Dollar Down, But Losses Capped as Markets Enter “Twilight Zone”

from Forex News https://www.investing.com/news/forex-news/dollar-down-but-losses-capped-as-markets-enter-twilight-zone-2629270
via IFTTT

Dollar stands tall as traders brace for tapering

from Forex News https://www.investing.com/news/economy/dollar-stands-tall-as-traders-brace-for-tapering-2629204
via IFTTT

Too embarrassed to ask: what is moral hazard?

The term “moral hazard” was first widely used in the insurance industry in the 18th century. Put simply, it refers to a situation in which a person or institution engaged in a risky activity does not bear the full negative consequences of their decisions. This lack of consequences encourages them to behave more recklessly than if they were fully responsible for their actions.

Here’s an easy example. Let’s say you’ve insured your mobile phone. As a result, you don’t bother to buy a protective case for it. After all, if it drops on the floor and breaks, the insurer will pay. That’s moral hazard.

For a much more dramatic real-life example, consider the role moral hazard played in the financial crisis of 2008. In the early 2000s, the US housing market was booming. Investors lined up to buy bundles of US mortgages, which they saw as a low-risk way to get higher interest payments than they could get from US government bonds. They bought these mortgage bundles from the banks. The banks, in turn, made the bundles out of individual mortgages they’d bought from mortgage lenders.

Because there was so much demand, mortgage lenders paid their salespeople big bonuses to sell as many mortgages as they could. But because they were immediately selling the mortgages on to the banks, the mortgage lenders didn’t worry about how creditworthy the borrowers were. They just cared about their commissions. And because the banks were selling the mortgage bundles on to investors, they didn’t worry about the quality of the loans. They just cared about their fees.

In short, the people who issued the mortgages made a profit, and thought they had offloaded the risks to someone else. Then house prices fell, some homeowners stopped paying their loans, and the entire financial system nearly collapsed.

That’s moral hazard, too – when profits go to one group of individuals or companies, but losses are borne by the taxpayer as a group.

And moral hazard is still rife in the financial system. For example, central banks constantly step in and print money to prevent economic shocks from spreading. But that encourages investors to take more risk than they otherwise would. 

Which just sets us up for a worse crash in the future.

On that cheery note, may I suggest you subscribe to MoneyWeek magazine.

from Moneyweek RSS Feed https://moneyweek.com/investments/investment-strategy/too-embarrassed-to-ask/603905/what-is-moral-hazard
via IFTTT

US Open – USD, Oil & Yields Higher, Tech Stocks Sell-Off

USA100, H1

Fed Chair Powell will testify (later today) that the economy continues to improve, according to his written testimony released Monday. He will add that the labour market has gained too, but the pace has slowed the last several months due to the rise in Covid. Meanwhile, supply constraints are restraining some activities. He added inflation is elevated and is likely to remain so in coming months due to the reopening of the economy and bottlenecks in some sectors. He acknowledged that these effects have been “larger and longer lasting than anticipated, but they will abate and as they do, inflation is expected to drop back toward our longer-run 2% goal.”

The advance indicators report revealed an unexpected widening in the August goods trade deficit trade deficit to $87.6 bln from $86.8 bln in July and an all-time high of $92.0 bln in June. August exports matched assumptions, but imports beat estimates by $3.6 bln, leaving a big downside net export surprise via a wider than assumed August trade balance.

The rally in the USD continued in to the US Open with Cable being the biggest mover trading as low as 1.3530 from opening trades today at 1.3715, EM currencies came under the spot light too as USDTRY hit new all-time highs at 8.8876 and the Rand sank further as USDZAR hit 15.1100. US Yields were the main catalyst as the 10yr hit 1.54% and the 30yr broke over 2.00% and even tested 2.10%. This resulted in further selling of the interest rate sensitive technology sector as the USA100, sank under 15,000 and the main markets were all down over 1% at the US Open. USOil continued to rally on supply chain bottlenecks and inventory drawdowns and spiked over $76.00 earlier before cooling to $75.00.

