Thursday, 19 September 2013

The Economist

Today's post is going to be about The Economist. Reason: I've been made the Student Brand Ambassador for The Economist on campus at the University of Birmingham. Therefore, my role is to promote the brand to students on campus - however it can also be relevant to anybody with an interest in current news, whether it be economic, financial or political.

In general terms, The Economist is a fantastically well informed weekly newspaper that can be delivered to your door. Each issue gives a brief run-down of the political and business news of the week, then further goes on to give in depth articles on matters affecting Britain, the US, Europe, Asia, The Americas, business and finance.

The main audience I'm targeting, however, is students. The Economist acts as excellent supplementary reading for those studying degree courses in economics, finance, politics and many more. For students, this is invaluable. I found in my first year at university that having knowledge on current affairs was essential for my exams, with questions asking for real life exams to back up concepts being discussed. The fact I regularly read The Economist meant I was in a position to answer these questions. Second big selling point (similar to the first, I know) relates to the job market. Through personal experience, I've found out that interviews for spring weeks/internships/graduate jobs(I assume) all require you to know how your chosen industry is being affected by current affairs. A degree alone is no longer good enough, you need a lot of further knowledge about your chosen sector - and The Economist is a good way of getting this. The final selling point is for referencing terms. The deal gives you full access to The Economist online which gives you a fully searchable archive dating back to 1997. Perfect for pulling up past news as a reliable source for referencing in coursework and essay tasks.

The student deal currently being offered is a staggering 90% off of the standard price. It is now possible for students to get themselves 12 issues for £12, which will cover you for a term at university. After that period has expired you'll be paying £38 per 13 issues, however the offer is on a completely no contractual basis. The deal can be cancelled at any time, meaning as soon as the offer period has expired you can walk away from the subscription if you so wished. In addition, the subscription can paused for up to a period of 4 weeks. This is extremely useful during exam periods when there isn't the time to read and when on holiday or away from the home. The subscription can be restarted again with the click of a few buttons.

What's more if you sign up now you get a free mini speaker!

So, here's a brief summary of what The Economist is offering to students:
- 12 print issues for £12
- No contract, cancel the subscription at any time.
- Full access to The Economist online - giving an archive of news dating back to 1997.
- The ability to pause your subscription for up to 4 weeks.
- All of this available on your smart-phone and tablets. (iPhone, iPad, Android devices, Blackberry)
- Free mini speaker.

Follow this link to subscribe now: The Economist Subscription

If there's any other questions about The Economist feel free to comment and I'll be very happy to help you out as soon as I can.
Cheers guys.

Thursday, 1 August 2013

The Curious Case of the Free Money

So, a combination of too much free time and increasing boredom meant I did a bit of personal accounting. The thrill. Upon closer inspection of my Santander student account, I noticed I get an overdraft of £1500 (I'm not one to overspend), but more intriguing is the line of text below my overdraft limit: "The fee for using an Arranged Overdraft is £0.00 per day". No fee for using this overdraft? Hmm. So much potential.

Essentially, a student account needs to have some form of overdraft because of the tendency for some youths to overspend drastically in week one of university and be stuck for the remainder of the term. Mine comes with a condition that £500 is paid into the account every academic term. Simple, the maintenance loan covers that. So, my bank is giving me access to £1500 worth of free money to do what I will with for the duration of my year at University. Is this money really free? In essence, yes it is. But in truth, if you're haphazard with your money I wouldn't view it this way.  It isn't free forever, and there will come a time when the bank will try and charge you for using it - if you cannot pay it back at this point that free money has just turned into expensive money. You see, banks use their overdraft as a way of praying on unsuspecting students. They know the stereotype that students spend all of their money on booze and parties and use this to their advantage. Force these students into their overdrafts, thinking their safe, up until a point where they cannot pay the money back and slap them with a huge charge. Not great.

