For Penney and Chief, Houseware Headache
J.C Penney is suffering major losses since Mr. Johnson became chief executive. They have lost over $4 billion dollars worth of sales and had to layoff over 2,000 workers. Its shares have dropped over 60 percent and their “deal” with Martha Stewart is not looking too bright. Ironically Mr. Johnson who is now the chief executive of J.C Penney is denying that he tried to breach the contract between Martha Stewart Living Omnimedia (MSLO) products and Macy’s. He testified in court that he believes in “perfect integrity and how “it’s important to honor contracts even if the terms are unlikable at the time”.
I think this whole issue between J.C Penney and Macy’s is absurd. The dispute is centered around whether or not a store within a store counts as a Martha Stewart store. It clearly is not a Martha Stewart Store in itself as J.C Penney will be setting the prices, promoting it when and where they please, and employing the people to sell the goods. J.C Penney will also own the goods, book the sales and bear all risk, therefore this is not a store within a store but rather Mr. Johnson’s attempt to sabotage a contract with his main competitor, Macy’s.
URL: http://www.nytimes.com/2013/03/09/business/the-headache-in-housewares-for-j-c-penney.html?_r=0
-Jonathan Chan
Corporate News: Big Texas Power Provider Seeks New Rules — Debt-Laden Energy Future Holdings Wants State to Allow Extra Payments for Electricity Generated in Times of Scarcity
Energy Future Holdings Corp. is requesting that new laws be put in place in Texas to increase the company’s revenue. The company has had total losses of $17.6 billion since 2007, when it was created. It lost $3.36 billion in 2012 and has hired a team of financial experts to help solve the problem of its overwhelming debt. