Luxembourg as a financial centre

http://www.economist.com/node/21623755/comments#comments

Luxembourg has become an increasing popular financial center because its leniency on taxation for individuals and businesses alike. Its recent growth has put it into the top ten in global financial centers. After the recession, the Luxembourg private banks rebounded well and boosted their reputation as a tax haven. Luxembourg’s clients are tax compliant and seeking expertise in financial planning. The clients seek out Luxembourg because the numerous EU tax laws. However, a movement for a new system of tax exchange may harm Luxembourg.

Luxembourg is also the focus of an international push by the OECD to discontinue tax breaks for multinational businesses. A push model assumes economies of scale and oligopolistic market structure. It stresses a firm's decision to industrialize may be contingent upon the expectations of other businesses. It also emphasizes that underdeveloped countries, such as Luxembourg, need large amounts of investments to start developing economically. Luxembourg has also become a center for the distribution of investment funds. Currently, it manages over 4,000 funds worth $3.7 trillion, which count as investments toward the EU.

            Companies such as Amazon and Fiat, which use financial services in Luxembourg, are under investigation because they are suspected to have received prohibited state aid. As a result, Luxembourg may lose of its business due to ease on taxes. However, some companies are whiling to take the risk to stay in the country. Chinese and German banks have also begun sending customers to Luxembourg because it has become a center for lending and trading of foreign currencies. Luxembourg is also the third largest center for Islamic funds.

Debt has some college students thinking about dropping out

In a recent Survey found almost half of enrolled college students are proposing to drop out due to the current price of school. Kids along with their parents are willing to do whatever it takes to pay and provide themselves with a great education but people can only pay so much before they exceed the limit to pay back the intense amount of debt. Some told the surveyors that they may have not made the decision to go to college based on if they knew what kinda debt they owe today. For students have at least one student loan the average debt is about 30,000 who now question whether it was worth it or not. Students are advised to look at the graduation rate, employment rate out of college and of course how much that school is per year.

Americans sour on SodaStream

Source: http://money.cnn.com/2014/10/07/investing/sodastream-earnings-warnings/index.html?iid=HP_River

SodaStream’s shares reached an all-time low on Tuesday when they fell by 21%. The stock trades for about $21 a share, up just one dollar from the IPO price in 2010. SodaStream hit an all-time high in August 2011 at $80 per share. In October 2013, they were still trading for about $60.

The company’s CEO claimed that the poor results from the third quarter are mainly due to the fact that haven’t attracted as many new customers to their carbonation system as they should have. The article mentions that Americans’ decreasing appetite for soda is one reason SodaStream’s stock is declining. In July, a Gallup Poll reported that 63% of Americans said they avoid drinking soda, an increase of 22% since 2002. However, an analyst at Roth Capital Partners thinks the company’s issues have more to do with flaws in their advertising and marketing strategies, or lack thereof. He mentions that a good portion of the company’s marketing budget went to its 2014 Super Bowl commercial which didn’t bring many new customers to the company.

More competition is also making its way into the home carbonation market, as Keurig Green Mountain is currently working on producing its own soda maker.

It will be interesting to see how SodaStream ends up handling this situation. If they can’t bring in new business when they have had nearly a monopoly on home carbonation systems, I wonder what will happen when Keurig Green Mountain releases their product.

Mediocre Economic Growth Plagues World Economy

http://money.cnn.com/2014/10/07/news/economy/economy-imf-outlook/

         It is predicted that the world economy will grow by just 3.3% in 2014 and by 3.8% in 2015 which is hardly any difference from the growth in previous years. Many countries are still trying to handle the legacy of the global financial crisis.
          In Europe for example, unemployment is so high it is almost about to reach a new record. The debt of advanced economies is also rising which just shows how the future expectations of economic growth.
         Germany for example, is about to reach its third recession since 2008 leading to a weaker demand for its exports. In August the German industrial production fell just to 4%.
          IMF has also said that shaved off 0.2% for the economic growth predicted for 2015.

China Just Overtook The US As The World's Largest Economy

The IMF measures both GDP in market-exchange terms and in terms of purchasing power. On the purchasing-power basis, China is overtaking the US right about now and becoming the world's biggest economy.

By the end of 2014, China will make up 16.48% of the world's purchasing-power adjusted GDP (or $17.632 trillion), and the US will make up just 16.28% (or $17.416 trillion). Adjusted for Purchasing Power, China is now the world's largest economy according to IMF. 

However in real terms the US is still far ahead, China still sits more than $6.5 trillion lower than the US and isn't likely to overtake for quite some time. 

Business Insider: http://ow.ly/CrVnx

Europeans Accuse Ireland of Giving Apple Illegal Tax Break

Source: http://www.nytimes.com/2014/10/01/business/international/european-commission-report-warns-ireland-over-tax-treatment-of-apple.html?ref=international

The European commission has publicly accused Ireland of giving illegal subsidies to Apple under the guise of tax breaks. The accusations come as the United States and the European Union look to curb multinational corporations maneuvering to get around higher tax rates and weak economies in their home nations. Ireland’s current corporate tax rate is 12.5%, which is extremely low in comparison to other EU members. While this low rate is not illegal it has drawn criticism from other countries over the theme of an unfair advantage.

            Whether the accusations are true or not will have little effect on Ireland or Apple. Worse case scenario Apple would have to pay back taxes to Ireland at an amount that does not even compare to their astronomically high profits.

            This article raises a number of questions.  Are tax incentives ethical for countries looking to bring in foreign business and further their economies? Are certain nations jealous of the low tax rates that other nations are offering and therefor want to level the playing field? Currently, lower tax rates are not illegal but there are questions on how Ireland actually figured Apple’s rates for taxation. It will be interesting to see how the effected governments will attempt to regulate these issues.

US Stocks Close Down

http://online.wsj.com/articles/u-s-stock-futures-higher-riding-fridays-momentum-1412597399?mod=WSJ_hp_LEFTWhatsNewsCollection
The Dow jumped 1.2% Friday after news of a strong job market, but could not sustain the gains at the opening bell on Monday. Traders are more cautious and uneasy about the slowdown overseas. That along with news, such as the HP split, caused investors to book profits and trading slowed.

Here's why the middle class feels squeezed

http://money.cnn.com/infographic/economy/heres-why-the-middle-class-feels-squeezed/?iid=SF_E_Lead

The middle class household income over the part 18 years has not improved at all. This is concerning to many people especially with costs on the rise everyday.  Since 1995, average college tuition has gone up 61%, cost of a house is up 13%, gas prices are up 94%, and there are many more examples shown in the article. With costs rising, and a stagnant income, people of the middle class have less and less dispoible income, this decreases saving, which gives them less financial freedom. The middle class is in a struggling state right now and has been for a while, this is a fact people need to realize is a real danger to a lot of people in the U.S.