If you're good with money - savers particularly, investors preferably, then there is profit to be made here. The bank is giving you £1500 (£1200 to be safe, or whatever your bank offers) to play around with. On the day the student loan is paid into your account, pull out all £1200. Use this money wisely. Put it in a savings account or an ISA if you want to make a small, but safe return. If you're willing to take risks and you know your markets then use it to create/enhance your investment portfolio. £1200 invested wisely has the potential to make a seriously good mark-up. For the remainder of the term live off your overdraft. Spend your way through it, but not past the £1200 mark. At the end of the term, cash out of your investments and pay £1200 of it back into your student account to cover the overdraft. Your account is back in the black, and you *hopefully* have some extra spending money to go out with, or donate to me for giving you this handy tip.  

I guess it is here that I should say I do not condone all students blowing their money on a lousy investment. I do not condone students emptying their accounts. I do not condone anything. Nada.  Understand the risks before you do anything, it is on you if it goes balls up. This is just a ramble from myself, I personally went down the safe ISA route - I'm not an investor, but the potential is there. Free money eh? Just a thought.

Friday, 26 July 2013

BRICs: Then and Now - An Emerging Markets Timeline

A recent article in The Economist regarding emerging markets, and more specifically the BRICs, caught my attention. BRICs is an acronym used for the 4 major emerging markets - Brazil, Russia, India and China (South Africa was added in 2010, it is now known as 'BRICS'). All 4 of these nations are newly industrialised, developing economies who share a common, rapidly expanding national economy.

As can be seen from this World Bank graph, the four economies have consistently posted growth rates well in excess of that set by the USA in the last 10 years (ignoring 2009 'financial crisis effect year', everyone suffered) up until this year. Brazil has dipped below the growth rate of the USA whilst the other 3 are falling. The turning point, potentially. The four economies have reached a point of maturity. The gap between themselves and the world leader that existed 20 years ago has been wiped out by the rapid progress, leaving no more room for this 'catch-up growth'. Coupled with this, each of the economies have their own individual problems that are hindering them from carrying on this progress - China's ageing population and India's need for reform, for example. Although we can't exactly call this slowdown a failure in economic terms, it does pose a problem for the economies.

For the most part of my life (or what I can remember of it) emerging markets and their rapid expansion has been one of the dominating stories, consistently cropping up in the media. Now the sense is that this era has come to an end. The days of the rapid economic expansion seen by the BRICS over recent decades are drawing to a close. Take China as an example, it's growth rate was 7.8% in 2012, half of the level it achieved back in 2007. China is also struggling to reached its 7.5% forecasted GDP growth for 2013 which would be the lowest growth rate the country has seen in 23 years.

The consensus is that the world will not be seeing growth rates well into the double figures like China posted in the mid 2000's ever again.

With this thought in mind, I thought it would be fitting to do a researched piece on the BRICS, looking at where they have come from in the last few decades and what has been the cause of this slowdown. I'll do this over a 5 part blog post, with each country being looked at in detail and then a conclusion at the end - so stay tuned for that. 

Tuesday, 18 June 2013

Using Your First Year of Economics Wisely...

Firstly, feel free to write off any of the drivel I spurt out here as rubbish - this will be coming from my own personal experiences, and I know everyone is different. So today I'm going to try and give some advice into how to spend your first year studying economics at university to set yourself up for the future. I started my first year fairly clueless about how to move forward and help myself pursue a career in finance - so I contacted a third year friend who has tied down a graduate job at an investment bank. I took that advice on board and used it to steer me in the correct direction. I feel if I had known what I do now before even starting my degree I'd be better placed, but that's life and the benefit of hindsight. I'm going to go through three main points: studying, interning and 'other stuff'.

So, firstly, the studying. A lot of the people you meet at university will tell you "it's only first year, it doesn't count". Ok, yes, that is partly true. At most universities what you achieve in your first year has no effect on your final degree classification. Most will have it in their heads that they only need to achieve the bare minimum to pass, 40%, anymore would be wasted efforts. I disagree totally with this. When you get into your second year and things get serious, the only thing anyone has to go on regarding your academic ability is your first year grade. So they may see a 42% average and get the wrong impression, you could be the smartest guy alive. However, try hard in your first year and achieving a good grade isn't that difficult. Put the effort in and reap the rewards. A solid 2:1 in your first year is a great way to start your degree, it shuts no doors in your face - and in fact opens a lot. My first piece of advice for your first year studying economics would be to take it seriously, aim for a decent grade.

