US Presidential elections in November may just prompt a rate hike now
The probability of a rate hike at the US Federal Open Market Committee (FOMC)’s meeting on 14-15 June 2016 meeting rose to 28% from 13% a month ago. Bets on a rate increase at the 26-27 July 2016 policy meeting edged up to 61%, more than double the estimate from a month ago. If the economy picks up as expected and jobs continue to be generated, the US Federal Reserve (US Fed) should raise interest rates in the coming months, says a research note.
The Ecowrap report of State Bank of India (SBI) says, "Even after this, if the US Fed goes for a hike sooner than later it will be a decision purely based on non-macro factors, we believe. Thus a US Presidential elections in November may just prompt a rate hike now rather than later".
The markets are abuzz over a US Fed rate hike sometime in June. The reasons seem to be following. It seems there are two opposing viewpoints within Fed. In 2014, Stanley Fischer had argued strongly that there were indeed global spill overs that the FOMC needed to consider, but the US Fed should primarily focus on its own domestic objectives. This view has supposedly gained prominence in recent FOMC meetings and members have argued that the current level of US rates is still far below equilibrium and should be raised. Further, it was also argued that foreign influences may not be used as a reason to delay the rate increases.
"We, however, believe such a decision is unlikely," says SBI Ecowrap, adding, "The US President has openly advocated that UK stayed in the EU. The next Fed announcement falls a week before the Brexit referendum. A further slowdown in China’s economy also impacts the US economy through impact on asset prices through the capital account. Furthermore, China has condemned the US Defense Department's annual report on the Chinese military calling it deliberate distortion that has 'damaged' mutual trust. How should one connect these dots?"
Prior to the symbolic rate hike of 25 bps, the Fed decision was not conditional on factors outside the US. This changed by the end of the 2015, when the Fed acknowledged that they reviewed developments in all important areas of the world, but they were particularly focused on China. This remark was a marked departure from Fed stance and in the Minutes of the meeting of 18 May 2016, we find that British referendum on membership in the European Union and an unanticipated development associated with China's management of its exchange rate was point of concern, it says.
Basing a rate hike decision when labour market trends and GDP trends are at odds, cost of model risk is way too high. It appears that Philip Curve relationship has weakened post 2008. In addition, little has changed since 2008 in terms of macro data (see table below), but for unemployment rate, which again is difficult to digest for reasons cited above, SBI in the Ecowrap says.
"In light of this, there is a case to draw that the US Fed will adopt a long pause strategy before its next rate hike. The domestic environment does not hold any promise. Although the unemployment rate has fallen, the participation rate among the young population group is either stagnating or declining. To add to the woes, the participation rate among higher age groups is expected to rise by 1.6% per annum over the next eight years. The cumulative drag on labour productivity will moderate growth and therefore favours a rate hike with long gaps," the report added.



Every cigarette rots you, inside out
Gory pictures on cigarette packets depicting the dangers of smoking have helped people kick the butt. But despite all the images of the diseased lungs and heart, the number of girls taking to the habit of smoking is on the rise. One of the prime responsibilities and a large opportunity in public health in the 21st century is to prevent the increase in smoking among women.
In what could sound alarming, according to the WHO reports, tobacco smoking currently kills five million people a year worldwide and, according to estimates, will probably kill eight million people a year between now and 2030 and one billion over the course of the 21st century.
The World No Tobacco Day was a theme initiated in 2010 with an intention to draw a relation between gender and tobacco, with an emphasis on marketing cigarettes to women. This theme was chosen "to draw particular attention to the harmful effects of tobacco marketing towards women and girls". And this continues to be observed year-on-year.
In the garb of being modern, fashionable, independent and self confident, women/girls consider smoking as an expression of independence. While it is imperative that women's empowerment continues, attention must be paid to its potential link to increased smoking among women and to the ways in which the tobacco industry is capitalising on societal changes to target them.
The most common time when women initiate smoking is in their teens, and the number of adolescents who initiate smoking increases every year from grades nine through 12. Moreover, there is growing evidence that the reasons girls initiate smoking is different from the reasons why boys begin. Many of the factors that contribute to smoking initiation have been elucidated; the strongest appear to be peer smoking and parent smoking.
Parent connectedness also plays a vital role. Adolescents desire greater connectedness to parents, school, and community. Unfortunately, today's busy adults frequently relinquish responsibility and supervision of teens allowing them greater opportunities to participate in unhealthy behaviours. When the adolescent is unable to meet her need for affirmation within the family, in this case, the daughter with the mother, the affiliation with the peer group may be greater.
Half a century ago, the risk of death from lung cancer among men who smoked was five times higher than that of women smokers. But by the first decade of this century that risk has equalised: for both men and women who smoked, the risk of death from lung cancer is 25 times greater than for non-smokers.
A study has indicated that women who continue to smoke die on an average more than 10 years sooner than those who never smoked. While lung cancer is the most infamous hazard linked to smoking, the habit also raises the risk of death from heart disease, stroke, pulmonary disease and other cancers, including breast cancer.
Interestingly, what several are unaware are the changes in manufacture of cigarettes that has led to increased dangers. The use of perforated filters, tobacco blends that are less irritating, and paper that is more porous has made it easier to inhale smoke and has encouraged deeper inhalation to achieve satisfying blood levels of nicotine. The result of deeper inhalation is chronic obstructive pulmonary disease (COPD).
Women who smoke are also more likely to have fertility problems. A single butt can result in more than 7,000 chemicals spreading through the entire body and the organs. This could lead to ovulation problems, damage to reproductive organs, damage to eggs, premature menopause and increased risk of miscarriage. 
It's never too late to reap the benefits of quitting. The younger you are when you stop smoking, the greater your chances of living a long and healthy life. And we can do a lot better to reduce the prevalence of smoking with the tools currently in hand if government agencies, medical insurers and the public work in tandem.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.


