NEWS,20.11.2012

Seven And A Half Things To Know: Fiscal Cliff Spurs Super-Rich Panic

Thing One: Super-Rich Super Panic: Rich Americans likely have the most on the line as we near the fiscal cliff, the New York Times notes. Their tax rates would rise under the President's plan or if lawmakers don’t reach a deal. Some are taking action in advance. The Walton family, which founded Walmart, may save as much $180 million in taxes thanks to the company’s decision to push up its dividend payout to December from January so investors can count the income for this year, according to The New York Times. If Obama and Congress fail to reach a deal this year the tax rate on dividend income could more than double. But as The NYT notes in a separate article, under Obama’s plan, rich is defined rather broadly. It could mean the super-wealthy Waltons or an individual or small business owner making more than $200,000 per year.Meanwhile, corporations also stand to lose: More than $150 billion over 10 years in tax breaks, according to the Financial Times. Some business leaders say they would graciously agree to help America by giving up their corporate tax breaks so as long as they come with more complete corporate tax reform next year. Still, it’s likely what business leaders want the most is for lawmakers to reach a solution. Stock indexes rose to their best day in two months on Monday on optimism that lawmakers would agree to a deal, according to the Wall Street Journal. There’s at least one CEO out there claims he’s willing to give up tax breaks for a solution, NASDAQ head Robert Greifeld said politicians need to worry less about “winning” and admitted that “broadening the tax base” may be necessary to get the necessary deal done. Thing Two: Walmart's Thanksgiving May Be Ruined: As Walmart’s founders are looking for ways to skirt higher taxes, some of their employees are protesting the company’s decision to make them work on Thanksgiving. More than 30,000 people have already signed an online petition protesting the company’s decision to open on Thanksgiving Day. Meanwhile, the Wall Street Journal reports that labor officials are trying to decide as soon as possible whether to seek an injunction on behalf of Walmart to stop planned protests at 1,000 of its store locations on Black Friday, the biggest shopping day of the year. Walmart claims the protests are an illegal disruption of business. Thing Three: The Twinkie Is Saved: Twinkie enthusiasts calm down, you’ll still be able to relive the tasteless 1950s as often as you’d like. Hostess Brands, the makers of Twinkies, agreed to mediation, with the Bakers Union, the group the company claimed was forcing them to liquidate. But don’t stop hoarding Cup Cakes and Ding Dongs just yet, the company isn’t positive it will reach a solution, a Hostess spokesman told the Financial Times. The two sides will meet with the bankruptcy judge that ordered the mediation Tuesday in an aim to reach a new contract and save 18,500 jobs, according to the Wall Street Journal. If they can’t reach a deal, Hostess will be able to move forward with its plans to liquidate.Thing Four: Eurozone Crisis Still Not Over: The European crisis rages on and yes, leaders are still fighting about what exactly to do. European finance ministers are racing to find a fix after deciding last week to give Greece two extra years to cut its budget deficit creating a $19 billion hole in the country’s finances and angering the IMF, according to Bloomberg. Meanwhile, France, one of the region’s stronger economies isn’t faring too well. Moody’s cut the country’s credit rating and slammed President Fancois Hollande’s attempts to fix the economy, according to the Wall Street Journal.Thing Five: Ex-Trader Found Guilty Of Losing Lots Of Money: In the continuing saga of finding others to blame for banks’ risky behavior, ex-UBS trader Kweku Adoboli was convicted of one count of fraud for losing the bank $2.3 billion, according to Reuters. In defending himself Adoboli had said that his managers encouraged him to push the risk limits, adding that his huge loss came “in pursuit of the goals set by our leadership.”Thing Six: Credit Suisse 2.0: Apparently when one of your rivals cuts 10,000 jobs it makes you consider a few things. Credit Suisse is splitting off its investment bank unit outside Switzerland from its global wealth bank, Swiss investment banking and wealth management units in an aim to meet the “new regulatory reality,” according to the Financial Times. The move comes just a few weeks after rival UBS slashed 10,000 jobs in its investment banking unit. The move will likely keep the bank less vulnerable to the whims of international markets and corporate finance. The bank might also get another thing added to its plate soon. The New York Attorney General’s office is planning to file a lawsuit against Credit Suisse, alleging that the bank misled investors on the quality of its mortgage-backed securities in the lead up to the financial crisis, according to Reuters. Thing Seven: People Still Don't Like PCs: The death of the PC claims another victim. Intel CEO Paul Otellini announced yesterday that he’s stepping down from his post early after not successfully shifting the chipmaker from a PC-based business to a mobile business, according to Bloomberg. The unexpected announcement may indicate the depth of the company’s woes, Intel is typically known for careful succession planning and Otellini could have stayed on for another three years, according to the Financial Times.Thing Seven And A Half: Your Favorite Thanksgiving Moments Revealed: Just two more days for Thanksgiving and the best holiday of the year can’t come soon enough. Here are the 15 best moments of Thanksgiving (many in gif form) via Buzzfeed to get you through these last 48 hours of work.

