Bear market: Short term investors can reduce exposure — Alangrange CEO

      The inflation figure just released by the National Bureau of Statistics, NBS, showed a declining inflation but rise in food inflation, which could affect the investible income of retail investors and their willingness to participate in the capital market. In this interview, Mr. Samson Amedu, Managing Director/CEO, Alangrande Securities Limited, said that food inflation as a single factor cannot determine the direction of the market. He also provided insight on how best investors could manage their portfolio to reap maximum benefit. By Nkiruka Nnorom


      IS the impact of the rising food inflation not capable of reversing the progress made in the equities market already?

      First of all, there are a number of factors that influence the prices of shares in the market. A number of times, it is a combination of factors that affect the market. Sometimes, some factors could be so significant at a particular time that they may move the market either up or down. Factors that influence share prices include what is called company’s specific factors. This includes the likes of earnings per share, which measures the profitability and how well a company is doing, price earning ratio and debt equity ratio. Another thing that affects share price include domestic factors. Here you talk about regulations and government policies. Regulations may include monetary policy, inflation and the rest of it. It also include regulations that regulators come up with. There are also other factors like industry specific factors. Some sectors will be more affected by some specific factors that are related to them. For example, textile and airline. Due to some certain factors that are specific to textiles, almost all the textile companies are dead today and the same for the airline. There was a time the banking sector was faced with certain challenge that almost all the banks were declaring losses and that affected the performance of the banking index before the Asset Management Corporation of Nigeria, AMCON, was set up. Now, there is also the demand and supply factor and investors’ perception of the companies. When investors perceive that the share price of a particular company is too high or the earning per share is too low, before you know it, the impact will start showing in the share price. There are other factors like the geopolitical factor, things like terrorism, natural disaster and globalisation. Part of the geopolitical factors also include inflow of capital from foreign portfolio investors. Where is there is an influx of foreign capital into a particular market, it affects the prices of stocks generally. So, rise in food inflation as a single factor cannot decisively determine comprehensively the direction of the market; it is only a combination of factors that can do that.

      What are some of the things that have shaped activity in the equities market this year? 

     The sudden positive performance of the market as witnessed today is actually as a result of two major factors. Initially, you can say the foundation of it was fundamentals; companies were churning out good results during the earning season. If you look at it, even as at March ending and early April, the market was still at a loss, but immediately the Central Bank of Nigeria, CBN, came up with the NAFEX window, it became very easy for foreign investors, who before the introduction of the new window could not take out their money, to resume investment in the market and also take out their money with ease. So, suddenly, there was a huge increase in portfolio investment. So, that inflow that came in led to a sudden rise in the market . From the moment the CBN made that pronouncement up till now, over $1.9 billion dollars has entered into the market. So, that had a huge impact and lifted the market to what you see today. The second factor has to do with Morgan Stanley Capital International, MSCI. Due to the perception of the market, Morgan Stanley removed Nigeria from its frontier index to stand alone start-up. Once we were on that start-up, a number of foreign investors could not invest because they make their decision based on the index. But immediately the NAFEX window was introduced, Morgan Stanley came up with reclassification and increased Nigeria’s weighting to about 7.9 percent. So, once that reclassification was done, there was increase in investment of about 17 stocks the index track and that led to the sudden rise you saw in the market.

 Now, that we have seen significant rebound in the market, how best do you think investors should approach the market to reap maximum benefit from their investment?

 For those who just entered the market, probably earlier in the year, depending on the sectors and the stocks, they are making money. Investors that have not yet exited the market are making money. First of all, the best strategy will depend on how an investor sees the market. Is it going up? 

Objective of the investment

 If not, if the understanding is that the market may not really go up between now and end of the year, depending on the objective of your investment, if you are short term investor, you can realize your profit and keep the money in the money market. But if the traditional behavior of the market comes to play, then it makes sense for short term investors to reduce the extent of their exposure in the market and wait till December or early November to reinvest. For long term investors who entered the market longer than now, the downturn may not really affect them much. For those long them investors, if the explanation I gave about the asset reclassification by Morgan Stanley is going to be positive, it makes sense to still buy. This is because if that happens and it is positive, we will still see more foreign portfolio managers still investing because they need to increase their weighting on some of those stocks tracked by MSCI and in the course of doing that, it will move the market further up.  





source:  https://www.vanguardngr.com/2017/09/bear-market-short-term-investors-can-reduce-exposure-alangrange-ceo-2/

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Simple steps to spend smarter as a student

Often times people refer students as rich people,believing in their own understanding that students can afford to buy what their parents cannot buy. yes, while that may be true in some instances, the story is not the same to others,because they find it difficult to manage their finances as a student.

