One study led by Ohio University professor emeritus Richard Vedder found that a larger share of graduates have taken jobs that require less than a college education. Vedder's research showed the pool of college-educated workers was disproportionate to the demand for skilled laborers, forcing a growing number of graduates to take jobs which historically have been filled by those with lower levels of educational attainment.
By being less picky and taking jobs out of necessity during the recession, many graduates pigeon-holed themselves to industries they weren't interested in or jobs below their skill level.
It's been even worse for low-end workers. They had to contend with higher-skilled workers who were pushed out of better-paid positions in the recession--think of the college-educated 20-something who got fired by his advertising agency and resorted to waiting tables to pay the bills. BLS data show 20.4 percent of bartenders 25 and older have a bachelor's degree or higher. That pushes lower-skilled workers into even lower paying jobs -- or even worse, unemployment.
They turned into awful investors
Their risk aversion extends beyond job hopping. The economic circumstances we live in have a major impact on how people spend and invest their money. For young people, many of whom don't remember or weren't alive during boom times, putting money in the stock market is too dangerous of a proposition.
Millennials have continued to forsake the stock market, a Gallup poll from last April shows. Instead of plunging into equities, which can provide better returns over the long run, young people are stashing savings in bank accounts and securities that pay near-zero interest.
A UBS Wealth Management survey last year found that millennials hold 52 percent of their assets in cash and 28 percent in stock, while older cohorts hold 23 percent in cash and 46 percent in stocks.
The effect is exacerbated by the fact that young people have a shorter frame of reference. While their older counterparts saw some ups and downs in their day, young adults are more likely to change their behavior based on one bad year because of limited experience, according to a paper from National Bureau of Economic Research.
They're drowning in student debt
During the recession, education loans became the largest share of household debt excluding mortgages. Balances more than tripled to $1.2 trillion in 2014 from 2004. In that time period, the average balance increased 74 percent to $27,000, and the number of borrowers skyrocketed 92 percent. It's the 800-pound gorilla on young adults' backs.
Among the consequences: Young people will probably need to work for so much longer than previous generations. NerdWallet, a personal finance website, estimated that the average retirement age for recent college graduates will be 73, or 12 years older than the average age of today's retiree--mostly due to higher levels of education debt.
A misstep in paying off student loans can also imperil young people's home ownership prospects, New York Fed researchers also found. Delinquencies can destroy a person's chances of getting a mortgage, especially at a time when credit is tight.
The share of loans that were officially delinquent—at least 90 days overdue—rose to 11.3 percent in the last three months of 2014, up from 11.1 percent the previous quarter.
Property developers in two of China’s weakest housing markets are offering to buy back homes above the purchase price to boost sales as demand slows.
In Hangzhou, where home prices fell the most in May among 70 Chinese cities watched by the government, Shanheng Real Estate Group is giving homebuyers an option to sell back their apartments in five years for 40 percent above the purchase price. In Wenzhou, DoThink Group is offering to repurchase homes at three of its projects for 120 percent of the purchase price after three years.
The offers are the latest strategy by developers across China, including reducing prices, delaying project launches and offering incentives to potential buyers, as they seek to maintain sales targets. Prices of new homes fell in May from April in half the 70 cities tracked by the government, the largest proportion since May 2012, according to government data. A more persistent and sharper downturn in the property sector is the biggest risk for China’s economy in the next couple of years, according to UBS AG.
“Obviously they’re relatively cash-thirsty,” said Dai Fang, a Shanghai-based analyst at Zheshang Securities Co. “If it works, there surely will be other developers following suit.”
Photographer: Brent Lewin/Bloomberg
China’s home sales slumped 10.2 percent in the first five months of this year from the... Read More
China’s home sales slumped 10.2 percent in the first five months of this year from the same period a year earlier amid tight credit and an economic slowdown, reversing last year’s 27 percent jump. The average new-home price in 100 cities tracked by SouFun Holdings Ltd. fell 0.5 percent in June from the previous month, accelerating from the 0.3 percent decline in May that ended 23 consecutive months of gains.
Purchasing Power
For closely held Shanheng Real Estate, which is controlled by Shanghai-based clothing maker Shanshan Group Co., the buyback offer helped attract more than 1,000 potential buyers to its Yishanjun project, meaning “mountainside homes” in Chinese, a half-hour drive from downtown Hangzhou during the three-day Dragon Boat Festival holiday that ended June 2.
