Financial Mirror 2015 12 30

FinancialMirror JIM LEONTIADES

OREN LAURENT

Where the Euro has failed PAGE 5

Windfall gains for foreign banks from Fed rate hike PAGE 14

Issue No. 1166 â‚Ź1.00 Dec 30, 2015 - Jan 5, 2016

End of the Bull run?

STOCK MARKET OUTLOOK FROM TOP WALL ST STRATEGISTS - SEE PAGES 10-11

Marijuana trading faces new obstacles SEE PAGE 19

December 30, 2015 - January 5, 2016

2 | OPINION | financialmirror.com

FinancialMirror MPs’ stupidity excels with Published every Wednesday by Financial Mirror Ltd.

shopping hours bill

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In their wisdom to try and muzzle the government, our honourable members of parliament, most of whom do not deserve to get re-elected in May, have shot themselves in the foot for the umpteenth time.

By depriving the Labour Minister of the right to set (or completely liberalise) shopping hours and days, the opposition parties have forced the question back to the courts, where hopefully reason will prevail and shops will be allowed, once again, to open whenever they want or in accordance with consumer demands.

The Minister said after the Cabinet meeting on Monday that the matter is now in the hands of the Attorney General and will be appealed in the Supreme Court. Until the judges’ final outcome, however, Cyprus will return to the Dark Ages, with shops shutting on Wednesday afternoons, at 6pm on Saturday and closed all day Sunday, as if God had decreed it. Let alone the trouble this will cause the working class, many of whom do not have a spare day for their shopping.

The Labour Minister also appealed to employers not to sack any staff, who by default will now become redundant, until the matter is resolved.

The opposition voices have failed to come up with

reasonable arguments to counter the administration’s claim that the extended shopping hours helped reduce unemployment and revived the retail sector. Instead, they insist on calling on the government to defend how jobless figures have been contained and how the economy has benefitted from a revival of the retail sector. They even want the government to help the SMEs, which, they claim, will be hurt most by the extended shopping hours and days. How naïve these people are…

Things have changed, as have market forces and trends, allowing the smartest to survive, not necessarily the biggest.

With Sunday closures, many of the small and medium sized manufacturers, farmers and suppliers, who provide goods to the larger stores, will lose out and also be forced to lay off staff. With money supply being reduced, due to one less shopping day, the cash flow of SMEs will be hurt most, having struggled in the past three years to make ends meet.

This will take us back to a vicious circle of extended loans, over-exposed mortgages, dried up supply chains and longer lines in front of the (un)employment office.

How MPs come up with these stupid ideas to impose controls on everything is anyone’s guess.

Perhaps they should all go home and let the consumers decide what is best for them.

THE FINANCIAL MIRROR THIS WEEK 10 YEARS AGO

CSE-ASE link in trouble, Cyta expands overseas Delays in upgrading systems in Greece and Cyprus may push the link up of the CSE with the Athens bourse from January 1 to the end of 2006, while CyTA announced it was expanding operations into the UK, Greece and Hungary, according to the Financial Mirror issue 651, on December 28, 2005.

CSE-ASE: Plans to link up the Cyprus and Athens stock exchanges through a common trading platform have been delayed over the absence of laws on custodians and short-selling, bank

20 YEARS AGO

Enlargement talks in ’98, share prices rise EU leaders agreed that accession talks with would-be entrants will begin in 1998 following reforms are achieved, while share prices continued to climb driven primarily in the Insurance sector, according to the Cyprus Financial Mirror issue 142, on December 28, 1995.

Enlargement: EU leaders agreed in Madrid to launch negotiations to bring in other European states into the Union, with Cyprus included among the 12 hopefuls. But talks will begin with the states

clearance beyond 2.30pm and EUR conversion, meaning that the initial target of January 1 will be missed for at least three months, if not to the end of the year, according to CSE Chairman Akis Cleanthous.

CyTA expansion: The state-owned telco is expanding in the British market where it recently launched CyTA UKn and plans to provide wholesale services in Greece through CyTA Hellas SA, as well as

in Hungary through its 80% stake in Actel, with triple play (voice, Internet, Cable TV) offered from March 2006.

Travel surges: Travel abroad has surged 16% in November with Greece the top destination for Cyprus residents, followed by the UK, Russia, Israel and Egypt.

Turkish embargo: Foreign Minister George Iacovou said that Turkey is on a “collision course” with the EU over Ankara’s refusal to open its ports and airports to Cyprus companies. Ankara began membership talks on October 3 and a progress review is expected within 2006, as entry talks may hit a crisis over Cyprus.

CAIR deadline: Cyprus Airways unions were given an extension until Friday to respond with their final answers to the controversial restructuring plan, that will include 500 redundancies, salary cuts and other measures.

best prepared to join and their applications will be on an “equal footing”, following a compromise from Germany that wanted only Poland, Hungary and the Czech Republic to join in the first wave The Commission has already issued favourable opinions on Cyprus and Malta.

Clerides satisfied: President Glafcos Clerides said he was satisfied with the decisions of the European Council summit which calls for priority to the applications of Cyprus and Malta for accession. He said Spain’s PM Felipe Gonzalez

assured him that that the two island states were ready to start membership talks six months after the 1996 Inter Governmental Conference.

Stocks up: Share prices continued to climb as the general index rose 0.5% with investors continuing to pump fresh funds into the market. The main contributing factor was the performance of the Insurance sector that has surged 9.6% on speculation of further mergers and acquisitions. Weekly volume also reached a new record of CYP 8.2 mln, wit the year-to-date reaching CYP 128 mln and the average weekly trade for the year at CYP 2.7 mln. Market cap is now CYP 1.05 bln, gaining 398 mln or 61% from the start of the year. The best performers are FW Woolworth (20c) gaining 196%, CTC (20c) up 192%, FW Woolworth (+185%), Universal Life (+174%) and Paneuropean Insurance (+168%) Even Cyprus Airways gained 86% in the year, closing at 60.5c.

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December 30, 2015 - January 5, 2016

financialmirror.com | CYPRUS | 3

Retail bonds start year with new high Record €47.9 mln for Jan 2016 series; 2015 total reaches €205.18 mln The Public Debt Management Office (PDMO) at the Ministry of Finance has auctioned a record EUR 47.9 mln 6year retail bonds, with the January 2016 series setting the pace for the government’s financing needs in the new year.

With the 2015 total reaching EUR 205.18 mln, the PDMO will continue to offer EUR 10 mln during its monthly auctions in the primary market, which are mainly subscribed by third country nationals seeking to take advantage of Cyprus “deposits for residency” programme.

The retail bonds, offered only to individual investors, carry a higher interest rate over the 6-year period, in addition to a competitive 3% tax on interest, compared to a 30% rate on deposits in commercial banks.

The PDMO said that for the January 2016 series, it received a total of 130 applications totalling EUR 47,920,000.

Of these, 114 applications were submitted by Cypriots and 16 applications by foreign investors. Offers ranged from EUR 3,000 to 2.95 mln.

The second series for 2016 will be issued on February 1, maintaining a monthly cap of EUR 10 mln, applications for which may be submitted from January 4 to 20.

The ratio of local to foreign investors had been about 1:2, but this is expected to change in favour of non-EU nationals, with any investment upward of EUR 5 mln entitling the buyer to a fast-track citizenship.

Enthusiasm in the monthly issue of 6-year retail bonds, the government’s alternative financing method after the economy crashed two years ago, recovered in September when the PDMO introduced the lower interest rates to an

average 6-year yield of 2.79%, down from the 4% average at the launch of the programme.

The retail bond that aimed to raise EUR 100-120 mln a year, has so far collected more than 300 mln for the government since the programme was launched in 2014 that has only this year returned to the markets following an austere bailout programme imposed the Troika of international lenders in 2013.

As of the September 2015 series, the interest rate had been adjusted downwards by 0.25 percentage points and ranged

from 2.50% for the first year to 5.50% in the final year. This works out at 2.5% for the first 24 months, 2.75% for 24-48 months, 3.00% for 48-60 months and 3.25% for 60-70 months.

Meanwhile, according to a recent PDMO presentation, the government’s total financing needs in 2016 are estimated at EUR 1.2 bln, of which 0.4 bln is short term T-Bills debt, 0.7 bln is medium/long term debt, and 0.1 bln is the fiscal deficit.

The PDMO said additional transactions will continue in the local market in 2016 and there is intent to continue international bond issuances once a year.

Meanwhile, the European Central Bank has bought EUR 285 mln worth of Cypriot government bonds up until November 30, under the Public Sector Purchase Programme (PSPP) on secondary markets, which became effective since March 2015.

Also, according to data released by the ECB, the Eurosystem bought Cypriot government bonds worth EUR 97 mln in November having first stared in July 2015.

The inclusion of the Cypriot government bonds in the extended purchase program is expected to keep having direct benefits for Cyprus, mainly through further reduction of borrowing costs and indirectly through enhancing confidence towards the economy generally and towards the domestic banking system specifically.

Purchases are conducted on the secondary market from mainly Cypriot government bondholders, ie. banks and investment funds, which are willing to sell some of their investments in Cypriot government bonds.

December 30, 2015 - January 5, 2016

4 | CYPRUS | financialmirror.com

Philippine bidder eyes casino license Manila-based Bloomberry Resorts is vying for a gaming license in Cyprus, as the Philippine casino operator moves to expand its presence beyond Asia, which has become vulnerable to China’s crackdown on high rollers.

On December 18 the company submitted an “indication of interest in bidding for the Cyprus integrated resort project,” Bloomberry’s director of investor relations Leo Venezuela told the Nikkei Asian Review.

The company was particularly attracted to the 15-year exclusive contract offered by the Cyprus gaming authorities, Venezuela added, although he did not say what the minimum investment requirement would be.

In all, eight companies have submitted bids, with the Commerce, Industry, Energy and Tourism Ministry confirming it has received a total of eight bids, with five bids to be set aside as the competition moves forward with three finalists.

In August, the government permitted the establishment of a casino to boost tourism and may issue a gaming license by next year, various reports indicate. Hong Kong-listed Naga Corp. is also reportedly bidding for the gaming license.

Bloomberry, which operates the almost three-year-old Solaire Resort and Casino in Manila, has been aggressively branching out overseas, from South Korea to Buenos Aires in Argentina, where it has proposed to build an integrated resort.

In South Korea, the company early this year took over a small hotel and casino on Jeju Island and plans to establish a

bigger one on its property near Incheon, if it is granted a gaming license there.

Despite its aggressive expansion into new markets, Bloomberry has not escaped the negative effect of China’s anti-corruption crackdown, which targeted Chinese big casino spenders, and which has hammered Asian gaming stocks.

The identities of the bidders have not been revealed but the media have been openly sharing names they feel are the companies showing interest in the casino license. Among the five bidders identified so far are Hard Rock International of

ENI-Kogas gets 2-year extension, to drill in 2017 The cabinet decided on Monday to give the ENI-Kogas joint venture a two year extension in order to continue its explorations within Exclusive Economic Zone in blocks 2, 3 and 9, on the eastern side of the Cyprus waters.

Energy Minister George Lakkotrypis said after the cabinet meeting that the consortium’s request for exploration until 2018 had been approved.

He said that there is a draft plan for the consortium’s actions, which was presented to officials at the ministry, adding that the government was informed on how ENI-Kogas will proceed based on geological studies.

He also noted that that matter will be clarified in January and that based on initial planning, the next drilling will be in 2017 and the plan will be examined after new data.

The consortium’s concession was due to expire in February 2016.

Lakkotrypis told reporters the ItalianSouth Korean joint venture had asked for more time in order to “re-assess the energy potential, which is all the more necessary now after the developments in Egypt’s Exclusive Economic Zone and the discovery of the Zohr gas reservoir.”

Previously, following two unsuccessful exploration drills in Block 9, ENI had been reportedly considering abandoning its operations here.

The minister may have been referring to a new model employed by ENI, which tracks carbonate reservoirs rather than sand reservoirs, according to the Cyprus Mail.

It is this model which ENI used when in the summer it discovered the Zohr prospect in Egyptian waters – the largest gas find ever made in the Mediterranean.

Zohr lies just 6km from the boundaries of Cyprus’ Block 11, licensed to French oil major Total, and about 90km from the Aphrodite reservoir in Block 12, operated by Noble and Israeli partners Delek and Avner, with BG entering as a new partner.

Earlier this month, the government also approved the extension of energy giant Total’s exploration licence in Block 11 for two years.

In an interview with daily Alithia, Lakkotrypis said Total has found indications of potential drilling targets.

In the same interview, the minister revealed that a mooted synergy for joint development of the Aphrodite and Zohr reservoirs was now all but ruled out.

