A SMALL PART OF APPLE'S BUSINESS IS AS BIG AS STARBUCKS.

 

Grim numbers abound in Apple’s latest earnings report.
The Cupertino, Calif. firm narrowly dodged the iPhone’s first ever sales drop, with revenue from the device up just 1% year-over-year. Growth in China, the company’s second-largest source of revenue, is slowing amid economic turmoil there (a strong dollar didn’t help) and the company is forecasting its first revenue decline in over a decade.
But there are upsides in Apple’s earnings report. First, none of these results came as a shock. They’re even a little better than analysts’ most dire predictions. No investors love bad news, but bad news that’s also surprising is far worse. (It’s also worth noting that the company still managed to post a staggering quarterly profit of $18.4 billion, a record not just for Apple but for any company not backed by the U.S. government.)
Second, Apple is seeing lots of growth in its ‘Services’ category, earnings from which are up 15% year-over-year for the quarter ending in December. That grouping includes music and movies purchased on iTunes, Apple’s cut of sales in the App Store, iCloud data storage subscriptions and more. Altogether, these services accounted for $5.5 billion in revenue for the quarter. That’s about the same as Starbucks’ entire business.
Still, as my Fortune colleague Adam Lashinsky points out, Apple likely chose to highlight its Services growth because of the relatively disappointing numbers elsewhere in Wednesday’s report:

It is a time-honored tradition for public companies experiencing pressure in their business to change the subject. Just as the Wizard of Oz urged Dorothy & Co. to pay no attention to that man behind the curtain, Apple asked its investors Tuesday to look past its flat revenue, profits, and iPhone shipments.
Instead, Apple pleaded, consider its revenue from services, all of which is recurring and therefore more predictable than device sales. What’s more, the success of services—including iTunes, Apple Music, iCloud, and Apple Pay—wouldn’t exist without the billion Apple devices in use. Translation: Apple device owners use Apple services, which begets more device purchases.

Apple’s strength in Services is good news for the company. With over 1 billion devices out there in the wild, that’s a nice big install base from which it can extract more money in the form of subscriptions and downloadable content.

MOODY'S: POLAND'S BANK THREATENED BY NEW TAX.

©AFP

A new tax on Polish banks threatens their credit ratings and profitability, warned Moody’s on Monday as rating agency concerns over the country’s political climate continued to mount.
Moody’s estimates that the tax, which from February will charge banks 0.44 per cent of their adjusted assets each year, will cost the sector around €1bn during 2016.

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“Such a decline in net income would reduce banks’ ability to absorb shocks,” Moody’s said. “The tax also threatens to hurt credit growth because it reduces banks’ capital creation, which risks adversely affecting Poland’s economy and resulting in slower GDP growth,” the rating agency added.
Shares in some of Poland’s largest banks, including PKO Polski, fell on Monday. The MSCI index of Polish banks is down around 18 per cent since October, and last week fell to its lowest level on record.

In addition to the new tax, the country’s banks face a challenge from a looming currency conversion of mortgages.

Mortgages denominated in Swiss francs — 16 per cent of total loans as of November, according to Moody’s — would be converted to the Polish zloty under a proposal by Poland’s president Andrzej Duda earlier this month.
Crédit Agricole on Monday said the franc conversion proposal was “a recipe for recession”, warning that the total cost to the affected banks could be as much as 59bn zlotys, or $14.3bn.
“The enforcement of the [franc conversion] act in the form proposed by the Chancellery of the President would trigger a loss for the banking sector significantly exceeding its annual net financial result,” wrote Crédit Agricole, which operates a subsidiary in Poland.
“We believe that this loss would lead to an extreme decline in lending, weakening of the zloty, higher yields on bonds and a sharp slowdown of economic growth conducive to a long lasting and marked deterioration of the fiscal situation,” the bank added.
Last week Fitch warned that the conversion could “weaken the banking sector to an extent it would not be able to provide financing to the Polish economy” and could result in a downgrade of the country’s rating.

Monday’s warning adds to a chorus of rating agency criticisms of Poland so far this year. Earlier this month, Standard & Poor’s downgraded the country’s credit rating and put it on negative watch, weakening the zloty and sending government borrowing costs higher.

Rating agencies have repeatedly pointed to the policies of Poland’s new conservative government, Law and Justice (PiS) party. The party assumed power in October and has since adjusted the structure of the country’s highest court, provoking an EU investigation.

CHINA ISN'T THE ONLY THREAT FACING THE GLOBAL ECONOMY IN 2016.

Billionaire investor George Soros had an ominous warning for the world on Thursday: A 2008-style financial crisis is brewing.

The main culprit, in his view, is China. Given Soros' reputation as a savvy trader and the turmoil in global markets right now, many investors would be inclined to agree with him. 

Chinese stock markets have fallen sharply this week, plunging more than 7 percent on Monday and Thursday and twice triggering new so-called circuit-breakers, which are designed to calm investors but have instead sparked a sell-off in financial and commodity markets around the world.

The catalysts were weak manufacturing data and Beijing’s decision to further reduce the value of the yuan to an almost six-year low, which have deepened concerns about the strength of the world’s second-largest economy and raised the prospect of a currency war with other emerging markets.

Markets “are in a panic over what’s happening in China,” Derek Halpenny, European head of global markets research at Bank of Tokyo-Mitsubishi UFJ in London, told The New York Times.

“People are saying, ‘Whoa, growth is way worse than we were expecting this year.’”

Soros suggested the Asian powerhouse was in crisis.

“China has a major adjustment problem,” he told an economic forum on Thursday, according to Bloomberg.

“I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.”

The concerns about China are not new. Since the huge sell-off in Chinese stocks last summer, investors have been fretting that Chinese policymakers’ attempts to kick-start economic activity were not working and that ongoing efforts to devalue the currency were a sign that Beijing had, to put it bluntly, run out of ideas — and was willing to risk the wrath of its trade partners in order to boost its exports.   

Given the size of the Chinese economy and its importance in global trade and investment, investors are rightly worried about its slowdown.