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

from HF Analysis /274014/
via IFTTT

EURUSD, GBPUSD may Need to Drop Lower to get Some Short-term Reprieve

On Tuesday, the markets intensified reassessment of prospective pace of policy tightening by the Fed. The dollar index creeped higher aiming for a retest of yearly highs at 93.72, supported by lower prices of risk assets, as well as higher yields of short-term Treasuries. The two-year yield hit a new high since April 2020, reaching 0.29% on Monday. Rising US yields on risk-free instruments lures investors from countries with low interest rates, such as Japan or Switzerland, so the currencies of these countries are noticeably sagging against the dollar. In less than a week, USDJPY gained 2%, which is quite unusual movement for this low-volatility pair. In addition, Japanese yen is under pressure from high oil prices, as the country is a major importer of hydrocarbons.Treasury Chief Yellen and Fed Chief Powell are speaking in the US Senate today. Both will be under pressure - Powell will explain why the two regional Fed leaders have resigned and how this is related to possible insider trading, while Yellen will have to clarify the situation with the IMF's accusations that they manipulated China's rating in the World Bank report.The data that will gives us a peek in performance of the US economy is trade balance report, consumer confidence estimate from the Conference Board and house prices index. Market nervousness about the issue of debt ceiling and a possible shutdown of the government appears to be worsening, which adds to sell-off of Treasuries and puts pressure on risk assets. In turn, progress in resolving this situation should bring some relief to battered assets.The ECB symposium will also begin today, at which potentially something unexpected for the market can be said. A good example is the comments of Mario Draghi in 2019, which significantly weakened the Euro. The ECB's focus is gradually returning to inflation figures, which can be said not only about the ECB, but also of other large central banks. Eurozone inflation data for September is due out on Friday, which could potentially dampen EURUSD bearish trend, especially if inflation rises above forecast. Due to the rise in oil prices and return of the economy to normal activity, the risks are indeed shifted towards higher inflation reading, more than the forecast of 3.3% y/y suggests.Speaking about the short-term prospects of EURUSD, the selling momentum is likely to push prices down to the lower border of the downtrend (1.1650), from which a short-term rebound to 1.17 may follow:As for the GBPUSD, the pound, which weakened strongly against the dollar, may be supported by the speech of the Bank of England official Mann today, However, not much. Fire sales of the Cable could indicate a shift in rate expectations which adds to the risk of a drop towards this year’s low at 1.35:

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/eurusd-gbpusd-may-need-to-drop-lower-to-get-some-short-term-reprieve"
via IFTTT