The reason, he explained, is that ENI and the Egyptian government want to pipe the Zohr gas unprocessed, whereas the development plan for Aphrodite provides for transporting processed gas.

the United States, NagaCorp of Cambodia, Bloomberry Resorts Corp in the Philippines, a French venture that includes Bouygues Batiment International Accord Hotels and casino operator Barriere of France. A conglomerate of Russian interests is also interested in the license, including Absolut, a firm involved in property and banking.

It was believed that the Genting company of Malaysia and Sun International of South Africa were interested but withdrew their bid late.

Caesars Entertainment showed interest in the past but with bankruptcy issues, they have opted to not focus on a new project as far as we can ascertain at this point.

Now, the eight companies vying for the license will be cut down to three within a 45 day time frame. This will be after the government reviews the prospective projects and will continue to narrow down the candidates until 2016 when the license will be awarded. The winner will have two years to create the gaming facility.

Legislation allows for a gaming facility to be created with 100 gaming table minimum and 1,000 electronic gaming machines. The casino can be built anywhere the operator is able to create a deal, as long as the land is private. The winning bidder will be able to construct a small casino immediately. Along with the revenue generating first facility, three satellite, slots-only casinos are allowed to be built in addition to the massive integrated resort, the first of its kind ever to be built in Europe.

December 30, 2015 - January 5, 2016

financialmirror.com | COMMENT | 5

Where the Euro has failed By comparison, the US entered the financial crisis in 2008 with an unemployment rate of 5%.

In the following two years, this peaked in 2010 at 10%, declining steadily for the subsequent five years to its current 5%, essentially where it began before the financial crisis. Britain closely paralleled the US experience. Beginning in 2008 at 5.6%, unemployment peaked in 2011 at 8.1%.

It subsequently declined and is now back to the British pre-crisis level of at 5.5% Current unemployment in the Eurozone has yet to reach the level it had before the 2008 crisis.

At 10.7% the Eurozone is still at a level unemployment consistent with economic recession. Included in that number is a current youth unemployment rate (2015) of 23%. For Spain and Greece, it remains close to 50%. This is despite the numerous “make work schemes” sponsored by Eurozone governments anxious to reduce unemployment along with record levels of migration to other countries by persons seeking

By Dr. Jim Leontiades Cyprus International Institute of Management It is now some 17 years since a group of countries came together to establish a common currency, the Euro. For the first years of its existence, the Eurozone group of countries had considerable success. The group eventually implemented a series of institutional and regulatory measures which went far beyond the aim of a common currency. These included far reaching measures aimed at improving the economic life and political cohesiveness of the group. The so called “more Europe”.

However, with the financial crisis of 2008 and more particularly the Greek sovereign debt crisis of 2012, there has been a marked deterioration.

The Eurozone has been hampered by both slow economic growth and more recently with growing political disarray. Its lack of success is most obvious in finding employment for its residents.

Unemployment The most important economic objective for any country is providing full employment to its citizens. Failure on this issue is not just an economic problem. It has social repercussions in terms of lives wasted, families destroyed and careers lost.

It is also here that the Euro group of countries have experienced their most conspicuous failure. Germany, with an unemployment rate of only 4.5%, is doing well but it is a notable exception.

Despite the many well-spun optimistic news releases from the Eurozone public relations office, the success of the single currency group in the area of jobs and employment has been noticeably lacking. Over 17 million people were unemployed in the Eurozone in 2015.

Assessing success or failure implies a comparison. Firstly to be considered is the current level of employment performance of the Eurozone relative to its peer group of other developed nations.

Secondly, its performance can be judged historically, comparing it over a period of time.

Unemployment Relative to other Developed Countries The most recent employment data for the major developed countries (see Table) shows Eurozone unemployment relative to its peers.

The Eurozone clearly underperforms by this measure. The next closest in unemployment is Canada, recently hit by the drop in demand for its oil and other commodities. If the Eurozone could match the unemployment rate of Canada, the least successful of its peers, it would require finding new jobs for over 5 million more of its residents, a distant prospect.

Performance Since the Financial Crisis The early years of the Eurozone saw a rapid improvement in employment. Beginning with an unsatisfactory rate of unemployment of 9%-plus, unemployment in the zone declined. By 2008, the first year of the financial crisis, it stood at 7.6%. Since then, the rate of unemployment in the Eurozone increased steadily for five years, hitting a peak of 12% in 2013, falling slowly for the next two years to its current level of 10.7% .

work.

Eurozone performance during the financial crisis compares unfavourably even against other EU countries which are not members of the common currency. Official EU statistics (Eurostat) state that after 2008 “unemployment declined more rapidly in the member states which do not yet have the Euro”.

Whatever else may be said about the efforts of the numerous crisis meetings of the Eurozone authorities to address the economic problems of Greece and other member countries , they have failed to provide a satisfactory solution for Eurozone unemployment. www.ciim.ac.cy

December 30, 2015 - January 5, 2016

6 | COMMENT | financialmirror.com

FBME continues media pressure on CBC with ‘open letter’ to President FBME Bank, the Cyprus arm of the Tanzania-based lender whose license was revoked by the Central Bank of Cyprus last week, on the grounds of alleged money laundering, has lashed out at the government in an open letter to the President, challenging his neutrality on the matter and alleging in turn a dose of corruption on the part of CBC officials who seem to be [pandering to US government officials.

The open letter, signed by FBME Chairman Ayoub-Farid Saab, said that after 17 months of the CBC’s mismanagement of this branch, during which time the CBC also closed the subsidiary FBME Card Services, and has denied access by ordinary depositors to their own accounts.

Now, Saab said, the livelihood of a further 250 of the bank’s employees is under grave threat while the CBC continues its efforts to send the bank to its grave. Thi follows the incompetence the CBC has shown in actions with Cyprus’ three systemic banks, all also under its suprvision and regulation.

“It is our contention that a small group of CBC officials, possibly colluding with outsiders, have made a sacrificial offering of FBME to a USA government agency completely without justification,” Saab wrote.

The CBC announced on Monday, December 21, that it had revoked the banking operation license of the Cyprus branch of FBME Bank, ending a long dispute over the Tanzaniabased bank’s suspected dealing with money laundering, according to the US Treasury conclusions.

But the bank, which had already contested the CBC’s suspension and appealed to the Paris-based International Chamber of Commerce, responded with a statement saying that it will launch a legal fight against the “unfounded CBC license revocation.”

“FBME Limited has announced that immediate legal action is being launched to contest the revocation by the Central Bank of Cyprus (CBC) of FBME Bank’s license for its branch in Cyprus and is challenging this Decision in front of Cyprus Courts,” it said last week.

“The revocation, communicated in a nine-page declaration, blames others for actions caused and taken by the CBC Board over the past 17 months, which stem from CBC’s unilateral takeover and attempted sale of FBME Bank’s branch in Cyprus. FBME rejects this Revocation of Licence in its entirety.”

“CBC’s illegal measures against FBME, of which this is the latest, have led to lawsuits in Cyprus and abroad, exposing the Cyprus authorities to a spiral of claims for substantial damages and compensation.”

In another announcement last week, the FBME said “it is clear that the real guilty parties are a small coterie of CBC officials and some shadowy figures external to the organisation. There is very little doubt that they had prior knowledge of the original measures to be taken by the US government agency FinCEN against FBME and probably colluded in their preparation.

“Now that the US courts are questioning the FinCEN measures and have ordered that these be re-examined, the CBC is being exposed. Similarly, the decision of the

international arbitration tribunal at the ICC in Paris to consider the claims of the plaintiffs, the beneficial owners of FBME, in respect to damages and compensation against the Republic of Cyprus, brings even more risk to those around the table who concocted this episode in the first place.

Financial penalties will be directed at the Republic of Cyprus, and the country’s taxpayers and their elected representatives will demand to know who has caused this calamity.”

In an earlier open letter also addressed to the President of the Republic, former Attorney General Alekos Markides, acting on behalf of the owners of FBME Bank, outlined the series of legal victories FBME has secured in overseas courts and argued that it is the Republic as the state that shall be left liable and exposed and not the Central Bank of Cyprus as an independent institution.

Markides argued that in the case of FBME the Central Bank’s has acted as Resolution Authority and therefore not in its role as an independent institution of the Republic.

This in effect leaves the State at risk of having to pay compensation described as a “huge sum” at the expense of the tax payer. The Resolution Authority, claimed Markides, has failed to sell the bank and has been acting arbitrarily and illegally and in a manner aimed at covering up its responsibilities, more recently by planning to liquidate the bank. This, he added, is a prospect that will have further devastating effects on all concerned.”

In August, the US agency FinCEN, on the basis of whose now disputed findings FBME was placed under administration, had to re-open its period for assembling and assessing evidence to late January 2016 after a US court halted its attempt to impose its Final Rule on FBME Bank.

Markides concluded by calling on the President to convene and chair a meeting with the Minister of Finance, the Resolution Authority and the beneficiaries of FBME Bank so as to discuss the prospect of finding constructive solutions to safeguard the interests of all concerned.

December 30, 2015 - January 5, 2016

COMMENT | 7

Why a pro-Kurdish Russia infuriates Turkey Russia’s issues with Turkey go beyond the Su-24 downing, as Moscow’s desire to increase its presence in the Middle East is fundamentally at odds with Turkey’s desire to do the same, according to an analysis by Stratfor, the global intelligence company.

Russia knows exactly how to push an opponent’s geopolitical buttons. Since Turkey downed a Russian Su-24 fighter jet exacerbating an already tense rivalry centred on regional dominance - Moscow has set about punishing Ankara politically and economically. Now, in its goal to antagonise Ankara further, Moscow is exerting its considerable influence on a particularly sensitive spot for Turkey: the Kurds.

Last week, Russian Foreign Minister Sergei Lavrov welcomed Selahattin Demirtas, the leader of the Peoples’ Democracy Party (HDP), Turkey’s most important Kurdish political party. According to Demirtas - who announced the meeting from the southeastern province of Diyarbakir, the main battleground for Turkish and Kurdish forces - the Peoples’ Democracy Party will establish an office in Moscow. The politician claims he can do what Turkish President Recep Tayyip Erdogan cannot: mend Turkey’s relationship with Russia. What is left unsaid, however, is that Demirtas wants to show Erdogan that the Kurds are a political force that cannot be sidestepped in elections or crushed in the streets. This meeting, the highest-level diplomatic encounter between Russia and Turkey since relations soured last month, comes after the Kremlin refused point blank to reconcile with Ankara.

After all, Russia’s issues with Turkey go beyond the Su-24 downing. Moscow’s desire to increase its presence in the Middle East is fundamentally at odds with Turkey’s desire to do the same. Russia knows that by supporting the Kurds, it weakens Ankara. To this end, Russia recently insisted that the Democratic Union Party - Syrian Kurds associated with the Kurdistan Workers’ Party (PKK) - must have a seat at the negotiating table along with other Syrian opposition groups. In October, Russia invited the Syrian Kurdish group to open an office in Moscow, emphasising a desire to coordinate with the Democratic Union Party and the Syrian government to target the Islamic State.

Russia has only recently come out in support of the Democratic Union Party’s

Russian Foreign Minister Sergey Lavrov greets HDP’s Selahattin Demirtas in Moscow

militia - known as the People’s Protection Units - in its fight against the Islamic State and against rebels holding territory around the town of Azaz. Yet, the Syrian Kurdish group was quick to deny this, wary of open support from Moscow. This makes sense considering the importance of US support channeled through the Syrian Democratic Forces.

The Russians have indeed launched deep interdiction strikes against the Islamic State in northern Aleppo, but have avoided the People’s Protection Units’ lines so far.

Russian jets could also be targeting rebel logistics routes running from Turkey. Still, the Democratic Union Party’s participation in negotiations could eventually lead to Kurdish autonomy in northern Syria, which could then become a fertile bastion of Kurdish activity from which the PKK could organise strikes. This would be a terrible outcome for Turkey, and Russia knows it.

For Demirtas, a meeting with the Russian foreign minister demonstrates the relevance of the HDP and its potential to gain support from Moscow, which the Kurdistan Workers’ Party has enjoyed for decades. While the United States and European Union have designated the PKK as a terrorist organisation, the People’s Democracy Party is a legal political party with representation in the Turkish parliament. Although the HDP officially distances itself from the PKK, both groups share certain ideals, goals and

patrons.