More than 50 of the at least 100 units eligible for the buyback were sold, exceeding the project’s total sales in the first five months of the year combined, according to the company’s President Xiao Jixiao.
“The five-year buyback helped a lot of people who wanted to buy make up their minds,” Xiao told Zhejiang Online in an interview, according to a video posted on the news website affiliated with the Communist Party’s local commission in the eastern province of Zhejiang. “The purchasing power in the market remains very strong.” The Shanghai-based developer declined to comment when contacted by phone.
Uncertain Outlook
Yishanjun is selling at an average price of 7,000 yuan ($1,126) a square meter (10.76 square feet), down from 9,000 yuan last year, according to sales information on Sohu.com Inc.’s real estate website.
New-home prices in Hangzhou, capital of Zhejiang province and popular with tourists for its West Lake, fell 1.4 percent in May from April amid high inventories, the biggest decline among the 70 Chinese cities tracked by the National Bureau of Statistics.
Slowing sales in Hangzhou are already hurting some of the city’s other developers. Standard & Poor’s cutZhong An Real Estate Ltd. (672)’s long-term corporate credit rating to B- from B in a June 27 report, citing “worsening operating conditions,” particularly in the developer’s biggest market of Hangzhou that are likely to weaken cash flows.
‘Root Cause’
Hangzhou-based DoThink Group said it is offering to buy back more than 200 apartments in Wenzhou, ranging from 70 square meters to 190 square meters, through private equity unit Kylin Investment Management Co.
The closely held developer has built more than 10 million square meters of homes and office buildings since 1993.
“Many developers have tried various marketing methods to get cash back, but they all missed the root cause” of falling home sales, Kylin’s Chief Executive Officer Huang Dong said by phone from Hangzhou. “The key is lack of confidence and the uncertain outlook” of the property market.
Underground Lending
A Kylin-managed fund will sign agreements to buy back homes after buyers pay the full price and hold the property for three years, a measure that can prop up confidence in the value of the properties, Huang said.
The company raised 200 million yuan in May from investors for a three-year property fund that will agree to buy the apartments at 120 percent of the current selling price, he said. That level is still profitable because the projects’ land and construction costs were low after the local property market declined in the past few years, enabling the projects to be priced competitively, Huang said.
The average new-home price in Wenzhou, known for pioneering local entrepreneurs, has slumped 35 percentsince its peak in November 2011 after a thriving underground lending market collapsed, while the national average climbed 12 percent in the period, according to SouFun, China’s biggest real estate website owner.
Prices in Beijing jumped 40 percent during the period and surged 19 percent in Shanghai, according to SouFun.
Sales Targets
“Given rising sales pressure, we expect developers to offer more attractive pricing” in the second half of the year, Barclays Plc’s Hong Kong-based property analysts led by Alvin Wong wrote in a report June 24.
Contracted sales as of May 31 at 28 developers tracked by Barclays accounted for only 30 percent of their full-year targets, suggesting they can only complete 36 percent in the first half, “significantly lower” than the 47 percent a year earlier, the analysts wrote in a June 12 report.
A gauge tracking Shanghai-listed real estate companies fell 0.4 percent as of 10:36 a.m. local time.
Shanghai Yuehe Real Estate Co.’s construction of mixed-use residential and commercial project in the city was halted last month after the closely held company couldn’t find sufficient funds, and the project was frozen by a court, two government officials familiar with the matter said last week.
Prolonged Downturn
About 120 miles away in the eastern city of Fenghua, Zhejiang Xingrun Real Estate Co. became insolvent in March with 3.5 billion yuan in debt, and its founder was detained for illegal fundraising, a local official said at the time.
To combat the weaker market in Guangzhou, in the southern province of Guangdong, almost 20 housing developments rolled out no-down-payment plans to boost sales, Nanfang Daily, Guangdong’s official Communist Party newspaper, reported in April, as government agencies in Guangzhou and Shenzhen issued warnings against the practice.
China’s property market downturn this time will be more prolonged than the last two corrections, Tom Byrne, a senior vice president at Moody’s Investors Service, said at a conference in Shanghai June 19. A 10 percent drop in property sales and building construction will lower the country’s economic growth rate to between 5 percent and 6 percent, he said.