But if another financial crisis were to erupt this year, China wouldn't be the only trigger.

Here are four other issues that are keeping investors awake at night.

1. US interest rates

BRENDAN SMIALOWSKI/Agence France-Presse

The Federal Reserve’s decision in December to raise interest rates for the first time in almost a decade has huge consequences for the rest of the world, particularly emerging economies. South Korea, Mexico, Turkey and Brazil are on a long list of countries that have seen their currencies weaken as investors boost their holdings of dollar-denominated assets to profit from the relatively higher interest rates in the United States. A stronger dollar can make their imports more expensive and fuel inflation. Higher borrowing costs also affect the dollar-denominated loans taken out by companies by making them more expensive to pay back. “Economic collapse” in emerging economies is a risk this year, UC Berkeley’s Barry Eichengreen told the Atlantic.

2. Falling commodity prices

Justin Sullivan/Getty Images

Crude oil prices are at multi-year lows, which is great for American car owners who are enjoying cheap gasoline, but worrying for the global economy. One of the main reasons for the weakness is a global glut — the world is producing more oil than it can consume. A slowdown in China’s energy-guzzling economy has eroded demand, but so has the stronger dollar, which makes commodities priced in the greenback more expensive for traders using other currencies. OPEC members' refusal to cut production isn't helping, either. That’s forcing oil producers to slash capital expenditure and lay off workers. It's also hurting countries that rely heavily on oil revenues to keep their economies operating, such as Russia and Mexico.

And it’s not just oil. The price of iron ore, which is a key ingredient in steel, is also trading at its lowest level in years, while the copper price is at a near seven-year low. 

More from GlobalPost: Uh oh, copper has fallen to its lowest price since the financial crisis

3. European economic weakness

DANIEL ROLANDAFP/Getty Images

European policymakers are still struggling to get the euro zone economy back on its feet. Very low inflation persists, and economic growth has been weak (although there were signs of a pick-up toward the end of 2015), despite their efforts to revive the region. As the Federal Reserve tightened interest rates in December — a move that reflected a strengthening of the US economy — the European Central Bank was cutting interest rates and leaving the door open to further monetary policy easing if required. The latest inflation data for the single currency area, a lackluster 0.2 percent in December, suggests it will be.

4. Brazilian disaster

Vanderlei AlmeidaAFP/Getty Images

Brazil, the largest economy in Latin America, faces a "political and economic disaster," the Economist predicted at the beginning of 2016. As the country prepares to host the Olympic games in August, its economy is sinking deeper into recession, its public finances are in tatters, and the country is wracked by political instability. An ongoing corruption scandal involving the state-owned oil giant Petrobras and top government officials is erasing whatever faith Brazilian voters still have in their leaders. In addition, President Dilma Rousseff is fighting efforts to have her impeached.

WHEN RUSSIA'S MONEY RUNS OUT, THE REAL TROUBLE STARTS.

 

 

Stuck in a recession and with no sign of a reprieve in the oil price, Russia could quickly descend into chaos if the money runs out, William Browder, a well-known critic of the Kremlin and chief executive of Hermitage Capital, told CNBC.
"I don't think you can underestimate how bad the situation in Russia is right now, you've got oil below any measure where the budget can survive and you've got sanctions from the West. Russia is in what I'd call a real serious economic crisis," he said on Thursday.
Speaking to CNBC in Davos where global business and political leaders are attending the World Economic Forum (WEF), Browder said the central bank of Russia was "running out of money."
"Let's say that they have $200 billion (in reserve) and they're burning through all sorts of money right now because of the oil prices and sanctions. They just don't have the money to support the ruble and so Russians are just suffering," he said, adding.

"Eventually they're going to run out of that money and when they do, that's when the real trouble begins," he added.
Browder was a one-time fan of Russian President Vladimir Putin but he became one of the Kremlin's biggest critics following the death of his lawyer and friend Sergei Magnitsky, who was found dead while in police custody in 2009.
Browder believes the Russian authorities were responsible for the death of Magnitsky, who had been investigating corruption among Russian officials before his death. Browder also wants an international investigation into the killing of Russian opposition figure Boris Nemtsov. Browder himself was expelled from Russia in 2005 after criticizing alleged endemic corruption in the country.

As such, Browder is certainly no friend of the Russian regime and in 2013,he told CNBC that he felt under threat.
Russia entered recession in 2015 following the dramatic decline in global oil prices (Russia is a major oil producer) as well as international sanctions imposed on it for its annexation of Crimea in March 2014 and role in the pro-Russian uprising in Ukraine in the same year.
On Tuesday, the International Monetary Fund (IMF) cut its growth forecast for Russia in 2016, predicting that the economy would contract by 1 percent, worse than the 0.6 percent contraction predicted by the IMF in October.
Concerns over Russia have manifested themselves in Russian markets which have continued to experience tumult since the start of the year. The ruble has also continued its slide against the dollar, falling a further 8 percent since the start of the year to currently trade around 81 rubles to the dollar.
 

 

The economic crisis had caused Putin to create a nationalist regime and foreign enemy in the West, Browder told CNBC, and to oversee what he called "repression" within Russia.
Browder's hedge fund has traditionally focused on emerging markets but he warned that former economic powerhouses such as Russia and Brazil, as well as still relatively robust China, were in turmoil, as market and currency turbulence has recently shown.
"There's a mess in Brazil, there's a mess in China, there's a mess in Russia, there's a mess everywhere, and I would say that having seen this play out before, were nowhere near the point where you want to step in."
"Having said that, as an investor, I like things cheaper rather than more expensive so at some point it's going to be worth bottom-picking."

 

 

 

 

 

MILLENNIAL GENERATIONS ARE BETTER WITH MONEY THAN THEIR PARENTS: RESEARCH SAYS. 

 

Saving a quarter of their salary a month

 The Millennial generation are actually better with money than their parents' generation with half of 18 to 34-years-olds saving a quarter of their salary each month, an Experian study has found.