Russia has a rich history of supporting the PKK and other Kurdish groups. The Kurdistan Workers’ Party was created during the Soviet era and shared a congruent leftwing ideology with Moscow. The Soviet Union provided havens throughout the Soviet Union for the constantly moving Kurdish populations. In fact, the first Kurdish language film, “Zare,” a silent black and white romance about a dashing young villager protecting his bride from the designs of a evil feudal lord, was produced in the Soviet Union in 1926. The Soviets facilitated Kurdish media and propaganda starting in the 1940s. In the 1980s, Soviet ally Syria offered the PKK a haven, and the group has legally operated in post-Soviet Russia throughout the 1990s.

Russia’s interference in Turkey-Kurdish affairs comes at a sensitive time. After the cease-fire between Turkey and the Kurdistan Workers’ Party ruptured in July, confrontations between Turkish security forces and the PKK increased. Two weeks ago, the Turkish army launched one of its largest domestic military operations in recent years against the PKK. Ankara deployed approximately 10,000 Turkish security personnel, supported by tanks.

Erdogan even promised to “annihilate” members of the PKK in their homes. Since the cease-fire was lifted in July, dozens of curfews have been imposed and thousands

have been killed in various operations, including Turkish airstrikes against the PKK in Iraqi Kurdistan’s Qandil Mountains.

Despite Ankara’s rash of actions against the PKK, members of the Turkish parliament are looking to de-escalate the Kurdish issue through dialogue. Lawmakers in Ankara are currently urging the government to restart talks with the Kurds as clashes increase in southeastern Turkey. Last week, the deputy chairman of Turkey’s second-largest political party called for open dialogue in parliament instead of violence. The ruling Justice and Development Party also called for talks.

Turkey’s conciliatory political tone toward the People’s Democracy Party is intended to put a wedge between the Kurdish political party and the PKK’s militancy, thereby bringing HDP back into the fold. However, this is likely to prove difficult. Also last week, Demirtas announced that the southeastern Anatolia region of Turkey has embraced the idea of autonomy in the face of what he called Ankara’s dictatorship. He went so far as to refer to snap elections called by the Justice and Development Party - after failing to achieve a majority - a “coup.”

Now, with the Kurds increasingly benefiting from Russian patronage, Turkey must face certain realities. A stronger Kurdish political constituency in Turkey could push the Kurdish autonomy agenda, while a Kurdish-controlled northern Syria has the potential to support the PKK in its attacks across the border in Turkey. Equally important, Ankara’s agenda of increased influence in the Middle East does not account for, nor lend itself to, internal political and security distractions. Turkey has so far failed to de-escalate the situation with Russia because Ankara refuses to admit fault through an apology and appropriate compensation. Moscow therefore responded with sanctions targeting Turkish exports and accusations that Erdo¤an has connections to the Islamic State?s oil enterprise.

Russia is good at identifying an opponent?s perceived weakness and then exerting pressure. In Turkey?s case, Moscow has found a pressure point in the form of the Kurds. It is suggestive of a Russian proverb quoted earlier this month by Turkish journalist Cengiz Candar in the daily Radikal: “If you invite a bear to dance, it’s not you who decides when the dance is over. It’s the bear.”

Bulgarian politician dumped for siding with Turkey The leader of Bulgaria’s ethnic Turkish party has been ousted from his post and expelled from the party, officially for declaring support for Turkey in its row with Moscow over the downing of a Russian warplane, according to the EU news and policy site EurActiv.

Lyutvi Mestan, who headed the opposition DPS party (Movement for Rights and Freedoms) which represents ethnic Turks, voiced support for Turkey’s action last month.

In a declaration to the Bulgarian parliament, Mestan said Russia’s violation of Turkish airspace amounted to a violation of sovereignty of NATO territory and that Russia had previously been given many official warnings.

Turkey said it shot down the plane in defense of its airspace. Moscow denied its plane had passed over Turkish territory. A spokeswoman for the MRF said that Mestan had been dismissed from his post and expelled from the party by a unanimous decision of its leadership taken at a meeting in the villa of party founder Ahmed Dogan.

“All the decisions regarding Mestan were unanimous,” the spokeswoman, Velislava Krasteva, told reporters.

Dogan, a respectable elder statesman of Bulgarian politics, said during the meeting that “this would be the fate of everyone who stands up against Bulgaria’s national interests.”

The declaration in support for Turkey in the context of the downed airplane may be only the tip of the iceberg.

In a speech to the DPS leadership on December 17, the text of which was published a week later, Dogan said that the EU had hardly the motivation to be an international player, while Turkey and Russia became more and more assertive.

In this context, he criticised Mestan for taking sides and transforming DPS into a Turkish “fifth column” in

Bulgaria.

“If you want to play that game, this is recipe for political disaster”, Dogan said.

The move highlighted Bulgaria’s unusual role in mainstream Europe. Though a member of the European Union and the NATO alliance, it still feels close to Moscow, for historic reasons dating back to the 1877-78 RussianTurkish war.

In a statement later last week, Mestan said the declaration he had made to parliament had been adopted by the party’s parliamentary group and showed DPS support for NATO values. “Bulgaria’s national interest has been connected with the EU and NATO for years now, and not with Russia,” Mestan, who was not invited to the extraordinary meeting, said in a statement.

Bulgarian political scientist Ognyan Minchev was quoted as saying that the attitude of Turkey vis-à-vis Bulgaria was aggressive, although it came in covert forms. Minchev criticised in particular the push of the Turkish authorities to legitimise Bulgaria as an integral part of the Ottoman space.

The DPS party represents ethnic Turks and other Muslim groups who make up about 13% of the 7.2 million population. DPS is affiliated to the European liberal ALDE party.

December 30, 2015 - January 5, 2016

8 | COMMENT | financialmirror.com

HAPPY NEW YEAR from the CYPRUS GOURMET In this volatile world it would be unwise to consider “New Year Resolutions”. “Hopes”, perhaps is a better word. At this time I am reminded of Woody Allen’s quip: “How do you make God laugh? – Tell Him your plans”.

The hopes I have for my family, friends and myself simply centre round that of good health for the next 12 months. I hope to have another year of my page here each week and that it may interest and entertain a few readers in 2016! So, to you all, I wish happiness, peace and prosperity for the year to come. And, of course, Bon Appétit.

CHRISTMAS PAST (just!)

Our 2015 Christmas lunch was with friends – the traditional British turkey. It’s one of those traditions that took hold in Cyprus in the years we lived there, although I can’t think why. For me it doesn’t have a great flavour and there’s a lot of it. Unless you’re a big family, the wretched bird hangs around for ages, coming up in guise after guise. Roasted. Cold, sliced. Fricassee. Risotto. With ham in a pie. So, I have only had to face it once this year. On Boxing Day (last Saturday) I roasted a chicken stuffed with a cooked mixture of finely chopped lamb flavoured with cinnamon, cumin and turmeric, plus onions, garlic, pine nuts, chopped mint and red wine. Much better!

This is how such a dish should look (it’s actually the jacket photo of a wonderful book published in 1982, by Arto der Haroutunian, called “Middle Eastern Cookery”. (See also below) To keep juices in, I cover the chicken with foil for about 40 minutes of the total cooking time of between 60 and 80 minutes (at 200C) When you’ve had your main meal, cut all the remaining meat off the bird, not forgetting the two lovely “chicken oysters” on the flat part (top). Keep this for another main dish.

Then, break up the carcass, put in a large pot with some mixed herbs (fresh and/or dried), add some bits of ham or bacon, a carrot or two, some pieces of other root vegetables such as swede, turnip or celeriac, and an onion or leek or two. Cover with water, season and simmer for about three hours. You will then have the basis for some excellent soup or stock in which to cook rice, pasta, bulgar wheat our cous-cous.

All this talk of what to do with a chicken was prompted by my looking through a new and decidedly original book about food, with recipes, sent to me for review.

“Under the Copper Covers”, by Sherine Ben Halim Jafar, has been published by Nicosiabased Rimal Publications, at US$55. It is a substantial hard-back book, with more than 300 pages, printed in colour on art paper. More than 200 pages concern food, in terms of ingredients, cooking and recipes.

Throughout, there is a feeling of family. Their story, encompassing departure from Libya in 1969, to escape the Gadaffi regime, to the present is redolent of several written of the Palestinian diaspora following the 1948 creation of Israel.

Here, though, we do not have a narrative about one nation’s food – the author, Sherine Ben Halim Jafar, found settling anywhere other than her homeland, Libya, most difficult.

FOOD, DRINK and OTHER MATTERS with Patrick Skinner This searching for a home and indeed her own self, led her through Lebanon, Syria and Iraq, then beyond the Arab world into Iran.

Everywhere she absorbed the individual culinary cultures. Now, she presents not only her family story, but her experiences with each cuisine. The dedication tells you a lot about the feeling of this work: “To my loves”, it reads.

The recipes are accompanied by atmospheric colour photographs, often in soft-focus and looking like they’ve been taken at home (in some you can almost smell the food). This is all to the good.

I have travelled in most of the countries represented here, eaten the food and cooked some of it, too. Their similar but different cuisines have been well documented and a number of dishes have joined the repertories of international chefs. But Madame Jafar has produced many recipes you don’t find in most Middle Eastern cook books or magazines. And, there is more than this. There is a feeling throughout of love and of family. It is a book to read, enjoy, feel. I keep my copy on a little table near my work desk and every now and then dip into it for a few minutes. In the depths of an English winter it takes me back many years, to another world, of sunshine, friendship and hospitality. I can recommend this as a gift for someone you love – or for yourself.

Said by some to be the seminal work on the food of the Middle East, Mr. der Haroutunian’s book remains available (current edition is pictured left). It offers a lucid exposition of the diversity, substance and style of Middle Eastern and North African cooking.

Born in Aleppo, Syria, in 1940, he grew up in the Levant, but went to England with his parents as a child, remaining there for most of his life. He studied architecture at Manchester University and embarked upon a career designing restaurants, clubs and hotels. In 1970, in partnership with his brother, he opened the first Armenian restaurant in Manchester which eventually became a successful chain of six restaurants and two hotels. It was logical that he should widen his horizons to include cookery books – 12 of them – because they combined his love of food with his great interest in the history and culture of the region.

Sadly he died before his time at the age of 47, in 1987.

Go to www.eastward-ho for recipes, food and wine news and notes.

December 30, 2015 - January 5, 2016

December 30, 2015 - January 5, 2016

10 | MARKETS | financialmirror.com

Has the bull market reached the end of the road?

Stock market outlook from 14 top Wall Street strategists

By Jon C. Ogg The bull market seems to be at a crossroads at the end of 2015. Six straight years of gains have been seen, but as 2015 winds down the Dow Jones Industrial Average (DJIA) has less than a week to close with the index down about 1.5% and the benchmark S&P 500 down less than 1%.

The real issue is not just that the bull market’s gain has gone on for over six years now. What matters is exactly what may come to be in 2016. Election years are supposed to be good for the markets, but the backdrop of a strong U.S. dollar and weak trends continuing in the prior growth markets of China, Brazil, Russia and elsewhere are weighing down on earnings growth — and that is weighing down Wall Street strategists’ expectations.

Another issue is that weak energy prices and weak oil and gas earnings are hurting the overall earnings power of the energy sector. Ditto for companies tied to metals and mining or other commodities, and companies reliant on high exports.

The DJIA has fallen far short of analyst expectation targets to derive a DJIA 19,142 peak in 2015. The S&P 500 Index closed out 2014 at 2,058.90 and was close to 2,044 last week. Keep in mind that some targets are carry-over targets that were made earlier and some of these may of course change before year-end or at the onset of 2016.

The universe of strategists was taken from the projections from Bank of America Merrill Lynch, Citigroup, Credit Suisse, Goldman Sachs, JPMorgan, Morgan Stanley, Wells Fargo, RBC, BMO, Barclays, Canaccord Genuity, Deutsche Bank, Nomura and UBS. Again, their estimates may change before year-end or in the beginning of 2016.

Merrill Lynch - S&P 500 target: 2,200 The firm sees a 7% total return for the

S&P 500 in 2016, roughly 5% in inflationadjusted terms. Its strategists believed that Federal Reserve rate hikes are designed to engineer modest growth rather than to put the brakes on a runaway economy, so stocks should do well, particularly those that can raise their dividends and offer investors a rising income stream. The current top 10 Merrill Lynch stock picks for 2016 are Citigroup, Coca-Cola, Exxon Mobil, 3M, Walt Disney, Ecolab, Pfizer, NextEra Energy, Qualcomm and Verizon Communications.

Other key strategist targets from Citigroup, Credit Suisse, Goldman Sachs, JPMorgan, Morgan Stanley and a half dozen more are featured below.

Citigroup - S&P 500 target: 2,200 Citi sees about 7% upside in stocks, despite lowering equities to a Neutral weighting. It also warned of an aboveaverage chance that the economy could dip back into a recession. That is not set in stone, but the firm is less positive in equities than in the past.

