The U.S. is pushing to reform the international postal treaty that subsidizes Chinese shipping

American e-Commerce Put at a Disadvantage – UPU

American e-commerce business has been put at a disadvantage for subsidizing shippers from developing countries like China, by the Universal Postal Union, a postal treaty where witnesses as well as legislators state, has created a rough playing field for international e-commerce, which is up for renegotiation in 2016.

A hearing was held on June 16th, by the Government Operations subcommittee of the House Oversight Committee that the committee Chairman, Mark Meadows considered as the start of a push for U.S reform strategy. Reported earlier by Fortune, the Universal Postal Union is considered a treaty organization which tends to set international postal standards, comprises of the terminal dues agreements between post-office.

Congressman Meadows, in his opening statements, branded the terminal dues system as `trade distortion’ that had left thousands of the small businesses of Americans at a disadvantage. This was due to the system favouring shippers from countries that included China, which is considered as `developing’ country.Meadows suggested a question for the committee on how the situation could be improved wherein some were offered by the witnesses, which represented the Amazon, FedEx, State Department and USPS.

Negotiating Rights Taken from U.S. Postal Services 

SinceCongress took the negotiating rights away from the U.S. Postal Service and gave the lead to the State Department in 2006, U.S reform efforts have made little progress. Presently the State lead negotiator at the UPU, Robert Faucher, defended the progress that was made while at the same time clarified that the UPU is a very slow moving organization and dependent on an extensive one-country, one-vote Congress, which is held once in every four years.

Head of regulatory affairs for FedEx, Nancy Sparks, claimed that lethargy seems to be the source of the UPU’s deteriorating discrepancies. She stated that the tradition of the UPU is that the haves tend to pay the have-nots and what brings this problem up is that the have-nots suddenly have a lot.

Sparks further pointed that time seems to be short for U.S. game plan ahead of next year’s UPU Congress where the rules could be amended. `September 2016, in UPU time, is a heartbeat away’

Specific Goal – 2016 UPU Congress – Establish UPU Task Force

Faucher refrained from offering a timetable for meaningful terminal dues reform when he was compelledby representative Meadows. He stated that the `State Department’s most specific goal at the 2016 UPU Congress would be to establish a UPU task force to explore fundamental reforms’.

Proposals similar to these had been put forward by the U.S. at earlier congresses though were not successful.Essential approaches were also offered by Paul Misener, Amazon representative who called for the U.S. in making postal rates part of larger diplomatic negotiations with China. He further added that the UPU seems to be an imbalance which makes no sense to Amazon and that they are on the look-out for the whole ecosystem.

Insignificance of the problem could make it difficult to meet that type of political stress and most of the committee members commented that before the hearing they were ignorant of the facts. However, as per Congressman Meadows, this seemed to be just the beginning who commented that this would not be the last hearing, since they were going to look for real results.

Gold Dips Below $1,170 Despite Greek Debt Crisis

Gold Price below $1,170 – On-going Greek Crisis

Price of gold fell recently as the markets anticipated news from euro zone summit speculating whether progress would be made due to the Greek debt crisis, as growing positions in gold underline bearish sentiments towards the precious metal.

In the meantime, China’s foremost stock market closed at 7.4% down the same day and some 18% down from fortnight back since several brokerage houses had tightened their margin trading rules. A data portrayed French and Italian consumer confidence rising though private sector loans from the 19 nation Eurozone increased by only 0.5% annually in May, as stated by the European Central Bank, inspite of 5% growth in the currency union’s broad money supply motivated by the new QE bond buying program of ECB.

 Gold has failed so far to see substantial safe-havenbids due to the on-going Greek crisis and the strength in the dollar has also stopped improvements. Higher prices attempts seem pointless with traders selling into rallies and bringing the prices quickly lower. Spot gold eased 0.1% to $1,168 an ounce by 0630 GMT and the metal increased as much as 0.6% early on Monday followed by Greek rejection on terms of the bailout package.

Investors Concerned – Major Macro Risks

However, it gave up most gains close to 0.2%. On Tuesday, US gold futures dropped to 0.5 percent. The price move indicated the growing evidence that gold cannot hold its weight against the face of market jitters according to an analyst at Phillip Futures, Howie Lee.

He commented that `while that suggest gold has lost some appeal as a safe-haven asset, more importantly it signifies the loss of interest in gold as an investment vehicle. Investor positioning reflected the same, established on US Commodity Futures Trading Commission data on Monday. In the week ending June 30, hedge funds as well as money manager increased their short position to the highest on record.

Non-commercial dealers increased their short positions to a two-year high. While, investors were still net long on gold, a week ago, bullish position fell drastically.However, in terms of transaction, 3 days of strong revenue in the Shanghai Gold Exchange’s domestic kilobar, contract trailed on Friday, by record high volume, with its premium doubling from the previous day to $2.60 per ounce over comparable London quotes.