 The research was conducted among 4,000 people from across the UK, of which half were Millennials and half were in the Generation X age group  Photo: Alamy Research has discovered that the younger generation are showing signs of building better money habits than the "Generation X" age group of 35 to 55-year-olds, according to the credit checking company.

Reports have previously claimed older people are the big savers, enjoying substantial salaries on so-called "defined benefit" schemes, which guarantee a salary based on your previous earnings.

And a home bought for £4,378 in 1970 would be worth £194,258 today, according to Nationwide's House Price Index.

But the Millennial Me and My Money report found that Millennials appear to have surpassed the generation above them when it comes to money management, with £8,384 in savings and £2,931 outstanding non-mortgage

 

 The research also found that one in four Millennials consider themselves to be "spenders" while nearly half see themselves as "savers".

The research was conducted among 4,000 people from across the UK, of which half were Millennials and half were in the Generation X age group.
Clive Lawson, managing director at Experian, said: "It's striking to see just how much of an impact parental influence can have on the financial well-being of Millennials in adulthood.
"What this research made clear to me was the opportunity that we as parents have to set foundations by helping our children learn from our experiences of managing money and enjoy the advantages that might bring them later in life."

 

 

OIL: WHO ARE THE WORLD'S BIGGEST PRODUCERS?

 

Russia and Saudia Arabia are the traditional world oil suppliers but the demand is changing, new energy is being found - swinging the major markets, but who are they?

  For decades Saudi Arabia has been seen as the oil tycoon of the world. However, regional instability causes prices to rapidly influx causing the Saudi giants to slump off the top spot. 

 

The US took the spot light as the biggest oil producer in the world after the foreign oil influxing made them look for alternative ways to make their own energy, in the form of fracking.

Canada, China and Russia are the other major suppliers, all produce between 4.6million and 11million barrels of oil per day.

Russia has also made the move in to the arctic, finding untapped oil under the sea ice, which estimates to be around 100 billion barrels.

OIL PRICE CRASH: rout reaches $27 as Opec warns US shale will be forced to relent.

 

 

Oil slumped to below $28 a barrel in early morning trading on Monday - its lowest level since September 2003 - as traders digested news of Iran's return to the world's over-supplied markets.

Brent crude shed 1.3pc to fall as low as $27.70 before rebounding by more than 2pc to $29.

The slide came after Opec said persistently low prices would finally begin to bite for rival producers in 2016, forcing the US and Canada to cut back on production this year.


In its latest monthly review of the oil market, the group said non-Opec supply would shrink by 660,000 barrels a day this year, above previous estimates of just 270,000.
The forecast seemingly vindicates the cartel's landmark decision to ramp up production in order steal a march on higher cost producers such as US shale.
But shale drillers, as well as producers in Canada and Russia have proven resilient in the face of the 18-month price crash - which is now the worst in the post-war era. Non-Opec production grew by more than expected in 2015 to 1.23m barrels a day, said the report, which predicted that 2016 was finally the year markets began to rebalance.

Oil prices have collapsed by 75pc since the summer of 2014. Record stockpiles have also put pressure on the world's storage capacity, forcing prices into negative territory in some parts of the US. One major US refiner - Flint Hill Resources - said it would now charge producers -$0.50 a barrel for North Dakota South - a variant of crude.
Saudi Arabia has led the charge in maintaining output, producing 10.25 million barrels a day in December, a hike of 750,000 barrels a day from the end of last year.
Analysts said the price rout is expected to deepen as Iran has vowed to pump an additional 500,000 barrels a day following the formal lifting of its sanctions over the weekend.
International companies are now free to invest in the Islamic Republic's oil resources as the ban on currency conversions is lifted and Iranian oil is available to purchase on international markets.

 

"Independent oil companies are highly interested in low-cost oil assets," said Bjarne Schieldrop, chief commodities analyst at SEB.
"On the other side, Iran has indicated highly favourable investment terms for international oil companies."
But Tehran's need for huge investment in its oil industry means an immediate expansion of its production to pre-sanction levels is not yet on the cards, said Al Stanton at RBC.
Iran has resisted calls from Saudi Arabia to hold back on production in a bid to stabilise the glutted oil market. The rift saw Opec fail to agree on a formal production target for the first time in its recent history in December.
Saudi oil minister Ali al-Naimi said he was "optimistic" that major producers would eventually come together to help rebalance the market.
“Market forces as well as the co-operation among producing nations always lead to the restoration of stability. This, however, takes some time," Mr al-Naimi said on Monday.
 

 

Oman, which is the largest Gulf producer to sit outside Opec, said it was ready to co-operate and cut back on production if other nations also relented, according to its oil minister, Mohammed Al-Rumhy.
Opec said it expected oil demand to pick up this year, revising up estimates by 1.7m to 31.6m barrels a day.
Major producers are currently over-supplying markets by 2-2.5 million barrels a day, said Stuart Gulliver, chief executive of HSBC.
Mr Gulliver said he expected prices to stabilise at between $25 and $40 in a year's time.
A barrel of Brent is now likely to fall below $25 this year, according to the latest odds from Ladbrokes. The bookies have 10/11 on oil falling below $25, and 10/1 for a collapse to $10.

 

 

 

E-COMMERCE WILL BOOST SMALLER BRANDS.