Credit spreads, an earnings dip, metals and transports, margins and low sentiment were all listed as concerns.

Credit Suisse - S&P 500 target: 2,150 The firm sees stocks trading near fair market value for the first time in about five years. It thinks this is a time to trim equity weightings, having previously seen a mid2016 S&P 500 target of 2,200.

Elsewhere, Credit Suisse sees the MSCI emerging market index offering roughly 15% potential US dollar upside to year-end 2016.

It recommended overweight positions on China, Korea, India, Mexico, Malaysia and Turkey, and the firm sees being underweighted in Brazil, Russia, Thailand, Philippines and Poland.

Credit Suisse also has been making controversial stock calls: it removed GE from the focus list, but now likes the AlcatelLucent/Nokia merger and is now somehow

Tech IPOs - Underpriced or overhyped?

November was a big month in New York as two high-profile tech startups made their stock market debut. Both Square, the payment company founded and led by Twitter co-founder and CEO Jack Dorsey, and Match.com, the parent company of several dating services such as Tinder, ended the opening day with a significant increase in their respective stock prices. Seeing tech stocks pop up on their first day of public trading is something people have come to expect and the lack of a significant jump is often seen as an unsuccessful IPO. But is it really?

Take Square for example. By pricing its IPO at $9, well below the expected range of $11 to $13, the company all but made sure that its stock price was going to see a sharp increase once trading started.

Sure, a big first-day pop does create positive headlines but it comes at a cost: by lowballing its IPO price, Square left a lot of money on the table.

In the end, an IPO is about raising money to grow your business and Square could have raised tens of millions more than it did if it had priced its IPO within the range it had initially given.

Our chart illustrates that big first-day gains are still all but a given for tech companies going public these days. Some may have been underpriced, some may have been overhyped. But that is something that only time (and the market) can tell. (Source: Statista)

bullish on BHP.

S&P 500) for 2016.

Goldman Sachs

BMO Capital Markets

- S&P 500 target: 2,100 The Goldman target was based on 2.2% average growth in 2016 and 2017, with a P/E ratio of 16.2. What stood out was that the firm thinks earnings can grow close to 10% due to a potential recovery of energy profits.

That means caveats, while in November Goldman added Apple to its Conviction Buy List.

- S&P 500 target: 2,100 BMO expects a correction of some sort to arrive in 2016, which may lead to the first year of losses since 2008 (if 2015 doesn’t beat 2016 to the punch). This call was from the end of November, so it could be refreshed.

BMO also sees $130 in earnings per share for the whole S&P 500. Its strategist was more bullish than many before this 2016 call, but concerns were around the impact from higher interest rates, low or lower commodity prices and lower growth in China and Europe.

JPMorgan - S&P 500 target: 2,200 The firm sees S&P 500 year-end earnings per share at $123.00. That implies roughly 3% to 4% in the S&P’s earnings per share over the year. JPMorgan expects the oil drag to fade, but it sees a strong dollar persisting.

It also suggested for its clients and investors to exit many of the top momentum stocks from 2015 because they have become crowded and expensive.

Morgan Stanley - S&P 500 target: 2,175 The firm made big news publishing its views for investors to brace for a period of low investing returns. It was back in August when Morgan Stanley cut its 12-month target for the S&P 500 to 2,200 from 2,275, with expected forward price-to-earnings ratios of 16.6 rather than the previous forecast of 17.2. It also cut its 2016 earningsper-share forecast for the S&P 500 to $128.50 from a previous $131. Morgan Stanley expects the Fed to raise rates five times between now and the end of 2016.

RBC Capital Markets - S&P 500 target: 2,300 RBC’s target of 2,300 is more aggressive than most, but it comes with some caveats.

This was from November, but a CNBC report from September showed that RBC was too bullish for 2015. At that time, the firm had cut its targets to 2,100 from 2,325 for 2015.

RBC gave four top tech stock picks for 2016 at the end of November: Adobe Systems, Amphenol, Facebook and Visa.

And Others A list of other targets from other firms without the color comes from Birinyi’s Ticker Sense. These five S&P 500 targets for 2016 have not been confirmed by 24/7 Wall St., but they were listed as follows: Barclays: 2,200 Canaccord Genuity: 2,350 Deutsche Bank: 2,275 Nomura: 2,245 UBS: 2,275

Wells Fargo - S&P 500 target: 2,230 to 2,330 Wells Fargo carries a scale of targets for a range rather than listing absolute numbers.

This seems more fair, although it makes the expectations for a low-end, mid-point, or high-end up for debate.

Wells Fargo has an S&P 500 Index operating earnings projection of $130 (per all

Without weighting any firms heavier or lighter due to size or confirmations of targets, this left 14 firms on Wall Street with current price projections for the S&P 500 target is almost 2,218 for 2016. Again, that can and very well may change in the days and weeks ahead as strategists tweak their 2016 numbers. (Source: 24/7 Wall St.com)

December 30, 2015 - January 5, 2016

financialmirror.com | MARKETS | 11

The 8 best performing Dow stocks of 2015

By Chris Lange, 24/7 WallSt.com Eight Dow stocks have made stellar performances in 2015, but they have obviously gone above and beyond the performance of the market, especially with the flat year so far.

Over the course of the past year, all of these top Dow Jones Industrial Average stocks have outperformed the broad markets and each one has risen for different reasons.

Nike Nike Inc. (NYSE: NKE) was the absolute best performer on the year thus far. The secret to Nike’s success in 2015 was the strengthening U.S. dollar. And over the course of the year, cheaper imports from this sports apparel giant led to higher margins across the board. Further pumped up by strong earnings reports, Nike was a force to be reckoned with in 2015.

In the past year, Nike stock has risen 36.4%. Shares of Nike closed last week at $129.80, with a consensus analyst price target of $142.86 and a 52-week trading range of $90.69 to $135.30. Looking ahead to 2016 earnings, the company has a multiple of 26.3, compared to the current price.

McDonald’s Early on in 2015, McDonald’s Corp. (NYSE: MCD) was a struggling brand. It actually replaced its CEO in the first month of the year due to perceived underperformance. The stock was relatively flat through the first half of the year, but what kicked this Dow stock into overdrive was the introduction of “all-day breakfast.” Following this, consumers seemingly changed their mind about the golden arches and investors bought in.

McDonald’s stock has risen nearly 30% year-to-date. The shares closed most recently at $117.69, with a consensus price target of $118.57 and a 52-week range of $87.50 to $118.90. Looking ahead to 2016 earnings, McDonald’s has a multiple of 22.0, compared to the current price.

Home Depot Compared to other Dow stocks, Home Depot Inc. (NYSE:

Large tech companies such as Apple and Google are often accused of avoiding U.S. taxes by stashing foreign earnings in countries with lower corporate tax rates. When asked about his company’s tax avoidance practices in an interview with “60 Minutes”, Apple’s CEO Tim Cook rebutted the allegations saying that Apple pays “every tax dollar it owes”.

He also criticised the U.S. tax code for being outdated in the digital age and claimed that Apple pays more taxes than any other company.

While that may be true in total terms, it definitely isn’t in relation to the company’s outlandish profits. In 2014, Apple paid $13.97 bln in income taxes, which is more than what IBM, Microsoft and Google paid combined.

More importantly though, Apple’s effective tax rate (the average rate at which pre-tax profits are taxed) in 2014 was 26.1%. While that is actually higher than it is for many of its fellow tech companies, it is 2.5 percentage points below the average tax rate paid by S&P 100 companies in 2014, not to mention the statutory federal income tax rate of 35%.

As our chart illustrates, Apple is far from alone in trying to pay as little taxes as possible. As a matter of fact, it is paying higher taxes than many of its peers. (Source: Statista)

HD) has been on an absolute tear for the past few years. As a leader in home improvement, it’s hard to believe that this retailer would ever fall out of favour with consumers barring something catastrophic like the hack it suffered in 2014.

However, strong fundamentals, earnings and a solid balance sheet make this stock a top performer in 2015.

In the past year, the stock has risen 27.6%. Shares of Home Depot closed last week at $131.31. The consensus analyst price target is $141.00, and the 52-week range is $92.17 to $135.47.

Looking ahead to 2016 earnings, it has a multiple of 21.2, compared to the current price.

GE

ahead to 2016 earnings, Microsoft has a multiple of 17.6, compared to the current price.

Visa The strong dollar benefited Visa Inc. (NYSE: V) this year.

When the company acquired its European arm, this added a whole new stream of revenue, and with the weakening euro, Visa gained across the board.

Visa stock has risen 18.6% year to date. Shares last closed at $77.17, with a consensus price target of $86.47 and a 52week range of $60.00 to $81.01. Looking ahead to 2016 earnings, Visa has a multiple of 23.0, compared to the current price.

General Electric Co. (NYSE: GE) can really break its performance down to two instances over the course of 2015, otherwise the stock was more or less flat. Most recently, GE reported third-quarter financial results that were very positive in October.

Just preceding this, activist investor Nelson Peltz and Trian Fund Management acquired a significant stake of 98.5 mln shares, after which the stock skyrocketed. Earlier in the year, GE announced a massive asset sale, along with an equally large share repurchase plan, which also sent the stock soaring.

GE stock has risen 24.5% year-to-date. Shares recently closed at $30.40, within a 52-week trading range of $19.37 to $31.23.

The consensus price target is $31.77. Looking ahead to 2016 earnings, the company has a multiple of 20.1, compared to the current price.

UnitedHealth

Microsoft

Despite selling off massively in August, over 20%, Walt Disney Co. (NYSE: DIS) still managed to make solid gains in 2015. The mouse house had a nice bounce in the final quarter of 2015. One thing that comes to mind immediately is Star Wars. In just the opening weekend, this movie has shattered all types of box office records, not to mention the merchandising from the franchise is a force to be reckoned with.

Disney stock has risen 14.6% year to date. Shares closed last week at $106.59. The consensus price target is $119.25, and the 52-week range of $90.00 to $122.08. Looking ahead to 2016 earnings, Disney has a multiple of 17.1, compared to the current price.

The stock has been on a roller-coaster ride this year, with long stretches of just trading sideways. The main factor with Microsoft Corp. (NASDAQ: MSFT) in 2015 was its earnings growth, in both the calendar first and third quarters (fiscal third and first quarters for 2016, respectively). The bottom line contribution for this stock in a market that was very unsure about its destination in 2015 helped provide a solid base for the company to perform on.

In the past year, Microsoft stock has risen 21.3%, and most recently closed at $54.83. The consensus price target is $57.00. The 52-week range is $39.72 to $56.79. Looking

UnitedHealth Group Inc. (NYSE: UNH) has made steady gains over the course of 2015, only really selling off in August and in the second half of the year. But this did not wipe out the gains that this health insurer had for the rest of the year.

Despite not finding a merger partner over the summer, UnitedHealth still benefited from the M&A premium in the industry.

In the past year, the stock has risen 18.0%. UnitedHealth shares closed at $117.41, with a consensus price target of $142.13.

The 52-week range is $95.00 to $126.21. Looking ahead to 2016 earnings, the company has a multiple of 15.2, compared to the current price.

Disney

December 30, 2015 - January 5, 2016

12 | PROPERTY | financialmirror.com

Germany has the lowest levels of home-ownership in all of Europe Only 52.5% of the German population was living in their own home in 2014, whereas the average home-ownership rate across Europe stood at 70.1%, according to figures released by the European Union’s statistics office, Eurostat.

When measured against the total number of households in the country, Germany’s home-ownership rate falls further, to below 50%.

According to Eurostat, the situation in Germany has historical roots and is strongly connected to post-World War Two reconstruction, which was only possible because it focussed almost exclusively on the construction of large apartment blocks and multi-family housing. Eurostat’s ranking

also revealed that the countries with the highest home-ownership rates are the continent’s poorer countries. Romania has the highest home-ownership rate (96.1%).

The EU’s richer nations all have lower rates.

Eurostat also investigated the affordability of housing. Some 11.4% of the population of the EU spend more than 40% of their disposable household income on housing.

Anything above 40% is classed by Eurostat as a “housing cost overburden.” 40.7% of Greeks are overburdened by their housing costs, followed by the Germans (15.9%) and the Danes (15.6%). In contrast, housing costs are especially affordable in France (only 5.1% are overburdened), Cyprus (4.0%) and Malta (1.6%).

London’s booming office market in sharp contrast to Paris’s subdued growth London’s office real estate market will see rapid growth over the next 12-18 months, while the Paris market will remain subdued as a result of ongoing sluggish macroeconomic growth, according to Moody’s Investors Service. UK GDP growth has been much stronger than France’s in recent years, although Moody’s expects that this gap will narrow in the longer term.

