The strong dollar Mismatch point

The rise of the dollar will punish borrowers in emerging markets

From the print edition of The Economist, March 2, 2015

IN THE three months following the collapse of Lehman Brothers, as the world economy crumbled and investors scrambled for shelter, the dollar rose by 5% against a basket of other widely used currencies. In the past three months it has jumped by 11%; over the past year, by 22%—its fastest ascent in decades. The dollar is not yet in uncharted waters: one euro was worth one dollar in the early 2000s, for example. Its rise will help exporters in less vibrant parts of the world, notably Europe. But moves of this magnitude usually catch someone out, and the likeliest candidates this time are in emerging markets.

The principal reasons for the greenback’s rapid strengthening are simple to grasp. With Europe and Japan stuck in the doldrums, and China and other emerging markets slowing, America’s economy looks relatively strong. The IMF expects it to grow by 3.6% this year. The Federal Reserve has already begun to tighten monetary policy, by stopping its programme of asset purchases, and is now preparing the ground to go further. This week the Fed altered the wording it uses to describe its plans (see article), giving itself room to raise interest rates later this year—the first rise since 2006. With American monetary policy tightening, and other central banks still loosening, investors can make higher returns from dollar-denominated assets. In capital floods, and up the dollar goes.

Continue reading The strong dollar Mismatch point

(Greek PM) Tsipras needs rupture with far-left, not Brussels

By Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

tsiprasDoes Alexis Tsipras, the Greek prime minister, have the guts to break with his far-left faction? The country’s fate hangs on the answer to this question.

Greece’s immediate prospects are dicey. It will default in mid-April unless its euro zone creditors lend it some money or it scrapes together cash from other sources. The key short-term issue is whether the reform proposals Athens plans to submit to creditors on March 30 will be adequate to unlock some credit.

The government sent negotiators to Brussels over the weekend to thrash out the package, following another week during which the technical teams on the ground in Athens achieved little. Meanwhile, Yanis Varoufakis, the finance minister, mused publicly about the possibility of a “rupture.” The implication was that Athens would default if it was not able to secure an acceptable deal with its creditors.

Such a rupture could happen as early as April 9 when Greece has to repay a tranche of money it owes the International Monetary Fund. If Athens defaulted then, capital controls would presumably be imposed at the same time, coinciding with the four-day Greek Easter holiday that starts on April 10.

Tsipras might toy with the idea of calling a snap election to gain renewed support from the Greek people for such a tough line. Given that the opposition is in disarray and his own popularity is riding high, he might hope to win such a vote.

But the government’s approval has already fallen from 83 percent in February to a still high 60 percent last week, according to a poll for Alpha TV, a Greek television station. Its popularity would probably plunge further since cash machines would run out of money within days and key commodities such as petrol might have to be rationed after capital controls were imposed.

If Tsipras is rational, he will want to avoid this scenario. The problem is that he will then have to do a deal with his creditors that will also be painful. They are likely to require him not just to make promises but to start implementing them before they release any more cash.

This is where the prime minister will run into a confrontation with his far-left faction, which accounts for around 30 to 40 of his 149 members of parliament. They will accuse him of selling out, and may well vote against the laws needed to implement a deal with his creditors.

Tsipras would probably still be able to pass legislation with the help of some opposition parties. But such an arrangement could not last for long. In that scenario, the most sensible move would be to call a second election.

The prime minister could then kick out his far-left faction and replace its MPs with moderates. In this scenario, there wouldn’t have been a rupture with Greece’s creditors or capital controls, so Tsipras would be well placed to win the election with an enhanced majority.

The snag is that the prime minister would have to summon up the courage to break with his political comrades. It is unclear whether he is tough enough to do this.

Meanwhile, there is a risk that the government will charge off in the wrong direction even if it secures a quick fix with its creditors in the next week or so. It has promised to deliver a 1.5 percent fiscal surplus before interest payments this year, according to Reuters. But this seems impossible without further austerity measures which will crush the economy.

Tsipras may think he will be a hero at home if he secures an agreement for a 1.5 percent surplus. After all, the current agreement calls for a 3 percent surplus.

But since that deal was made, the economy’s prospects have deteriorated. Political uncertainty has shattered confidence and lack of liquidity is asphyxiating business. The European Central Bank has kept Greek banks on a tight leash, while the government itself has grabbed every little bit of cash it can get its hands on to stop it going bust.

Athens is still predicting 1.4 percent growth this year. But it will be lucky to grow at all. Things will only settle down if the government reaches a new long-term deal with its creditors – for which the current discussions are just the preliminary skirmishing – and that isn’t scheduled until June.

In other words, Tsipras is setting himself up for failure by promising a 1.5 percent surplus. He needs to find a way off this hook. But this won’t be easy since the creditors would consider even a 1.5 percent figure a concession and might hold out for a higher number – as the lower the surplus, the more money they will have to cough up.

