21 Legit Ways To Make Money Online

Technology’s ever-pervading permeation into every last fiber and morsel of society has caused a dramatic upheaval in the way we live, work and entertain ourselves. Thanks to the disruptive nature of the internet, the rate of change has only increased exponentially in recent years.

Yet, with so much change in the world today, and a nearly-instantaneous access to the globe’s population through mediums such as social media and online search, many people are still left perplexed by how they can utilize the powerful technology inherently available through the internet, to actually make money online.

The truth? It’s not easy making money online today. With so much competition and so many people and headlines vying for our attention, sifting through and finding reputable sources to generate any respectable amount of income through the web has become an ever-increasing challenge.

Often, what happens is that we run into unscrupulous Internet Marketers (IMs) who have less-than altruistic intentions of extracting money from you rather than helping you to make it. However, this isn’t something new. People have been falling for networking marketing, pyramid schemes, and affiliate marketing scams since before the start of the net.

So, where are we supposed to turn to make money the legitimate way online? This isn’t just about generating passive income; this is also about finding ways and means to create an active income through the conveniences afforded to us by the internet that will not only help us with our debt obligations, but also empower us to save, invest and get really rich in the future.

It’s not easy by any means. Anyone that tells you otherwise isn’t being transparent with you. It takes an enormous amount of effort and authority-building before you can really start getting rich through your online income-producing activities. However, there are some basic methods for making a respectable amount of cash in the short term.

Pain Versus Pleasure

Before I talk about some of the methods for making money online, I wanted to address the role of pain versus pleasure. Every decision that we make in life is weighed on a pain-versus-pleasure scale. We will always do more to avoid pain than we will to gain pleasure, plain and simple. However, this is also what holds us back from succeeding in any endeavor.

Let me explain…

Now, making money online should seem like a pleasurable activity. Why wouldn’t we do just about anything to see things through, since it would be a major source of pleasure, right? Wrong. In the beginning, like anything else, we might get really excited about it. We might also set our hopes very high. But that all comes crashing down when we begin to fail.

The problem? In order to make serious amounts of money online, you need to the most amount of work for the least initial return, not the least amount of work for the greatest return. Translation — major amounts of pain. That’s also the problem with how affiliate marketers, network marketers, and IMs attempt to sell you the “dream,” so to speak.

When people buy into the hype, they set their expectations extremely high. All they need to do is send a few emails out, and voila, instant millions overnight. Well, clearly it doesn’t quite work like that. The issue at heart is that we will always do more to avoid pain than to gain pleasure in the short term, not in the long term.

That’s why it’s so hard to quit bad habits or do anything else that requires any semblance of struggle. The human mind is hardwired to avoid pain in the short term, not in the long term. It’s part of our survival instinct. However, you can easily overcome this in the long term as long as you set your expectations the right way.

What Are The Best Ways To Make Money Online? 

As someone who’s been immersed in a number of online industries for quite some time, I know a thing or two about what it takes to succeed in this arena. However, just like you, I started at ground zero with little knowledge, but a great deal of passion. What I learned along the way were some invaluable lessons from failure that hurt at the time, but helped immensely in the grand scheme of things.

Today, if you’re at all serious about succeeding in any endeavor, whether online or offline, you have to deliver enormous amounts of value. Yes, you have to do the most amount of work for the least initial return. This is especially true online. Why? Because it takes time to build authority and create an audience, two primary ingredients necessary to succeed in the wonderful world of commerce on the web.

Every successful business and person has delivered a tremendous amount of value at the outset. They did the most amount of work, and they inspected every detail meticulously, to ensure that they were doing right by their customers. As long as you keep that in mind, and you don’t look for a quick buck, you’ll succeed in the long term.

  • Find your niche — Figure out what you’re good at or what you want to be good at. You don’t need to be an expert right now, but you do need to decide where you’re going to fit in if you’re at all serious about making serious cash in the long term.
  • Build a blog on a custom domain — Your blog is your virtual home. Without it, you’ve no place to filter all that traffic and people interested in what you have to say. But don’t build a blog on a subdomain like yoursite.wordpress.com, create a blog with a custom domain like www.yoursite.com.
  • Always add value — Adding value over time creates authority, and authority breeds trust, which in turn helps to grow your audience and readership. Without a significant following, you’ll find it hard to gain any traction online. It simply takes time.
  • Create an email list and treat them right — One of the best ways to make money online is by marketing to an actively-interested group of email subscribers. While most people think that email marketing is dead, that’s far from the truth. This is your greatest potential source of income online. Think of it as your money tree.
  • Don’t sacrifice morals for a quick buck — At the outset, you’ll want to do all sorts of things to make money online, but don’t sacrifice your morals for a quick buck. Not only will you put people off, but you’ll lose Google’s trust. You also shouldn’t concern yourself with things like Adsense or other ads on a blog before you have around 100,000 visitors per day. Yes, per day.

The point? Think about the long-term results of your activities. It will seem frustrating in the beginning. Then again, everything worthwhile is going to be difficult. It will take time. Stick it out and don’t give up. In the meanwhile, here are some of the best and most legitimate ways you can make money online in the short and long term.