“We anticipate that the pace of growth in London’s commercial real estate market will remain brisk, aided by the strong economy, regulatory limits on new construction and occupier demand”, said Maria Maslovsky, a Moody’s senior analyst. “This will benefit UK-based firms, such as British Land and Land Securities PLC”, added Maslovsky.

Moody’s notes that prime rents are growing in London, recording a 5.8% increase between 2010 and June 2015 in

the West End, compared with a decline of 2.8% in Paris CBD. There is also a disparity in direct real estate investment between London and Paris, with investment in London far outpacing that in Paris, where less favourable rental growth, combined with lacklustre economic growth lessens the incentives for new investment.

Although the UK experienced a steeper contraction of GDP during the financial crisis in 2009, it has recovered strongly since 2012, whereas France’s GDP growth continues to lag. Similarly, the unemployment rate in France was persistently higher through the financial crisis and shows no signs of abating, while the unemployment rate in the UK has been trending down since 2013. Still, Paris’s real estate market benefits from stricter permitting environment which prohibits razing existing structures.

Although the Paris market is seeing a decline, especially in large-block rental rates, Moody’s believes professionally managed real estate companies with diverse portfolios such as Gecina SA (Baa1 stable) and Fonciere des Regions (unrated) will continue to buck this trend and maintain relatively high occupancy rates. Similarly, Moody’s anticipates strong leasing momentum for Land Securities and British Land given their track record and the London market’s solid performance.

Because these office companies prudently managed their balance sheets while pursuing profitable growth opportunities, improvements in their performance will generally translate into stronger credit profiles. However in the longer-term an increase in supply or softening in occupier demand may pose risks.

Did U.S. home sales fall?

That depends We’ve actually gotten a big dose of economic news while nobody was looking last week,

but there’s one piece of information in particular is worth a closer inspection at this time... an overview of last month’s home sales pace.

You may have already heard, but if not, the November new-home sales pace moved from 470,000 to a pace of 490,000 per year. That still missed estimates of 505,000 though. Earlier in the week, we heard the pace of existing-home sales slumped from 5.32 million to 4.76 million in November, also missing estimates of 5.3 million.

The news isn’t good on the surface, and with just a quick glance at the existing-home sales trend chart, it’s almost a little alarming. The more we look at the long-term data of both, however, the better we feel.

Last month’s existing home sales-pace plunge was rattling. Just for the record, though, the total number of home sales between new and existing houses in November - the unadjusted total - was better than the total of the two seen in November of last year.

That’s an important detail to note.

The “seasonal adjustment” is supposed to smooth out the data and make it reflect a discernible trend. This adjustment of the raw data, however, can sometimes skew the chart.

We can’t help but wonder if that’s what happened above, because when we look at the raw data for existing home sales below through last month compared to the annualizsed and seasonally-adjusted figure above, we’re not sure the two charts lead to the same conclusion.

All the Novembers are marked with arrows.

Lastly, there’s the same version of the new-home sales charts. Looks like November is supposed to be the low point of the year here too, but even this most recent November is just another improvement on the prior November.

Perhaps that’s the long way of saying “I’m not sweating this week’s superficial lull in November home sales”. It’s also a warning that you have to be very careful about jumping to conclusions when the headlines reference data that’s been seasonally adjusted. (Source: SmallCap Network)

December 30, 2015 - January 5, 2016

financialmirror.com | PROPERTY | 13

Could we be wrong? µy Antonis Loizou Antonis Loizou F.R.I.C.S. is the Director of Antonis Loizou & Associates Ltd., Real Estate & Projects Development Managers

The recent legislation on the liberalisation of real estate mortgages and other government charges (such as property tax, etc.) has greatly helped achieve some sense of tranquility to the buyer, the State (by achieving transfers) and of course the whole operation of the property sector.

My recent experiences show a great number of differences in what the law says about the release of mortgages, etc., and what is actually implemented. Lenders require that the buyer proves that he has paid his dues (and not only present a declaration and receipts from the seller) and that the relevant payments were deposited into the account where the bank loan is held. So, I

ask, where does the law refer to this specific procedure? Lenders continue to insist on the above procedure even if the loan for this project has been paid off (but perhaps the project remains mortgaged in order to facilitate buyers who secured a loan from the lender), thus even though the developer is not obliged to, the buyer has this obligation and so the whole system of free transfers is blocked by the arbitrary interpretation (or due to extortion) of the law.

What is also surprising is the failure of lenders to consider a fast pace to review these cases of freeing up mortgages, etc. In my recent experience, a client informed our office that in order to release even a single apartment, all buyers throughout the project must be reviewed, and even then, one by one.

So? Why is this process being implemented and where does the law say so?

Also, in order for the authorities to release the mortgage and secure the property tax, they continue to demand full settlement. But

are transfers not prevented in this way and is this not against the provisions of the law?

The lawmakers missed out that charges for the municipal taxes, sewerage, etc. be included in the release, and so, if the rest settled or released then this obstacle still remains. I wrote to the Minister of Interior on this issue with the hope that these charges be included for the release, otherwise the whole system will be almost unworkable (ie. the effort of direct transfers). Of course, there remains the right of direct appeal to the Land Registry for the transfer and this Department is not involved in matters related to loan collections, etc.

The appeal to the Land Registry, with the 5,000 existing applications still pending and which are expected to double in the coming months, is not an easy tast. Besides the cost, the waiting process may even go beyond 12/2016 and so the buyers cannot reap the 50% discount on the transfer fees. I expect, however, that depending on the progress of transfers by mid-2016, perhaps this measure

of the discount incentive be extended to the end of 2017.

The easiest thing to do in this country is the filing of a “complaint” against several people who do not follow the law and certainly taking legal action against them.

But is this a solution or should there be a proper implementation of the law as proposed by the government and approved by the House? Complaints filed to the Central Bank for non-implementation of the law by the lenders or even submitted to the Interior Ministry, the Auditor General and others, may be a little “in fashion” nowadays, but perhaps in the end we should end up there? Do we need to resort to such measures?

Then again, perhaps we have “misinterpreted” the law and are wrong in the matter, an argument I can hardly find to be realistic or logical. www.aloizou.com.cy ala-HQ@aloizou.com.cy

Limassol Marina: The new superyacht destination When the first superyacht sailed into Limassol Marina back in 2013, few could believe that this would be the beginning of a new era for Cyprus. M/Y Anastasia made history as the largest vessel to enter a marina on the island.

Peering over the lighthouse, her slick 75m claimed its position along the south eastern breakwater and changed the dynamic of Limassol’s most ambitious waterfront development for ever.

Just last month, four of the most prestigious superyachts in the world used the services and facilities at Limassol Marina, the only superyacht marina on the island. Second time visitor, 88.5m M/Y Nirvana, was followed by 99m M/Y Madame Gu, 119m M/Y A and 72.6m M/Y Queen K. And these are just a handful of more than 50 superyachts to have visited or signed long-term berthing agreements with Limassol Marina since its official opening.

“Arriving after just completing our round the world cruise was the best move we could have made. The entire team was welcoming, professional and enthusiastic. Not only are the staff and facilities first rate, but the surrounding area presented a myriad of safe and wonderful opportunities to experience the fine cuisine, history and natural beauty of Cyprus. Limassol Marina is the perfect place to base any yacht. We eagerly look forward to returning,” said Captain Christopher Walsh, 67.75m M/Y Archimedes.

With the world superyacht fleet growing in numbers, deliveries are on the rise and sizes are increasing. Berths are in demand and a lack of space in the traditional

locations is forcing superyachts to cruise further afield.

Limassol Marina has stepped in to provide an ideal stopover or winter berth, conveniently located at the crossroads of three continents, with standards of quality that are redefining the industry in Cyprus as a whole and boosting the island’s image.

Operated and managed by Francoudi & Stephanou Marinas, in partnership with Camper & Nicholsons

Marinas, the new safe haven caters to 650 yachts from 8m to 110m. The waterfront development also combines luxury apartments and villas with private berths or direct access to the beach, with an enticing mix of dining and shopping establishments, spa, fitness and cultural facilities.

For information call +357 25 020 020 or visit www.limassolmarina.com

December 30, 2015 - January 5, 2016

14 | MARKETS | financialmirror.com

Gains for foreign banks after Fed rate liftoff

By Oren Laurent President, Banc De Binary

When the Federal Reserve decided to raise interest rates by 25 basis points, there was growing concern among many analysts, economists and speculators that the move would hurt emerging market economies.

However, after careful consideration it has now emerged that some of the biggest beneficiaries of the Fed interest-rate hike are foreign-based banking institutions. Various business units of these offshore banks were the recipients of approximately $3.125 billion in interest repayments made by the Federal Reserve Bank. The money that was paid out is known as reserves, and it is deposited and stored at the Federal Reserve Bank. These financial institutions are in charge of approximately 1/7 of total assets held by banks in the United States.

The news from the Fed vis-a-vis interest payments will bode well for these foreign banks since the interest-rate rose from 0.25% to 0.50%. And since it is expected that the Fed will continue raising interest rates throughout 2016 – provided the US economy stays on track towards reaching its 2% inflation objective, and US economic data shows strong growth moving forward – we could be looking at a rate above 1.2% within a year. The rate is otherwise known as the IOER (Interest on Excess Reserves Rate).

The reason why these foreign-based banks enjoy an unequal share of the interest repayments that are made by the Fed are directly attributed to the disproportionate share of total reserves held with the Fed by these foreign banks.

Federal Reserve Bank data reflects that American agencies and branches of foreignbased banks held over $880 billion in reserves by June 30, 2015. This figure accounts for some 35% of all reserves. If we extrapolate to the beginning of December 2015, it is clear that foreign financial institutions had deposited for safekeeping some $1.2 trillion with the Federal Reserve Bank. This accounts for almost half of total reserves (47% in total). Between June and November 2015, the average cash assets and other reserves held by foreign banks in the United States hovered around $1.1-1.2 trillion per month. This figure includes balances due from financial institutions, balances owing from Federal Reserve Banks, vault cash, cash in collection, etc.

HOW FOREIGN BANKS BENEFIT FROM THE FED RATE HIKE Banc De Binary analysts point out that the reason why foreign banks have an unusually greater quota of reserves with the Fed is a combination of incentivised schemes and financial regulations. The FDIC (Federal Deposit Insurance Corporation) receives revenues in the form of premiums from US chartered banks. This also includes foreign banking entities. The exact amount that these institutions receive ranges from 0.05% all the way up to 0.35%, contingent upon the asset holdings of these banks. The calculations are complex; suffice it to say that it is a combination of cash reserves less various capital measures. There are scores of financial entities that are exempt from making payment to the FDIC, notably those banking institutions that do not take deposits, as well as American financial operations that are incorporated offshore, and whose US-based financial institutions do not accept deposits.

It is entirely possible for US-based banks and foreign-based banks to borrow substantial sums of money overnight at really low rates of interest. These are known as short-term interest rates, and the funds

can be kept at the Fed for a higher rate. The spread is the interest rate differential between the overnight borrowing rate and the rate these banks receive when depositing with the Fed. Not all foreign-based banking institutions have to pay the fees levied by the FDIC. As a case in point, prior to the 0.25% rate hike, this fee paid by banks for overnight borrowing in the short-term Federal Funds Market was 0.13%. However the earnings on reserves amounted to 0.25%. The spread was therefore 0.12% by comparison; US-based banks received a far lower spread of just 0.05%. Now that the Fed has hiked interest rates to 0.50%, the overnight borrowing rate is 0.35% and the amount that they receive on earnings is 0.50%. This leaves a spread of 0.15% for foreign-based banks. However, the differential is substantially smaller for USbased banks which now only receive approximately 0.08%.

SPECULATORS HAVING A FIELD DAY WITH RATE HIKES

in foreign markets, and regulatory treatment varies from one market to another.

As can be seen from the increasing spread for foreign banks after the Fed rate hike, there will be tremendous interest in using the Fed to pay more to foreign-based banks now that the interest-rate has been increased to 0.50%. According to those in the know, the 25-basis point rate hike will cost the US government approximately $13 billion in annual repayments to foreign banks. Of course reserve levels need to be kept at their status quo, ceteris paribus. There is a disproportionate advantage being given to foreign banks after the Fed rate hike. Very little news has been circulating in the media about the effect of a rate hike, while most of the attention is centred on options trading, with currency speculators having a field day, notably with the emerging market currencies.

Please note that this column does not constitute financial advice.