 

 

As growth indicators such as commodities and oil test their lowest price levels for more than 10 years, the fear of deflation that gripped Japan for many decades is quickly becoming a global phenomenon. Even in the U.S., where economic growth is relatively strong, there is a noticeable lack of wage inflation in the face of strong employment reports over the past 12 months.
     While we can blame part of this problem on the aftermath of the global financial crisis of 2008, I place at least some of the blame on the rapid proliferation of Internet technology. A clear example is the loss of traditional retail jobs to ballooning online sales.
     South Korea is a good leading indicator on this issue because of its heavy Internet penetration and dense population, making it a good market sample for other economies to track. South Korea's retail industry is also an interesting case of being both a victim and beneficiary of the creative destruction of traditional retail channels caused by the onset of e-commerce.
     South Korean retail businesses are dominated by large corporations, often part of one of the country's huge conglomerates known as chaebols. The scale these corporations enjoy at the group level gives them a huge cost advantage over small to medium sized enterprises, which need to build from the ground up. Right now, e-commerce is killing retail businesses through intense price competition that is driving down margins.
     In South Korea, traditional retailers are hurt not just by domestic online sales but also overseas Internet purchases. In 2014, the value of purchases from overseas websites delivered to South Korean homes reached more than $1.5 billion, from $274 million five years earlier. This figure slipped slightly in 2015 because of government restrictions on purchases, but will continue to rise in the coming years at the expense of traditional retailers and their workers.
     For decades, chaebols operating in domestic retail and consumption industries enjoyed outsized margins due to protectionism against imported goods. In the last decade, however, the South Korean government has forged trade agreements with 52 nations far and wide, including one with China just last year.
     The combination of e-commerce and trade deals has driven the rapid rise of overseas online purchases, especially from the U.S., where a much broader selection of products is available, often at huge discounts to local prices. South Korean shoppers have become so successful at arbitraging this pricing gap that the South Korean government has placed an unofficial limit on cross-border online transactions that qualify for exemption from customs duties.
Viable competitor
Another driver of online imports is cheap and efficient delivery, made possible by a growing logistics industry. Strong growth in e-commerce has allowed for rising efficiency in deliveries, which now makes it a viable competitor to offline retailers.
     Overseas online purchases hurt all South Korean retail and consumer brands, but they hurt the large corporations most. For two decades, the chaebols have enjoyed government support through import protection and distribution networks built over many decades of lobbying and cooperating with myriad regulatory hurdles.
 South Korean SMEs never benefited from this because they were usually niche players in crowded markets. As a result, the flood of foreign brands coming into South Korea through online purchases threatens the profitability of large corporations more than the SMEs. A good example is Samsung Electronics' 60 inch LED TVs, which South Korean shoppers have been buying from U.S. e-commerce shopping sites. Even after delivery and customs duties, prices are up to 20% cheaper than in South Korea.

     But these developments are not all bad news for South Korean retailers. The advent of technology will also allow South Korean SMEs to penetrate a much bigger market: China.
     Historically, when South Korean companies wanted to expand overseas, they would spend years investing in distribution channels and learning how to deal with customs and local regulations. As a result, expansion outside South Korea was a high-risk strategy that yielded patchy results for smaller companies. But the rapid development of e-commerce in China is making the expensive and time-intensive task of establishing distribution channels as quick as the click of a mouse. Already we are seeing companies that have rocketing China revenues, driven by online sales that would previously have taken years of investment and experience to achieve.

 The speed at which China's online giants are making e-commerce accessible to outsiders will help companies from South Korea that have a good following at home but lack the scale to expand overseas. As South Korea continues to attract millions of mainland tourists annually, recognition of domestic-oriented brands will spread through China and create follow up demand.
     Right now, investors seeking to benefit from Chinese interest in South Korea are focusing on duty free stores. But the next phase of investor attention will be consumer brands that attract attention from Chinese customers seeking to buy outside duty-free channels. E-commerce and information distribution via the Internet will accelerate that process.
     As China tries to promote domestic consumption to compensate for the declining economic growth coming from falling investments, the tax incentives that duty free stores attract will have to decline. That will put brand owners in pole position in the China market rather than traditional retailers such as department stores, hypermarkets and duty free channels.

 

 

 

 

 

 

 

IRAQ'S KURDS TO START NATURAL GAS EXPORTS TO TURKEY IN 2019-2020.

 

 

Iraq’s semi-autonomous Kurdish region plans to start exporting 10 billion cubic meters a year of natural gas to Turkey by 2019-2020, according to an official at the Kurdistan Regional Government’s Ministry of Natural Resources.
The KRG will double gas exports to 20 billion cubic meters a year by the early 2020s, the official said in an e-mailed statement on Friday. He was clarifying remarks made on Thursday by Bewar Al-Khinsi, economic security adviser at the KRG’s Kurdistan Protection Agency, who had said gas exports will start by the end of 2016.
The final plans and costs for the project haven’t yet been finalized, the official said, asking not to be named because of ministry policy.
Gas exports will allow the self-governed region to generate much needed revenue and will bring it closer to economic independence. A 35 percent collapse in the price of Brent crude last year is adding to strain on KRG finances at a time when the regional government is fighting Islamic State militants that control much of northern Iraq.
The Kurds have long chafed against control by Arab-led governments in Baghdad, and gas exports would enhance their financial self-sufficiency. The Kurdish region could hold as much as 200 trillion cubic feet of natural gas reserves, more than Algeria or Nigeria, data from BP Plc show. Kurdish reserves represent about 3 percent of the world’s total deposits, according to the website of the KRG Ministry of Natural Resources.
Work on the gas export pipeline will not start next month and will not link Khor Mor or Chemchamal fields, according to tweets from the KRG’s Ministry of Natural Resources. Khor Mor is used for local gas supply to power stations and Chemchamal is not yet developed, it said.
The “goal is for Repsol’s Kurdamir and Topkhana fields to also deliver gas for export and local use in addition to Bina Bawi and Mira,” the ministry said.

 

 

 

 

 

 

SAUDI LIFE WITH $30 OIL.

 

  Young population is at forefront of changing economy

Times are getting tougher in the Hathut household, so father Mohammad is looking for extra work and the three kids are being told to switch off the lights to cut his electricity bill.

 

This is Saudi Arabia in 2016. It may be a familiar story to austerity-hit Europeans and Americans, but in a nation synonymous with conspicuous consumption, the belt-tightening has been unsettling. Unprecedented cuts to fuel and energy subsidies are forcing the kind of rigor never seen during the era of petrodollar-fueled wealth that quadrupled per-capita income since the late 1980s.
“A lot of things will change,” said Hathut, 30, who plans to supplement his income as a business-administration teacher at a Riyadh university with private training sessions. “But many youths are still in a state of shock. They haven’t processed the news and what to do.”
With oil having plunged to about $30 a barrel, signs of the tectonic shift taking place in the ultra-conservative Islamic kingdom are everywhere: from the royal palace where the nation’s founding family is contemplating the sale of its monopoly oil producer to the homes and businesses adjusting to the new economy.