#1 — Write And Sell An Ebook 

If you have a propensity for writing and you can slay with your prose, consider writing an ebook. While the market has certainly become saturated as of late, books that help teach people about a technical topic still sell extremely well. This is a great source of passive income but does require a large amount of effort at the outset before any money is generated.

You can sell your ebooks through Amazon’s Kindle program or Apple’s iTunes Connect, which gives you access to a large majority of the digital-book reading market and the barriers for entry are incredibly low. You don’t need to invest lots of money to make this happen, but you do need to invest lots of time, not only in writing the ebooks, but in marketing them as well.

#2 — Sell Audiobooks With Audible

I’ve been in the audiobook-selling business for some time now and have over 3 dozen titles to my name. I know a thing or two about audiobooks. And, what I’ve noticed recently is that audiobooks are growing in popularity as their digital-ebook counterparts are becoming less and less popular.

People are turning to audio and visuals when it comes to technical subjects. However, you should consider doing an ebook first and turning it into an audiobook through a resource like Audible’s ACX platform. You can hire a producer either through a royalty share program, so you don’t have to shell out upfront cash, or you can do a pay-per-hour hire as well.

#3 — Create An App 

Yes, this is far more technical. Unless you have the right app-development skills, doing this is going to be a significant undertaking. But, apps are also a great source of passive income when done the right way. You can reach a massive audience of smartphone users by building a great app.

However, like anything else truly worthwhile, apps require a significant investment of your time or money upfront. If you don’t have the skills, then you have to hire someone who can assist you in creating a great app. But first you need to come up with an idea that will sell. Do the proper market research and analytics to come up with the right app.

#4 — Use Mechanical Turk

Mechanical Turk is Amazon’s take on micro-jobs. These are small miniscule-jobs that you can do for other people, which they call HITs, or Human Intelligence Tasks. These are super simple tasks that anyone can do. Some examples are listing off some URLs with certain kinds of images for one cent, or recording a few phrases with a microphone for 6 cents.

Yes, they don’t pay much, but if you string together hundreds of well-paying HITs, you can make a bit of money quickly online if you’re in a crunch for cash. Also, it’s important to note that you can also employ people with HITs to help you with whatever micro-tasks you might have.

#5 — Offer Gigs On Fiverr

If you have some professional experience in graphic design, accounting, social media marketing, web development or SEO training, for example, you could offer gigs on Fiverr starting at $5 per job. You could perform a valuable service that you could also up-sell to make more money per gig.

Fiverr is one of the biggest providers in the gig economy on the web and you can sell a wide variety of services and products through this medium. Do the research and find out what you can offer. However, keep in mind that like any other money-making task, it takes time to succeed here. And stellar reviews will help you generate more and more income over time.

#6 — Sell Professional Services On Upwork or 99Designs

Upwork and 99Designs are two of the biggest resources for selling just about any professional service under the sun. If you have extensive experience in a field, you might want to consider selling your services through one of these sites. 99Designs only applies to graphic design while Upwork applies to nearly every other professional service.

However, like anything else, the beginning will be difficult. Before you have a significant track record and extensive reviews, sourcing work in one of these highly-competitive platforms will be difficult. Find the most successful people in your niche and try to model your approach and online profile after theirs.

#7 — Build A Blog

One of the most exhaustive endeavors when it comes to making money online is to build a blog. But we all know that building a blog with real readership is difficult. It takes a lot of work. And I’m speaking from experience. However, once you reach a certain point, the progress and momentum sways in your favor and it becomes far easier.

Blogs can easily generate tens of thousands of dollars to hundreds of thousands of dollars per month when done right. Yes, that much. But it won’t be easy to get there. However, looking back on it, a year from now you’ll wish you started today. So why wait another moment?

#8 — Email Marketing

Email marketing is at the heart of every successful endeavor on the web. For those serious about making money online, email marketing is certainly where it’s at. But it has to be done the right way. Before you even try to market anything to anyone via an email list, be sure that they’re people that subscribed and opted in directly to you.

When you try to market to people via email out of the blue, you won’t find as much success. But, if those email subscribers are actively and keenly interested in what you have to say, and they signed up directly through your blog or site, your success rates will be much higher.


#9 — Auction Items On Ebay

Ebay is a bellwether. It’s been around since nearly the start of the online boom. But, like any other platform, success can seem fleeting if you don’t know what you’re doing. Selling items on eBay, professionally that is, can be an art form. Getting people interested in your auctions isn’t always easy, especially when there’s hefty competition and low demand for what you’re selling.

Like anything else, you need to do the proper research, but you can make significant amounts of money as an eBay Power Seller. Find the most successful eBay sellers in your niche and model after their success. Find all of their listings and see just how they list the items that they’re selling.

#10 — Rent Your Home On AirBnB

Rent your entire home or just a room on AirBnB. This is a simple and effective way to make money online, especially in the short term. While you won’t get rich doing this, you can generate thousands of dollars per month for the right place. And, if you live in a sought-after vacation destination, then you’re certainly in luck.

