Blog Archive - Savings and Investments

Ronan Lyons (Sunday Business Post) gives us 11 reasons for optimism
http://bit.ly/ecHG8c
As we face into 2011, it’s worth taking stock.

Throughout 2010, and particularly in the final three months, there was lots of doom and gloom about the Irish economy, with plenty of talk of Ireland going bust and losing its economic sovereignty.

This is simply not the case. Everyone knows that Ireland has its problems. Two cornerstones of the Irish economy – the government and the banking system – are in dire straits financially.

The three big drivers of employment growth in the 2000-2007 period – public services, construction and retail – are in various states between stasis and major contraction. However, there is much more to Ireland and much more to its economy than the government, banks and builders.

Looking ahead, here are 11 things about Ireland’s economy that I hope will convince you all is not lost.

1. Ireland is not bust

At the height of the boom, Ireland was borrowing up to €10 billion a year from the rest of the world. This year, Ireland may not have to borrow from the rest of the world at all.

So why all this talk of Ireland being bust?

What people actually mean is that the Irish exchequer is heavily indebted, not the Irish country as a whole.

Our current account balance of payments has been moving into surplus.

So the important point is that the non-government part of the economy, a combination of households and companies, has been earning, saving and paying down debt over the past two years at a faster rate than the government has been borrowing.

So there’s definitely money here in Ireland, lots probably in nervy savings accounts.

The tricky bit is making sure enough of it gets to the government on the right terms.

2. Farmers had a great year in 2010

While real income has been at best static for large swathes of Irish society, Ireland’s farmers had a bumper year in 2010.EUfigures suggest that the typical Irish farmer’s income increased by almost 40 per cent in 2010,well ahead of the typical 10 per cent increase seen in the EU.

Tillage farmers have done particularly well From price increases in cereals and potatoes, but dairy farmers have also done well, with milk prices up 10 per cent.

3.Top of the world for tourism

Irish tourism had a tough year in 2010, and between 2007 and 2010, there was a cumulative fall in revenues and visitors of about a third. Nonetheless, there is a general sense that 2010 will mark the bottom of the cycle.

Two factors that may help Are Tourism Ireland’s campaign to coincide with the British census and a new flight service connecting North Carolina to Ireland.

What will also help is that the readers of Frommers have voted Ireland as the top tourist destination in the world, while Le Guide de Routard has voted Ireland’s restaurants as offering the best combination of quality, value and service.

4. Exporters continue to outperform

Ireland was one of the world’s only developed countries not to experience a sharp fall in exports during the greatest collapse in trade in recent history.

(The global recession was just a coincidence for Ireland.) The only downside to this is that exporters here could not expect to have the rebound that many of their counterparts elsewhere have enjoyed.

And yet, year-on-year growth in Irish exports soared from 4 per cent in the first quarter of 2010 to 15 per cent in the third quarter.

Not only that, but the indications from the final quarter are very positive.

A survey of exporters found growing optimism during late 2010.Almost half expected their orders to grow, while just one in six expected their exports to shrink.

Despite taking a hit in 2008 and 2009,our exports are rebounding in 2010 and 2011.This looks set to continue into 2011: the Irish Exporters Association expects exports to grow 7 per cent this year.

5.A world-leading service exporter

I have never really understood the association of economic success with tangible commodities and manufacturing. ‘‘Things’’ are only valuable because they are useful to people, and usefulness is an entirely intangible concept.

Services, intangible by nature but definitely useful because people are willing to pay for them, constitute four-fifths of economic activity in modern economies.

Technological advances mean that, pretty soon, services will also make up about half of all trade and the bulk of growth in trade.

For example, in Ireland, since the start of 2009, manufacturing exports per quarter have grown €1.3 billion, while service exports per quarter have grown €3.2 billion.

Therefore, I’m not sure Ireland should turn its back on a growth market in pursuit of a manufacturing El Dorado, particularly when Ireland is ahead of the curve already on services trade: 46 per cent of our exports come from service sectors, more than almost any other developed economy.

6. Regaining cost competitiveness

As late as 2009,Dublinwas among the ten most expensive cities in the world for office rents.