Resurgent Youth

Those aged 15 to 34, who make up more than 40 percent of the 21 million Saudis, are at the forefront of the upheaval. No longer can they take for granted free health care, gasoline at 20 cents a liter and routine pay increases.
 

 Even the power of the religious police, which upholds the strict brand of Islam that defines Saudi Arabia, may no longer go unchecked by the government. The Consultative Council, an advisory body, last month urged the Commission for the Promotion of Virtue and Prevention of Vice to compile a list of banned behaviors to prevent abuse by officers. They can arrest unmarried couples found together in a car or people caught with flowers on Valentine’s Day.

 

More women are entering the workplace and were able to run in local elections for the first time last month, though they’re still banned from driving.
It’s “night and day” from 20 years ago when investment banker Khlood Aldukheil, 42, would get into the elevator to go up to her office only to be told no women worked in the building. People used to hang up on her because they thought they were calling the wrong department, she said.

Saudi Welcome

Young, social media-savvy Saudis now expect to have more of a say in running and modernizing the country, changing Saudi Arabia as we know it, said Ghanem Nuseibeh, founder of London-based consulting firm Cornerstone Global Associates.
“Saudi youth won’t be content with what the previous generations were content with,” said Nuseibeh. “Whatever the state is going to take away from them because of dwindling financial resources they would expect to receive it by some other means.”
Something different is apparent from the minute you set foot at Riyadh airport. The drab arrival hall from years ago is now bright with televisions showing cartoons.
Passengers are greeted by smiling young officials in traditional white robes: “Welcome to Saudi Arabia.” Older women and mothers with children are guided to comfortable chairs as male relatives stand in line at passport control.

Taking Selfies

In downtown Riyadh, dining no longer feels like eating in a prison cell after many restaurants got rid of screens placed around tables to shield female diners from men.
Ten years ago, most eateries had a notice at the door that said women were not allowed entry without a male guardian. Uncovering would have been unimaginable. On a visit to one last month, young women took off their head covers and fluffed honey brown hair as they took selfies. The male waiters just went about their business.
The cloaks called abayas that women have to wear in public are increasingly adorned with colored designs, lacy trimmings and glittery panels instead of the mandatory black.
“There’s more freedom now,” Mona, 23, who works in human resources and was among the diners, said after she and her friend spent more than half an hour posting pictures on Snapchat. “Our parents weren’t so lucky.”

New Generation

What those parents did have was the financial boom that made Saudis collectively rich.
Gross domestic product per capita soared to $52,000 by 2014 from about $12,000 at the time of the first Gulf War in 1990. Even during the troughs of the 1980s and late 1990s, wealth burgeoned more quickly because of the relatively lower cost of pumping oil and a smaller population.

 

 

Though many Saudis are embracing the changes, the more hardcore are pushing for restrictions.
The conflict played out at the restaurant, where two women covered entirely ordered waiters to comply with rules banning music in public. They did. But after the women left, the sound of Egyptian love songs filled up the place again.
The other side of allowing more openness is "how do the conservative powers that be in society react?" said David Butter, associate fellow at Chatham House in London. "That clearly is potentially a field of political confrontation in the period ahead."

Executions

Politically, the kingdom remains in crackdown mode. Prominent human rights activist Samar Badawi was briefly detained in Jeddah this week for questioning. Her brother, Raif Badawi, is currently serving a 10-year sentence for insulting Islam. Hundreds of writers around the world held readings of Palestinian poet Ashraf Fayadh, sentenced to death after being accused of apostacy.

Saudi Arabia also carried out its largest mass execution since 1980, putting 47 men to death on Jan. 2, including Shiite cleric Nimr al-Nimr. His execution led to the kingdom cutting off ties with rival Iran after protesters attacked its embassy in Tehran.
In the background is the new economic reality after oil sank from more than $100 18 months ago.
Saudi authorities, themselves a driver of the price collapse as the world’s biggest exporter, announced increases to the cost of fuel, electricity and water last month.
The government intends to cut spending this year and gradually privatize some state-owned entities in the biggest shake-up of economic policy in recent history. It comes almost a year after King Salman named his increasingly powerful son, Deputy Crown Prince Mohammed bin Salman, to head the economic council.

Aramco Sale

In an interview with the Economist published last week, Prince Mohammed said the country is looking into selling all or parts of oil behemoth Saudi Aramco. He also said it’s vital to create employment as he steers the kingdom away from an oil-based economy, including the possibility of putting Saudis into jobs occupied by foreigners who typically work longer hours for less money.
“We have great opportunities to create jobs in the private sector,” he said, according to a transcript published by the magazine. “At the same time I have reserves now, 10 million jobs that are being occupied by non-Saudi employees that I can resort to at any time of my choosing.”
The prince, who is in his early 30s, has been meeting with business leaders, ministers and young Saudis to address the challenges people of his age group will face. Khalid Alkhudair, 32, who attended one of the meetings, said he felt reassured.


“I’m not worried at all,” said Alkhudair, whose businesses include a company that works on finding jobs for women. “This is the time for us to create our own businesses. We need to roll up our sleeves and do something different.”

Bit of Color

Madawi al-Issa, 30, said nowadays young Saudis can start businesses thanks to social media. Hers is emblematic of the social and economic change: she sells abayas online, though not the traditional all-black ones.
Her goal, al-Issa said, is to “change the concept of the abaya from something boring to something you’d want to wear.”
Hathut, the university lecturer, echoed the optimism. But in the meantime, he needs to make some cuts. The first target is to reduce the family’s electricity bill by almost half, to 400 riyals ($107) a month. The children will pocket the difference and are definitely doing their bit.

 “My wife says they are driving her crazy, switching off the lights even when she’s in the room,” said Hathut. “I’m glad it’s working. I want my children to become more responsible about spending money. The oil will run out one day.”