The intricacies of international financing and regulation between retail banks, wholesale banks and the Federal Reserve Bank are complex. The spread is often offset

The Financial Markets Interest Rates Base Rates

LIBOR rates

CCY USD GBP EUR JPY CHF

0,25-0.50% 0.50% 0.05% 0-0.10% -0.75%

Swap Rates

CCY/Period

1mth

2mth

3mth

6mth

1yr

USD GBP EUR JPY CHF

0.42 0.50 -0.20 0.05 -0.81

0.51 0.54 -0.16 0.07 -0.79

0.60 0.59 -0.13 0.08 -0.77

0.83 0.75 -0.04 0.11 -0.70

1.15 1.06 0.06 0.22 -0.61

CCY/Period USD GBP EUR JPY CHF

2yr

3yr

4yr

5yr

7yr

10yr

1.13 1.05 -0.03 0.11 -0.71

1.37 1.23 0.06 0.11 -0.64

1.54 1.40 0.19 0.13 -0.51

1.70 1.53 0.33 0.16 -0.37

1.92 1.74 0.61 0.26 -0.12

2.17 1.95 0.98 0.42 0.18

Exchange Rates Major Cross Rates

CCY1\CCY2 USD EUR GBP CHF JPY

Opening Rates

1 USD 1 EUR 1 GBP 1 CHF 1.0970 0.9116

100 JPY

1.4923

1.0119

0.8293

1.3603

0.9225

0.7559

0.6781

0.5557

0.6701

0.7351

0.9882

1.0841

1.4747

120.59

132.29

179.96

0.8195 122.03

Weekly movement of USD

CCY\Date

01.12

08.12

15.12

22.12

28.12

CCY

Today

USD GBP JPY CHF

1.0532

1.0801

1.0971

1.0860

1.0918

0.6976

0.7179

0.7232

0.7296

0.7316

129.30

132.85

132.43

131.56

131.40

GBP EUR JPY

1.0795

1.0786

1.0768

1.0773

1.0756

CHF

1.4923 1.0970 120.59 0.9882

Last Week %Change 1.4885 1.0860 121.14 0.9920

-0.26 -1.01 -0.46 -0.38

December 30, 2015 - January 5, 2016

financialmirror.com | MARKETS | 15

The French patient Marcuard’s Market update

by GaveKal Dragonomics

By Francois-Xavier Chauchat As a Frenchman visiting Italy last month, I had the strong sense that for the first time in decades France was lagging its transalpine neighbour. Italian business and consumer confidence has picked-up over the last two years, and unemployment has declined for four straight quarters.

France, by contrast, is the only European country that saw rising unemployment during 2015. Political confidence has evaporated as reinforced by the recent rather desperate tactical voting to deny the National Front party victories in regional elections. And as if that was not enough, the Paris attacks are expected to cut -0.1% from French GDP this year.

And yet despite these headwinds, France displays pockets of economic strength. The impact of easing by the European Central Bank has been to spur a 4% YoY rise in consumer credit, while loans to domestic firms are up 3.7%. An improved credit cycle has been aided by non-bank institutions such as insurance companies reaching-for-yield and moving toward direct financing activity. Also, the lower euro and a reduced payroll levy since 2013 has helped industrial profit margins hit a post-2007 high, reflecting a near 3pp rise since mid-2014. These were the arguments which I broadly made back in June.

This begs the question, why does French growth and employment still lag? The standard explanation is a lack of structural reforms. That may be so, but it does not explain the last two years cyclical weakness. The more straightforward explanation is that France’s construction sector is in a depression, with investment having fallen -20% in real terms since 2008; declines have accelerated since 2013 (see chart).

Excluding construction, GDP growth would have hit 1.7% YoY in 3Q15, instead of 1.2%. The sector now accounts for a quarter of corporate bankruptcies, while lay-offs in 3Q rose by 5%. By contrast, most eurozone countries are now adding construction jobs. Given the labor-intensive nature of the sector, it is probably not surprising that French unemployment is so intractable a problem.

France’s construction depression has been aggravated by policy mistakes — including increased environmental and

social regulation — that are now being corrected. The government is also supporting first-time home buyers with a loan guarantee scheme that offers zero interest finance — the so called pret a taux zero.

The scope of the PTZ will be substantially extended in January to include purchases of existing homes and flats on the condition that buyers spend a sum equivalent to at least 25% of the purchase price on refurbishment.

Such zero-cost finance will cover up to 40% of the purchase price, up from 20% previously. Also, eligible buyers can opt for a 5-year grace period on the repayment of the principal. These measures will significantly boost the purchasing power of first-time buyers as the PTZ can be used as a down-payment, against which a bank loan can be raised.

The cost of the program to the public purse is about EUR 2 bln.

If the new PTZ, associated with record low mortgage rates, is able stop the bleed — as did the UK’s “Help to Buy” scheme since 2013 — then, by 2017, French employment should gradually improve to levels prevailing in the rest of Europe. The probability of this scenario is still hard to assess, but it is encouraging that the government now understands the importance of the construction sector, and seems willing to admit that its own policies proved to be highly destructive.

WORLD CURRENCIES PER US DOLLAR CURRENCY

CODE

RATE

EUROPEAN

Belarussian Ruble British Pound * Bulgarian Lev Czech Koruna Danish Krone Estonian Kroon Euro * Georgian Lari Hungarian Forint Latvian Lats Lithuanian Litas Maltese Pound * Moldavan Leu Norwegian Krone Polish Zloty Romanian Leu Russian Rouble Swedish Krona Swiss Franc Ukrainian Hryvnia

BYR GBP BGN CZK DKK EEK EUR GEL HUF LVL LTL MTL MDL NOK PLN RON RUB SEK CHF UAH

18360 1.4923 1.7823 24.6245 6.8026 14.262 1.097 2.39 287.79 0.64061 3.1473 0.3913 19.58 8.6828 3.8672 4.1146 71.2447 8.3888 0.9882 23.4

AUD CAD HKD INR JPY KRW NZD SGD

0.726 1.3865 7.7505 66.14 120.59 1165.16 1.4629 1.4065

BHD EGP IRR ILS JOD KWD LBP OMR QAR SAR ZAR AED

0.3770 7.8083 29980.00 3.8829 0.7070 0.3031 1513.20 0.3850 3.6405 3.7511 15.2745 3.6729

AZN KZT TRY

1.5545 333.22 2.9214

AMERICAS & PACIFIC

Australian Dollar * Canadian Dollar Hong Kong Dollar Indian Rupee Japanese Yen Korean Won New Zeland Dollar * Singapore Dollar MIDDLE EAST & AFRICA

Bahrain Dinar Egyptian Pound Iranian Rial Israeli Shekel Jordanian Dinar Kuwait Dinar Lebanese Pound Omani Rial Qatar Rial Saudi Arabian Riyal South African Rand U.A.E. Dirham ASIA

www.marcuardheritage.com

Disclaimer: This information may not be construed as advice and in particular not as investment, legal or tax advice. Depending on your particular circumstances you must obtain advice from your respective professional advisors. Investment involves risk. The value of investments may go down as well as up. Past performance is no guarantee for future performance.

Investments in foreign currencies are subject to exchange rate fluctuations.

Marcuard Cyprus Ltd is regulated by the Cyprus Securities and Exchange Commission (CySec) under License no. 131/11.

Azerbaijanian Manat Kazakhstan Tenge Turkish Lira

Note:

* USD per National Currency

December 30, 2015 - January 5, 2016

16 | WORLD | financialmirror.com

Why big oil should kill itself

By Anatole Kaletsky Now that oil prices have settled into a long-term range of $30-50 per barrel, energy users everywhere are enjoying an annual income boost worth more than $2 trillion.

The net result will almost certainly accelerate global growth, because the beneficiaries of this enormous income redistribution are mostly lowerand middle-income households that spend all they earn.

Of course, there will be some big losers – mainly governments in oil-producing countries, which will run down reserves and borrow in financial markets for as long as possible, rather than cut public spending.

That, after all, is politicians’ preferred approach, especially when they are fighting wars, defying geopolitical pressures, or confronting popular revolts.

But not all producers will lose equally.

One group really is cutting back sharply: Western oil companies, which have announced investment reductions worth about $200 billion this year. That has contributed to the weakness of stock markets worldwide; yet, paradoxically, oil companies’ shareholders could end up benefiting handsomely from the new era of cheap oil.

Just one condition must be met. The managements of leading energy companies must face economic reality and abandon their wasteful obsession with finding new oil.

The 75 biggest oil companies are still investing more than $650 billion annually to find and extract fossil fuels in ever more challenging environments. This has been one of the greatest misallocations of capital in history – economically feasible only because of artificial monopoly prices.

But the monopoly has fallen on hard times. Assuming that a combination of shale development, environmental pressure, and advances in clean energy keep the OPEC cartel paralysed, oil will now trade like any other commodity in a normal competitive market, as it did from 1986 to 2005. As investors appreciate this new reality, they will focus on a basic principle of economics: “marginal cost pricing.”

In a normal competitive market, prices will be set by the cost of producing an extra barrel from the cheapest oilfields with spare capacity. This means that all the reserves in Saudi Arabia, Iran, Iraq, Russia, and Central Asia would have to be fully developed and exhausted before anyone even bothered

exploring under the Arctic ice cap or deep in the Gulf of Mexico or hundreds of miles off the Brazilian coast.

Of course, the real world is never as simple as an economics textbook.

Geopolitical tensions, transport costs, and infrastructure bottlenecks mean that oilconsuming countries are willing to pay a premium for energy security, including the accumulation of strategic supplies on their own territory.

Nonetheless, with OPEC on the ropes, the broad principle applies: ExxonMobil, Shell, and BP can no longer hope to compete with Saudi, Iranian, or Russian companies, which now have exclusive access to reserves that can be extracted with nothing more sophisticated than nineteenth-century “nodding donkeys.” Iran, for example, claims to produce oil for only $1 a barrel. Its readily accessible reserves – second only in the Middle East to Saudi Arabia’s –will be rapidly developed once international economic sanctions are lifted.

For Western oil companies, the rational strategy will be to stop oil exploration and seek profits by providing equipment, geological knowhow, and new technologies such as hydraulic fracturing (“fracking”) to oil-producing countries. But their ultimate goal should be to sell their existing oil reserves as quickly as possible and distribute the resulting tsunami of cash to their shareholders until all of their low-cost oilfields run dry.

That is precisely the strategy of selfliquidation that tobacco companies used, to the benefit of their shareholders. If oil managements refuse to put themselves out of business in the same way, activist shareholders or corporate raiders could do it

for them. If a consortium of private-equity investors raised the $118 billion needed to buy BP at its current share price, it could immediately start to liquidate 10.5 billion barrels of proven reserves worth over $360 billion, even at today’s “depressed” price of $36 a barrel.

There are two reasons why this has not happened – yet. Oil company managements still believe, with quasi-religious fervour, in perpetually rising demand and prices. So they prefer to waste money seeking new reserves instead of maximising shareholders’ cash payouts. And they contemptuously dismiss the only other plausible strategy: an investment shift from oil exploration to new energy technologies that will eventually replace fossil fuels.

Redirecting just half the $50 billion that oil companies are likely to spend this year on exploring for new reserves would more than double the $10 billion for clean-energy research announced this month by 20 governments at the Paris climate-change conference. The financial returns from such investment would almost certainly be far higher than from oil exploration. Yet, as one BP director replied when I asked why his company continued to risk deep-water drilling, instead of investing in alternative energy: “We are a drilling business, and that is our expertise. Why should we spend our time and money competing in new technology with General Electric or Toshiba?”

As long as OPEC’s output restrictions and expansion of cheap Middle Eastern oilfields sheltered Western oil companies from marginal-cost pricing, such complacency was understandable. But the Saudis and other OPEC governments now seem to

recognise that output restrictions merely cede market share to American frackers and other higher-cost producers, while environmental pressures and advances in clean energy transform much of their oil into a worthless “stranded asset” that can never be used or sold.

Mark Carney, Governor of the Bank of England, has warned that the stranded-asset problem could threaten global financial stability if the “carbon budgets” implied by global and regional climate deals render worthless fossil-fuel reserves that oil companies’ balance sheets currently value at trillions of dollars.

This environmental pressure is now interacting with technological progress, reducing prices for solar energy to nearparity with fossil fuels.

As technology continues to improve and environmental restrictions tighten, it seems inevitable that much of the world’s proven oil reserves will be left where they are, like most of the world’s coal. Sheikh Zaki Yamani, the longtime Saudi oil minister, knew this back in the 1980s. “The Stone Age did not end,” he warned his compatriots, “because the cavemen ran out of stone.”

OPEC seems finally to have absorbed this message and realized that the Oil Age is ending. Western oil companies need to wake up to the same reality, stop exploring, and either innovate or liquidate.