For modern economic activity, which is services dominated, property costs are one of the most important items of expenditure.

They make up perhaps 10 per cent of costs in services and R&D, and underpin typically one third of wage costs, which constitute three-quarters of the cost base. So property costs are responsible directly or indirectly for about one-third of all costs.

Therefore, the fact that prime city centre rents have since fallen by almost half in two years is fantastic news for Ireland’s competitiveness.

Not only that, but with high vacancy rates, there is still downward pressure on commercial rents, particularly in secondary areas, which makes IDA Ireland’s job that bit easier.

Accommodation costs also look likely to fall in 2011, so that will ease the wage demands of new workers, which means less pressure on the single most important cost, which is wages.

7.The IDA continues to find more jobs

A few weeks ago, I outlined some of the great successes that IDA Ireland has had in recent months. Since then, there have been more job announcements in a range of sectors and locations across the country.

2010 was a bumper year for the IDA, with more than 11,000 jobs created – again created, not announced – and they are essentially using that bumper year as their baseline for 2011 and the years following, with a target of about 65,000 jobs by 2014.

8. Ireland has its own ICT players

Much is often made of global giants coming here and using Ireland as a base for Europe, the Middle East and Africa.

A number of local successes have emerged from Ireland, and that pipeline will continue.

We have already seen relatively significant companies emerge from Ireland in recent years, such as Havok (now a part of Intel), Hostelworld and DemonWare (part of Activision Blizzard).

Currently, there is a generation of Irish successes emerging and going international, such as Jolt in gaming, Realex and Intrade in relation to money online, and VoiceSage and Blueface in communications.

Behind them again, the next generation is already starting, such as two highlighted by Adrian Weckler in this paper last week,tweak.com in design/ publishing and Datahug in relationship management.

9. Ireland’s life science successes

A second key sector in job announcements over the past few months – and indeed past generation – has been life sciences, a broad sector that includes pharmaceutical, biotechnology and medical devices.

For those trapped in the mindset of ‘‘why can’t we create our own jobs instead of importing them’’, it’s worth remembering that Ireland’s targeting of jobs from abroad in these activities has spawned a very significant number of local companies that almost certainly would not exist otherwise.

And it’s not just Irish spin-offs of multinationals. Early in 2010,Galway-based Crospon launched its own spin-off, Janisys. In fact, according to Enterprise Ireland, of 160 medical technology companies here, 90 are Irish-owned.

And there are other life science success stories too.

Have you ever heard of Icon? Icon is an Irish company listed on the Nasdaq, and one of the world’s leading ‘‘central lab’’ service providers. In plain English, it does very high-skilled outsourcing services for pharma, biotech and medical devices firms.

10. Ireland is exporting education

There is a €4 billion export opportunity for Ireland, in terms of physically bringing students here to learn.

We must also consider, though, licensing our education services abroad or exporting them online.

On bringing students here, and on licensing their service abroad, consider the success of the Royal College of Surgeons in Ireland. In Ireland, the college has 3,500 students, 70 per cent of whom are non-Irish. In addition to many noneconomic benefits, these students bring jobs (RCSI has about 800 staff) and spending to the local economy (it’s estimated each student spends about €8,000 locally per year).

This is something that, if well managed, could be replicated across the country. In the online sphere, there are a number of institutions with a growing profile.

They range from the reasonably well established, such as Hibernia College, which recently won an elearning award, and Intuition.com, which now has offices in New York, London and Singapore, to an impressive group of new companies.

11. Ireland’s entrepreneurs

An argument you often hear about jobs is that ‘‘It’s all well and good attracting jobs from abroad, but why don’t we have more home-grown jobs?” Hopefully the last few items have shown that these are in fact complements. In a modern economy, activity tends to agglomerate in certain locations.

If we can’t attract foreign capital and labour here, we are less likely to keep domestic capital and labour here also.

The reverse is also true.

By attracting so much foreign direct investment into Ireland, it can look from a narrow perspective as if we are diverting those most likely to set up local companies into multinationals. In fact, viewed from a bigger perspective, we are making sure there is an economic future in Ireland by creating a hub where local business can emerge.