Research other listings in your city on AirBnB and see what the going rate is for a place like yours. You could also just rent out a private room as well or even a bed in a shared room. In fact, that’s how AirBnB got its start. However, you might find it hard in the beginning without reviews, but as long as you take really good care of your guests and provide a lot of value, the reviews will eventually come rolling in.

#11 — Sell Photos Online

If you’re at all into photography, and you have a cache of nice photos, you could consider selling them through sites like Shutterstock and iStockPhoto, two of the biggest photo resources online. It doesn’t take too much effort to do this, but it does take creativity and persistence to succeed with it.

You’ll find serious competition when trying to sell photos online, but this is also a great method for generating passive income. If you can license your images or sell them as stock photography, you won’t have to do any additional work to generate income from that sale once the photos have been posted online. Just collect your payments.

#12 — Drive For Uber Or Lyft

If you live in an area where Uber or Lyft operate, why not become a driver? If you’re looking to make some short-term cash, you can definitely rake it in by working for one of these popular car-hire apps. As long as your vehicle fits within the specifications of their program, and you have a clean license, you could do this on the side, especially if you’re in a crunch for cash.

Treat your guests right and offer them perks that other drivers don’t offer, simply because you want to deliver a lot of value. You might not get that much out of it from the outset, but it will set you apart from all the other drivers and your reviews will be indicative of just that.

#13 — Sell Products On Etsy

Etsy is a great resource for those that enjoy making their own products and selling them online. If you’re into hand-crafted items and you have a penchant for creating killer goods and wares that people just have to have, then you might want to consider setting up an Etsy shop and selling through a massive online portal.

Etsy is a great way to go directly to where all the consumers are congregating. While the company will take a small fee to list your products, along with fees to process the transaction itself, it is easier than setting up your own transactional website. Do some research on the top sellers and try to emulate their success.

#14 — Use Shopify To Build Your Own Online Store

Don’t want to sell through Etsy? You could always build your own online store using a platform like Shopify. Shopify makes it easy to build a transactional website without all the hassle, which takes much of the guesswork out of doing what some would consider a highly-complex task.

The company markets their services with being able to start selling online in seconds. Well, it might not work that fast, but you could most certainly get a good transactional website up and running within minutes or hours.

#15 — Build An Amazon FBA Business

If you want to go directly to the world’s largest online retailer, consider setting up a Fulfilled-by-Amazon (FBA) business. Amazon will pick, pack and ship your orders, and you’ll have enormous exposure to a buzzing marketplace where products are selling every second.

Clearly, there’s a lot of demand on Amazon, and if any product is going to sell, it’s going to sell well on Amazon. But the goal here is to source the right products that will easily sell at the world’s largest online retailer. Generally, products between $10 and $50 sell very well here. Just be sure to do the right market research before jumping on this bandwagon.

#16 — Answer Professional Questions 

Are you a professional in a field that can help answer questions for people looking for your expertise? Websites like JustAnswer and LivePerson match you up with people looking for answers to technical or professional questions. You can make money online by simply answering these questions and providing the right information to people based on their individualistic circumstances.

Depending on your area of knowledge, you could either make a lot of money or just a little bit by answering questions professionally. Do your due diligence before signing up to any website where you’re providing answers in exchange for money and be sure that it’s a reputable source.

#17 — Create Video Tutorials On YouTube

This is definitely a long-term strategy, and you won’t get rich overnight by doing this, but creating engaging and well-thought-out video tutorials and posting them on sites like YouTube could make you a significant amount of passive income in the long term depending on just how well-received those videos might be.

Find a niche and stick to it. Build a YouTube channel and find something that you can do that will add a whole lot of value to the people that might be interested in that field or niche. However, keep in mind that this will require a significant amount of time and upfront investment before this pays off at all.

#18 — Develop Educational Courses On Udemy

One of my absolute favorite sites for selling educational courses is Udemy. In fact, you can check out the courses that I have for sale on the site here. Udemy is a great place to build out technical courses that will teach people how to do some complicated task or learn some sought-after skill.

In my courses, I teach things like web development, search engine optimization and graphic design, but you can teach just about anything on Udemy. However, there is enormous competition on here, but it’s a great source of passive income if you can create a course that people will love.

#19 — Become A Virtual Assistant

While becoming a virtual assistant won’t pay you enormous amounts of money, if you’re looking to be a digital nomad in a city with a low cost-of-living, this could be something that pays your bills. This will require a significant amount of organization and some technical skills as well to succeed.

As long as you have the basics covered with programs like Word, Excel and PowerPoint, for example, and you’re an effective communicator, able to stick to deadlines, you might find yourself excelling as a virtual assistant.

#20 — Teach Others As A Virtual Tutor

Want to teach others directly? You can become a virtual tutor and engage in one-on-one tutoring sessions or even host Webinars to help people directly with any number of topics. This is terrific for teaching people new languages. If you have a second-language skill, this might be the right option to generate some money quickly and easily.

Of course you could teach a number of things virtually. This could range from technical to non-technical skills. For example, you could use a site like VerbalPlanet to teach a language, or try to source clients directly through social media or other avenues and process their payments through PayPal.

