Archive | March 5, 2013

Investors’ Quandary: Get In Now?

The stock market has rebounded dramatically since 2009.  Over the last 12 months, stocks have seen a net inflow of about $76.7 billion. In just over the first two months of this character year alone, net inflow into stocks totaled $27.75 billion.  The Dow Jones industrial average reached its nominal high on Thursday, and the Standard and Poor’s 500-stock index has risen more than 13 percent in the last 12 months.  It is no question that the stock market has made a huge comeback.  Many, though, still wonder about the sustainability of its success.  History dictates that the stock market may still have room to grow.  Over the 12 months following a nominal high in the Dow Jones industrial average, the Dow has averaged a 7.1 increase since 1900.  There is also the action taken by the Fed and central banks to consider.  They will be forced to keep short-term interest rates low to promote borrowing and spending.  However, there are still many problems that the stock market will face including federal budget cuts and continuing troubles in Europe.  Investors may be better off putting their money in other investment options rather than risk it in a stock market that has possibly already peaked.

Written by: Constantine Kostikas

Source: NYTimes.com

http://www.nytimes.com/2013/03/06/business/investors-quandary-get-in-now.html?ref=business&_r=0

 

Las Vegas Sands Probably Violated Foreign Corrupt Act

03-05-2013 - Las Vegas Sand Faces Bribery Allegations

Recent allegations have arisen concerning the business practices of American casinos and resorts in China, specifically, Macau. Of note is the Las Vegas Sands Corporation, which had a government probe initiated after a lawsuit from China CEO Steven Jacobs. His allegations stated that he did not want to conduct illegal activities for Las Vegas Sands,which led to his subsequent termination. The allegations go as far as directly pointing blame at Sheldon Adelson, CEO of Las Vegas Sands, for making the demands for bribery.

The auditing could prove fatal to the business of American casinos, as the majority of revenue for these companies is from Macau. “Casino revenue in Macau, the world’s largest gambling hub, rose 14 percent to $38 billion last year.” The revenue from Macau is even greater than Las Vegas and the overall profits of the Las Vegas Sands Corporation largely consists of revenue from Macau. Las Vegas Sands is not the only to suffer, however. Another company Wynn Resorts, who has faced allegations of bribery after donating millions to a local school in Macau. It has been argued that the actions are that of corporate responsibility. With all of these allegations of corruption, American business in Macau could soon be facing much stricter regulation.

In terms of the markets, investors don’t seem to be too deterred. Even though Las Vegas Sands stock prices dropped, there is no definitive action occurring or to what extent said actions will affect business, so a rise to normal prices is expected by some.

Source:

http://www.bloomberg.com/news/2013-03-04/las-vegas-sands-probably-violated-foreign-corrupt-act.html

Fannie-Freddie in Venture to Securitize Home Loans

Many people know Fannie Mae and Freddie Mac as government-sponsored enterprises that acquired high-risk mortgage loans and led to the financial crisis of 2008. Recently, these two entities announced that they will be forming “a new joint company for securitizing home loans” to lessen the government’s influence in the mortgage market. This may be one of many steps that these enterprises are taking to repay the government after the crisis several years ago. The regulator, Edward DeMarco, hopes to sell this company to policymakers in hopes of improving the housing market. After the bailout, these two entities took over approximately two-thirds of housing loans. These steps will help reduce their reliance on the Treasury for monetary support. The Federal Housing Finance Agency also hopes to unify Fannie Mae and Freddie Mac’s systems into one so that mortgages are handled on a single platform. With the government involved in these changes may lead to a more efficient system for the housing market.

Written by: Melody Mark

Source:

Reuters. “Fannie-Freddie in Venture to Securitize Home Loans.” New York Times. The New York Times, 4 Mar. 2013. Web. 5 Mar. 2013.

Unemployment

It is evident that unemployment is an issue in modern culture. This especially concerns college students trying to scope out what their prospective career outlook to be. As of January, those with a bachelor’s degree have a 3.7 percent unemployment rate as opposed to those without a degree that have an 8.1 percent unemployment rate. Many argue that this research mainly considers those college graduates that have been in the work field for a substantial amount of time. The 2011 graduates have shown an unemployment rate of 14 percent, but this drops drastically after given a few months. Those that are within the same age range of recent college graduates with only a high school diploma or G.E.D. have a 16.2 percent unemployment rate. Although some college graduates have jobs that do not need their academic standards, there is still more room for advancement and promotion than those without a college education. As the economy prevails, these graduates will be better suited in the work force.

It is important for college students to be aware of their options in the work force after their education. Because today’s economy has a high rate of unemployment, college students must work even harder and start earlier in the work field. With this knowledge in mind, it is vital to build work ethics and skills from the beginning. Therefore when it is time to enter the work force with a degree, built experience will guide to progression.