The prime minister’s best bet is to convince his creditors that he is so serious about structural reforms that they don’t need to twist the austerity screw further. There is a huge amount to be done – on tax evasion, corruption, rule of law, liberalisation, privatisation, removal of special privileges and so forth. Some of these reforms even fit into a left-wing agenda.

The problem is that Tsipras has not convinced his creditors that he is serious about reform or that his team is remotely on top of the detail. He needs a game-changer. This should, indeed, be a rupture – but with his left faction, not his creditors.

Posted in , Monday March 30, 2015 (15:07)  

Exciting Tech News this Week?

Peter Diamandis

Dr.Peter H. Diamandis is a Greek American engineer, physician, and entrepreneur best known for being the founder and chairman of the X PRIZE Foundation, the co-founder and chairman of Singularity University and the co-author of the New York Times bestseller Abundance: The Future Is Better Than You Think.

Three exciting developments – that I believe you should know about — happened in technology this week.

Pebble Time Crowdfunding > $20 million

A few days ago, Eric Migicovsky and his team at Pebble closed their Kickstarter campaign for the new Pebble Time watch, raising $20,338,986 from 78,471 backers. (They recaptured the crowdfunding record, dramatically dethroning Ryan Grepper’s recent Coolest Cooler campaign, which raised $13 million.)

This Pebble Time campaign is important for two reasons.

Crowdfunding is growing, fast: In 2012, crowdfunding platforms raised some $2.7 billion and successfully funded more than a million campaigns, according to a Massolution report.

This year, crowdfunding platforms are projected to raise over $5 billion. Kickstarter alone has raised over $1.6 billion and successfully funded 80,000 projects.

By 2025, the global crowdfunding market will reach about $100 billion — roughly 1.8 times the size of the global venture capital industry today, according to a 2013 study commissioned by the World Bank.

Power in the hands of small entrepreneurs: Rather than try to compete with the Apples and Samsungs of the world, the Pebble team decided to make a BOLD move and play to their strengths.

Their key differentiator was their massive 100,000+-person online community of fans and early adopters.

Clearly the Apple Watch will probably sell 100 times more watches, but this crowdfunding campaign allowed Pebble to “time” their announcement, show their stuff and begin selling their product before Apple flooded the market.

SEC allows non-accredited investors to participate in equity-based crowdfunding

After nearly 3 years of regulatory delays, the SEC has voted to approve equity crowdfunding for non-accredited investors.

This is huge.

This breakthrough in Equity Crowdfunding (as distinct from reward-based crowdfunding, like Pebble Watch) will open the door for billions in investment capital to be injected into the entrepreneurial economy.

The SEC approved the rules for Regulation A+, under Title IV of the JOBS Act, allowing companies to raise up to $50M with non-accredited investors.

In 60 days, the new regulations will go into effect, and will create a new market for both accredited only (current Title II), as well as non-accredited crowdfunding.

Now, if you have a strong community, and you need to raise money, you can sell shares (stock) in your company directly to your community of followers, users and raving fans.

In my opinion, we are now at the knee of an exponential growth curve in equity-based crowdfunding that will empower millions of entrepreneurs globally to start new businesses, create new jobs, and to solve some of the world’s toughest challenges with backing from the crowd.

Chance Barnett of equity-crowdfunding platform Crowdfunder provides an excellent explanation here, if interested.

Facebook announces their plans for virtual reality

At their recent F8 conference, Mike Schroepfer, Facebook’s CTO, described their vision for the future of virtual reality.

Three years ago, many were asking: Why did Facebook pay $2 billion for Oculus Rift?

And why is VR going to work now, especially when it didn’t work in the 80s or 90s or 00s?

The team at Facebook laid out four major reasons that this time is different.

Key convergence of exponential technologies: The key tech to make VR work is now finally here and cheap enough to mass produce. Namely: integrated circuits, IMUs, gyros to track head location, high-resolution screen, and high-resolution, high-performance cameras.

It’s just good enough: VR is already just far enough along to enable compelling experiences on consumer hardware, as seen by demand for consumer systems like the Oculus or Samsung Gear VR.

Lots of Investment & Broad industry participation: It’s not just Facebook. Billions are being invested by Google/Magic Leap, Microsoft, Samsung, Sony and Valve/HTC. Expect a lot of breakthroughs and new capabilities.

Companies are making long-term commitments: Developing better VR technology is hard and will require long-term commitment. The companies above are planning to make long-term investment commitments to take VR into a multitude of markets from gaming, to retail, to real estate and beyond.

We live in the most exciting time ever

This is the sort of content and conversations we discuss at my 250-person executive mastermind group called Abundance 360 — the convergence of technology leading to the dematerialization, demonetization and democratization of products, services and industries. The program is 85% filled. You can apply here.

Share this post with your friends, especially if they are interested in any of the areas outlined above.

We are living toward incredible times where the only constant is change, and the rate of change is increasing.