Many students come to me and complain shortage of cash, then I ask them a question "HOW WELL DO YOU MANAGE YOUR MONEY" this is a serious problem that everybody faces just that cloth has covered it to some extent, both young and old, working class or students must make a genuine decision on managing one finances.

After my review and study, I came out with some causes and possible solution to the listed problems believing that it is strictly adhere to.

SOME CAUSES DISCOVERED

1 lavish spending/over spending

2 lack of savings

3 show offs

4 confusing wants and needs

5 compulsive shopping

6 going with the crowd..

The above listed may not apply to some students whose parent are extremely rich, I could understand they can afford it with ease, but if they can key to the provided solution I guarantee, you will become richer than before.

FOUR GOOD STEPS TO SPEND SMARTER

STEP 1. ADMIT YOUR SPENDING MISTAKE

STEP 2. REVIEW YOUR SPENDING HISTORY

STEP 3. CREATE YOUR SPENDING PLAN

STEP 4. STICK TO YOUR SPENDING PLAN




Watch out for part 2, advice on overspending and other possible solutions
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Pls drop comments, add to the causes and provide your own solution. Thanks

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ECONOMICS MATTER: WANTS VS NEEDS

ECONOMICS MATTER: WANTS VS NEEDS:      Knowing the difference between these two concepts will help your finances and know exactly how you spend your money by asking yourse...

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WANTS VS NEEDS

     Knowing the difference between these two concepts will help your finances and know exactly how you spend your money by asking yourself whenever you want to buy something “is this really my WANTS or NEEDS”

NEED is a “must to”, it is something you have to have. Basically there are four basic needs for survival which are good food, clothing, shelter, basic health. Food is a must for survival, you might not need a lot of food but you must eat something, wear something, and be sheltered somewhere. NEEDS ARE NECESSITY.

WANT otherwise is something you would like to have, not that without them you are nothing, but something it will be a good thing to have, extra of whatever you have before is your  want, they are not absolutely necessary for you to have. Example: some people refer music as a need, because they believe they can’t do without it, yes that may be true but you don’t need music to survive. Try 3 days without music and 3 days without food.

NOW, confusion may arise because I generalized the word “food”→any substance… but, note some food can be a WANT also. You need all these classes of food e.g. protein, carbohydrate, vitamin etc. for growth and healthy body. Ice cream, yogurt, meat pie etc. are your wants, they may do your body good, but you don’t need them for survival therefore they are wants.

IN CONCLUSION

NEEDS:                something you have to have

WANTS:               something you would like to have

In actuality you just need four things

• ·         A roof over your head
• ·         Enough food and water
• ·         Basic health care
• ·         Clothing

Everything apart from those things listed above are your wants- a big house, Gucci cloth, fancy food, a new car, latest phones etc.

Advice, life is meant to be lived, not survived. Treat yourself to some wants along the way, but do so when you can best afford to, and enjoy those wants as the extras that they are. Be careful when satisfying your wants.

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devaluation vs depreciation

DEVALUATION VS CURRENCY DEPRECIATION

     Students often misinterpreted these two exchange rate policy together, although they seems to do the same thing, as they both deals with value of a particular currency in the international market. In real sense, the value of currency dropped relating to other currencies in the world market. To this extent they are the same.

For simplicity it is necessary to understand Exchange rate and its types.

     Exchange rate can be define as rate at which one currency exchanges for another, it has to do with the rate at which a particular currency let say Nigeria (#) relate to other foreign currency let say ($), the changes in exchange rate is either an increase or a decrease, which directly affect the country’s (import and export) .

Types of exchange rate

Ø    Fixed exchange rate

Ø    Floating exchange rate

A fixed exchange rate is a type of exchange rate regime where a country currency’s value is fixed against other currency/currencies. Here, a country’s central bank uses an open market merchant to buy and sell its currency at a fixed rate.

A Floating exchange rate is a type of exchange rate regime where the value of a country’s currency is allowed to fluctuate in response to foreign exchange market mechanism. Currency that uses a floating exchange rate is called floating currency.