My second point is interning. This is the information I could really have used before I started my degree - but I was lazy and didn't put the effort into researching. My fault entirely. The bottom line is, if you want to enter the finance sector after completing your degree you need some experience under your belt. The best way to get this experience is to intern. Internships are commonly done during the Summer of your penultimate year, but you can get a head start. Many firms offer what is known as a 'Spring Week' during first year. This is essentially, as the name suggests, a week during Spring spent at the firm learning the ropes and getting an insight into the operations undertaken there. It can lead to a fast track to a second year Summer internship, which is fantastic. These aren't a necessity though, I never got a Spring week because I started applying too late, but they sure will help. Applying early is my advice. Applications for some firms can open as early as August, and as they recruit on a rolling basis getting in there early is the best bet. I applied in late December/early January and didn't even get a look in.

My third point is do 'stuff'. Ambiguous, I know, but you need to get out there and do as much as you can in the first year. Join societies, go to events, network.. everything will help. Even if it doesn't seem like its helping, it isn't doing any harm. The likelihood is that your CV will be fairly dull before going to university, you need to spend first year sprucing it up - doing things that show you'd be a great catch for some firm in the future. Get on committees for societies, volunteer, these sort of things all make your CV look good. And it needs to. Talk to people, get numbers and e-mail addresses. Having a large network of people you can talk to is vital - you'll hear it a lot but it's definitely 'who you know' that gets you places nowadays. You'll be surprised how much you can benefit from befriending and staying in contact with just a few people. So, my third tip for first year is to build up the CV fodder.

I hope my advice is helpful to some, if not then I apologise for taking up your time and I'll ask you nicely to bugger off my blog. If you want to ask any questions about being a first year economics student with a goal of the finance career then feel free, I'll be happy to answer. Best of luck. 

Monday, 20 May 2013

Economics at the University of Birmingham

My first year at the University of Birmingham came to an end last Friday. I finished my last exam at half past 11 and now I have an overwhelming feeling of freedom. Too much so, perhaps. I have nothing to do, hence why I'm here. I wanted to give my opinion on the University of Birmingham, and the economics course they offer. I'm going to try to be honest, but of course I have the potential to be bias so feel free to ignore every word I say. There will be a few words of advice towards the end.

I'll start by saying that I've loved my first year at University. It's been great. I've enjoyed pretty much all of it - but it did fly by, unfortunately. It seems only yesterday I was moving my stuff in and saying goodbye to friends from home. If I had to quantify my first year studying economics at the University of Birmingham it would be a solid 8 out of 10 (I believe that nothing is perfect, so an 8 is pretty damn good coming from me).

'Old Joe'

As far as the University as a whole goes, there are plenty of positives. The campus is talked about a lot - it's a beautiful campus, centring around the main attraction 'Old Joe', and it doesn't get that reputation for no reason. It even looks good in the rain. It almost makes you want to walk on to campus for your 9 o'clock lecture! Understandably, having a nice environment around you for your 3 years+ of studying is important - it really does help. The transport links are also a massive benefit. Having an on-campus train station that can take you to Birmingham New Street in 10 minutes is invaluable. It makes the trip home/back to university for holidays so much easier and less stressful, as well as giving you easy access to a great city in your free time. I'd recommend getting a 16-25 railcard if you plan on using the station a lot, the railcard makes a return journey into New Street only £1.40 and you can also use it to get a third off trains home. Perfect. Amenities on campus are also pretty awesome. I love my coffee, so being able to pick up a Starbucks or a Costa in the middle of campus is great. The queues aren't even that big as you might expect, and it's normal pricing. There's also the farmers market for all of your fresh fruit and vegetables which is a neat touch.

