How technology has changed trading

Technology has changed trading in a multitude of ways, the first of which being increased market volatility. It has never been easier to trade than in this day and age, where at the click of the button, you can buy or sell shares in a company, and this trade will be registered in a matter of microseconds. As a result of this, more people than ever are getting into trading, and this means that the concept of a “herd mentality” is stronger than ever. When someone gets a tip from a trader who has a reputation for getting it right more often than not, they will pass this information on to their friends, which will result in a chain reaction. Therefore, share prices will have larger swings, as a result of the greater volume of trading.

Moreover, a greater emphasis has been placed on shorter term trading, which is, in turn, leading to the increased popularity of CFD trading. The new, younger generation have been conditioned to want everything in a matter of seconds, as that is simply how they have been brought up, in an world where it is becoming increasingly easy, in this rapidly developing world, to have all your whims and fancies served up to you on a silver platter. This is why trading on short term fluctuations is ideal for the younger generation, and also why scalping has become so popular in recent years. The young people of today want profits, quick and easy, and CFD trading is a excellent avenue to provide that.

While it is a good thing that lots of young people are getting into trading, it also means that there has been a disturbing “blurring of the lines”, if you will, between trading and gambling. Analysing the charts, and using moving averages and the like is slowly becoming obsolete, with people simply wanting to trade to make a quick buck. This means that share prices are now becoming more and more random, so, in fact, these young people are also taking the adults down with them, and it is becoming harder and harder to make a profit. While I acknowledge that young people do not make up such a large proportion of the trading contingent as perhaps the older traders do, I see the proportion of young people trading proliferating over the next decade or so, and they will become a crucial factor in share price movements, even more than they are already.

Finally, the introduction of technology into the trading landscape means that financial markets are more susceptible to manipulation and exploitation than any other time. A recent example of this would be the case of Navinder Singh Sarao, who caused the 2010 “flash crash” where prices fell and then rose in massive amounts, all in a matter of 20 minutes. When technology was not used in trading, and you simply had to give orders to your broker, the system was less susceptible to manipulation. With the growing explosion of young computer “geeks”, there are more and more people who could be a threat to financial markets, and, dare I say, they are more in danger than ever before.

A brief analysis of the 2015 Conservative manifesto from an economic and financial point of view

The main economic pledge made by the Conservatives is to eliminate the deficit by 2020 and to be running an overall surplus by that time. Judging by the Conservatives’ last five years in charge, this seems to be a very real prospect. It is true that only when you eliminate the deficit that you can start eliminating the national debt, and Cameron seems very well on the road to that. In my opinion, he is the perfect antithesis to Labour, and the note that said “we have no money” which he so religiously parades, and with good reason! In this regard, Cameron in power is very good for the country. Politicians have a reputation for lying and breaking promises, however, this is one that Cameron has not broken in the past five years and hopefully will not repeat if he is declared incumbent on May 7.

However, some aspects of the manifesto are largely unsubstantiated, such as the pledge to give £8 billion a year to the NHS till 2020. This seems all very well and good on paper, but when you actually analyse this, you come to the ironic fact that if you would ask a Conservative about this in 2017, for example, they would respond with the words of that Labour note: “I’m sorry, there is no money”. In this regard, it feels like Cameron is simply trying to garner more votes and will not actually carry out this pledge if he is declared incumbent.

Having said this, the Conservatives seem to be the party of the working people, yet again, as evidenced by Cameron’s pledges to raise  the personal allowance to £12,500 and  the 40% tax threshold to £50,000. In addition to this, he also wants to reduce the benefits cap. This means that if the Conservatives are declared incumbent on May 7, that the working people will benefit the most from Cameron’s pledges, however not so much the non working contingent, who are reliant on the state. This is the reason why this sector of the population are largely voting Labour, as reducing the benefits cap is a massive no-no to them.

If you are working, however, you would welcome with open arms their pledges regarding the personal allowance and tax threshold. Simply, this means that you get to keep more of your own money, and thus have more disposable income to spend on necessities and the occasional luxury. This is a superb idea, which means that the working person is rewarded for his or her work more, and might be the one which swings the Conservatives into power once more.

Cameron also pledges no rise in VAT or national insurance contributions, which the majority of the public will swat away with ease, for he said this exact same thing five years ago, and within a matter of years, VAT was raised to 20%. As such, this policy which reads good on paper could actually be a detriment to the Conservatives, as people will see them as the same old party, who definitely will not be fooling the public again.

Why Ed Miliband and Labour could shatter the allure of the UK

First of all, thank you all so much for helping me attain 20,000 views! I never thought that my blog would get this much traffic when I started, so the views have really surpassed my expectations.

If Ed Miliband is elected in the upcoming 2015 General Election, he proposes raising money for the social services such as healthcare and education by taxing the rich more. It is evident that he has not looked at France’s failed social experiment, where the levels of brain drain are at all time high, with the most skilled and most prestigious workers leaving, and ones from other countries not considering coming at all.