To contact Bloomberg News staff for this story: Zhang Dingmin in Beijing at dzhang14@bloomberg.net
To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net Iain McDonald, Tomoko Yamazaki
It was unforgettable day... I believe both Spain and Netherlands will never forget the moments So many articles .. this is how dailymail reported
Spain 1 - 5 Holland World Cup 2014: Arjen Robben scores INCREDIBLE solo effort as Netherlands hit FIVE and Robin van Persie also scores one for the history books
Arjen Robben's fantastic goal is applauded by the Dutch bench
Robin van Persie capitalises on Iker Casillas mistake to make it FOUR
Stefan de Vrij scores a header to put Netherlands 3-1 up against Spain
Diego Costa is substituted and replaced by Chelsea's Fernando Torres
Arjen Robben gives Holland the lead with a great individual goal
Robin van Persie's incredible diving header just before half-time puts the score to 1-1
Xabi Alonso scores from the spot after Diego Costa is brought down in the box by Stefan De Vrij
Louis van Gaal sets Holland up in a 5-3-2 formation
Holland starting XI: Cillessen, Janmaat, Vlaar, De Vrij, Martins Indi, Blind, De Jong, De Guzman, Sneijder, Robben, Van Persie
Three games in to this World Cup and already the champions have a weaker grip on their trophy. Spain lost the first game four years ago, too, but defeat to Switzerland back then cannot compare psychologically to the stunning events of last night.Spanish coach Vicente del Bosque will ask himself quite how his team lost from a winning position. A goal up on the cusp of half-time, Spain were cruising.
Three days in to this World Cup and already the champions have a weaker grip on their trophy. Spain lost the first game four years ago, too, but defeat by Switzerland in South Africa cannot compare psychologically to these stunning events in north-east Brazil.
Spain’s worst defeat since a 1963 reverse to Scotland, this was more than a setback. This was a humiliating, humbling capitulation, a defeat that asks as much about the mental fortitude of Vicente del Bosque’s team as it does their hapless defending.
Some defeats in sport represent more than the loss of a solitary contest and this was one of them. This was a 7&6 in Ryder Cup singles, an Ashes defeat by an innings, a round one knockout in Vegas. Some teams would not recover from this. It remains to be seen if Spain can.
VIDEO Scroll down to watch Ecstatic Dutch fans flood out of the Emirates
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Dutch destroyers: Robin van Persie embraces Arjen Robben on a superb night for Holland
Heading into the net: Robin van Persie hurls himself through the air to score a superb equaliser
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Aerial ultra: Van Persie hangs as he watches his header go into the Spain net
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Calamitous error: Van Persie robs Iker Casillas to poke home Holland's fourth goal
Can't believe it: Casillas looks downcast as the Holland players celebrate Van Persie's goal
Match facts
Spain: Casillas 5, Azpilicueta 6.5, Sergio Ramos 5.5, Pique 5.5, Jordi Alba 7, Alonso 7.5 (Pedro 63), Xavi 7, Busquets 6, Silva 7.5, Diego Costa 7 (Torres 62), Iniesta 7.
Holland were brilliant. So hungry as to be ravenous and driven relentlessly forwards by the mesmeric talents of Robin van Persie and Arjen Robben.
The upshot was one of the World Cup’s most startling results. We all remember Argentina’s loss to Cameroon in 1990, France succumbing to Senegal in Seoul 12 years later. In the very same way, we will remember this.
Taken in isolation, the result was staggering enough. Spain 1 Holland 5. Say it slowly to make sure it’s real.
What made this even more remarkable, though, was the way that it happened. Moments before half-time, Spain were a goal ahead and cruising. Had David Silva scored when played clear at this time the champions probably would have won.
Fast forward an hour, though, and Spain were on their knees. In their eyes they had the shocked look of street mugging victims. Holland scored five and could have scored eight. Iker Casillas – who had a dreadful night – produced a stunning double save late on, while Wesley Sneijder fell over when it looked easier to score.
'In the end, it could have been six, seven or eight,' said Van Persie. 'But, really, it couldn’t be better.'
Ultimately, the only thing that saved Spain was the full-time whistle. Back in the quiet of the dressing room, they will have looked at each other and seen faces they did not recognise staring back.
The highlights reel will, of course, show them scoring first. Once again there was controversy about it but few will care now.