The walk to campus during the snow

Everything of course isn't perfect, there are some downsides which I'll even admit to. Firstly, although this depends on what sort of person you are, the accommodation leaves a fair bit to be desired. Although I can only speak for the halls I live in, I assume it's a similar story for the others. For what you're paying you may expect a lot more. I've paid over £4,000 a year for my room and with that I get a flat with one shower, two toilets and a kitchen that I'm sharing with 4 others. The rooms are averagely sized. The biggest problem is from above. The management seem very unwilling to put any effort into helping out students. I met with my halls manager twice about issues in my flat that were affecting me and my flatmate and she virtually laughed us out the door - not ideal, but if you have thick skin you probably won't meet many problems. The maintenance service is also pretty slow - expect at least a 2 day delay when it comes to fixing broken things in your flat. We had to cook for a week using torchlight because our kitchen light broke and essentially bath in the shower because of a blocked drain. Another slight issue is location for decent food shopping. If you're a food delivery sort of person then ignore this, but if you're like me and you actually like going to the shop and picking out your own things then there's a slight problem. You get an Aldi, a Sainsbury's, a Tesco and a Morrisons nearby, but all are about a twenty minute walk. This of course limits the amount of stuff you can actually buy to the amount you can carry in bags, meaning you may have to go a few times a week - which can be a bit of a pain.

The course itself was very good. I went with straight economics, but there was plenty of scope to vary that a bit - maybe put in a language, or go down a more mathematical route. I liked the fact I could cater my degree to my own preferences, despite still sticking with pure economics. There's a good balance of modules in first year: a few maths-y ones, some pure economics and then more applied and specific modules which give you a good introduction to the whole subject and assist you when it comes to picking modules in the second year. On that note, for the second year you get to choose 6 out of the 12 modules you will study - so there is a lot of freedom for you to make your degree as appropriate to you and your aspirations as possible. The teaching quality is as good as I expected - I do feel I've learnt a lot in this first year, despite it of course not really counting for anything. The office hours of lecturers are always available if you're having any issues with the work and they're more than happy to help you over e-mail in the hours when their office isn't open. One of the big debates nowadays is how the university are spending our £9000 tuition fees - but I think the economics department is doing it well. We get all lecture slides printed out for us, which is good when it comes to note-taking and the revision period. We also get a personal tutor that we can see with any issues and an economics office staffed with friendly people who are always willing to help. I'd say that money was well spent relative to other departments in the university.  

One little fault I had with the course was that one of the modules was made up of 50% business studies. I mean, no disrespect to business studies students, but that wasn't really the sort of stuff I wanted to be learning on my economics degree. It's not very relevant to me and thus I found it frustrating. Especially when it came to revising for the exam, I couldn't focus or concentrate on learning the material because it just didn't interest me. Although the boundaries between economics and business studies can be blurred at times, this module definitely took a step over which I wasn't best pleased with. My second problem is the library. This is probably an issue in all other universities at exam time, but I noticed it was particularly difficult to even get a space during April and May, let alone get a computer. The solution would be to get up at 8 am and get in there before the crowd, but that isn't always ideal. I toyed with taking my laptop down there to use, but found the Wi-Fi to be infuriatingly unreliable and I had to just stay at my flat to revise. There could be an improvement in this area. However, the next big investment from the university is a re-housing of the library so that could solve the issues.

My 'average' sized bedroom

I'd like to conclude by saying that Birmingham is a great place to study. It's an awesome city, everything you need is right on your doorstep and the University is fantastic. It's highly rated and will take you places in life. I do have some tips for you, though. First, try hard in your first year. Many people will tell you that the first year is a doss and 40% is all you need to continue to second year. Yes, that's true, but 40% doesn't look great on the CV, and if you have real aspiration you're going to want to be doing internships during the Summer of second year. A 2:1 minimum in first year is needed to do these internships, and that will take some commitment and some work. My second piece of advice is to dive in to everything. So many opportunities will present themselves in such a short space of time. Try as much as you can and get involved in everything that takes your fancy. If it means little sleep, so be it - you won't look back and remember the nights where you got plenty of sleep. "C.V, C.V, C.V" will be hammered into you for the first few weeks, and the only way to make yours look good is to do stuff, get involved and experience things. Good luck in your ventures, and I'll potentially see you at Birmingham next year. Laters.