Anatole Kaletsky is Chief Economist and CoChairman of Gavekal Dragonomics and the author of Capitalism 4.0, The Birth of a New Economy. © Project Syndicate, 2015. www.project-syndicate.org

The case for $20 crude oil

By Douglas A. McIntyre 24/7 WallSt.com Oil prices have dropped to $35 a barrel, down from over $110 in 2011. The trend line does not mean much; it is just a chart. But that does not mean the causes of the trend are not obvious, and likely are also not over.

The argument for lower oil prices breaks into a very few parts. The first is that massive oil producer Saudi Arabia means to destroy the industry financially so that it can keep its long-term leverage on pricing. Its production costs are low enough that its strategy might work. But even Saudi

Arabia cannot pump cheap oil forever without affecting the kingdom’s treasury, and perhaps crippling it for decades.

Another cause is fracking, an industry that bet high oil prices would last for years or even decades. It is an expensive business to get into, with somewhat new age technology, so frackers need prices well above the current ones to remain is business. Supply is ample. Funding is not. Bankruptcies are not only possible, but they already have begun.

Analysts from Bloomberg recently wrote: “According to the consultancy Wood Mackenzie, about a third of oil production in the U.S. states, not including Alaska and Hawaii, comes from companies that have borrowed against their oil and gas reserves and that face redeterminations of their borrowing base. Banks recalculate the value of reserves for their oil company clients twice a year, in the spring and

in the fall. Forecasts for the October redeterminations are dire. Last month, a survey conducted by the law firm Haynes and Boone predicted a 39% decrease in the oil companies’ borrowing ability, with 79% of borrowers expecting a decrease.” For financiers, better to take a beating now than a worse one later.

Finally, there is the theory that China’s economy has slowed. As the world’s largest importer of oil, it makes sense that the demand loss would take a bite out of the price of crude. On the other hand, the economies of the United States and Europe are recovering. The analysis has become a tightrope of expert forecasts.

Is past performance an indication of future results? No, as mutual funds would say. However, for oil prices that answer may be different.

December 30, 2015 - January 5, 2016

financialmirror.com | WORLD | 17

4 high flying stocks that could fly higher in 2016 hasn’t suffered too much of a correction during the latter half of this year. This comes despite a number of its key revenue generators facing biosimilar competition.

The company hiked its dividend by 27% last week and expects to buyback between $2 bln and $3 bln throughout 2016.

From a purely quantitative perspective, this makes the biotech behemoth an attractive exposure for 2016. Add in the first insight into the performance of its headline PCSK9 inhibitor, Repatha, in a cardiovascular indication scheduled for early 2016 and top line for its secondary potential blockbuster romosozumab expected June 2016, and we’ve got an exciting year ahead for Amgen.

While buy low, sell high is the best way to make money quantitatively, it requires impeccable timing and more nerve than most investors possess. Buy high, sell higher is more the typical strategy, also called ‘trend following’.

Here are four stocks that, while expensive at current levels, have fundamentals good enough to continue and even exceed their success in 2015 through next year.

Facebook

Netflix Netflix Inc. (NASDAQ: NFLX) has been one of the darling stocks in the tech space for the past five years. At the end of the past decade, the stock traded a little shy of $10 a share. At the end of October this year, the stock logged all-time highs of $123, and it currently trades just off these highs. On the one hand buying high is not generally recommended. On the other hand, there is no major threat to Netflix’s status as king of streaming, at least not currently. Amazon is the runner up at 13% market share to Netflix’s 36%, but Netflix may be growing too quickly for Amazon to catch up.

Netflix has revamped its technology to make it more accessible from a bandwidth perspective, and it just pulled off a successful Japanese launch launch, something that critics suggested was going to be a big ask given the current state of the Japanese economy. With a focus on original content, sports programming and in-house movie production slated for the first half of next year, expect Netflix to spearhead the subscription-based online content space for the foreseeable future. It is an expensive stock, but not unjustifiably so.

Disney Walt Disney Co. (NYSE: DIS) suffered a few downgrades

last quarter, as losses primarily related to ESPN put pressure on expectations. ESPN though is still the dominant force in live sports programming in the United States, and it looks set to hold onto its dominance for a long time. The revamped Star Wars franchise is already set to bring in more than $2 bln on the back of the latest movie’s ticket sales alone, and merchandise, spin-offs and amusement park associated revenues probably will double this number.

Not to mention the follow-up movie, set for release early 2017. Disney is one of the world’s powerhouse brands, and at its current 15% discounted price on this year’s highs, looks to be a strong value candidate as we head into 2016.

Amgen Amgen Inc. (NASDAQ: AMGN) is one of a number of companies in biotech that benefited from the strength in the sector over the past half-decade, but unlike many others, it

Citigroup recently listed Facebook Inc. (NASDAQ: FB) as one of its so-called all-weather stocks, those that have outperformed the S&P across all four predefined phases of market movement during 2015. The company recently announced it had reached 1.55 bln monthly active users, as well as 900 mln WhatsApp and 400 mln Instagram users. In the third quarter, for the first time, 1 bln users used the platform daily.

The social media giant generated $4.3 bln revenues across that quarter and expects to report even higher numbers for the current period.

Video views are doubling quarter over quarter. Mobile use is growing, and Facebook has achieved a seamless transition from desktop to handheld as far as its advertising revenues are concerned. Comparisons with former players in the space, such as MySpace and Friendster, have become moot.

Despite claims that Facebook has become “uncool” by critics, user interaction across practically all demographic ranges is at all-time highs.

Zuckerberg’s ability to spot the next social trend like he did with Instagram and WhatsApp, coupled with Facebook’s ever deepening pockets, positions the company for further growth during 2016. Amazingly, there is still upside potential at its current $300 bln market cap. (Source: 24/7 Wall St.com)

Consumer spending surges over Christmas PwC economists analyse consumer spending trends in western countries Recent trends in consumer spending indicate that year-on-year growth in most western economies is in the 2-4% range in real terms (see Figure 1), signalling good news for retailers and businesses this festive season.

“Consumer spending is fundamental to businesses and economies, and, in many of the advanced economies that we track, accounts for around two-thirds of economic activity. It is also a key driver of corporate revenues, which, in turn, correlate positively with the hiring intentions of most businesses,” said Richard Boxshall, Senior

Economist at PwC. According to PwC economists, both the main drivers of consumer spending – real disposable income and the savings ratio – have played a part in this uptrend. Most of the economies in the sample are in a ‘sweet spot’ where real disposable incomes have grown and savings ratios have decreased, but in Germany the savings ratio has increased despite rising incomes.

Greece and Italy, however, are in the

‘squeezed’ quadrant, where incomes have fallen and consumers have brought down their savings ratio to offset this.

Going forward, there is a positive outlook for consumer spending in most of the advanced economies being tracked.

However, some emerging economies – such as Russia and Turkey (because of geopolitical events) and Brazil (due to economic troubles) – could be facing higher downside risks.

“If consumers continue to behave more like Santa and less like Scrooge, the retail sector as a whole should record good sales figures during the key Christmas shopping period,” Boxshall concluded.

“However, businesses and retailers in some emerging economies that are seeing geopolitical or economic uncertainty should continue to put in place contingency plans via scenario planning to prepare for the impact of possible downside risks.”

December 30, 2015 - January 5, 2016

18 | WORLD | financialmirror.com

Why GE could gain over 20% in 2016

By Jon C. Ogg 24/7 WallSt.com General Electric Co. has by far been the best conglomerate of 2015. 24/7 Wall St. just ran a comparable analysis on all the large conglomerates to see which one would be the best opportunity in conglomerates for 2016. And while its views were very preliminary, Argus is looking for a solid 2016 for General Electric.

Last Wednesday’s analyst upgrades and downgrades showed that Argus has reiterated its Buy rating in GE shares. What stood out here is that GE’s price target at the firm was raised to $36 from $34 in the call.

GE closed at $30.49, so if you include its dividend yield, this would imply more than 20% in upside in 2016.

Argus now has among the highest analyst price targets on Wall Street. Just recently, the highest target was $35. Thomson Reuters now shows the highest analyst target being $38, but the consensus analyst price target is still only $31.77.

Argus noted that the GE’s 2016 outlook and updated 2015 guidance was a positive.

CEO Jeff Immelt and team now see midteens earnings per share (EPS) growth based on 2% to 4% organic revenue growth in 2016. Immelt said that he again expects “slow growth” and a “volatile world” to take place in 2016. GE set its 2016 earnings guidance at $1.45 to $1.55 per share, which was up 11% to 19% from the Argus 2015 estimate.

Argus sees leadership in GE coming from integrating the Alstom power and grid businesses (adding five cents in 2016 EPS and $0.20 EPS in 2018), renewable energy and in health care operations. Oil and gas

and transportation are expected to be laggards, and foreign currency is expected to have a negative impact of $0.02 per share next year. Argus said: “We expect a pick-up in EPS next year based on current restructuring efforts, the Alstom acquisition, and share buybacks. Our 2015 EPS forecast is $1.30 and our 2016 (EPS) forecast is $1.55.

Now that the restructuring of GE Capital is essentially complete, the company plans to apply to regulators to deregister as a Systemically Important Financial Institution.

Assuming the filing is approved, management will likely take out additional debt to buy back stock.”

Argus also pointed out GE’s strong new order trends. The growing backlog of booked business was a positive, as was the continued divesting of GE Capital. Argus said: “The plan to divest most of GE Capital will now place additional focus on the Industrial businesses, and management expects to

invest $10-15 bln annually in industrial growth initiatives. We see the higher margin backlog, solid execution in the industrial businesses, and a smaller GE Capital that provides financing for the company’s industrial customers, as strong positives for General Electric, and believe that GE stock remains attractively priced based on a range of valuation metrics.”

Argus does acknowledge the disappointment in the failed sale of GE Appliances for $3.3 bln to Electrolux. The company said that the 2015 Industrial operating earnings will come in at the low end of its forecast range of $1.13 to $1.20 in EPS. Still, GE Capital’s retained verticals are expected to add $0.15 in EPS. Another boost is expected to be a massive share buyback and strong dividend in 2016.

The GE board has authorised the repurchase of up to $50 bln in common stock, and it is expected to cut its share count to 8.5 bln or less by 2018. GE has indicated that it plans to

IBM set to drop 13% in 2015

By Douglas A. McIntyre, 24/7 WallSt.com After underperforming the stock market for many quarters, International Business Machines Corp. (NYSE: IBM) shares almost certainly will have dropped another 13% this year to $139. That is down from $210 in March of 2013.

IBM’s turnaround plan continues to be rejected by investors.

Much of the disappointment in the tech company is because it has been unable to replace its hardware and software legacy products with new cloud-based and AI products — at least not at a rate that would pull IBM’s revenue up. Its major branded product in new age technology is Watson. While Watson has been the source of press releases and small customer alliances, outsiders have trouble seeing what it does to sharply increase IBM’s sales.

Granted, Watson may be one of the most impressive product advances among large companies in the sector recently, but what it does for IBM may be very modest.

In its most recent 10-K, IBM described its major goals, looking ahead: “The company’s business model is built to support two principal goals: helping enterprise clients to become more innovative, efficient and competitive through the application of business insight and IT solutions; and providing long-term value to

shareholders. The business model has been developed over time through strategic investments in capabilities and technologies that have superior long-term growth and profitability prospects based on the value they deliver to clients.”

Paying clients have been underwhelmed by the innovation and applications, which has undermined the share value for long-term shareholders.

In 2016, IBM faces another brutal year unless its financial performance changes radically. Its revenue dropped to $19.3 bln in the most recent quarter, compared to $22.4 bln in the same quarter a year ago. EPS from continuing operations fell from $3.46 to $3.02. Among the worries about IBM is that it cannot take hundreds of millions of additional dollars beyond its current expense cuts, which reduced its total expenses and other income to $5.8 mln in the most recent quarter from $6.5 bln in the same period a year ago. At some level of cuts, it loses an expense base that makes it an effective competitor.

IBM’s shares are set for another down year in 2016.

maintain its dividend at the current level in 2016 and grow it thereafter.

On the valuation front, Argus thinks that GE shares are attractively valued at the current price (near $30). While this is at the high-end of a 52-week and multiyear range, GE’s stock chart is in a bullish pattern of higher highs and higher lows that dates back to August 2015. GE is valued at 19.3 times projected 2016 earnings. While that is above the midpoint of the five-year range, it is actually in line with the peer average.

On a price-to-sales basis, GE’s shares are now trading below the peer group average, according to the Argus analysis. GE’s dividend yield of about 3.0% is also above the midpoint of its five-year range and remains above the average dividend for peers.