 

U.A.E'S RAKBANK CUTTING UP TO 250 JOBS TO 250 JOBS TO BOOST EFFICIENCY.

 

 

National Bank of Ras Al-Khaimah PSC is cutting about 250 staff as the United Arab Emirates lender adjusts to slowing growth in the second-biggest Arab economy after oil’s plunge.
RAKBank, as the lender is known, "revisited the organization structure of select departments and made changes where necessary to improve synergy and efficiency," a bank spokeswoman said in an e-mailed response to questions on Sunday.
Banks in the U.A.E. are prepared for deteriorating conditions into next year as oil prices remain lower for longer, leading to a decline in government spending, slower economic growth and falling asset quality, Standard & Poor’s said last week. Loan loss provisions at Abu Dhabi-based Union National Bank PJSC jumped 57 percent in the third quarter and United Arab Bank PJSC swung to a loss from a year-earlier profit in the period.
RAKBank is one of several in the U.A.E. that have cuts jobs amid falling oil and property prices. HSBC Holdings Plc cut about 150 employees at its retail and commercial banking operations in the U.A.E., a person familiar with the matter said in November, while Standard Chartered Plc also cut several positions in the country as part of a global restructuring.

 

 

 

 

 

BRENT DIPS BELOW $28 AS END TO IRAN SANCTIONS SET TO WORSEN GLUT.

 

 

Brent oil traded near $28 a barrel as it extended declines after international sanctions on Iran were lifted, paving the way for increased exports from the OPEC producer amid a global glut.
Futures lost as much as 4.4 percent in London, slipping to the lowest since November 2003. Iran is beginning efforts to boost output and exports by 500,000 barrels a day now that restrictions have been lifted, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said Sunday. Saudi Arabia’s Oil Minister Ali al-Naimi said prices will rise, and that market forces and cooperation among producing nations will lead to stability.
 

 

“There is ongoing negative pressure on oil prices from oversupply,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “Iran is not new, but we’ve arrived now at the point where sanctions have been removed and it’s going to be a key focus for the markets over coming weeks. The question is how much supply can come online in the short-term.”
Brent capped a third annual loss in 2015 as the Organization of Petroleum Exporting Countries effectively abandoned output limits amid a global surplus. Iran, which was OPEC’s second-biggest producer before sanctions were intensified in 2012, is trying to regain its lost market share and doesn’t intend to pressure prices with an export increase, officials from its petroleum ministry and national oil company said this month.
Brent for March settlement dropped as much as $1.27 to $27.67 a barrel on the London-based ICE Futures Europe exchange and was at $28.65 at 11:55 a.m. Hong Kong time. The contract slumped $1.94 to $28.94 on Friday, capping last week’s decline at 13.7 percent. The European benchmark crude was at a discount of $1.56 to West Texas Intermediate for March.

Nuclear Program

WTI for February delivery fell as much as $1.06, or 3.6 percent, to $28.36 a barrel on the New York Mercantile Exchange. The contract slid $1.78 to $29.42 on Friday. Total volume traded was more than three times the 100-day average. Prices have lost 21 percent this year.
Buyers of Iranian crude are free to import as much of its oil as they want after the International Atomic Energy Agency determined that the country had curbed its ability to develop a nuclear weapon. As holder of the world’s fourth-largest reserves of crude and biggest deposits of natural gas, the nation gains immediate access to about $50 billion in frozen accounts overseas, funds the government says it will use to rebuild industries.
“Uncertainty remains regarding how much oil Iran can bring on in the short term as well as their re-entry strategy,” Victor Shum, a vice president for Asia Pacific at IHS Inc., said by e-mail from Singapore Sunday. “Export levels could feasibly ramp up quite quickly due to releasing this pent-up supply.”

Iran Output

The Persian Gulf nation will only be able to increase oil production by 100,000 barrels a day, or 3.7 percent, a month after sanctions are lifted and by 400,000 in six months, according to the median estimate of 12 analysts and economists surveyed by Bloomberg. Iran is the fifth biggest OPEC producer.
Saudi Oil Minister Al-Naimi declined to comment Sunday when asked how the removal of economic sanctions against Iran might affect prices. The kingdom is the world’s biggest crude exporter, pumping 10.25 million barrels a day in December, according to data compiled by Bloomberg.
Hedge funds last week increased bearish oil wagers to a record as global equities fell and sanctions on Iran were poised to be lifted. Speculators’ short position in WTI rose 15 percent in the period ended Jan. 12, data from the U.S. Commodity Futures Trading Commission show. It’s the highest in records dating back to 2006. Net-long positions fell to the lowest in more than five years.
“Iran’s additional crude shipments have the potential to further depress prices, perhaps to as low as $25 a barrel,” Gordon Kwan, a Hong Kong-based analyst at Nomura Holdings Inc., said by e-mail Sunday.

 

 

 

 

 

HSBC PLANS NEW MIDEAST HEADQUARTERS NEAR WORLD'S TALLEST TOWER.

Burj Khalifa, the worlds tallest tower, center, in Dubai, United Arab Emirates

 

HSBC Holdings Plc will start building a new Middle East headquarters near the world’s tallest tower in Dubai as the lender aims to combine staff from three other locations in the city.
Abu Dhabi developer Gulf Resources Development & Investment will construct the tower and sell it to HSBC Bank Middle East Limited for about 920 million dirhams ($250 million) upon completion in 2017, according to Jim Osborne, an official at the building company. GRDI recently sold a building it constructed for Standard Chartered Plc to Kuwait’s sovereign wealth fund. HSBC confirmed the plans in a statement Sunday.
Corporate occupiers in Dubai are building their own offices as most commercial towers built during the city’s real estate boom were sold to multiple owners, often with a different owner for each floor. Companies shunned those buildings to avoid dealing with multiple landlords and some are now teaming up with developers to build offices suitable to their needs. HSBC’s Middle East unit is planning to move its place of incorporation from Jersey to the Dubai International Financial Centre this year, according to the bank.