The UK Energy Crisis Explained

Notes From Post-Brexit Britain People fighting on petrol station forecourts, taking fuel away from pumps in any sort of container they can get their hands on, petrol stations around the country running empty, speculation that the army will be brought in to manage the situation. Nope, this isn’t a new Bruce Willis action movie, just another day in post-Brexit Britain. The escalating fuel shortage in the UK has rocketed into the limelight over the last week with price around the country soaring, distributors and suppliers going bust and now fears the military will need to be mobilised. If you’re confused as to how the crisis started, why it’s become so bad, and how it’s impacting the economy, read on.What Caused the UK Energy Crisis?Sadly for UK consumers, the economy is now being hit by a perfect storm of Brexit related difficulties and COVID related difficulties. The change in regulations as a result of the UK leaving the single customs union have added a frustrating layer of complexity and expense to operations between the two economies. Over recent months, distributors have been struggling to maintain normal service whilst also dealing with the complexity and expense of COVID healthy and safety procedures as well as the disruption caused by the pandemic (drivers off ill, isolating etc). These two factors combined have created a massive lorry-driver shortage between the UK and Europe, amplified by the number of foreign lorry drivers in the UK who returned home as a result of Brexit.Why Has the Situation Become So bad?The lorry driver shortage has been a big factor all year with a range of vendors from supermarkets through to clothing retailers and restaurants all struggling with maintaining supply chains. However, the issue spilled over into the fuel market (pardon the pun) as a result of a recent announcement from BP. The mammoth oil company announced a series of closures at some of its stations due to supply issues. Additionally, energy price at all time highs and the collapse of a wave of smaller providers and distributors has added to the sense of woe. Ultimately though, the situation was essentially then inflated and exaggerated by the press, sparking panic in the public which has reacted in typical fashion by unleashing a wave of panic buying which has dramatically exacerbated the situation.What Happens Next and How Will It Impact The Economy?Having been backed into a corner, the UK PM has been forced to take several actions, including: Offering temporary work visas to foreign drivers to by pass all the red tape creating the bottleneck. Waving competition rules among fuel providers to allow them to share information to help get supplies to the petrol stations being emptied by panic buying Finally, recent reports have suggested that Johnson is considering bringing in the army to drive fuel tankers and distribute fuel around the country. While this has so far been denied by the government, there tends to be no smoke without fire around these “leaks”.So, in terms of what this all means for the economy. The obvious answer is: nothing good! The situation is the culmination of the driver shortages which have been building all year and look set to worsen heading into the winter months and the projected fourth wave of COVID takes its toll on the UK. Furthermore, the spike in energy prices is driving inflation even higher, squeezing the UK consumer at a time when they are only just starting to recover from the pandemic. This puts the BOE in a very tight spot as a lift in interest rates to help curb prices would also increase the debt obligation of the public. With this in mind, the situation is very precarious and certainly worth monitoring. The current weakness in GBP and UK assets is a clear sign of the investor uncertainty towards the UK right now.Technical ViewsGBPUSDGBPUSD is now threatening a downside break with price testing below the contracting triangle pattern which has framed recent price action. Below here, 1.3570 is the main support to note, a break of which would pave the way for a much deeper move lower, supported by bearish indicator readings.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/the-uk-energy-crisis-explained"
via IFTTT

Market Spotlight: S&P Reversal Risks

S&P Turning Lower?The current price action in the S&P500 is getting very interesting. The sell off from the 4545.25 highs saw the market breaking down below the rising channel. Price tested as low as the 4295.75 level before rebounding. The current rebound, however, has now stalled into a test of the 4475.25 level with indicators both remaining bearish. This area now risks forming a lower peak against the all time highs, with a break below 4383.50 suggesting room for a medium term correction targeting a break of the 4295.75 lows and 4236.50 thereafter.Key Data to WatchThe key focus this week will be on comments from Fed chairman Powell who makes two testimonies, starting today. With recent Fed commentary having turned decidedly more hawkish, any hawkishness from Powell risks fuelling a sharp repricing of US rates which would be a major headwind for equities markets in the near term.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/market-spotlight-s-and-p-reversal-risks"
via IFTTT

The IndeX Files 28-09-2021

Risk Aversion Deepening On Inflation FearsBenchmark global equities indices have started the week under pressure with selling seen across Monday and over the European open on Tuesday. The resurgence in the US Dollar along with broader risk-aversion is seeing the four indices tracked here potentially carving out lower highs against the YTD peaks. Contagion fears around the ongoing Evergrande crisis are continuing to dog markets here with. Additionally, a spate of more hawkish comments from Fed members yesterday is helping lift USD and is once again putting a stronger focus on Fed tapering.Among the Fed members yesterday who commented on inflation and the need for tapering was NY Fed president Williams (typically more dovish) who now also concludes that tapering “may soon be warranted”, highlighting the more hawkish shift in the Fed. On the back of last week’s more hawkish message from the BOE, investors are spooked around the potential reduction in QE over coming months.Looking ahead today the big focus will be on comments due from Fed chairman Powell. In light of the hawkish shift seen from other Fed members, there are clear upside USD risks heading into today’s comments, which hold the potential to driver equities markets lower still.Technical ViewsDAXThe sell off in the DAX this week is seeing the market probing below the 15486.96 level as of writing. With indicators both turned lower, there are risks of a continuation lower here putting the focus back on the 15078.83 level. To the topside, bulls will need to see price back above the 15743.01 level to alleviate near term bearishness.S&P500The current sell-off from the 4475.25 highs is potentially a very bearish development for the market, carving out a lower high against the 4545.25 highs. With indicators both turned lower here, a break below the 4383.50 level will turn the focus back to the 4295.75 level, a break of which will signal a trend reversal lower in the medium term.FTSEFollowing the recent failure at the 7137 level, price is now testing the bullish trend line from YTD lows. With indicators just about still in the green here, bulls will need to see this region (extending down to support at 6968.7) hold. Below there, however, the focus will turn to 6895.6 and 6806.5 thereafter.NIKKEIThe index is in a very interesting place technically. The recent test of the 30502.8 level now risks becoming a double top formation if price breaks below the 29464.9 level. Bulls will need to defend this level to keep the focus on further upside. Below there, the focus will shift to the broken bear trend line and deeper support at the 28356.6 level.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/the-index-files-28-09-2021"
via IFTTT