Conclusion

So, while Ireland faces very significant challenges, we should not write ourselves off just yet.

Yes, our problems are largely our own fault in not preparing for life in the eurozone.

The next five budgets are going to be tough ones for everyone. And Ireland in 2016 will not be what we might have thought it would be back in 2006. But Ireland in 2016 will probably be a far better place to live than any of us thought possible in 1996,1986 or indeed any previous decade.

The Celtic tiger was not a mirage. We have a very real economy that, with a good bit of hard work and with a fundamental reorganisation of how government raises and spends money, can deliver for us again.

That starts now, in 2011.

Ronan Lyons is an economist.

http://bit.ly/ecHG8c

Adam and Eve had very different approaches to risk and reward.

But a fundamental difference in how men and women operate was not confined to the Garden of Eden, with many modern day Adams and Eves still taking a very different view of many things, not least money.

Recent figures from Standard Life showed a difference in the level of financial confidence of men and women.

The financial confidence index found that men displayed a greater level of confidence than women, with men’s confidence ranked at almost 55 out of 100, compared with 52 for women.

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The 29th September 2010 is fast approaching, and the question arises are my savings guaranteed after that date?

The Government is yet to make a firm decision on the matter, but in the interim period, your savings are fully guaranteed.

There are a few schools of thought out there on the matter, most probable outcome is the blanket guarantee will be withdrawn, and the original deposit guarantee scheme will be reinstated whereby your deposits up to €100K per individual per institution will be guaranteed. This guarantee also applies to Credit Union movement.

Blanket guarantee has been extended for amounts of greater than €100K if your funds are in a fixed account which must be opened prior to 29th September 2010, and guarantee in this instance is extended to 2015.

For more information on savings and Investments Contact Pat Nestor of SCK Group today.

Pension Assets under Threat

Pension Assets under Threat
A recent legal decision could affect the future financial security of thousands of pension investors, especially those struggling with debts.  According to Sunday Business Post correspondent, Emma Kennedy (25/4/2010).

http://archives.tcm.ie/businesspost/2010/04/25/story48765.asp

On Wednesday, April 14, a receiver was appointed over the pension assets of businessman Brendan Murtagh. The former Kingspan boss, who went on to purchase Smart Telecom, once had a multimillion euro fortune, but is now being pursued by investors for debts of close to €30 million.

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The Economiser

The NCA, National Consumer Agency have launched a new facility for people to save money by reducing the cost of utilities and other household expenditure.

They have launched a cost comparison tool known as “Economiser“, and given the usage for each household, it directs you to most favourable supplier.

The Economiser

This is an excellent resource for people and households trying to cope with ever reducing income and ever increasing costs.

Try the Economiser for yourself.

After reading a recent Aviva mailshot I noticed a statistic indicating that annual savings out of disposable income in 2010 will be €10 billion higher than they were in 2008.

People have cottoned on to the idea of saving. My view is for people with borrowings to realise the optimum way for them to save is by accelerating the repayments on their debts, be they mortgages, credit cards or personal loans. By doing this they are effectively getting a return of the interest rate being charged on the debt, which is much higher than sticking the funds on deposit and having to pay DIRT into the bargain.

An interesting Article from Irish Independent, by Charlie Weston, headed Cannibals Rule makes for an interesting read on the subject.

Also, PTSB article in RTÉ Business News confirms savings is the new mortgage, but now the financial institution owes you the money, as opposed to you owing them the money!!!

For more information on Mortgages and Savings Advice contact Pat Nestor pat@sckgroup.ie or 01-2910800.

In a recent Sunday Business Post article, it was reported that Appian Asset Management will launch a new equity fund at the end of this month.  A minimum investment of €50,000 will be required and a return of 8% per annum is expected.  It is higher risk than Appian’s main Value Fund, which invests in a range of assets.


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  1. Make out a Budget Plan. The purpose of preparing a budget plan is to give your greater control of your finances by determining how much you can spend and save each month without getting into debt. If you discover that you are spending more than you earn, then it is essential that you make the appropriate changes to your finances to start clearing your debts.

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