A London bullion bank had commented that `more people getting involved is a clear sign that investors are concerned about major macro risks – Greece, Europe, China’, adding that the exchange trade trust fund vehicles backed by gold, saw strong inflows on Thursday.

Athens Speculating Proposal for a Deal

The benefit of gold had also been affected by prospects of higher US interest rates later this year which would have increased the demand for the dollar and reduce the appeal of non-interest paying bullion. The weakness in the euro, recently from the Greek crisis has supported the dollar.

Dollar index trading near a one month high was reached on Monday and according to a Sydney based bullion trader, focus was on the euro zone meeting to take place with any Greek debt deal is likely to send gold prices below $1,150.Athens is speculating in bringing a proposal for a deal to the summit after Germany and France informed Greece on Monday, to come up with thoughtful proposals for the purpose of restarting financial aid talks.

Edward Meir, an INTL FCStone analyst stated that `any movement towards an agreement would probably mean that gold’s staying power at current levels will prove to be short-lived’.

Interest Rates Could Stay 'Glued' to the Floor, Admits Bank's Chief Economist

Photo: CHRISTOPHER PLEDGER

Interest Rates Remain Glued to the Floor – Andy Haldane-Chief Economist

Reports have come in from the Bank of England’s chief economist, that the interest rates would remain glued to the floor for the instant future. It has been stated by Andy Haldane who sits on the Bank’s committee of interest rate setter that inspite of strong attempts in dislodging them; rates tend to remain stuck at unprecedentedly low levels across major economies.Presently the financial markets are speculating that the UK rates would rise from their lows of 0.5pc to around 2,5pc ten years from now which according to Mr Haldane implies an extraordinarily slow pace of monetary tightening at least by historical standards.

He suggested that policymakers, in trying too hard to raise rates would make the situation even worse, but on the contrary with in due course, they could come free of their own accord. He further stated that it is one reason why the glue holding interest rates to their floor has stayed so strong and feels no immediate need to loosen that glue.Mr Haldane has earlier considered himself as one of the Bank’s most dovish interest rate setters, indicated that he would prefer rates to be lower, instead of being higher. He comments that the Bank should be prepared to cut interest rates if it looks like low inflation and tends to become entrenched in the UK.

Interpreted Downward Drift as Evidence of Secular Stagnation

He has said that the glue holding rates low is remarkably resilient and could have been aggravated by deficient western investment together with additional savings in the east. While in conversation with Milton Keynes, Haldane has stated that `some have interpreted their downward drift as evidence of secular stagnation’, which is a concept that economies tend will grow slowly than in the past and this fear is an echo of concerns raised after the Great Depression. Consumers and businesses now are concerned that what is a reasonable recovery may not be permanent. Consumers are pleased that their glass is now less than half empty but they are no more willing to drink it and this cautious behaviour is to a degree, mirrored also among companies’.

Wage Growth Causing Fluttering 

Inspite of encouraging signs of wage growth during the year right up to April, together with rise in pay with its fastest pace from the time of the crisis, Mr Haldane had cautioned using the phrase `one swallow does not a summer make’. Analysts had informed that the pay growth could be even stronger after accounting changes in the UK’s workforce like the changing mix of employee ages, occupation and job tenures.

However, Mr Haldane has criticized the idea stating that `the wage growth is causing some fluttering though not in this dovecote’. It is now a matter of time to wait and watch for the outcome of the prevailing scenario on the interest rates in the near future.

How Crowdfunding is Exposing Bad Professional Investors

Crowdfunding Platform – Exposes Business

Crowdfunding is getting popular in the present world as an innovative method in which companies could generate funds and presently North America market is far advanced followed by the European market. Crowdfunding is the concept which comprises of funding a project or a business done through a number of individuals who tend to invest small amounts generally through a web-based platform.

Presence on a crowdfunding platform enables people to expose their business ideas to a large number of potential investors as well as business professionals. Fully funded crowdfund indicates that the group of investors and business professionals have faith in an idea and not just one investor. There is Equity Crowdfunding which involves a company offering equity share capital in return for the funding of cash which is not different with that of a Public Limited Company having share issue.

 But Private Limited Companies do not have access to Stock Market and the cost of going Public in most cases will be prohibitive for smaller or new companies. Crowdfunding thus, enables private companies with the benefit of raising capital from a number of investors through a share issue, minus the cost, regulations as well as reporting implications of being a Private Limited Company.

Google Search – Rise of Crowdfunding

Loan Crowdfunding on the other hand does not need any issue of shares by the company wherein one can just apply for a loan from investors at the agreed rates and the repayment terms. Instead of an individual or a fund provide offering the total amount of the loan needed, the business receives loads of small loans which could have various interest rates.In recent years, Google search has provided some data supporting the rise of crowdfunding and one that stems out from a study done by the World Bank, indicates that the global crowdfunding market would touch between $90 and $96 billion towards 2025.