Why are people panicking about fuel shortages?

• SEE MORE Why we will be reliant on fossil fuels for a long time to come

Fuel has become the latest source of frenzy in UK markets. Drivers flocked to petrol stations over the weekend, with long queues forming through the nation’s cities, despite government efforts to convince the public that there is no shortage of fuel. 

What’s going on, and will things get back to normal any time soon?

What happened? 

Members of the Petrol Retailers Association, which represent roughly 65% of UK forecourts,  say that panic buying left the taps dry at up to 90% of the UK’s 8,000 petrol stations on Sunday. 

Cars queued at forecourts, prompting many petrol stations to shut down, unable to meet demand. BP said that the panic buying saw it run out of its two major grades of fuel on Sunday, forcing it and other forecourts to ration some supplies. 

The panic buying and shortages come at an unsettled time. Last week also saw a massive surge in both UK natural gas and electricity prices hitting headlines, as well as a shortage of fertilisers and CO2, which is used in the manufacture of many products. 

What is causing the fuel shortage? 

The havoc in fuel markets stems from the shortage of lorry drivers. Last week, BP, along with some Esso-owned Tesco Alliance stations, said that it had to close petrol stations temporarily, because it did not have enough lorry drivers. This in turn prompted many drivers to scramble to petrol stations to fill their tanks, ignoring government advice.

How serious is the shortage and how long is it expected to last?

As a result of the chaos, almost 400 petrol stations, including those owned by Shell, Esso and BP, have introduced a £30 fuel limit to give customers a fair chance to fill up. 

But is the UK’s fuel situation really as bad as people say? Ministers have been quick to deny claims that the UK is facing a national fuel shortage, with the transport secretary, Grant Shapps, calling the turmoil a “manufactured crisis”. 

Unsurprisingly, several fuel providers, including Esso and ExxonMobil, released a statement with industry bodies stating there was no overall shortage of gas.

The UK’s business secretary, Kwasi Kwarteng, said: “We have  long-standing  contingency plans in place to work with industry so that fuel supplies can be maintained and deliveries can still be made in the event of a serious disruption.”

Boris Johnson’s spokesman echoed the view. “We have ample fuel stocks in this country – the public should continue to be reassured there are no shortages.”

What measures has the government taken to defuse the situation? 

As a shortage of lorry drivers sparked the fuel crisis, so the government has taken measures over the weekend to attempt to fix it. 

It announced a temporary three-month scheme, expected to last until Christmas Day, to make it easier for 5,000 foreign lorry drivers to work in the UK. Up to 4,000 people will also be trained as new HGV drivers to tackle skills shortages. 

It has also temporarily suspended competition laws to enable oil companies to supply petrol stations more efficiently. Officials said the relaxed competition measures will allow the industry to share information more easily so that deliveries can be prioritised in regions which are experiencing more acute shortages than other parts of the country. 

On Monday, environment minister George Eustice denied earlier media reports that the army may be deployed to help with fuel deliveries. 

"We've no plans at the moment to bring in the army to actually do driving,” Eustice said.  "But we always have a civil contingencies section within the Army on standby – but we're not jumping to that necessarily at the moment."  However, this morning, the government said that army tanker drivers have indeed been put on standby. 

Is this the first time the government has relaxed competition rules?