GE shares were last seen trading up 0.5% at $30.64 last Wednesday. The Argus price target of $36.00 implies 17.5% upside, and then the 3.0% dividend yield takes the implied total return over 20%.

Boeing boosts annual order total, on path for record deliveries (Source: 24/7 Wall St.com) Last week, Boeing Co. (NYSE: BA) released its order totals through to December 22, adding a total of 166 net new orders and bringing its net total for 2015 to 743 passenger jets. The announced orders for December included only planes in the company’s 737 family of singleaisle, narrow-body planes.

Delta Air Lines ordered 20, Jet2.com ordered two and the remaining 143 orders were attributed to unidentified customers. A week earlier, Boeing announced an agreement with China Southern Airlines (NYSE: ZNH) for 50 737s and 60 of the new 737 MAX jets, including 30 of the new planes for China Southern subsidiary, Xiamen Airlines. At the time Boeing said the orders would be added to the order book once they were confirmed. Boeing’s order book shows four unfilled orders for China Southern and five for Xiamen at the end of November.

Boeing’s target for new plane deliveries in 2015 is 750 to 755, and the company also has targeted a book-to-bill ratio of 1 for the year. Up until November, Boeing delivered 709 new commercial planes, and in November alone the company delivered 71 new jets. Unless production slows in December, deliveries to customers could surpass the target by up to 20 new planes.

In 2014, Boeing delivered a total of 723 new commercial planes, an all-time record for any aircraft maker. The company will certainly break that record this year.

A record-breaking year for deliveries should help Boeing deliver on its promise of generating $9 bln in free cash flow in 2015. That’s the number Boeing wants investors to pay attention to. That number is within reach: free cash flow for the first three-quarters of the year totaled $4.42 bln, according to YCharts. In the fourth quarter of 2014, Boeing piled up $4.33 bln in free cash flow by pulling some payments forward, and there is a fair chance the company will have to do that again.

December 30, 2015 - January 5, 2016

financialmirror.com | WORLD | 19

Marijuana legal challenges continue

By Paul Ausick, 24/7 WallSt.com In December 2014 the states of Nebraska and Oklahoma filed a suit against Colorado to stop the state from allowing commercial growing and distribution of marijuana in Colorado.

Because the case involves a dispute between two states it was filed directly with the U.S. Supreme Court. In early May, the court asked the U.S. Solicitor General to file a brief on the administration’s view of the case.

The U.S. Solicitor General sided with Colorado in that brief filed on December 16.

In essence, the brief urges the Court to reject the challenge to Colorado law. Here’s the Solicitor General’s main point: “The motion for leave to file a bill of complaint should be denied because this is not an appropriate case for the exercise of this Court’s original jurisdiction. Entertaining the type of dispute at issue here — essentially that one State’s laws make it more likely that third parties will violate federal and state law in another State — would represent a substantial and unwarranted expansion of this Court’s original jurisdiction.”

The federal government’s argument does not address the merits of the case, arguing instead that the Supreme Court does not normally take cases of this type and that now is not the time to start. If the Court accepts the Solicitor General’s argument, Nebraska and Oklahoma could still file the suit in federal district court.

Here are other important news stories for the week.

Best Kept Banking Secret in the Industry During a routine audit of a business account in 2014, Maps Credit Union discovered it was providing financial services for a marijuana dispensary.

Shane Saunders, vice president of operations for Maps, said the credit union had a decision to make: close the account, or create policies to serve it within state and federal guidelines. They chose to keep the account open. The accounts Maps offers to marijuana businesses are one of the bestkept secrets in the industry.

The credit union doesn’t advertise the accounts. Businesses that have an account can’t talk about it — Maps has them sign a non-disclosure agreement when the account is opened, Saunders said.

For Oregon’s cannabis business owners unaware of Maps’ unique service, securing something as simple as a checking account can be nearly impossible.

Finding the Right Strain of Medical Marijuana A medical marijuana patient and caregiver since 2007 share some thoughts and observations about a recent survey by Care

by Design, a medical cannabis company in California, on the painnewsnetwork.org blog.

They surveyed 621 patients who had been using medical marijuana for over 30 days, asking them about: 1. The conditions for which they are taking cannabidiol (CBD) rich cannabis; 2.

The ratio of CBD-to-THC (tetrahydrocannabinol) they are using; 3. The impact of CBD-rich cannabis therapy on their pain, discomfort, energy, mood, and overall well being.

“I would like to address three areas about the survey findings, based on my personal use of medical cannabis and the patients we assist as caregivers.

“Patients with psychiatric or mood disorders and patients with diseases of or injuries to the CNS (central nervous system) system favour CBD-dominant cannabis therapies,” the survey found.

“Patients with pain and inflammation favor CBD-rich cannabis therapies with more equal levels of CBD and THC.”

Shatter, a Super-High-

Potency Marijuana, now on the East Coast As marijuana extracts expand their presence on the East Coast, an especially potent concentrate is appearing on law enforcement radar.

Shatter, a cannabis extract with about 80% THC content, is legal for recreational use in states such as Colorado and Washington, sold in medical marijuana dispensaries in other states and is fasteracting and far more easily concealed than marijuana.

Last week, Loudoun County sheriff’s deputies intercepted a truck that had about $900,000 worth of packaged marijuana near Dulles International Airport. Included in that load was 15 pounds of shatter, in total packaged weight. Shatter, which is sold by the gram because of its potency, retails for about $60 a gram in Colorado, so 10 pounds of shatter would be worth nearly $270,000 — in a state where it is legal. Black-market shatter probably would cost much more.

Volunteers Give Away Free Joints to the Homeless on Christmas Eve A local nonprofit hit the streets of downtown Denver on Christmas Eve and gave away a thousand free, pre-rolled marijuana joints to the homeless and anyone else who wanted one.

“Merry Christmas and a puff puff, New

Year’s,” said one woman who accepted a joint.

Nick Dicenzo, the founder of Cannabis Can and the one responsible for handing out the free weed, said they’re trying to raise awareness about homelessness and encourage people to donate to their cause.

The cause? To raise money to buy several RVs and provide restrooms and showers for those in need. Dicenzo said their goal is to use weed for good and to bring people together to make a difference.

‘Adults were not the target audience’: Agency defends campaign The advertising agency behind ‘Stoner Sloth,’ an anti-marijuana ad campaign, has hit back against social media backlash.

Saatchi & Saatchi have argued that the concept was intended specifically for teens and ‘not for adults or long-term cannabis users,’ reported The Sydney Morning Herald.

The $500,000 ad which was used as the New South Wales government’s latest antidrugs initiative was launched last week under the slogan ‘you’re worse on weed.’

The NSW Government’s #StonerSloth campaign depicts a human sized stoned sloth looking lethargic in settings such as a school examination and a house party.

The bid to raise awareness about the dangers of marijuana has been relentlessly mocked on social media, with the #StonerSloth soaring to the number one trending Twitter spot last week.

Marijuana price slips 2% to $2,001 For the week ended Friday, December 25, the spot price index for a pound of cannabis in the U.S. decreased by $40 (about 2%) from $2,041 in the prior week to $2,001. The simple (non-volume-weighted) average price for a gram dropped nearly 2% from $4.84 to $4.75.

The futures price for January rose from $1,850 to $1,900 on the near-month contract. For the month of February 2016, the forward price increased from $1,875 a pound to $1,925. The six-month forward price for June 2016 remained unchanged at $2,050 a pound.

About two-thirds of the past week’s transactions occurred in a range of $1,641 to $2,671 per pound, according to the analysts at Cannabis Benchmarks, who also noted ten market trends for the year. Among them:

- A federal district court upheld the Rohrabacher-Farr amendment, prohibiting the U.S. Justice Department from prosecuting businesses operating legally under state law.

- Banking services remain unavailable to the vast majority of cannabis businesses. Without access to banks, cannabis businesses are forced to operate on an all-cash basis.

- The IRS continues to prevent cannabis businesses from deducting normal operating expenses from their tax filings.

- Continued use of pesticides that are not approved for cannabis application. An incident in Colorado last March resulted in the quarantine of more than 100,000 plants and had a direct impact on tighter testing requirements being adopted in Nevada and Oregon.

- The high cost and energy intensity of indoor cannabis cultivation could lead to tighter regulation on carbon emissions.

A price check at MJCharts.com indicates prices range from $25 a gram to a low of $3 in the all-cities index. The overall average price for a gram of marijuana (all strains) in Colorado is currently $12.63, ranging from a high of $20 a gram to a low of $8.

In California the price is $14.57 per gram, ranging from $25 down to $6 per gram, and in Michigan the average is $16.59 per gram in a range of $20 to $10. The average in Oregon is $10.34 per gram in a range of $20 to $3, while in Washington the average is $11.02 per gram, ranging from a high of $15 to a low of $6.

December 30, 2015 - January 5, 2016

20 | BACK PAGE | financialmirror.com

The education antidote to radicalisation

By Gordon Brown No visitor to the Middle East can avoid noticing the yawning gap between the educational, entrepreneurial, and occupational aspirations of the region’s young people and the harsh reality that deprives so many of them of a positive future. Indeed, in the Middle East, half of those aged 18-25 are either unemployed or underemployed.

Aggravating this situation is the global refugee crisis, which has displaced some 30 million children, 6 million from Syria alone, very few of whom are likely to return home during their school-age years. It should come as no surprise that the group known in the region as Daesh (the Islamic State) believes that it can find fertile ground for recruitment in this vast population of dispossessed and disaffected young people.

Daesh propagandists are misusing social media in the way that their extremist predecessors and contemporaries have sometimes misused mosques – as a forum for radicalisation.

The group consistently posts content that challenges the possibility of coexistence between Islam and the West and calls young people to jihad.

The grotesquely violent videos that Daesh produces have shock appeal. But what really attracts disaffected young people is the invitation to be part of something that seems larger than themselves and the societies in which they live.

Shiraz Maher of the International Centre for the Study of Radicalisation (ICSR) at King’s College London identifies a common thread of sentiment among recruits: “righteous indignation, defiance, a sense of persecution, and a refusal to conform.” As a recent Quilliam Foundation report concludes, Daesh plays on the youthful desire to be part of something worthwhile; it is the organisation’s utopian appeal that is most alluring to new recruits.

Given this, few would disagree that we find ourselves in a generational battle for hearts and minds that cannot be won by military means alone. Hard power can eliminate Daesh’s hardcore leaders. But we will need more than that to

convince nearly 200 million young Muslims that extremism is, quite literally, a dead end.

There are many examples of under-the-radar operations working to counter extremism across the Indian subcontinent and the Middle East: children’s magazines in Pakistan, videos aimed at teenagers in North Africa, radio stations in the Middle East, and books and publications opposing Al Qaeda. They can help to expose the truth about life in Daesh – that it is brutal, corrupt, and prone to internal purges – in several ways, including by drawing attention to defections. As a 2014 report states, “[the very existence of defectors] shatters the image of unity and determination that [the group] seeks to convey.”

But we must be more ambitious if we are to win the war of ideas, sustaining the cultural space that Daesh calls the “the grey zone,” which it longs to destroy. It is a space in which Muslims and nonMuslims can coexist, discover their shared values, and cooperate.

Peter Neumann, the director of the ICSR, has proposed a YouTube contest for videos that explain the failings of Daesh.

“You would receive 5,000 videos in no time,” he says. “Four thousand are junk, but 1,000 of them are effective – 1,000 videos against [Daesh] propaganda.”

The best long-term tool for countering extremism, however, is education. In Jaffa, Israel, a school run by the Church of Scotland teaches the virtues of tolerance to Muslim, Jewish, and Christian children. Throughout Lebanon, a common school curriculum championing religious diversity – including the “refusal of any radicalism and religious or sectarian seclusion” – is being taught to Sunni, Shia, and Christian children starting at the age of nine. The country has also introduced double shifts in its school system to accommodate some 200,000 Syrian refugee children.

If troubled Lebanon, wracked by sectarian violence and religious divides, can champion coexistence and provide Syrian refugees with a chance to study, there is no reason other countries in the region should not follow its example.

The choice could not be clearer. We can stand by and watch a new generation of web-savvy Muslim youth be deluged with false claims that Islam cannot coexist with Western values. Or we can recognise that the young people of the Middle East and the rest of the Muslim world share the aspirations of young people in every other part of the world.

All the evidence indicates that the region’s young people want education, employment, and the chance to make the most of their talents. Our resolution for 2016 should be to make that happen.

Gordon Brown, former Prime Minister and Chancellor of the Exchequer of the United Kingdom, is United Nations Special Envoy for Global Education. © Project Syndicate/Mohammed Bin Rashid Global Initiatives, 2015 - www.project-syndicate.org

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