HSBC, which first opened in Dubai in 1946, will start moving some of its 4,000 workers to the 20-storey building in 2018. The bank has staff spread across four locations including a building in Bur Dubai and offices in Emaar Square and Lufthansa building.
The new headquarters will include 320,000 square-feet (29,729 square meters) of office space. It will vacate three locations, only maintaining space in Dubai Internet City, according to the statement Sunday. The headquarter’s total area, including parking and facilities, will be approximately 861,000 square feet, Osborne said.

 

 

 

 

 

 

 

 

IRAN'S OIL WILL JUST MAKE LIFE WORSE FOR GULF RIVALS.

 

 

As Iran emerges from a decade of international sanctions, its Gulf Arab rivals are facing their toughest economic predicament since the global financial crisis.
Governments across the six-nation Gulf Cooperation Council are taking unprecedented measures to counter the slump in oil prices, curtailing some of the world’s most generous welfare systems to plug widening budget deficits. In some countries, contractors are facing delays in government payments, while companies are reducing their workforces to trim costs.
Every major stock index in the Middle East, with the exception of Tehran’s, plunged on Sunday as the prospect of Iran adding to an oil supply glut pummeled markets already reeling from falling crude prices and a global sell-off in equities. With oil priced below $30 a barrel, governments may have to eat further into benefits that citizens have enjoyed for decades -- at a time of growing regional turmoil and a proxy confrontation with Iran from Syria to Yemen.

“The Gulf has been dependent on its energy exports and the public sector for 40 years; it’s all the region has known and there are no quick or easy answers to the problems it has brought,” said Simon Williams chief economist for central and eastern Europe, the Middle East and North Africa at HSBC Holdings Plc in London. Without a rally in oil prices, the burden of reforms “will have to be carried by nationals who will face rising costs and diminished real incomes,” he said.

Buying Spree

While Iran reeled under sanctions linked to its nuclear program, GCC nations used the oil windfall over the past decade to boost their reserves and set up sovereign wealth funds that acquired stakes in companies from Barclays Plc to General Electric Co. Governments swelled the public-sector with nationals while the majority of private-sector jobs went to foreigners.
 

 

That’s slowly changing. The Saudi Arabian central bank’s net foreign assets fell by $96 billion in the first 11 months of 2015 to $628 billion, and the government sold bonds for the first time since 2007 to finance a budget deficit of about 15 percent of economic output. Authorities plan to sell stakes in state-owned assets from hospitals to roads and airports and have reduced fuel subsidies.
“In more than 15 years, this is the first real fiscal challenge they’re facing,” said Raza Agha, chief Middle East economist at VTB Capital in London. “Taking these measures is a big thing.”

No Taboos

Leading the charge is Prince Mohammed Bin Salman, the king’s son and the second-in-line to the throne. In an interview with The Economist published this month, the prince said the government may privatize parts of its biggest oil company. No economic reform is taboo, his officials told the magazine, including laying off under-performing public-sector workers.

Bahrain and Oman have also raised fuel prices, and authorities in Muscat are considering plans to remove all corporate tax exemptions. Subsidies were reduced even in the United Arab Emirates and Qatar, two countries the International Monetary Fund considers better prepared to weather the oil slump than others because of the amount of assets they hold relative to the size of their populations.
“The political contract between the rulers and the citizens is based on a provision of wealth to the citizens, so any adjustment of the subsidies or of the other services will have some political risk,” said Toby Matthiesen, senior research fellow at the University of Oxford and author of “The Other Saudis: Shiism, Dissent and Sectarianism.”
Markets across the region are already feeling the pain. Banks are charging more to lend to each other, and investors are questioning the commitment of the region’s central banks to the dollar peg.

Stocks Drop

Saudi Arabia’s Tadawul All Share Index tumbled 5.4 percent on Sunday, extending its losses over the past year to 35 percent. The MSCI Emerging Market Index has fallen 26 percent over the same period.

“Ambiguity is high and all of the surrounding news is bad, with Iran sanctions easing and how their oil production and reserves are expected to flood the oil market,” said Mohammed Alsuwayed, the head of capital and money markets at Adeem Capital in Riyadh.
Etihad Rail, the developer and operator of the U.A.E. rail network, said Sunday it is reducing about 30 percent of its workforce, as Abu Dhabi seeks to trim costs after the slump in oil prices. National Bank of Ras Al-Khaimah PSC is also cutting 250 jobs as the U.A.E.-based lender adjusts to slower economic growth.

Dubai’s Exception

In a study released in December 2014, the IMF listed Dubai, the commercial hub of the U.A.E., as a successful example of economic diversification in the Gulf. Reducing reliance on oil is “very difficult,” and typically depends on policies put in place before the price shock, the study said.
Income from oil exports makes up 25 percent of Iran’s revenue in the year starting March 21, according to a draft budget submitted to parliament on Sunday. That compares with about 70 percent in Saudi Arabia.
Still, Iran has to make up a lot of lost ground before it can compete with GCC economies, and needs more investments to upgrade infrastructure, said Adel Abdel Ghafar, an assistant professor at Qatar University.
“Iran and the GCC are at different stages of economic maturity, so Iran will need investment in its upstream, downstream and they’re starting a bit late in the game,” he said by phone Sunday. “If Iran is able to catch up, then it can be a serious competitor.”

 

 

 

 

 

ABU DHABI'S ETIHAD RAIL CUTS ALMOST A THIRD OF ITS WORKFORCE.

 

Etihad Rail has cut about 30 percent of its workforce, as Abu Dhabi seeks to trim costs after the slump in the oil.
"We have introduced a restructuring initiative across the company to further streamline our operations as well as our internal procedures and processes," a company spokesman said in an e-mailed statement, without disclosing the number of dismissals. "These changes involve a number of staffing adjustments, as we move towards a flatter management structure."
The 40 billion dirham ($11 billion) Etihad Rail network, which will provide both freight and passenger services when completed, will eventually link the six Persian Gulf nations from the United Arab Emirates to Saudi Arabia through Ghweifat in the west and Oman through Al Ain in the east. Etihad Rail is expected to start awarding contracts for Stage 2 of the project, a 628-km stretch connecting Mussafah, Khalifa Port and Jebel Ali port as well as to Saudi and Oman.
"The rail links to Oman via Al Ain and to Saudi Arabia via Ghweifat remain within the scope of Stage Two, in line with the project mandate," Etihad Rail said in the statement.
The deadline to complete the Gulf Cooperation Council rail project by 2018 could face delays as some countries have yet to begin laying down track in their national network.