Till recently, the number given on investing in start-ups and entrepreneurs was only reachable to people with deep pockets and the democratization quests is the major benefits of the rise of crowdfunding. The development of renowned platforms in the world, such as Kickstarter and Indiegogo, has provided many non-professional investors with the opportunity to back start-ups which tend to be appealing. Moreover, it could also provide a previously untapped way of capital for start-ups while acting as a competition for angel investing community and possibly also for the larger investment institutions.

Innovative Idea- A Game Changer 

Jeff Lynn, CEO of Seedrs, one of UK’s leading crowdfunding platforms had a discussion with Hot Topics on the factors behind the rise of crowdfunding, on his thoughts on professional investor as well as his advice on building a successful crowdfunding campaign.

Crowdfunding tends to be an innovative idea; however like anything which promises to be a game-changer, it also has its benefits as well as drawbacks that have to be measured. Several individuals would want to assist their colleague or neighbour in launching a new business, an idea or a product, help someone in need or pre-purchase some of the latest innovative product and crowdfunding could have the potential to do so.

Equity crowdfunding via a portal tends to expose many individuals to investments in start-up business through the internet and with crowdfunding; investors send money in exchange of intangible right without being aware of what happens to their funds invested. Recent investor survey carried out by the Ontario Securities Commission indicated that people in favour of equity crowdfunding were not aware of the risk. More disturbing was the fact that 12% of those identified as low risk tolerance were strongly interested in equity crowdfunding.

Implementation of Equity Crowdfunding Model 

Advocates recommend that the crowd would be capable of identifying fraud and weed out bad actors Experience together with research demonstrates that this is not the case; on the contrary investors tend to turn out to be victims of fraud at a shocking rate.Officials are probably proceeding in implementing an equity crowdfunding model and though the Canadian Foundation for Advancement of Investor Rights does not back an equity crowdfunding exemption individual could limit themselves to fraud and probable losses.

According to Jeff Lynn, `crowdfunding tends to be hard work and one of the issues which people always misunderstand is that you don’t just put up the listing and then wait for people to come and fund you. It is a tool for you to go into your networks and the public and get them excited about the deal’. They often inform the entrepereneurs that if they come there expecting that they will have to find the majority of the investments then a lot can be found from the network.

Crowdfunding tends to be useful in various ways, providing opportunities in fundraising for creative projects or for any start-up projects. It is a platform which enables the user to market their project, generate interest as well as receive funds. Its supporters could provide valuable feedback about a project and once the individual has settled with a stabilised support, there is no limit to the volume of projects one can fund.

How Much Cash is Too Much for Your Portfolio?

Cash Position – 6% - 30% Based on Age/Risk Appetite

As per Charles Schwab Corpn’s – SCHW robo-advisor, Schwab Intelligent Portfolios, the cash position of an investor should be between 6 and 30 percent based on age and risk appetite. If one would be looking for a precise percentage, advice from financial experts will inform the individual to focus on capital allocation of 60 percent stock, 30 percent bonds and 10 percent in cash.

Investors though who are more likely to take risk are the younger generations who don’t necessarily need a stable income and could have more capital allocated to stocks. Cash is king as well as trash and nowhere is cash said to be more controversial than using it by way of investment, where too much of it is considered to be a risk but how much could be `too much’?

The debate came up when Charles Schwab had launched Intelligent Portfolios which is an algorithm based platform that automatically builds and rebalances portfolios like the asset-management services of robo-advisors and his treatment of cash in platform had many eyebrows raised, leading to criticism of allocation to cash, depending on the investor’s risk profile.

How Much Cash an Investor Should Hold …?

Charles Schwab replied that there seems to be no right or wrong answer as to how much cash an investor should be holding as an investment and that it is a strategic decision. He further added saying that it is easy to question cash in the 6th year of a bull market and when the Federal Reserve is artificially suppressing interest rates, but they did not invest based on the last six years.

Investment was based on what can be expected in the future. Bull market end and interest rates increase and when they do, a little cash will feel pretty good’.The question raised was, how much should one hold in their brokerage account to which both sides seemed to agree and there was not a single answer that fits all circumstance. When people tend to discuss their investing portfolios they usually refer to the stocks, commodities, bonds and real estate that they own. Regarding cash and how much to hold in a portfolio is based on who you are and how you are investing as well as your investment perspective.

Cash Not As Asset Class – Call Option Which Can Be Priced

When Warren Edward Buffett an American business magnate, investor and philanthropist and the most successful investor of the 20th century had patiently held around $20 billion in cash, he thought of cash not as an asset class which is returning next to nothing but as `a call option which can be priced, relative to ability of cash to buy assets.’ He put in good use at the time of the financial crisis gathering deeply discounted bargains. Most of the investors, lack the discipline of Buffet.

When the market is rallying, cash in the portfolio tends to drag on performance, returning to around zero. The debate for cash in the portfolio is that it does not go down at the time of market crashes but enables the purchases of cheap assets like Buffett, at smart prices. However, investors rarely tend to buy when markets are crashing and are simple apprehensive, to take the plunge. Those who avoided the 2008 crash were stuck with too much cash in their portfolios as the markets recovered.