#21 — Write Articles For Other Sites

Last, but certainly not least, is article writing. Depending on your skill level when it comes to writing, you could always find work writing articles for other people. At the outset, this won’t pay you much, especially if you have little in the way of examples or portfolio pieces. But, like anything else, you can build this up over time.

You could also do a number of other things related to writing such as copywriting for descriptions, emails, or other sales-related content. Do your due diligence to find out what the going rates are for writing articles, and even try to find a mentor if you’re serious about making money online through this method.

R.L. Adams is a software engineer, serial entrepreneur, and author. He runs a wildly-popular blog called Wanderlust Worker and contributes to Entrepreneur, Engadget and the Huffington Post.

Where’s the clever money going? March 2018 Faith Glasgow Global Growth

It’s been an eventful start to 2018, with a return to a more volatile environment as global markets climbing to record highs in January, before several days of dramatic correction at the start of February.

The FTSE 100 index has seen falls of almost 10% since its high point in mid-January, while in the US the S&P 500 fell by a similar amount but has since recovered about half of its losses.

Ben Yearsley of Shore Financial Planning points out that ironically, those market falls are actually a consequence of strong economic figures from various economies as investors anticipate more interest rate rises and the negative impact they could have on corporate and economic performance.

February nonetheless saw positive returns in a handful of fund sectors:

Top-performing sectors in February:

Tech & telecommunications               +2.4%

Global em mkt bond                           +0.9%

UK index linked gilts                            +0.7%

UK gilts                                                            +0.6%

North American smaller companies   +0.5


Meanwhile specialist sectors dominated the mainstream investment trust sectors table:

Top-performing investment trust sectors:

Country specialists: other                  +3.2%

Forestry & timber                                           +3.2%

Property direct: Asia Pacific               +3.0%

Tech, media and telecoms                  +2.2%

Insurance & reinsurance                                 +2.0%

The most popular funds on the Interactive Investor website during February suggested investors have hardly changed their investment inclinations as a result of the market upheaval, with only one fund, Henderson China Opportunities, leaving the top 10 over the month.


Most-bought funds and performance in February:

Fundsmith Equity                                            -2.9%

Lindsell Train Global Equity                +1.5%

Legg Mason IF Japan Equity                +2.9%

Vanguard LifeStrategy 80% Equity                  -1.3%

Baillie Gifford Greater China              -1.0%

The investment trust line-up, meanwhile, reflects ii customers’ continuing love affair with Scottish Mortgage, and the strength of the Japanese market. It also reveals their eye for a bargain, as Woodford’s Patient Capital trust slipped onto a 13% discount, down from the one-year average of -6.2%.


Most-bought trusts in February and performance (to 6 March):

Scottish Mortgage                                          +2.9%

Baillie Gifford Shin Nippon                              +5.8%

Woodford Patient Capital                              -3.3%

City of London                                                 -1.3%

Monks                                                 +1.3%

With an eye on the approaching Isa season, multi-manager firm Architas produced some revealing research on the fund sectors that have produced the best long-term returns since Isas were launched in 1999. It found that smaller company sectors dominated the top 10, but the top place went to China/Greater China.

Best-performing sectors and total return performance since 1999:

China/Greater China                           824%

European smaller companies             639%

UK smaller companies                        557%

Asia Pacific ex Japan                           527%

Global emerging markets                               500%

N Am smaller companies                                406%

Asia Pacific inc Japan                          357%

Global emerging market bond                        327%

Japanese smaller companies              317%

Specialist                                                         235%

Looking ahead, commentators have been hard at work producing recommendations for investors looking for ideas for their Isa as the 2017/18 tax year enters its final month.


At The Share Centre, Sheridan Admans suggests six funds for a well-diversified Isa:

Pyrford Global Total Return: Offers inflation protection, low volatility capital preservation without the use of derivatives and selling short stocks.

GAM Star Credit Opportunities: A high-quality bond fund to minimise the risk of rising interest rates forcing defaults. Holds fixed Income issues as well as floating rate notes (FRN) and convertibles, which should provide a cushion regardless of rates rising or falling.

LF Miton UK Multi Cap Income: This multi-cap approach provides broad diversification, producing attractive income flow plus some capital growth.

Fundsmith Equity: A high-conviction, highly concentrated global portfolio with a long long-term ‘buy and hold’ strategy. The portfolio is more defined by those companies it will not hold, than by those it will.

Legg Mason Japanese Equity: ‘One of our preferred regions’; this fund aims to benefit from the economic, demographic and structural changes taking place there.

Threadneedle US Equity Income: Good choice if you believe there’s a way to go yet for the US economic expansion story. Focus on large multinational names.


Jason Hollands has six more suggestions for a similarly broad-based Isa:

Lindsell Train Global Equity: A concentrated global portfolio of 25-35 quality companies; buy and hold approach with very low portfolio turnover.

Evenlode Income: The team seek out “asset-lite” businesses, those where returns on equity are not dragged down by the wear and tear of replacing plant and machinery, and which have robust balance sheets.