 SAUDI ARABIA FACES 'ECONOMIC BOMB' AND HIKES GAS PRICES 50%.

Saudi Arabia is running out of money.

While the world's attention is focused on Saudi Arabia's latest flare up with Iran, many Saudis are concerned about the "economic bomb" at home. The government is slashing a plethora of perks for its citizens.

The cash crunch is so dire that the Saudi government just hiked the price of gasoline by 50%. Saudis lined up at gas stations Monday to fill up before the higher prices kicked in.
"They have announced cutbacks in subsidies that will hurt every single Saudi in their pocketbook," says Robert Jordan, a former U.S. ambassador to Saudi Arabia and author of "Desert Diplomat: Inside Saudi Arabia Following 9/11."
Gas used to cost a mere 16 cents a liter in Saudi Arabia, one of the cheapest prices in the world. Many Saudis drive large SUVs and "have no concept of saving gas," says Jordan

Gas price hike is just the beginning
The gas hike is just the beginning. Water and electricity prices are also going up, and the government is scaling back spending on roads, buildings and other infrastructure.
Those cuts might sound normal for any government that is running low on cash. But it's especially problematic in Saudi Arabia because the vast majority of Saudis work in the public sector.
About 75% of the Saudi government's budget comes from oil. The price of oil has crashed from over $100 a barrel in 2014 to around $36 currently. Most experts don't expect a rebound anytime soon.
The Saudi government used its vast oil wealth to provide generous benefits to its citizens. When the Arab Spring rocked the Middle East in 2011, the Saudi king spent even more in an effort to subdue any discontent in the country.


The perks Saudis receive:
Here are some of the perks Saudis receive:
-Heavily subsidized gas (It used to be 16 cents a liter. Now it's gone up to 24 cents.)
-Free health care
-Free schooling
-Subsidized water and electricity
-No income tax
-Public pensions
-Nearly 90% of Saudis are employed by the government
-Often higher pay for government jobs than private sector ones
-Unemployment benefits (started in 2011 in reaction to the Arab Spring)
-A "development fund" that provides interest-free loans to help families buy homes and start businesses.
Saudi Arabia may have to start taxing its people
Now Saudi Arabia can't pay for all those benefits. It ran a deficit of nearly $100 billion last year and expects something similar this year, if not worse.
The International Monetary Fund recently predicted that Saudi Arabia could run out of cash in five years or less if oil stays below $50 a barrel.
"The Saudis have used their economic power to buy off their population," says Jordan, who is currently serving as diplomat in residence at Southern Methodist University.
He predicts Saudi Arabia may even have to start collecting an income tax or sales tax.
"Part of the leverage the regime has had on their people is that they don't impose taxes and therefore people don't expect representation," Jordan says. "But once they pay taxes, you're likely to see an increase in political unrest."
Unemployment is already high in the country. Official statistics put it at about 12%, but experts say it's likely much higher since many Saudis don't even look for work.
Saudis not cutting back on defense
Members of the royal family have enjoyed lavish expense accounts for years. Those were detailed in U.S. embassy cables leaked on WikiLeaks, including a sex, drugs, rock 'n' roll lifestyle of many young royals. It's unclear how much those will be scaled back since many of the royal perks are off budget.
Jordan says the execution of 47 Saudi prisoners over the weekend is a warning sign that the Saudis will not tolerate dissent.
And there's one area the Saudis are not cutting: defense spending. The country currently spends 11% of its GDP on defense, the highest in the world. It intends to spend even more this year.

Asia-Pacific’s alarming AIDS rise

Asia-Pacific’s alarming AIDS rise

Asia-Pacific’s alarming AIDS rise

8 TOP FOOD FRANCHISES IN THE US

 

Food chain franchise is often much more for people than a simple food business venture. For some it is a real estate purchase since the presence of food businesses, especially of the big chain type, tend to contribute to real estate value change. McDonald's Fast Food Franchises founder Ray Kroc, for example, once said: "We're not in the hamburger business. We're in show business."  In the US, Entrepreneur.com compiled this list of best franchises based on expansion plans, financial stability, and franchise opening cost and summarised in Franchise 500 scores.

 

1 Subway
With 42,227 franchises and a franchise opening cost that may be anywhere between $117,000 - $263,000, Subway is making headway in overcoming bad publicity from the past and attracting good business especially after a smart switch to healthier menus.
2 Jack in the Box
This business, which has 2,238 franchises and costs $323,000 - $544,000 to open expanded successfully from being a regular burger chain to adding  menu with salads, tacos, breakfast and milkshakes. In 2003, the Jack in the Box acquired Qdoba Mexican Grill.

3 Jimmy John's

This gourmet sandwich shop has 2,238 franchises and requires $323,000 - $544,000 to open.
4 Denny's
Family restaurant Denny's requires about $1.2 million to $2.1 million to open a franchise.
5 Pizza Hut

Opening a franchise of this pizza chain requires an initial investment of $297,000 to $2.1 million.
6 Dunkin Donuts
This doughnut chain has 11,310 franchises and costs an initial franchise investment of $217,000 - $2 million. Currently, coffee offerings have been boosting the chain's popularity.
7 McDonald's
This burger chain of Ray Kroc's show has 13,846 franchises. Initial franchise venture may cost anywhere between 1 million - $3 million. 'McDonald's Next' and meal deals like 'McPick 2 for $2' enable McDonald's to guard its post in this list.
8 KFC
This chicken shop has 13,846 franchises and, similar to McDonald's, requires an initial franchise cash out of $1 million - $3 million.