Kerian Maharaj

http://economix.blogs.nytimes.com/2013/03/05/yes-even-young-college-graduates-have-low-unemployment/

Dow Jones Record High

In March of 2009 our economy started to crash, the Dow Jones Industrial Index had fallen to a relative low of 6547.05. Nearly 4 years later the Dow Jones Index has hit an all time high of 14253.77. Corporations of the blue chip 30 such as Pfizer, Cisco and Johnson & Johnson have reached its highest level of the past 52 weeks. Markets in countries such as China, Australia and some European countries have also seen relative highs. The all time high of the Dow Jones Index shows that America is moving away from the housing crisis of 2008, and is on its road to recovery. Corporations are increasing in worth, and consumer spending and factory work is also increasing.

 

Though our economy may not be as strong as it was during the housing boom, and while many people still remained unemployed, our economy is getting better. Though the Dow Jones Index may show development in the part of corporations, the government still has a lot to do to get America back on its feet, government debt is still soaring, and many people are still unemployed. Hopefully the success of the Blue Chip 30 will give the government an incentive to work even harder to improve our economy and open up new jobs for those searching for one.

 

Written by: Jessica Ho

 

Source: The Wall Street journal

 

Jarzemsky, Matt. (2013). Dow Hits Highest Close Ever. The Wall Street Journal. Retrieved from http://online.wsj.com/article/SB10001424127887324178904578341794219815204.html?mod=WSJ_Business_LatestHeadlines

Dow Jones’ New High

A sign of relief has come after Tuesday’s Don Jones Industrial average closing at an all-time high.  The record topped the previously all-time high of 14164.53 in October of 2007 by closing at 14253.77. According to Jack Ablin, investment officer at Chicago’s BMO Private Bank, who manages 66 billion, this is a sign of “achievement that we have climbed out of this crater.”

Slowly but surely throughout the duration of the 4 years of slow recovery, stocks are picking up, businesses are regaining stability, consumer spending confidence appears to be positive, housing markets are healing, and service sectors data shows positive sign. Even though there are good signs, many traders are still very skeptical of conditions of the stock prices by saying that the economy is still sluggish in comparison to the activities on the stock markets. However, according to Mark Otto, director of exchange floor from Knight Capital Group, traders are definitely “more caution”, which he claims is a “momentum to the upside”.

In today’s closing there are mentioning of several blue chip stocks that pushed the earnings up. These companies included: Cisco Systems, gaining 2.3 percent; Johnson and Johnson, gaining .6 percent; Pfizer, gaining 1.37 percent.

 

Written by: Victor To

 

Source: 

http://online.wsj.com/article/SB10001424127887324178904578341794219815204.html?mod=WSJ_hpp_election_3ups 

Young Adults retreat From Piling Up Debt

No intro APR for your first year if approved! These credit cards ad has definitely caught our eyes once in our life time, although these deals might be very attractive and enticing many adults as young as 35 years old still carry a debt of over $10,000.  This statistic only accounts for credit card debt but the debt that haunts young adults most is college loans. 

I personally am in debt myself with both credit card and student loans. From this article though, we see that the number and amount of debt that young adults are owed are slowly decreasing. This is probably a result of more financial aid are being awarded and there are many websites and programs out there to assist the “dummies” for debt. I think these sites are definitely making us more more savvy with our finances. 

Nonetheless, it doesn’t matter how attractive it sounds. Be careful before you sign up for anything and be savvy with your own money. At the end of the day, whatever you sign will be under your name! 

 

-Derby Ng

http://online.wsj.com/article/SB10001424127887323293704578334761823150672.html?mod=WSJ_MIDDLENexttoWhatsNewsSecond

IKEA Stops Cake Sales After Bacteria Found

IKEA, not only a company known for offering consumers furniture, but also inexpensive dining and food shopping, ran into trouble as their almond cakes contained high levels of coliform bacteria. The bacteria that tested positive in the cakes imported from Sweden to China are found in everyday human environments such as soil, vegetation, and water, as well as in feces of humans and warm-blooded animal. This issue arises after horse DNA was found in frozen beef patties last month in Europe, causing many supermarkets to remove processed meat products off of their shelves. IKEA gains five percent of its revenue from its food sales alone, so having contaminated suspicious food products can ruin the company’s reputation.

The government in China has been keeping a closer watch and cracking down on the food industry for domestic companies that add chemicals and other additives to increase their profits. The horsemeat scandal was upsetting to many of the consumers because it was made in China, according to the newspaper, China Daily. I think that the government should focus on other companies that are also using cheaper substitutes to gain a profit, in order to protect us as consumers who are purchasing these products.