Liontrust Special Situations: ‘Has delivered everything you could wish for from an actively managed fund: significant and consistent outperformance with relatively low volatility. It is an approach which has worked well in both tough market conditions and in rising markets.’

Fidelity Emerging Markets: A core emerging market holding with 75 businesses in the portfolio and a good spread of emerging economies.

FP Crux European Special Situations: A multi-cap fund run by a manager with three decades of experience and ‘an outstanding track record’. He ‘targets well-managed companies that he believes have business strategies that can deliver a high return on capital and can weather changes in the economic cycle.’

Morant Wright Nippon Yield: Run by a boutique fund house specialising in Japan, this is a conservatively managed fund that taps into the growing dividend culture there.

For investment trust fans, the Association of Investment Companies has tapped into adviser ideas and put together a selection of trust suggestions for Isas, with an eye to different age groups.


Millennials with time on their side:

Dennis Hall of Yellowtail Financial Planning suggests both Lindsell Train and Scottish Mortgage: ‘The secret is to buy well and hold.’

Tim Cockerill of Rowan Darlington likes Downing Strategic Micro Cap, ‘a small specialist investment company which runs a very concentrated portfolio of micro-cap companies – one for the long term, so ideal for patient millennials’.

Neil Mumford of Milestone Wealth Management recommends Witan as ‘an ideal investment for millennials saving on a monthly basis’.


Middle years with retirement on the horizon:

Hall says investors who want to lower their risk profile a little could look at a couple of globally diversified trusts: Baillie Gifford’s Monks or Janus Henderson’s Bankers.

Jim Harrison of Master Adviser suggests a smaller companies fund for more experienced investors with some time still to go: Henderson Smaller Companies offers ‘impressive total return, surprising strong dividend for a smaller companies growth fund and available at almost a 9% discount.’

Cockerill likes Mercantile from JP Morgan. It holds around 100 stocks, reducing specific stock risk, ‘and yet this is still very much a stock picking fund – a good long-term, core holding providing exposure to the higher growth part of the UK stock market which historically has outperformed large-cap stocks.’


Retirees employing the return:

Mumford picks one of the AIC’s dividend heroes, Scottish American from Baillie Gifford. ‘Currently providing an income yield of 3%, more impressively this investment company has continually delivered a rising dividend income, which has increased by 46% over the last ten years.’

Cockerill points out that Merchants is a UK equity income investment company which pays an attractive yield of 5.2% per annum, which has increased, year on year, for the past 35 years. A great choice for ‘a high and reliable income stream’.

Harrison identifies JPMorgan Claverhouse as a trust ‘to buy, put in a safe place and never touch again’. It ‘has been described as a fortress in terms of dividend cover and revenue reserves, having materially more of both than their peers,’ he adds.


Finally, if you fancy giving your portfolio a bit of a kick, Darius McDermott of FundCalibre has five suggestions for ‘satellite funds’:

Aberdeen Latin American Equity: The growth potential of emerging markets over the long term is very exciting but investing in them can be a bumpy ride. This fund is managed by Aberdeen’s renowned emerging markets team, whose primary investment concern is quality, followed by value. The strategy has had considerable success across a range of regions.


First State Global Listed Infrastructure: Many infrastructure companies involved in areas such as water, hospitals or bridges have government-backed contracts and the underlying assets are often inflation-linked. This means infrastructure can offer a defensive source of diversification.


M&G Emerging Markets Bond: Rising interest rates are usually bad for bonds, as it means yields should rise but in doing so, could cause the price to fall, resulting in capital losses. But emerging market bonds still offer value and a good level of income. This fund has a very experienced manager and yields 5.3%.


Polar Capital Global Insurance: Another defensive choice. In the good times, we may pay less attention to insurance renewals, but in the bad times we are likely to cut other expenses before we cut our insurance policies. Polar Capital has many years of experience in risk and casualty insurance markets.


Premier Pan European Property Share: This fund does not invest in ‘bricks and mortar’ property but in the shares of property companies across Europe, including the UK. The manager is incredibly knowledgeable about his sector and has managed to differentiate the fund meaningfully from both its benchmark and its sector.


“Central Bankers Face a Crisis of Confidence as Models Fail”

The title of this week’s commentary is the title of an FT article published at the end of last week as monetary authorities gather in Washington for the annual meetings of the IMF and World bank. It would appear that the mood is somewhat subdued…central bankers are puzzled as to why inflation is not rising as much as their models suggest. To quote the FT;

“As they gather in Washington for the annual meetings of the International Monetary Fund, there is a crisis of confidence in central banking. Their economic models are failing and there are doubts whether they understand the effects of interest rates and other monetary policies on the economy…In short, the new masters of the universe might not understand what makes a modern economy tick and their well-intentioned actions will prove harmful.”

Link to article here.

What we find even more amazing is that despite their growing lack of faith in their models (models that the FT describes as fiendishly complicated), some central bankers still believe that forward guidance (aka simple jawboning) is an effective policy tool even when they are worried that their fiendishly complicated models are not up to scratch. Let’s just say we’re sceptical on this front. In fact, we’re pretty sceptical whenever a central banker speaks nowadays, as they are often self-serving, duplicitous and completely ignorant of the unintended consequences which we truly believe are yet to be seen from their audacious monetary policy experiments of the last decade.