Saturday, 11 May 2013

A Background to Financial Assets

Financial markets essentially revolve around the buying and selling of assets, intangible assets to be precise. An intangible asset is an asset that's physical properties are irrelevant to its value - it tends to just be a piece of paper.  The relevant part is the future claim to some income or benefit that the asset legally entitles the owner to. The owner of the asset would be referred to as the investor, whereas the person/institution that is agreeing to pay out in the future is known as the issuer. Examples of these intangible, also known as financial, assets would be common stock, bonds, loans or mortgages to name but a few. These differ from tangible assets. The value of a tangible asset is derived directly from its physical properties. Examples of these would be a house or a car.

The return the investor receives on these financial assets depends on what sort of asset they've purchased. It could be an equity instrument or a debt instrument. If the investor has purchased an equity instrument then the issuer will be paying an amount out depending on the earnings of the asset. So, for example, an equity instrument could be a partnership share in a business. The issuer would then pay the investor an amount depending on the profits earned by the business. In contrast to this, a debt instrument involves fixed payments to the investor. These would be loans or bonds, when a fixed interest rate is paid out. One exception to the rule would be a convertible bond - these allow the investor to switch between debt and equity if certain conditions are met.

Financial assets play two key roles in the economy. They are a method of transferring funds to those who need them to purchase tangible assets from those who have excess funds. They also act as a method of redistributing the risk that comes with the cash flow generated by tangible assets among those seeking and those providing the funds.  

The price of an asset is the most important factor - this is essentially what determines whether people will buy and/or sell. The basic principle to follow is that the price of the asset is equal to the current value of its expected cash flow. The certainty of that cash flow is what causes variations in the price of the asset. The assets are all subject to risk, and it's this risk that can cause price fluctuations, allowing investors to potentially profit. The three main risks that financial assets are subject to are the following:
  • Purchasing Power Risk - This is to do with the rate of inflation. The rate of inflation will affect the real value of the financial asset and thus cause the price to fluctuate.
  • Credit/Default risk - This is the risk that the issuer will default on their obligation. Or, in Lehman's terms, the risk that the person agreeing to pay up cannot pay up, causing the investor to lose money.
  • Foreign Exchange Risk - The risk associated with the value of the currency changing and potentially being worth less.

There is a relationship between tangible and financial assets. Financial assets tend to be used to finance tangible assets. So a debt instrument may be issued to generate funds to buy some delivery vehicles, for example.

There's a simple introduction to financial assets.  An intangible asset that legally obliges the issuer to pay the investor an agreed amount in the future. The play a pivotal role in the economy - moving funds around from those with an excess to those that need them. The price is determined by how much the asset is expected to bring in at a future date, this value is subject to fluctuations caused by different types of risk. Hope that all makes sense 

Friday, 10 May 2013

The European Union - A Process of Economic Integration

The European Union is a very contentious issue in current affairs. To stay? To leave? The benefits? The drawbacks? These are dilemmas that will never really be resolved, regardless of what action is taken. What we can discuss, though, is how the European Union came to be what it is today - and what exactly that is.


Today's EU is has derived from more than 50 years of European economic, political and social integration. The process started on the 25th March 1957 when the Treaty of Rome was signed by the six founding members of the European Economic Community: West Germany, Italy, France, Luxembourg, the Netherlands and Belgium. The treaty was laid out into a series of articles, with Articles 1, 2 and 3 being the most important. Article 1 established the European Economic Community. Articles 2 and 3 set out all of the economic goals and initiatives to achieve them for the six nations.