Turning him inside out: Arjen Robben gets past Gerard Pique after taking the ball down superbly
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Finish: Sergio Ramos can't close down Robben, who strikes the ball with his left foot
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Net gain: Iker Casillas (right) is sent the wrong way as the ball goes into the goal
The best 11: Robben holds out his arms in celebration after scoring Holland's second
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Pointing the finger: Nigel de Jong tells Fernando Torres to get up
Forward Diego Costa turned in the penalty area, placed his foot on a defender’s leg and was given a penalty. It was a poor decision but Xabi Alonso struck the kick to the right and Spain had a deserved lead.
For a while, all was normal. Costa was struggling but it didn’t seem to matter. Xavi and Silva enjoyed a good 15 minutes and Spain looked likely to score again.
Had they done so, Holland couldn’t have complained and Silva’s miss – trying to chip the goalkeeper – was certainly pivotal as within a minute or two the Dutch were level.
Dutch left back Daley Blind’s pass from deep across field to Van Persie was certainly a good one. Spain failed to move out as one and the Manchester United forward was onside. Briefly he looked as though he may control the ball but ultimately he threw himself forwards and the header that arched above and beyond Casillas was as good as you will see.
On terms at half-time, Holland would have taken a draw. As it transpired they emerged to humiliate Spain. The Dutch simply can’t have had a better 45 minutes of football.
The second goal, in the 53rd minute, started with Blind once again. This time his target was Robben and the manner in which the Bayern Munich star controlled the ball to turn back inside Gerard Pique and score was wonderful.
Happy Holland: Louis van Gaal high fives Van Persie after the forward's brilliant equaliser
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Shut up: Diego Costa gestures to the Salvador crowd, who barracked him throughout the match
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Trip: Costa is caught by De Vrij inside the area in Salvador
On the way down: Costa is tripped by Stefan de Vrij and the referee pointed to the spot
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Spot on: Xabi Alonso rolls his penalty to the right of Jasper Cillessen and into the corner
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Not too Xabi: Alonso celebrates putting Spain a goal up from the spot
HELL SALVADOR FOR SPAIN
It was Spain’s heaviest defeat since Scotland beat them 6-2 in 1963.
Portugal beat them 4-0 in 2010.
Spain last conceded three in Brazil in the Confederations Cup final last June (lost 3-0 to Brazil (Fred 2, Neymar).
They last conceded two to Group B rivals Chile in a friendly in September.
They lost WC opener to Switzerland in 2010 (0-1, Gelson Fernandes).
The Dutch have scored as many goals against the World Champions as they did in both their qualifying games against Andorra combined (5)
As the rain fell hard, Spain sought answers. Del Bosque appeared briefly to urge them to lift their heads but they couldn’t. He made substitutions but they didn’t work. The direction of the game was set, the die cast.
Goal three was a tough one. Casillas’ attempt to gather a corner was impeded by Van Persie but he simply needed to be stronger and as the ball disappeared over his head, Stefan de Vrij bundled it in on the goal line.
Here on Friday night, Casillas looked like a goalkeeper in need. He looks not to have recovered from his poor showing in last month’s Champions League final and it will be interesting to see if Del Bosque drops him next week and, if so, who out of David de Gea or Pepe Reina comes in.
'I won’t blame individuals,' said Del Bosque. 'But we must improve. We cannot go under.'
Certainly what happened in the 72nd minute wouldn’t have helped Casillas’ cause. Trying to control a simple back pass, the goalkeeper only managed to present the ball to Van Persie and goal No 4 was poked in to the empty goal as Holland took events from the surprising to the simply unforgettable.
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Thwarted: David Silva sees his chip comfortably saved by Cillessen
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Waste: Wesley Sneijder hits his shot straight at the keeper when through on goal
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Proceed with caution: De Vrij (second right) is shown the yellow card by Nicola Rizzoli
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Clash of the titans: Alonso and Arjen Robben compete for a ball in the air as the Dutchman goes flying
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Stop right there: Holland defender Bruno Martins Indi (left) grabs hold of Spain midfielder David Silva
Still there was time for a fifth. More mistakes from Spain, a gallop forward by Robben past Sergio Ramos and another devastating finish.
On the Dutch bench, coach Louis van Gaal smiled and tried to look phlegmatic.
'We can get better, without a shadow of a doubt,' he said later.
Del Bosque, meanwhile, placed a towel across his knee as the rain fell. He may well have placed it over his head.
