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Strategies & Market Trends : The Financial Collapse of 2001 Unwinding -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (503)	9/24/2017 1:40:04 AM
From: elmatador	1 Recommendation Recommended By John Pitera Read Replies (1) \| Respond to of 13775

The Next Crisis Will Start in Silicon Valley Forget Wall Street. Worry about fintech. revolutions often end in destruction. And the fintech revolution has created an environment ripe for instability and disruption. By William Magnuson September 18, 2017, 2:00 PM GMT+3 It has been 10 years since the last financial crisis, and some have already started to predict that the next one is near. But when it comes, it will likely have its roots in Silicon Valley, not Wall Street. The world of finance looks very different today than it did 10 years ago. In 2007, our biggest concern was “too big to fail.” Wall Street banks had grown to such staggering sizes, and had become so central to the health of the financial system, that no rational government could ever let them fail. Aware of their protected status, banks made excessively risky bets on housing markets and invented ever more complicated derivatives. The result was the worst financial crisis since the Great Depression. In the years since 2007, we have made great progress in addressing the too-big-to-fail dilemma. Our banks are better capitalized than ever. Our regulators conduct regular stress tests of large institutions. And the Dodd-Frank Act imposes strict requirements on systemically important financial institutions. But while these reforms have managed to reduce the risks that caused the last crisis, they have ignored, and in some cases exacerbated, the emerging risks that may cause the next one. Since 2007, a tremendous wave of innovation has swept across the financial sector, affecting almost every aspect of finance. New robo-adviser startups like Betterment and Wealthfront have begun dispensing financial advice based on algorithmic calculations, with little to no human input. Crowdfunding firms like Kickstarter and Lending Club have created new ways for companies and individuals to raise money from dispersed networks of individuals. New virtual currencies such as Bitcoin and Ethereum have radically changed our understanding of how money can and should work. These financial technology (or “fintech”) markets are populated by small startup companies, the exact opposite of the large, concentrated Wall Street banks that have for so long dominated finance. And they have brought great benefits for investors and consumers. By automating decision-making and reducing the costs of transactions, fintech has greased the wheels of finance, making it faster and more efficient. It has also broadened access to capital to new and underserved groups, making finance more democratic than it has ever been. But revolutions often end in destruction. And the fintech revolution has created an environment ripe for instability and disruption. It does so in three ways. First, fintech companies are more vulnerable to rapid, adverse shocks than typical Wall Street banks. Because they’re small and undiversified, they can easily go under when they hit a blip in the market. Consider the case of Tokyo-based Mt. Gox, which was the world’s biggest bitcoin exchange until an apparent security breach took it down in 2014, precipitating losses that would be worth more than $3.5 billion in today’s prices. Second, fintech companies are more difficult to monitor than conventional financial firms. Because they rely on complex computer algorithms for many of their essential functions, it’s hard for outsiders to get a clear picture of the risks and rewards. And because many of their technologies are so new and innovative, they may fall outside the reach of old and outdated regulatory structures. The recent proliferation of “initial coin offerings,” for example, has left regulators around the world scrambling to figure out how to respond. Third, fintech has not developed the set of unwritten norms and expectations that guide more traditional financial institutions. In 2008, when Lehman Brothers was teetering on the brink of bankruptcy, the heads of the largest Wall Street investment banks gathered in New York to coordinate their actions and prevent further panic. It’s hard to imagine something like that happening in the fintech world. The industry is so new, and the players so diverse, that companies have little incentive to cooperate for the greater good. Instead, they prioritize aggressive growth and reckless behavior. So what can make fintech safer? There are no easy answers, but a start would be to look beyond the U.S. Entrepreneurial governments in Abu Dhabi and Singapore have launched new “regulatory sandboxes,” where fintech companies can cooperate with regulators to ensure the safety and soundness of their businesses. London’s Financial Conduct Authority has created a similar program. These kinds of arrangements hold significant promise. But more important than how we address fintech is that we recognize the need to address it. Wall Street is no longer the future of finance. Silicon Valley is. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. To contact the author of this story: William Magnuson at magnuson@tamu.edu To contact the editor responsible for this story: Mark Whitehouse at mwhitehouse1@bloomberg.net

To: John Pitera who wrote (503)	10/17/2017 10:26:42 AM
From: elmatador	1 Recommendation Recommended By John Pitera Respond to of 13775

Emerging Markets Will Be Key Drivers of Global Growth The IMF’s 5-nation growth lineup is especially positive about India and Brazil. By DIMITRA DEFOTIS October 14, 2017 The market already knew, but the International Monetary Fund confirmed it last week: Global growth is on track and many developing countries are fueling the economic expansion. The IMF expects global growth of 3.6% in 2017, and 3.7% in 2018, a very slight upward revision from its July forecast. For developing economies, the IMF maintained its 4.6% GDP growth estimate for 2017, but raised it by a tenth of a point to 4.9% for 2018. The IMF’s assumptions are, in general, good for emerging markets. Those include generally higher commodity prices next year, but a relatively flat $50-per-barrel oil price this year and next. The IMF also assumes a gradual normalization of the policy interest rate in the U.S., a slightly weaker U.S. dollar, and no U.S. tax cuts—to President Donald Trump’s consternation. The report notes risks to the rosy outlook, including debt, a shift by central banks away from monetary stimulus, and weak profitability at a third of the world’s systemically important banks, which represent $17 trillion in assets. Here’s the IMF’s outlook for some of the largest emerging economies: China (2017 GDP growth, 6.8%; 2018, 6.5%): The IMF raised its growth estimates by a small amount for each year, saying China is benefiting from recovering demand for its exports. Domestically, the economic refocus on services and consumption is likely to bear fruit, but the IMF warned that Chinese authorities must accelerate their efforts to curb the expansion of credit to avoid “a sharp growth slowdown in China, with adverse international repercussions.” Brazil (2017 GDP growth, 0.7%; 2018, 1.5%): The supranational agency more than doubled its growth estimate for this year and raised it for next year. It noted that the beleaguered nation should benefit from strong export growth and benign inflation. Each has helped to reverse a stubborn recession, exacerbated by corruption and political scandals that continue to unfold. India (2017 GDP growth, 6.7%; 2018, 7.4%): The IMF moderated its estimate a bit for 2017, and cut still further for 2018 as a new national goods-and-services tax adds to the lingering negative impact of the government’s November 2016 currency demonetization. While inflation is tame and India benefits from lower prices for commodity imports, the IMF attributed the lower forecasts to India’s uneven transition from a cash-based society to one being pushed toward digital banking and mobile payments. But the IMF said these changes will ultimately help India’s economy expand at an 8% pace “in the medium term.” Russia (2017 GDP growth, 1.8%; 2018, 1.6%): With the economy healthier than expected after two years of recession, thanks to recovering demand and lower inflation, the IMF raised Russia’s growth estimate for both years. Stable oil prices have helped the recovery, but Russia will need them to rise well above $50 per barrel to accelerate economic growth. South Africa (2017 GDP growth, 0.7%; 2018, 1.1%): Because allegations of influence peddling have weakened the ruling African National Congress party and sapped consumer and business confidence, the IMF shaved its growth outlook for both years. The party’s December elections will determine the favorite to replace President Jacob Zuma in 2019. The mostly encouraging outlook helped lift the iShares MSCI Emerging Marketexchange-traded fund (ticker: EEM) to another 52-week high.