Just because Mr. Miliband evidently hasn’t looked at France’s failed experiment yet, that doesn’t mean that I’m going to overlook it. Francois Hollande came to office in 2012, and France’s economic growth has since stagnated from 2.1 percent in 2011 to just 0.3 percent in 2012 and 2013. The allure of France to the rich and powerful has been completely shattered. Would you want to live in a country which taxes high earners at a rate of 75 percent? Granted, Mr Miliband is only proposing taxes of 50 percent to people earning above £150,000 – but then where is the attraction?

We live in a society that is simply obsessed with money, and this intrinsic trait will only be exacerbated higher up on the totem pole. It may be true that Miliband will raise a little more money and cut the deficit somewhat more through this, but when faced with the Conservatives’ long term economic plan, Miliband’s tax falls flat. People will not want to go to places where more of their money is being taken away and handed to the state, plain and simple.

This high rate of tax is only compounded by Mr. Miliband’s proposition of a new mansion tax on homes above £2 million. If you take all of these factors into account, this means that the richest of the rich and the most powerful people in society will not be attracted like moths to the bright light that once was the UK, but the UK will be a giant dark spot where the richest and the most powerful fly away to.

Given that quite a large proportion of the rich, such as the Hinduja brothers, are heads of global conglomerates, if they left the UK and their company subsequently reallocates themselves, unemployment will increase substantially. How would Ed Miliband like to pay thousands of extra sets of benefits?

My opinion of Shell buying BG Group

With the large decline of energy prices, in particular oil prices, it was inevitable that there was going to be at least one major acquisition in the energy sector, and that is exactly what we got, with Royal Dutch Shell acquiring BG Group. The merger is for £47 billion at a 50 percent premium to its closing price on Tuesday, and is one of the biggest deals of the year so far, subject to being approved by shareholders and regulators. The combined group would be the biggest producer of liquefied natural gas in world by far.

The terms of the deal state that BG shareholders will receive £3.83 in cash and 0.45 Shell B shares for every BG share they own. This means that each BG share has a valuation of £13.50, which works out as a 52 percent premium to the average price of the shares over the past 90 days. BG shareholders will end up owning roughly 19 percent of the combined group. In my opinion, a deal like this was inevitable as BG’s share prices fell 30 percent in the last year, and the company themselves were struggling financially as a result of oil prices declining by almost 50% to $59.10. They were not the only ones, with shares in Tullow Oil falling a whopping 65 percent and shares in Premier Oil down 55 percent.

In Egypt, gas reserves were diminishing rapidly and this also pushed BG’s profits down to $915 million in the three months which ended on December. The writing was on the wall quite some time ago, in actuality, as BG was forced to take down its oil and gas assets by $9 billion in February and paved the way for new chief executive Helge Lund from Statoil a month early. His arrival makes him the third chief executive in as many years, and BG had no boss for almost 12 months after Chris Finlayson departed after the release of poor results. This showed tremendous instability, in my opinion, which was not good for shareholder goodwill and was a contributing factor in the declining share price.

This deal will be highly beneficial for Shell, if not only for expanding their reserves of oil. It is estimated that Shell have already spent around $6 billion searching for oil in the seas off northern Alaska, with no result. As such, this recent acquisition means that Shell can expend their reserves without spending a significant amount of money on exploration for oil, and while the deal may be a somewhat more expensive alternative, it means that Shell have a large reserve base, with their oil and gas reserves increasing by 25 percent and its production capabilities by 20 percent. They know they can utilise these, and surety of thought is always good, not least when running one of the biggest energy companies in the world.

In the words of Shell chairman Jorma Ollila, the deal will result in a “more competitive, stronger company for both sets of shareholders in today’s volatile oil price world”. This is true as no-one knows where oil is going to go at the moment, and opinion is divided on whether it will go down to $30 a barrel or come cascading up to $100 a barrel. As such, this bigger company formed by the merger will be an even bigger player than Shell on its own was, and thus can cope with lower, volatile oil prices much better than they could have otherwise.

On the assumption that oil prices will be $67 per barrel in 2016, $75 per barrel in 2017 and return to $90 per barrel between 2018 and 2020, Shell expects a 15-$20 billion cash flow per year. While upstream operations including downstream refining, will add another $15-$20 billion , on-stream activity will see an additional $10 billion of cash flow per year. This means that Shell will see a return on their investment in the fourth year, which is quite good and means that the share price of Shell should continue rising. All in all, a great deal for both parties.