No, this is not the first time the government has done that. It also relaxed competition laws in March 2020, at the depths of the coronavirus crisis. That paved the way for retailers to share data on stock levels as well as share delivery vans and distribution depots, to ensure minimum disruption to vital supply chains during panic-buying last year when the pandemic kicked off. 

What are the knock-on effects? 

Edmund King, the president of motoring association the AA, said that there is “plenty of fuel at source”, and the situation will rectify itself in just a matter of days. 

If that is true, given the government has already introduced measures to tackle the HGV driver shortage – the root cause of the fuel crisis – it is likely that higher fuel prices will only be temporary. But, that being said, consumers may still suffer short-term disruption and higher prices while the driver shortage persists. 

From an investment angle, there are unlikely to be any ramifications due to the short-term nature of the fuel situation, but it is worth keeping an eye out on oil and gas companies. 

from Moneyweek RSS Feed https://moneyweek.com/economy/uk-economy/603900/why-are-people-panicking-about-fuel-shortages
via IFTTT

Why investors should beware of corporate waffle

Corporate jargon is an irritating fact of life. But it can also damage your investment returns, if a new study is to be believed, reports John Authers in Bloomberg. Analysts at investment bank Nomura looked at the language used by top executives at America’s biggest listed companies (those in the Russell 1000 index) in conference calls discussing their annual and quarterly results, going back to 2014. They used a readability tool to rate the communications for complexity (readability tools analyse aspects such as sentence length and choice of words). They found a strong correlation between clarity and returns: share prices of the stocks whose executives used the clearest language in calls far outperformed those who waffled or used lots of impenetrable jargon. 

This makes logical sense. If someone can’t explain their business strategy clearly, it usually means one of two things: either they don’t know what they’re doing, or they do know what they’re doing, and they’re trying to hide it from you. Neither is a good prospect for an investor. What’s more, the analysis backs up previous research into the relationship between corporate communications and earnings. For example, one study published in the Research in International Business and Finance journal in 2016, found that French companies that used more complex language in earnings reports also were more inclined to use debatable accounting techniques to make their results look better than they really were. 

Lessons for investors

There are many examples of skilled communicators who have done well for their investors over the years. Warren Buffett’s annual letters to Berkshire Hathaway shareholders are perhaps the most-scrutinised corporate documents in investment history. In his own shareholder letters, Amazon founder Jeff Bezos also proved highly skilled at boiling down a complex business to some key strategic points. Here in the UK, fund manager Terry Smith is admired for his forthright views, while a large part of Simon Wolfson’s success as head of retailer Next is his commitment to explaining very clearly what the company is doing and why.

Yet you don’t need to hunt down CEOs or managers with exemplary communication skills. Here’s a simple test to carry out on your own portfolio right now. Look at your holdings. Are you confident that you could clearly explain to another interested investor what your reasoning is for owning each fund or stock? Try to sum it up in a sentence for each one. If you can’t, then maybe it’s a sign that it shouldn’t be in there – or at the very least, that you need to do more homework. Give it a go – I suspect you might be surprised.

from Moneyweek RSS Feed https://moneyweek.com/investments/investment-strategy/603898/why-investors-should-beware-of-corporate-waffle
via IFTTT

Ensign Group: profiting from US private care

The British government has incurred criticism for its decision to raise taxes in order to fund social care. But however the issue is ultimately dealt with, it will be a recurring theme over the next few years as populations age and require more looking after. And given this backdrop it’s no surprise that private care providers have attracted the attention of investors recently. 

Shares in nursing and care-home specialist Ensign Group (Nasdaq: ENSG), for instance, have done very well over the past eighteen months, more than doubling from their lows in March 2020. However, over the past few weeks they have fallen back, and are now approximately 20% down from their peak in the early spring. Does this mean that all the investment opportunities have disappeared, or is this just a pause?

A fragmented industry

Ensign operates 250 US care homes employing 25,000 people in 13 states on a franchise model, with around two-thirds of its homes in five states: California, Texas, Arizona, Utah and Colorado. While this makes it the second-largest provider in the US, the fact that the industry is so fragmented means there is still plenty of room for expansion, and Ensign has been steadily growing its presence by buying up care homes. Even though Ensign spun off its home health and hospice division in 2019, its overall number of facilities has grown from 150 in 2015, and 223 in 2019 to 250 homes as of July 2021.