NOW

DEPRECIATION OF CURRENCY: depreciation of currency happens to that currency that operates with a floating exchange rate and it is likely to change on daily basis. Here the forces of demand and supply in the international market determine the value at which a country’s currency exchanges for other currencies. DEPRECIATION occurs when the forces of demand and supply cause the value of the currency to DROP.

DEVALUATION OF CURRENCY: devaluation deals with country that uses a fixed exchange rate to value its currency. In a fixed exchange rate economy it is the work of the government to decide the worth of its currency compared with other countries, here the government buy and sell its currency to keep its exchange rate the same. The exchange rate can only be influenced by the government. If a government decides to make its currency less valuable, it is called devaluation.

What is the effect of depreciation/devaluation of currency on the economy of a country?

 Generally both have similar impact on on the economy in the short run. Both depreciation/devaluation tends to help exporting companies, as a decrease in the value of home currency, it allows the other countries to import goods at a cheaper price from the country whose value of currency has depreciated/devalued, thus export from home country will increase. More so citizens will find imported good more costly, as it cost more of local currency to import from other countries. This is good to help infant industries to grow and, also as a means of correcting balance of payment deficit. By implication depreciation/devaluation tends to increase export and reduce import.

Depreciation in the long run is a slow process, and the value of the currency gets adjusted automatically by the forces of demand and supply. Thus, when the currency of a country had been depreciated, the investors from other countries will see an opportunity and are likely to shift from other economies. This will help in boosting the economy which in the long run will appreciate the currency.

Devaluation on the other hand, there is less trust in the economy and once currency is devalued, government finds it very difficult to revalue the same by government dictate as there will be fear that such revaluation can backfire and put the economy is risk.

Comment below if this is helpful…stay tune for APPRECIATION OF EXCHANGE RATE

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Microeconomics and Macroeconomics

By the end of this section, you will be able to:
 • Describe microeconomics
 • Describe macroeconomics
 • Contrast monetary policy and fiscal policy

 Economics is concerned with the well-being of all people,including those with jobs and those without jobs,as well as those with high incomes and those with low incomes. Economics acknowledges that production of useful goods and services can create problems of environmental pollution. It explores the question of how investing in education helps to develop workers’ skills. It probes questions like how to tell when big businesses or big labor unions are operating in a way that benefits society as a whole and when they are operating in a way that benefits their owners or members at the expense of others. It looks at how government spending, taxes, and regulations affect decisions about production and consumption.

 It should be clear by now that economics covers a lot of ground. That ground can be divided into two parts:

•  Microeconomics focuses on the actions of individual agents within the economy,like households,workers,and businesses;
•  Macroeconomics looks at the economy as a whole. It focuses on broad issues such as growth of production, the number of unemployed people, the inflationary increase in prices, government deficits, and levels of exports and imports. Microeconomics and macroeconomics are not separate subjects, but rather complementary perspectives on the overall subject of the economy.

 To understand why both microeconomic and macroeconomic perspectives are useful, consider the problem of studying a biological ecosystem like a lake. One person who sets out to study the lake might focus on specific topics: certain kinds of algae or plant life; the characteristics of particular fish or snails; or the trees surrounding the lake. Another person might take an overall view and instead consider the entire ecosystem of the lake from top to bottom; what eats what, how the system stays in a rough balance, and what environmental stresses affect this balance. Both approaches are useful, and both examine the same lake,but the view points are different. In a similar way,both microeconomics and macroeconomics study the same economy, but each has a different viewpoint.

Whether you are looking at lakes or economics, the micro and the macro insights should blend with each other. In studying a lake, the micro insights about particular plants and animals help to understand the overall food chain, while the macro insights about the overall food chain help to explain the environment in which individual plants and animals live. In economics, the micro decisions of individual businesses are influenced by whether the macro economy is healthy; for example, firms will be more likely to hire workers if the overall economy is growing. In turn, the performance of the macro economy ultimately depends on the microeconomic decisions made by individual households and businesses.

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THEORY OF SCARCITY

THEORY OF SCARCITY 

 Our resources are limited. At any one time, we have only so much land, so many factories, so much oil, so many people. But our wants, our desires for the things that we can produce with those resources, are unlimited. We would always like more and better housing, more and better education— more and better of practically everything.

If our resources were also unlimited, we could say yes to each of our wants—and there would be no economics. Because our resources are limited, we cannot say yes to everything. To say yes to one thing requires that we say no to another. Whether we like it or not, we must make choices.