A number of central bankers were either speaking publicly or being interviewed by the media in Washington. Outgoing Fed vice chair Fischer said the US has room for more investment and consumption. Dallas Fed president Kaplan said that business activity was strong and the consumer was in good shape. St Louis Fed president Bullard said financial market risks not extraordinarily high at the moment…to cherry pick just a few. These comments, along with some other research on the looming pensions crisis (ie tens of trillions of dollars in off balance sheet liabilities waiting to hit in the coming decades) prompted us to do a little digging around in the US national accounts.

We continue to think that imminent (next two or three quarters) risks of recession are low (famous last words!), but we are see the current economic performance as very sub-par. We also worry about the quality of growth and the inequality that seems to worsen on a monthly basis. On the surface, the consumer is spending a lot. The first chart below shows consumption and household savings as a per cent of GDP. Between 1950s and the early 1980s, consumption was fairly steady around 59% to 62% of GDP, since which time it has steadily increased to the current level near 70%. So if record consumption is indicative of a consumer in good shape, then Fed president Kaplan is correct. It is also possible that the share of consumption continues to increase, in which case vice chair Fischer is correct. But is this good economic management?

Chart 1 – Consumption as a share of GDP

What should also be clear is that the increase in the share of consumption coincided with a marked decline in the savings of households. But what of the post GFC period? The share of consumption has continued to increase even as household savings have increased. Well, perhaps the answer lies in the continue rise in consumer credit. Chart two shows that consumer credit as a share of GDP continues to rise pretty relentlessly. Student debt and auto loans have been rising strongly during the post crisis period, and although this adds to GDP in the short term, too much debt could prove problematic at some point in the future, for example in the next recession.

Chart 2 – Consumer credit as a % of GDP

A huge amount of research has shown the growing inequality in the US, with the spoils on both income and asset wealth accruing to the top few per cent whilst the remaining 90% or so are either worse off, or just about managing (chart 3 below). The relentless rise in consumer credit could be indicative of the lowest 90% borrowing to consume today in the hope that greater income in the future will help them reduce their debts.

Chart 3 – Wealth shares by percentile 1989 to 2016

Whilst this is entirely possible, who is going to fund the increase in future incomes? Basically, there are two potential sources. First, the Government could choose to increase both the salaries that they pay their workers…they could also choose to increase benefit payments. However, Government finances are already deteriorating and simply put, the Government is in no position to fund a sustainable increase in consumer’s incomes. We will return to the subject of Government finances soon as this is a major long term problem as unfunded off balance sheet liabilities come due in the years ahead.
Second, private sector companies could pay their workers more. Well, the evidence suggests that the incentive structure that corporate America has built for itself strongly favours capital over labour. The chart below shows the share of GDP going to purely employee compensation, both wages & salaries only, and total compensation including pension and social security contributions.

Chart 4 – Labour compensation as a % of GDP

Rather than reward workers, executives are rewarding shareholders…and themselves. And here is what is wrong with the incentive structure for American executives. Because they receive the vast majority of their compensation from share options, executives are much more focused on pushing the share price up than with the long term welfare of all stakeholders. Not only are they spending less on traditional capex (i.e. plant and equipment) even though borrowing costs are near 5000 year lows and profit margins are high (see chart 5), they have been running deficits (i.e. borrowing money) to cover both capex and share buybacks – see chart 6.

Chart 5 – Business spending on new plant and equipment as a % of GDP

Indeed, the last two times the corporate sector was bingeing to the same degree, the economy was on the verge of a recession.

Chart 6 – Corporate America spending more than it is taking in

So here we have the vast majority of consumers just about managing and in some cases stretching themselves through increased borrowing in order to carry on consuming so that GDP grows. Corporate America is choosing to leverage their balance sheets in order to boost share prices (and executive compensation), rather than increase salaries and invest for future growth. On the current course, we cannot see how these two trends continue. Surely it is a question of time until something breaks.
Of course, the theory of Trump’s tax plan is that corporate America will take the funds available from repatriation and lower tax rates, and use the cash to create jobs. Well, unless the tax code changes the incentive structure of executives away from share buy backs, we doubt very much that this so-called trickle down policy will work. The Bush tax cuts hardly helped in this regard, and corporate America has hardly shared the benefits of paying lower effective tax rates in recent years – tax paid is at the low end of historical ranges as seen in the chart below.

Chart 7 – US Non financial corporate taxes paid

So here is our problem. We can identify a number of imbalances in the system, but until something changes, these imbalances can remain and even become more extreme. Central bankers remain wedded to models that don’t seem to work, and their policies are allowing many imbalances to build to unprecedented levels. Policymakers want us to focus on the shiny veneer that they have created for both the economy and financial markets, and yet they risk creating a system that is arguably more vulnerable than ever before.

The financial markets currently are much more focused on the shiny veneer. Equity markets are simply not suffering any downside price action to speak of and volatility is essentially at record low levels. This seems dichotomous with the vulnerabilities in the real economy. We believe that without real change in the way the economy is managed and the way monetary policy is conducted, the system will breakdown at some point.