Ensign’s growth does not just come from increasing the number of homes but is also a result of growing the amount of money it derives from each home, with their average revenue and occupation rates increasing after several years of ownership. This success, combined with the overall growth of the market, which is set to expand by around 7% a year thanks to America’s ageing population, has helped Ensign grow its revenue by nearly 80% from 2015 to 2020, around 12% a year. The group’s earnings per share have risen nearly threefold during the same period. Both revenue and earnings are expected to carry on growing over the next few years.

Ensign’s other metrics also look impressive. Its operating margin increased from around 6% in 2015 to 9% five years later. It also makes good use of its capital, achieving a double-digit return on capital, a key gauge of profitability. This has allowed it to eliminate its net debt even as it expands. Furthermore, the fact that it trades on a 2022 price/earnings (p/e) ratio of 20 times, roughly the same as the overall US market, means it is hardly expensive in view of the growth opportunities in this area.

Still, Ensign’s Group’s share price has been in the doldrums, so I suggest you wait a little until it regains its momentum before jumping in. Go long after it reaches $85 a share, around 10% above its current price of $77. When it does reach that level, I recommend you go long at £40 per $1, with a stop-loss at $60. This gives you a total downside of £1,000.

Trading techniques: using circuit breakers

Since 1988, US regulators have sought to impose so-called “circuit breakers” on both individual shares and the overall market. Once the S&P 500 falls by 7% from its opening price, trading is halted for 15 minutes (unless it is late in the trading day), with another brief interruption once the S&P 500 declines by 13%. Finally, if the market falls by 20%, then all trading is halted for the rest of the day. 

For individual shares in the S&P 500, a 5% fluctuation up or down in any five-minute period will cause trading in that share to be halted for five minutes, while there is a temporary short-selling ban on any share that has fallen by 10% or more in a single day. Those supporting circuit breakers argue that they can exert a calming effect on the market by giving traders a breathing space, reducing panic-buying or selling. Advocates also claim that breakers can prevent attempts to distort or manipulate the market. 

However, critics argue that it not only interferes with the market adjusting to changes in the price that are the result of new information, but could also make a crash worse by depriving the market of liquidity.

For traders the big question is whether a circuit breaker represents a buying opportunity (once trading is allowed to resume) or presages future falls. According to a study by Concordia University in Montreal, US shares that fell by 10% or more between 2012 and 2015, thus triggering the short-selling ban, tended to perform roughly in line with the market once the ban expired, suggesting that circuit breakers are not a useful trading indicator.

How my tips have fared

It has been a poor fortnight for my four long tips. Three fell and only one appreciated. Media group ITV slid from 116p to 108p, homebuilder DR Horton decreased from $94.96 to $87.17 and construction firm Morgan Sindall slipped from 2,615p to 2,507p. The only bright spot was spread-betting firm Plus500, which increased from 1,400p to 1,416p. 

Broker TP ICAP, US homebuilder PulteGroup and Royal Mail remain below the level at which I recommended that you should go long. Overall, my long tips are making a total profit of £3,253, down from £4,146 two weeks ago.

My six short tips have done better, with four going down, one rising and one unchanged. Electric-car company Plug Power fell from $26.40 to $25.72, digital currency bitcoin dropped from $51,253 to $43,075 and remote medicine firm Teladoc dipped from $144.56 to $136. 

Cinema chain AMC also declined from $44.02 to $40.29. However, cloud-computing specialist Snowflake remain unchanged at $310 while electric carmaker Tesla increased from $706 to $730. Overall, my short tips are making a net profit of £109, compared with a loss of £360 a fortnight ago.

I now have four active long tips (ITV, DR Horton, Morgan Sindall and Plus 500) and six shorts (Plug Power, bitcoin, Teladoc, AMC, Snowflake and Tesla). I also have three pending long tips yet to reach the level at which you should activate them (Royal Mail, TP ICAP and Ensign Group). 