Our unlimited wants are continually colliding with the limits of our resources, forcing us to pick some activities and to reject others. Scarcity is the condition of having to choose among alternatives. A scarce good is one for which the choice of one alternative requires that another be given up.
Consider a parcel of land. The parcel presents us with several alternative uses. We could build a house on it. We could put a gas station on it. We could create a small park on it. We could leave the land undeveloped in order to be able to make a decision later as to how it should be used.
Attributed to Libby Rittenberg and Timothy Tregarthen  Saylor.org Saylor URL: http://www.saylor.org/books/  15  

Suppose we have decided the land should be used for housing. Should it be a large and expensive house or several modest ones? Suppose it is to be a large and expensive house. Who should live in the house? If the Lees live in it, the Nguyens cannot. There are alternative uses of the land both in the sense of the type of use and also in the sense of who gets to use it. The fact that land is scarce means that society must make choices concerning its use.

Virtually everything is scarce. Consider the air we breathe, which is available in huge quantity at no charge to us. Could it possibly be scarce?

 The test of whether air is scarce is whether it has alternative uses. What uses can we make of the air? We breathe it. We pollute it when we drive our cars, heat our houses, or operate our factories. In effect, one use of the air is as a garbage dump. We certainly need the air to breathe. But just as certainly, we choose to dump garbage in it. Those two uses are clearly alternatives to each other. The more garbage we dump in the air, the less desirable—and healthy—it will be to breathe. If we decide we want to breathe cleaner air, we must limit the activities that generate pollution. Air is a scarce good because it has alternative uses.

Not all goods, however, confront us with such choices. A free good is one for which the choice of one use does not require that we give up another. One example of a free good is gravity. The fact that gravity is holding you to the earth does not mean that your neighbor is forced to drift up into space! One person’s use of gravity is not an alternative to another person’s use.
Attributed to Libby Rittenberg and Timothy Tregarthen  Saylor.org Saylor URL: http://www.saylor.org/books/  16  

There are not many free goods. Outer space, for example, was a free good when the only use we made of it was to gaze at it. But now, our use of space has reached the point where one use can be an alternative to another. Conflicts have already arisen over the allocation of orbital slots for communications satellites. Thus, even parts of outer space are scarce. Space will surely become more scarce as we find new ways to use it. Scarcity characterizes virtually everything. Consequently, the scope of economics is wide indeed.

Scarcity and the Fundamental Economic Questions

   The choices we confront as a result of scarcity raise three sets of issues. Every economy must answer the following questions:

1. What should be produced? Using the economy’s scarce resources to produce one thing requires giving up another. Producing better education, for example, may require cutting back on other services, such as health care. A decision to preserve a wilderness area requires giving up other uses of the land. Every society must decide what it will produce with its scarce resources.

2. How should goods and services be produced? There are all sorts of choices to be made in determining how goods and services should be produced. Should a firm employ a few skilled or a lot of unskilled workers? Should it produce in its own country or should it use foreign plants? Should manufacturing firms use new or recycled raw materials to make their products?

3. For whom should goods and services be produced? If a good or service is produced, a decision must be made about who will get it. A decision to have one person or group receive a good or service usually means it will
Attributed to Libby Rittenberg and Timothy Tregarthen  Saylor.org Saylor URL: http://www.saylor.org/books/  17  
not be available to someone else. For example, representatives of the poorest nations on earth often complain that energy consumption per person in the United States is 17 times greater than energy consumption per person in the world’s 62 poorest countries. Critics argue that the world’s energy should be more evenly allocated. Should it? That is a “for whom” question.

Every economy must determine what should be produced, how it should be produced, and for whom it should be produced. We shall return to these questions again and again.

Scarcity and Choice

  From our definition of economics, it is easy to see why economists view the world through the lens of scarcity. Since human and property resources are scarce (limited), it follows that the goods and services we produce must also be limited. Scarcity limits our options and necessitates that we make choices. Because we “can’t have it all,” we must decide what we will have, and what we must forgo.

Limited resources have given economics its core: the idea that “there is no free lunch.” You may get treated to lunch, making it “free” to you, but there is a cost to someone—ultimately to society. Scarce inputs of land, equipment, farm labour, the labour of cooks and waiters, and managerial talent are required. Because these resources could be used in other production activities, they and the other goods and services they could have produced are sacrificed in making the lunch available. Economists call these sacrifices opportunity costs. To get more of one thing, you forgo the opportunity of getting something else. So, the cost of that which you get is the value of that which is sacrificed to obtain it.

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