Does the Sharepro fraud highlight poor regulatory oversight?

The Sharepro share transfer fraud was uncovered when a complaint was filed with the Securities Exchange Board of India (SEBI) pursuant to which the market regulator initiated an investigation. Upon discovering the fraudulent transfer of shares and unclaimed dividend, SEBI, and many of the companies for which Sharepro acted as a registrar and share transfer agent, filed a compliant with the Economic Offences Wing (EOW).


Registrars and share transfer agents have been familiar with controversy. Last year, SEBI recognized the failure of TSR Darashaw Ltd to act with due skill, diligence and its violation of the code of conduct specified in the Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993, which resulted in a fraudulent transfer of shares, however it did not go so far as to impose a penalty vide its order. Shortly thereafter, in June, 2015 SEBI cancelled the certificate of registration granted to Knack Corporate Services Ltd due to their lack of even basic infrastructure and adequate office space, equipment and man-power to effectively carry out its activities.


Although any move towards higher supervisory oversight and tighter regulation is often faced with fierce resistance, mandating higher supervisory oversight often has the unintended effect of increasing accountability of the regulator itself. The converse is true in the case of supervision of registrars and share transfer agents by The Registrars Association of India (RAI), a self-regulatory organisation for registrars to an issue and share transfer agents. Consequently, in the event of a fraud, by virtue of registrars and share transfer agents being inherently self-regulatory, SEBI’s lack of regulatory oversight is obviously not called into question.


SEBI, however, is equipped by virtue of Regulation 16 of the SEBI (Registrar to an Issue and Share Transfer Agents) Regulations, 1993 to undertake an inspection of any registrar or share transfer agent. A fetter imposed on the powers of SEBI is the requirement under Regulation 17 for SEBI to provide a reasonable notice to the registrar to an issue or share transfer agent before carrying out inspections, which does not permit the market regulator to conduct a dawn raid. This fetter, although reasonable, may need to be revisited and perhaps diluted in light of the recent spate of share transfer frauds.


Inevitably investors are the worst affected by frauds perpetuated by registrars and share transfer agents, being placed in a lopsided battle against a systemic issue wherein ludicrously the easiest recourse is to approach SEBI. It would therefore be in the interest of investors if SEBI were to institute a stronger framework for monitoring the activities of registrars and share transfer agents and institute controls to prevent fraud. This could include yearly, or quarterly filings and/ or compliance reports along with the constitution of a specific ombudsman entrusted with the task of resolving the residual disputes not redressed by the registrar or share transfer agent.


To address the larger question of whether SEBI should adopt a more proactive approach, it may help if SEBI take a proactive approach rather than act reactively upon the occurrence of a fraud. Allowing SEBI to monitor electronic matching of share transfers through access to servers and computer systems, algorithmic suspicious transaction identification and strict record keeping for physical share transfers may appear to be ostensibly onerous and perhaps stifling regulatory measures, but they may go a long way in reducing, if not eliminating instances of fraud.


Another challenge with accountability for fraud prevention and control is that owing to the requirement to establish criminal intention or ‘mens rea’ involved' in fraud, it would be unfair to attach liability to directors of a company for fraudulent conduct of employees when they are neither privy to, nor complicit in such fraudulent activity. Needless to say, this principle cannot be diluted as it would be ridiculous to hold someone liable for a criminal offence if he lacked any intent to commit it. Negligence in ensuring minimum standards of fraud prevention however, is an entirely different matter.


Setting minimum standards of fraud control measures may allow SEBI to hold directors liable if their companies fail to implement such fraud control measures. Establishing these minimum standards of fraud prevention and control for registrars and share transfer agents has become imperative given that the last decade has been peppered with instances of share transfer fraud. These measures could include logging of order matching, dividend distribution and share transfer activities on a system which shares these logs with SEBI on demand and also allows for algorithmic risk identification so that the large volumes of data can be analysed by software, rather than having any unrealistic expectations of manual identification of suspicious transactions. The prevalent SCORES, grievance redressal platform could be augmented with a specific ombudsman for grievances relating to registrars and share transfer agents accordingly focus the attention of SEBI where adequate fraud control measures are lacking.


Allowing self-regulation without randomised inspections, or at a minimum, compliance and audit requirements, in an industry rife with instances of fraud, would tantamount to deliberately neglecting reasonable investor protection measures.


(Akash Karmakar is an associate at AZB & Partners. Opinions expressed in this article are personal.)


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