I don’t advocate closing any of these positions, but I think you should cut the level at which you cover Snowflake and Plug Power to $325 and $40 respectively (down from $350 and $55) and raise the stop-loss on DR Horton to $70 (from $63). 

from Moneyweek RSS Feed https://moneyweek.com/trading/603897/ensign-group-profiting-from-us-private-care
via IFTTT

Salary sacrifice: how to earn less and save more into your pension

Pension experts are anticipating a surge of interest in salary-sacrifice schemes ahead of next April, when the chancellor Rishi Sunak’s 1.25% national insurance increase for employers and employees alike takes effect.

In a salary-sacrifice scheme, you agree to give up part of your salary in return for a different benefit worth the same amount. That might be anything from childcare vouchers to membership of a cycle-to-work scheme, but pension contributions are a popular option.

How salary sacrifice works

Typically, employees make pension contributions out of their wages before they are subject to income tax. This means you will pay national insurance on your earnings at the usual rates. In addition, your employer has to pay employers’ national insurance on your wages. 

The effect of a salary-sacrifice scheme, by contrast, is to reduce your salary, with your employer paying the amount you give up straight into your pension scheme instead. National insurance, for both you and your employer, is then calculated on your reduced wages, resulting in lower bills for both parties.

Salary-sacrifice schemes have grown in popularity in recent years. Employers are especially keen on them because the schemes provide an opportunity to reduce their national insurance costs substantially. Some employers even offer to share these savings with staff, in the form of higher pension contributions.

With national insurance due to rise from 6 April 2022 in order to help fund the NHS and the costs of social care, these benefits will become even more attractive. 

A basic-rate taxpayer on a salary of £30,000 will then pay £332.50 in income tax and national insurance on their final £1,000 of pay; assuming they then want to make a £1,000 pension contribution, £200 of that is covered by income-tax relief, but national insurance of £132.50 will still be payable.

By contrast, in a salary-sacrifice scheme, where the employee simply gives up £1,000 of pay in return for a pension contribution of £1,000, there is no income tax or national insurance to pay on the income forgone. In addition, the employer makes a national insurance saving of £177 under the new tax rates. Effectively, employer and employee share a windfall of £309.50.

Mind the drawbacks 

There are some downsides to salary-sacrifice schemes. In particular, they reduce the value of benefits linked to your salary, such as life insurance cover and maternity and paternity pay. 

There could also be an impact on the size of the mortgage you can secure, since lenders look at salary when making advances. Nevertheless, if your employer offers a salary-sacrifice plan, it will be even more worthwhile considering it now that national insurance rates are rising.

from Moneyweek RSS Feed https://moneyweek.com/personal-finance/pensions/603874/salary-sacrifice-how-to-earn-less-and-save-more-into-your-pension
via IFTTT

EURUSD H4 approaching pivot, potential for bounce | 28 Sept 2021

Type: Bullish BouncePivot: 1.16634Support: 1.15974Resistance: 1.17368Preference: Price is approaching the pivot where we may potentially see a bounce towards 1st resistance, in-line with 23.6% Fibonacci retracement and 100% Fibonacci extensionAlternative Scenario: If price drops from the pivot, we may see it swing towards 1st support, in-line with 127.2% Fibonacci retracement and 200% Fibonacci extension

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/eurusd-h4-approaching-pivot-potential-for-bounce-or-28-sept-2021"
via IFTTT

DAX testing pivot, potential for a drop | 28 Sept 2021

Type: Bullish UpsidePivot: 15,678Support: 15,459Resistance: 16,007Preference: DAX H4 is testing the pivot where we may potentially see a drop towards 1st support, in-line with 38.2% Fibonacci retracement and horizontal overlap support.Alternative Scenario: If price bounces above the pivot, we may see it swing towards towards 1st resistance, in-line with 100% Fibonacci retracement and 61.8% Fibonacci extension.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/dax-testing-pivot-potential-for-a-drop-or-28-sept-2021"
via IFTTT