 

China escalates subsidies spat with US

China is to ask the World Trade Organisation to rule on its latest commercial spat with the United States, the WTO said on Tuesday, hoping it will back Beijing's complaint that punitive US tariffs imposed on a raft of Chinese goods are illegal.In a move that deepened the dispute, China will ask the WTO to set up a three-person dispute panel at a meeting on Nov. 30. If China wins the case and any subsequent appeal Washington could be forced to drop the tariffs it levied on 31 Chinese products which it said were being traded unfairly.The US tariffs affected photovoltaic cells and modules used in solar power, various steel products, off-road tyres, aluminium goods as well as towers for windfarms.Such capital-intensive and cyclical commodity products have frequently been at the centre of trade disputes as national industries have asked governments to step in and stop foreign competition from destroying profits and jobs.Steel products have frequently been involved, as more recently have solar power components, with the oversupplied global solar industry struggling to maintain its profit margins.The United States has been a fierce critic of what it says are clandestine Chinese subsidy programmes, but Beijing says Washington's efforts to tackle suspected wrongdoing have gone beyond the rules.China's complaint targets Public Law 112-99, which was signed by President Barack Obama in March, as well as US steps taken against suspected export-distorting subsidies between Nov. 20 2006 and the passage of the contested law.In a WTO filing, China said the US law had broken the rules because it applied retroactively to suspected Chinese subsidies as far back as 2006.The United States was also at fault, China said, because it used "double remedies" against China between 2006 and March this year.Double remedies means targeting the same Chinese exports twice over - once for being subsidised and once for being "dumped", or sold at unfairly cheap prices.China launched the complaint in September, just hours after the United States lodged a similar complaint against China's support for car exports.Under WTO rules a country accused of breaking the rules has 60 days to try to resolve the complaint, after which the complainant can ask the WTO to set up a panel of adjudicators to judge the merits of the dispute. The WTO's ruling is likely to be made public in mid-2013.

Watchdog investigates lending practices

Britain's consumer watchdog has launched investigations into several payday lenders over aggressive debt collection and expressed its concern about general poor practice within the sector.Payday lenders offer short-term loans, which are intended to be paid back when borrowers receive their wages. Britons have increasingly turned to these loans as mainstream banks have tightened their criteria for granting short-term credit."We have uncovered evidence that some payday lenders are acting in ways that are so serious that we have already opened formal investigations against them," David Fisher, the Office of Fair Trading's (OFT) director of consumer credit, said on Tuesday."It is also clear that, across the sector, lenders need to improve their business practices or risk enforcement action."The OFT identified issues around debt-collection practices, the adequacy of affordability checks made by lenders, the number of loans not repaid on time and the lack of forbearance shown by some lenders when borrowers get into financial difficulties.Wonga.com, which offers individuals short-term loans of up to 1 000 pounds, more than trebled its earnings last year. Like other payday lenders, the company has faced criticism that its annual percentage rate (APR), listed on Wonga.com as 4 214%, takes advantage of the financially vulnerable.The OFT is reviewing the whole sector and has said that some firms will face enforcement action if they do not improve their practices.Wonga said that it welcomed the OFT's review. "We provide a valued, transparent service to more than a million customers and want to see rogue practices rooted out across all financial services," it said.The OFT will publish a full report next year and state whether wider action is needed to tackle problems in the sector.

NEWS,17.09.2012

Billionaires score over millionaires

Many millionaires got poorer in the last year, but billionaires did just fine, using their heavyweight money management teams to ride out market and economic turmoil that hit the lesser rich, research company Wealth-X said on Monday.The ranks of people with at least $30m edged up to 187 380 but their total wealth fell 1.8% to $25.8 trillion - still a sum bigger than the combined size of the US and Chinese economies, Wealth-X said in a report.Hardest hit globally were those in the $200m to $499m range, whose numbers dropped 9.9% and whose fortunes shrank 11.4%, the World Ultra Wealth Report said, using data for the year through July 31.But the really, really rich got even richer as the number of billionaires rose 9.4% to 2 160 people and their wealth grew 14% to $6.2 trillion."Even at a billion or two billion, they have a much larger entourage, they have much more in the way of investment advice. They certainly get the attention of every major bank," Mykolas Rambus, Wealth-X's chief executive officer, told Reuters. "This was the issue about that mid tier, the $100m to $500m risk land. I don't think it appears these guys employ enough talent to help their own portfolios plus their holding companies to be successful."As Europe struggles and the US economy recovers fitfully, the affluent are shifting away from speculative investments into private companies, commodities and property, said Wealth-X, a Singapore-based firm that provides intelligence on the ultra-rich to banks, fundraisers and luxury retailers.Asia suffered the worst regional loss of wealth, with a fall of 6.8% to $6.25 trillion due to weaker equity markets and lower export demand from the West, it said.While wealth also shrank in Europe, Latin America and the Middle East, the rich saw their fortunes grow in North America (up 2.8% to $8.88 trillion) and Oceania (up 4.4% to $475bn) - much of that in Australia.But Asia's rich cannot be discounted, Wealth-X said, as the fall in wealth in Japan, China and India - home to 75% of ultra high net worth (UHNW) Asians - will reverse, based on the strength of the region's financial systems and economies."Total Asian UHNW wealth is forecast to surpass the US combined wealth by 2020," it said.