If policymakers get ahead of the curve, and start implementing wide ranging reforms, then the process of tackling the real problems will be a lot less painful. If, however, we remain on the currency policy setting, we fear that we are headed for a great reset that will be painful for the vast majority. At the moment, policymakers are still wedded to their models which even they worry are broken. As a result, we fear that we will have to endure a great reset.

The timing of such a reset remains as elusive as ever, and with centrals bankers still trying to inflate everything, it is possible that the reset is years away. However, markets have a history of sucking in the vast majority of players just before the turning point. Anecdotal evidence suggests that in the big picture, more and more investors are getting swept up every month by the most hated bull market in history. All we can say is that the higher the market goes without an underlying improvement in the health of the broad economy, the worse the next bear market will be.

Stewart Richardson
RMG Wealth Management




Latin America’s Renewable Energy Revolution

For centuries Latin America’s natural resources have helped move the world economy. From the silver galleons that financed the Spanish Empire to the iron and copper exports that are rebuilding China, Latin America’s natural resources have long been sold around the globe. But now the growth of renewable energy across the region is creating a new economic phenomenon – exploiting those natural resources for domestic growth.

In recent years Latin America has made huge strides in exploiting its incredible wind, solar, geothermal and biofuel energy resources. It is now on the cusp of an energy revolution that will reshape the region and create a host of business opportunities. To investigate the changes taking place Canning House helped to organise the recent Green Finance Summit in London and commissioned a Canning Paper from Latin News.

Oil addiction

At the moment Latin America is still very dependent on another one of its natural resources – oil. According to the BP’s Statistical Review, Latin America accounts for more than 20% of the world’s oil reserves, making it the second-most important oil region in the world, which, is probably why it relies so heavily on the stuff. Oil accounted for 46% of the region’s total primary energy supply (TPES) in 2013, well above the global average of 31%.

When it comes to transport, oil-based fuel is likely to keep its pole position for some time to come. Electric cars and hybrids have been slow to make an impact globally, and in Latin America they are barely present. Brazil has made impressive strides with ethanol alternatives, but oil and its derivatives remain the number one choice. Moreover, Latin America’s outdated transport fleet, which is heavily made up of cast offs from the US or older models produced locally, is going to remain behind the curve on any transition to electric vehicles for at least the medium term.

Powering up

But Latin America’s electricity sector has already begun to wean itself off its oil dependence. According to the Inter-American Bank, Latin America is expected to almost double its electricity output between 2015 and 2040 and will need an extra 1,500 terawatt hours (TWh) of power. That’s a huge amount – enough to power the entire UK’s electricity grid for five years. Practically none of Latin America’s new large-scale power plants will be oil-fuelled, which opens up the field for different technologies.

Countries in Central American and the Caribbean, whom traditionally imported oil, were the first to move away from oil-based power plants, after suffering a decade of high and volatile prices at the start of the century. In some cases, such as the Dominican Republic, that meant a switch to coal, which represents 5% of Latin America and the Caribbean’s TPES. However, growing environmental objections mean that new coal plants are unlikely to be adopted by many Latin American countries in the future.

Facebook investors sue social media giant over Cambridge Analytica scandal

Facebook investors are suing the social media giant following revelations of a major data breach that has sent its shares plummeting by almost £50bn.

The world’s most powerful social network is in the midst of a reputational crisis after it emerged that data firm Cambridge Analytica had improperly used data from 50m Facebook users to target American voters in the 2016 election.

US court filings show that shareholders now want to sue the business over “significant losses and damages” as a result of the scandal, which has seen the group’s value drop $60bn (£43bn) in just two days.

Fan Yuan, the investor who filed the suit on behalf of those who bought shares in Facebook between February 2017 and March 2018, claims the technology company has made “materially false and misleading statements” and alleges that it violated its own data privacy policies by allowing a third party to access personal data.

The document does not disclose the number of shareholders but says there could be “hundreds or thousands” involved in the lawsuit. The investors are being represented by US law firm Pomerantz, which in 2014 acted for shareholders suing BP over the collapse of its share price following the Gulf of Mexico oil spill.

Essay mill websites must warn students about risks of submitting fake work, advertising watchdog rules

ssay mill websites must warn students that they face being punished by their universities for submitting fake work, the Advertising Standards Agency (ASA) has ruled.

The website of UK Essays has been misleading customers by failing to make them aware of the risks associated with submitting purchased essays, the watchdog said.

The Quality Assurance Agency for Higher Education (QAA), whose complaint prompted the investigation, said it is a “landmark” decision Ian Kimber, the QAA’s director of academic standards, said: “Essay mills mislead students and put their academic and professional careers at risk.

“This landmark ruling by ASA is the first successful challenge to their claims of legitimacy, exposing their cynical use of anti-plagiarism disclaimers and exploitative media referencing.”

Universities already have strict anti-plagiarism systems in place 
Universities already have strict anti-plagiarism systems in place 

The ASA also said that UK Essays misled customers by selectively quoting from articles and implying that they had received positive press coverage.

