The US Fed's move in 2016 prediction

The US Fed is about to announce their job reports and forecasts about the US economy as well as the global economy. I think that the US Fed will face a similar situation as it faced in 2015 September. Last September, the US economy was performing well in terms of job increases; however, meanwhile, the Chinese stock markets were sliding and the global economy was affected by the worries over EMs. The same is taking place currently. The Chinese stock market is sliding and the world asset markets are affected as well. Many companies and institutions lower their expectations of 2016 revenues by taking the Chinese economy effect into account. All these will be added up and affect the US economy finally. Therefore, I think that the US economy will not perform as well as it did in 2015, so the US Fed may wait for a longer time to raise its rates even it might not choose to raise its rates by the end of 2016.

Can hedge fund managers really work to maximize their clients' profits?

We can read many from newspaper articles that talk about how hedge fund managers play strategies to maximize their own profits instead of their cilents'. This is natural but immoral. Hedge fund managers have very good incomes, especially with their "two and twenty fee" structure. With this fee structure, managers with better performances will have higher incomes; however, if there is a strategy that can increase their own wealth more than if they better manage their clients' wealth, they are more likely to go for that strategy and not to improve their clients' wealth management strategy. Therefore, if clients want their investment managers to maximize their profits, the clients have to increase their payments to match the managers' gains from maximizing their profits. Managers with more personal wealth tend to be more difficult to be satisfied, so managers who stay in the industry for longer time demand higher and higher incomes. This results the incomes in this industry increase rapidly. To maintain the income level, it is important to attract more people into this industry and increase the competitiveness. If the managers are not performing well, but still have high incomes, the firms need to hire new people and make the income level more relevant to the managers' performances.

UK bonds are more attractive to investors

2016 is going to be a challenging year for the global economy, as there are many uncertainties among EMs and commodity markets. The equity market fell on the first trading day of 2016 globally. Britain is to decide about its future in the EU this summer. The debt problem among the Eurozone has not been solved yet, and I do not see it could be solved by the end of 2016. The falling commodity prices and the worries about the EMs will affect the performances of many financial markets. UK bonds are cheaper than those of Spain and Italy, whose futures are more uncertain. Moreover, UK bonds have higher returns compared with those of US and Germany, which have relatively stable economies. Maybe the UK economy is expected to grow relatively slowly compared with the US economy; however, the UK government has a record and always pays back its bonds. In general, the UK bonds may become even more attractive in 2016.

What is the most likely to cause a global economic disaster?

I read an article by Martin Wolf on Financial Times, about if it is likely to be another global economic disaster. Martin Wolf suggests that global economic disaster is an unlikely event. He suggests that there are three things to worry about in general: inflationary shocks, wars and financial crisis. He is optimistic about the global future performance but also lists some potential risks, such as central banks' balance sheets, the risks in emerging markets and geopolitical upheaval and conflict. I agree with Martin Wolf mostly; however, I think the three potential risks have different degrees of effects on our global economy. Considering the current low inflation levels, I think we do not need to worry too much about inflation, as a high inflation is not likely to occur in a short period. The risks in emerging markets have been realised by the market, meaning they are not unexpected risks. Expected risks are less likely to cause a major crisis in general, However, the geopolitical upheaval and conflict is the most uncertain risk among the three that can directly affect the global economy immediately. Therefore, I think if there is a global economic disaster, it is more likely to be caused by geopolitical upheaval and conflict.

Why global economic disaster is an unlikely event (by Martin Wolf): https://next.ft.com/content/db57a57e-b38b-11e5-b147-e5e5bba42e51

What is circuit breaker and how does it perform so far?

Circuit breaker is designed to pause the tradings when the violation of the market reaches a certain point in order to control the risk. This policy was announced on the 4th of December, 2015 and officially put into practice today. Based on the market performance, it is not a successful policy. It speeded up the falling speed from the circuit breaker level. The circuit breaker system does work in the US stock markets. What is going wrong in China? The traders in the Chinese stock markets look for "long" opportunities; therefore, the market is falling unexpectedly, the market has a big swing from one extreme to the other. Because the circuit breaker and the daily fluctuation limits are both designed to pause the market and limit the market bubble creation. However, when both policies are used, the markets could become easier to be paused as people rush to buy in or sell off their stocks when they realise that the markets are more likely to be paused than previously.

An instructive article by Gavyn Davi

https://next.ft.com/content/6c4bf745-6f57-33b7-be72-f64c4c903a21

This article is published in the Financial Times, with informative and intelligent analysis. Moreover, it is well structured and gives out clear conclusion by the end of the article.

Public or private? The number depends on the market performance

Tech companies raised less than 10 billion dollars in the US in 2015. The figure was lower than the previous years. It could be caused by two facts. Firstly, if the investors are not as interested as previous in investing in high tech, the funds raised could be lower than the previous levels. Secondly, if more tech companies feel staying private is important, fewer companies will choose to issue IPOs. However, the advantages and disadvantages of going public and staying private are generally the same. The one that changes often is the size of funds that could be raised from the financial market. When the stock markets do not perform well, the benefit of going public will be weakened. Therefore, more companies will choose to go public if the stock market is performing well. The decision largely depends on the market performance.