Private banks target the super rich

 

What do you get the client who has everything? An evening at a sleep school to get tips on how to beat insomnia? A chance to play cricket with former England star Andrew Flintoff? Advice on finding the right school?These are just some of the services offered by Barclays in its "Little Book of Wonders," underscoring the lengths to which the bank is prepared to go to win the custom of the super-wealthy at a time when its traditional businesses are struggling with weak economies and tougher regulators."There is more to wealth than managing one's assets," said David Hughes, Head of Affinity Partnerships at Barclays, which oversees the Little Book of Wonders. "This is a complement to the financial advice we give clients and a recognition of the world in which our clients exist."Attracting the business of wealthy clients, worth an estimated $42 trillion globally, is critical for banks seeking not only to maintain their profitability, but also to diversify their sources of funding and reduce their reliance on capital markets."Private banking, given the relatively lower capital requirements and the fee based nature of revenue is an area of growth and competition which is expected to increase," Jill Zucker, a partner at McKinsey's, told Reuters.Private clients pay on average 1 percent of assets under management in fees to their wealth managers each year, estimates specialist wealth management consultant Scorpio Partnership.Banks are keen to attract such fees as profits remain squeezed in other parts of their business, from high street lending to commercial and investment banking.For example, Barclays reported a 38 percent rise in adjusted pre-tax profit in its wealth and investment management division in the first 6 months of the year compared with a 15 percent rise in its retail and business banking and 11 percent rise in corporate and investment banking.Coutts, the 300-year old British bank which counts Britain's Queen Elizabeth among its clientele, is beefing up its non-financial services to hold onto elite customers.Ian Ewart, head of product, services & marketing, said the bank still loved to whisk away clients on horseracing jaunts and to a welter of events hosted in the social calendar of the glitterati - including the Cowes Quarter Ton sailing regatta and annual British Academy of Film and Television Arts awards bash.But as entrepreneur clients start to outnumber heirs and heiresses, who tend to have a different outlook, Coutts is spending more time, effort and money satisfying a thirst for intellectual "entertainment" and high-level networking in a business world where success increasingly depends as much on 'who you know' as 'what you know'.A new thought leadership series called Futurescope has been designed to help the bank's entrepreneurial customers analyse future macroeconomic issues and identify moneymaking opportunities in this decade and the next."Our clients can buy whatever they want for the most part. What they cannot buy - which is also what they really need - is to connect with people like them, to hear new ideas. The experience is far (more) important than a luxury freebie," he said.Tale of two millionaires But in expanding the breadth and depth of services offered, private banks will have to make sure the extra cost is worth their while as profit margins in wealth management buckle under the increasing cost of regulation, compliance and technology.The global wealth management industry is now paying $8 to generate every $10 of income, calculates Scorpio Partnership in its closely watched annual health check of the global private banking sector in July."The question of how you can continue to cater for clients that might be less profitable for you in the future is a difficult one," Coutts' Ewart said.In the case of its Little Book of Wonders, Barclays declined to disclose the cost of building and maintaining the online portal, saying it was part of its overall investment in its wealth management platform.In an attempt to offset the costs of providing the service, the bank has offered the luxury brands the opportunity to advertise, for a fee, on its Little Book of Wonders portal.Banks will pitch services such as Futurescope or the Little Book of Wonders to a select set of clients depending on their wealth and how they've made their money rather than offering blanket invites, to preserve the exclusivity of the offers.But as clients question the fees they pay, especially in an environment where investment assets are delivering lacklustre returns due to ongoing economic uncertainty, additional services not seen as essential to business needs might raise eyebrows."If there are fancy chandeliers and teacups, some clients might assume they are paying too much in fees," said Zucker.Such services are often tailored to the ultra high net worth individuals, with assets greater than $25 million, who are not only costing the banks more but are also not necessarily the most profitable.So-called 'Core Millionaires', with assets of between $1 million and $10 million, generate investment revenue margins on average two to three times higher than their wealthier counterparts, making greater use of more profitable banking and lending products, a survey by McKinsey estimates.These Core Millionaires are also projected to generate 60 percent of asset growth amongst all households with more than $1 million in assets by 2015."They're a bit of a lost set of clients," said Zucker. "Banks need to tailor their offering so there is growth in different market segments."So, where does this leave the Little Book of Wonders?A junior member of one of Britain's most successful entrepreneurial families, whose mother recently switched private banking allegiance, was sceptical that affluent individuals would be tempted to change banks based on free offers."Would clients be impressed by that? No way," said the family member, who declined to be named. "They just want to make sure that their banking is done, that their transfers happen, that they can speak to someone when they need to," he said.