What I think the Iran nuclear deal could do to crude oil prices

The Iran nuclear deal that was recently agreed provisionally on Thursday could do many things to the price of oil, but what it definitely means is an influx of supply at some point down the line – close to 2 million extra barrels a day, in fact. This influx of supply is set to lower the price of oil as supply further outstrips demand. Some are saying that oil could fall to $30 a barrel soon enough. However, some may remain uncertain that the deal will even be agreed, with a deadline set at July 30 for a final deal to be agreed or waved away.

However, as Colin Cieszynski, chief market strategist at CMC Markets, said: “An outline of an understanding is a good start anyway, but not a final deal. [The] news conference could send oil lower if it includes a clear timetable for when more sanctions are to come off and oil released into the market place. Otherwise, much of the reaction may already be in the market.” As we do not know when Iran will be allowed to export vast reserves of oil, the supply will not change soon, and this means that the price of oil will, therefore, not substantially change right now.

Moreover, as the market was already expecting the framework of a deal to be announced, the reaction in the market will be limited, and, as such, the actual announcement will not affect prices that much. Further to this, even if the sanctions against Iran are lifted, they will not be allowed to export oil for at least another year, so if one is investing for the short term, they do not need to worry, because the long term repercussions are more poignant than the short term reactions.

It may, also, be difficult for Iran to meet the requirement of clarifying whether they conducted research on missile-borne nuclear warheads. Taking all of these important factors into account, the Iran nuclear deal will not, in my opinion, have a profound effect on oil prices for now, but a year from today, that could be a very different story.

Austerity: good or bad?

One of the big issues globally, and more specifically in the UK before the General Election in 34 days time, is austerity. Is it good or bad? Should we impose it or not? Personally, I believe that budget deficits are too high and need to be reduced, especially in the UK where the deficit is at £91 billion, with Cameron having reduced it by a third in his five years in power. However, in this post I will hope to assess the pros and cons of austerity, and leave you, the reader, to make your own judgement.

Firstly, if you cut the budget deficits by austerity, it will give investors greater confidence in your country, as it shows that you have a greater degree of control over your expenditures and revenue, and bringing them closer together means that the private sector will also have greater confidence with which to invest in your country, which is very good for the country as a whole, and the civilians too by virtue of more employment.

There’s also the issue of morality. Why should people spend money that they just don’t have? Some would argue that one should only spend money when they have it, and borrowing more money and increasing the deficit day by day just isn’t right, in moral terms.  One could argue that one of the only ways to cut the deficit is by austerity, and until the deficit is cut to 0, the government has no right to spend money when they are already in hundreds of billions of pounds of debt.

An argument commonly propagated against austerity is that it will hinder economic growth. However, one just has to look at countries such as Canada, where, in the 1990’s, they cut fiscal deficit but still maintained relatively strong economic growth. This means that austerity is not a sure fire guarantee to hinder economic growth – it can be imposed without doing so.

However, some could say that countries who have imposed austerity have not necessarily benefitted economically from it. Countries such as Estonia, Latvia and Ireland still have a lower GDP than when austerity was imposed, and as such, one could argue that the same thing could, possibly, happen to Britain as well. Although some stories such as Canada’s seem relatively bulletproof, one could say that that was 20 years ago and we live in a different time to then.

Finally, there is no rock solid evidence that cutting government spending increases investor confidence. One could say that when the coalition came into power and announced spending cuts of £81 billion, then consumer confidence dropped to record low levels. As such, one can only hypothetically state that austerity would increase consumer confidence, and would only be plugging an unsubstantiated opinion.

Thanks for reading! Stay tuned for my next blog post.

Why I would not invest in companies that have a questionable history

As I write this, thousands of workers who produce goods for companies such as Nike and Adidas are still on strike for a fifth day in Ho Chi Minh City over social insurance cover. According to the Guardian, these sorts of things are a relatively rare occurrence, but Nike, in particular, has a well documented history of poor working conditions and disregard for environmental degradation. Although Nike shares have been constantly rising for the past 5 years, people who invest in their stock are propagating the idea that what they do is somehow right.

Personally, I would not want to promote the idea that exploiting thousands of workers and paying them less than minimum wage in sweatshops is okay. Companies such as Nike, where the money they make is the most important thing will only listen when there is a lack of investment. Even though I acknowledge that one person not investing in them will not make a considerable difference, I would not want to be part of this growing general consensus that it is only the data that matters when investing.

In my opinion, one should also take into account the human values that the companies choose, and in a utopian world, the companies growing the most rapidly would be the ones with better conditions for workers, not higher dividend yields or anything of the sort. What makes a company great, in my opinion, is if they can maintain or even improve profits and sales without having a visible history of poor working conditions in LEDCs and NICs such as the aforementioned Vietnam.

People investing in these companies will not set a good precedent for that to happen in others. As the public, we need to incentivise these companies to clean up their record by giving them an ultimatum, that we will not invest unless these companies make sure that they do not exploit these poor workers, and, as such, their share price will decline. Am I thinking of a far too idealistic society? Maybe. But at least it’s what should happen.