Last year it emerged that more than 20,000 students are buying professionally-written essays every year.

Research carried out by Doctor Thomas Lancaster and Robert Clarke, two of the UK’s leading experts in essay cheating, showed that tens of thousands of students are purchasing tailor-made essays via online “essay mills” in order to circumvent plagiarism software and cheat their way to top-class degrees.

Universities already have strict anti-plagiarism systems in place to detect the copying of academic texts. But contract cheating, where students purchase professionally-written essays to submit as their own original work, is far harder to detect.

Simon Bullock, the QAA’s lead on contract cheating and academic integrity said he hopes the ASA ruling will set a precedent for other essay mill sites.

‘Trust me’ Donald Tusk signals SECRET Brexit deal agreed on Northern Ireland border

DONALD Tusk has signalled the European Union has devised a secret proposal which will solve the Northern Ireland border issue after Brexit, insisting people should “trust him” the plan will appease both Britain and the EU.

The European Council President revealed the bloc had come up with “new guidelines” to avoid a hard border on the island of Ireland which are acceptable to both London and Dublin.

Speaking at a press conference this afternoon, Mr Tusk said it would be up to Britain to iron out the finer points, but suggested an agreement on the border could be much closer than previously thought.

He said he had “some good news for Prime Minister May” and announced he had recommended to European leaders they accept the proposed transition terms drafted earlier this week.

The deal includes protection for EU citizens’ rights – a major sticking point in previous talks – but no solution on what to do with the Irish border, other than the stipulation that all options would be kept on the table.

This condition, dubbed the ‘December agreement’, included a promise by the UK that “full regulatory alignment” could be on the cards if no other way to avoid a hard border could be reached. 

When asked why he would recommend transition terms that did not include a solution for the Northern Ireland border question, he said: “Trust me, our latest proposal when it comes to new guidelines is also acceptable for Dublin and London.

“Still we need more time to clarify, it is the British obligation to clarify the logistic and legal details, but today I can say our interpretation of the so-called December agreement is almost identical compared to the British position.

“I am absolutely sure that we will finally find a proper solution to avoid this question of a hard border.”

“The Irish question remains our highest priority.”

Submarine accused ‘thought of Se7en’ movie as he severed Swedish journalist’s head

Danish submarine and rocket builder Peter Madsen told Danish police that he thought of the 1990s serial killer thriller Se7en as he cut off the head of Swedish journalist Kim Wall on board his submarine, it has emerged on the second day of his trial in Copenhagen.

The 47-year-old self-taught engineer was defiant as prosecutor Jakob Buch-Jepsen read back to him a statement he had given to the police, in which he described how the macabre Brad Pitt blockbuster had sprung to mind as he dismembered the body.

“I don’t think that there’s anything unnatural in that remark,” he told the court. “In that film, there is a scene where a person’s head is cut off.”

The 1995 film by director David Fincher is notorious for its shock ending, when the character played by Brad Pitt opens a box to find his wife’s severed head.

Madsen, a 47-year-old artist-engineer and inventor, stands accused of murdering Ms Wall to fulfil his violent sexual fantasies, after the 30-year-old journalist joined him on his submarine last summer to research an article on his amateur space project.

Madsen claims that Ms Wall died after a malfunction on his submarine filled the vessel’s mess room with toxic exhaust fumes
Madsen claims that Ms Wall died after a malfunction on his submarine filled the vessel’s mess room with toxic exhaust fumes CREDIT: TOM WALL/AFP

Wearing a black t-shirt and blue trousers, his shoulders were hunched, his head bowed, his feet fidgeted nervously and at times he rubbed his hands over his face as if in pain. But as the questioning continued he became more outspoken.

He claims that Ms Wall died after a malfunction on his submarine filled the vessel’s mess room with toxic exhaust fumes, after which he went into a psychosis and decided to dispose of her body.

But he admitted to using a 50cm-long sharpened screwdriver to skewer parts of Wall’s body, to watching a Russian animated snuff movie depicting a woman being beheaded, and to having had an interest in Marcel Lychau Hansen, known as “Amager man” or Amagermannen, one of Denmark’s most notorious serial killers.

Shown a set of 50cm-long sharpened screwdrivers by Mr Buch-Jensen, Madsen admitted that he had used them to pierce holes in the journalist’s torso, claiming he had wanted to make sure her body would sink for good in the waters off Copenhagen.

“I put some punctures in the body parts because I didn’t want them to be inflated by gases,” he said.

“There is nothing sexual in the fact that the stab holes were in her vagina. I understand why you might think there was, but there was nothing sexual in it for me.”

Madsen said the screwdrivers were used to leave marks on the seabed when he was out in his submarine.  “I was in a crazy situation and I used whatever came to hand,” he said.

Madsen also admitted to having watched an animated film by a Russian snuff artist, which was found on his computer.  The film, which was shown in court, depicted mongol warriors impaling naked women on spikes and then beheading one of them.

On Wednesday afternoon, Madsen was due to be questioned by his defence lawyer. The trial is set to last for 12 days, with sentencing on April 25.