Written by: Samantha Chin

Source: The Wall Street Journal

Hansegard, J., & Burkitt, L. (2013, March 5). IKEA Stops Cake Sales After Bacteria Found. Retrieved March 5, 2013, from The Wall Street Journal: http://online.wsj.com/article/SB10001424127887324178904578341910454692542.html?mod=WSJ_business_whatsNews

Looks Like They’re Not Wegelin ( Wigglin’) Out Of This One

wegelin-co

It is a known fact that many Americans open offshore bank accounts in order to avoid taxes and recently through the Obama administration conducting investigations of offshore accounts, Wegelin & Co., Switzerland’s oldest private bank was ordered by a judge to pay up $74 million for breaking United States tax laws and for their role in helping Americans evade taxation. What’s interesting is that this bank dating back to 1741, which makes it 272 years old, is the first foreign bank that actually pleaded guilty for breaking United States tax laws. The banker’s of Wegelin and Co. performed acts such as opening accounts for customers using fake names and non existent business entities in far and remote places such as Panama, which resulted in the hiding of around $1.2 billion of untaxed American dollars. With their payment, and settling this case, which started a year ago, Wegelin and Co. will finally close down after providing services for more than almost three centuries. Looks like this will be one of the many cases that will be brought up due to to the efforts of the Obama administration.

Written by: Kevin Zhang

Source:

Werdigier, Julia. “Wegelin Ordered to Pay $74 Million in Tax Plea.” The New York Times. The New York Times, 06 Mar. 2013. Web. 05 Mar. 2013. <http://www.nytimes.com/2013/03/06/business/global/06iht-wegelin06.html?ref=business&gt;.

Platinum Parachutes

When the recent recession hit the US economy, I remember reading all sorts of articles about the severance packages and “Golden Parachutes” for the CEO’s whose companies were financially distressed; I remember thinking about how ridiculously excessive these payments were. An article in the Wall Street Journal just reported today that William Johnson, CEO of H.J. Heinz Co. could walk away with more than $200 million if he leaves when the new owners take control which would be among the 10 largest exit packages for a U.S. CEO. While Heinz Co. is not a financially distressed company and while Mr. Johnson’s 15 year career at Heinz as president and CEO has been exceptional, I still shook my head in disbelief when I read the article.

It isn’t my intention to question our economic system because I believe capitalism to be a system which works, albeit nothing is perfect. Relative to the $23 Billion which Heinz is now valued at, perhaps $200 Million is reasonable, however I cannot help but think about all the different ways that amount of money could be used to benefit those in need. It’s an irrational thought which goes against capitalism… yet it’s still a thought.

 

Evan Chang

http://online.wsj.com/article/SB10001424127887324539404578340843926547954

New Ads Promote New Houston.

Tasty_Mongoose_JAN4-304

Houston is currently going through a revitalized campaign to promote tourism in Houston. They are attempting to attract visitors by accentuating the good aspects of Houston. For example they are using local chefs, artists, singers, musicians, and museums instead of famous celebrities. The old campaign which ran for the past five years emphases people like George Foreman, Carl Lewis, and Jim Parsons. To contrast the old campaign they are using local stars that represent the “real” Houston. They are promoting their local attractions because of the realness factor Houstonians bring to the campaign. “The study, conducted by the research organization  TNS, found that people visit Houston for two primary reasons: its culinary offerings and its arts and culture scene.”

I think the new campaign is a great idea because of the fact they are promoting what Houston really is, not only what the rest of America perceives. The headlines are very simplistic while at the same time it still catches your attention. “Houston is tasty” (with a Fork as the Y) “Houston is inspired” “Houston is hip”.  I learned the importance of advertising worldwide, and the extreme benefits that come with tourism.

URL: http://www.nytimes.com/2013/03/04/business/media/houston-we-have-an-opportunity-to-attract-more-tourists.html?pagewanted=all

-Jonathan Chan

A Stealth Tax Subsidy for Business Faces New Scrutiny

Some of the biggest projects in the US were built and financed with tax exempt bonds. When companies plan a project, they usually structure it, so that the company can avoid taxes. While this is good for different companies to expand, it comes at the expense of tax payers. Some might feel that the invested money can help rebuild the economy by creating jobs, but there is never a guarantee for new jobs. With the recent budget cuts, large companies fear that there will not be enough money for them to continue this method to expand their corporations using tax free financing. There have been talks with fiscal experts to end this method of tax free financing. An end to this can bring in as much as $50 billion for the federal government over a 10 year time span.

Although it is always a good idea to expand and invest into projects, companies should not finance projects using tax payer’s money. With no guarantee for new job creations, it is a burden on American tax payers in the current and weak economy. Recent budget cuts have also affected both tax payers and the government financially. An end to this method of tax free financing can ease the impact of budget cuts because the government is bringing in more money with tax revenue.

Written by: Wilson Tang

http://www.nytimes.com/2013/03/05/business/qualified-private-activity-bonds-come-under-new-scrutiny.html?ref=business&_r=0&gwh=41175C7177EDD721DB082968A5DB0934