Article 3 would be the main focus for us economists, here the methods of creating economic integration between the nations are discussed. The main points are outlined below:
  • Article 3a - Removal of trade barriers, tariffs and quotas between member states.
  • Article 3b - Adoption of a 'Common Commercial Policy'. This in essence is a tariff on imports from all non-members. This common policy with respect to tariffs made the EEC a 'customs union'.
  • Article 3c - Integration of capital and labour markets, which meant there should be a freedom of movement of services.
  • Article 3g - Ensures undistorted competition in member states. This meant subsidies from governments to national firms that distorted trade were banned, there had to be a common competition policy, a harmonizing of national laws that affected market operation and harmonization of some national taxes.
  • As well as these, there was a call for mechanisms to coordinate member state macroeconomic policy in case of Balance of Payments crises and they all agreed on goals and principles for agriculture (The Common Agricultural Policy came into effect in 1962).

One thing that wasn't included in the treaty was integration on social policy and taxes (bar the ones that affected competition). The argument was that both of these would greatly affect the lives of citizens in the EU and therefore a harmonization would cause difficulties and conflict. There was also an economic argument put forward as to why both of these weren't necessary for success.

Since the Treaty of Rome was signed in 1957 there has been very little modifications to the actual content of the articles - until the signing of the Treaty of Lisbon in 2007, changes only came in the form of additions to the original policies. For example, Article 2 stated that the EU should be promoting the 'economic good life'. The definition of this has changed and been expanded over time and now includes all of the following criterion: high employment, gender equality, high degree of competition, environmental quality improvements and rising living standards, to name but a few. Article 3 set out a list of activities to achieve the 'economic good life', this list has also been added to as the years have progressed and the dynamic of the community has changed. It now includes the following non-exhaustive list: immigration policy for non EU members, coordination of employment policy, environmental policies, improvements in industrial competitiveness, promotion of research and development and promotion of health and consumer protection. The Treaty of Lisbon is set to overhaul the original treaty in terms of its form, not its content. The main change would come in its promotion of the 'good life' as opposed to the 'economic good life', suggesting less emphasis is being placed on economic integration in more recent times. The result of this treaty will not be seen for many years yet as most of the policies aren't set to take effect until 2014 and beyond.

So European economic integration took place in a variety of stages. An index was created so economic historians could quantify the extent of integration (Mongelli et al. 2007). The suggestion from this index was that from 1958-1968 integration happened quickly and over these 10 years a Customs Union was formed. From 1973 to roughly 1986 there was a period of Euro-pessimism where little integration occurred because people were unsure of the effects. From 1986 to 1992 things picked up again as the Single Market was formed through the Single Market Programme. Finally, from 1992 onwards integration continued as the Economic and Monetary Union was adopted and of course the common currency came into effect.  

The structure of the EU changed drastically in 1992 and is set to change again when the effects of the Lisbon Treaty fully take effect. Prior to the signing of the Maastricht Treaty in 1992, all new integration had to be subject to majority voting before it was passed. This system was problematic - it created a divide. On one side we had "the Vanguards", Germany for instance, who were all for the spread of integration and would agree to any policy that improved things. On the other side was "the Doubters", the UK for example, who feared that further integration was forcing EU citizens to accept more integration that they didn't even want - therefore this side rejected most attempts at further integration. The solution was the Maastricht Treaty and its three pillar system. This organisational structure drew a line between supranational and intergovernmental policy areas. The first pillar contained all integration under the Treaty of Rome, and was still subject to supranational-ity (majority voting between members). This was the European Community. The second pillar was for all foreign and defence matters and the third pillar for police, justice and 'other home affairs'. This treaty put member states in full control of the second and third pillars, giving some independence. Integration is these two pillars was subject to direct negotiation between member states and required a full "yes" consensus before anything was passed. The development of the Treaty of Lisbon is set to remove the three pillar system.

What we can conclude is that economic integration in Europe has come about through a progressive series of treaties. The three most important ones to remember are the Treaty Establishing the European Community (Treaty of Rome), the Treaty on the European Union (Maastricht Treaty) and finally the Treaty of Lisbon. These three are the only ones that created real structural change to integration in Europe. The results of the Treaty of Lisbon are still in the pipeline, so it'll be a while before we can analyse the success of such a policy. Cheers for reading.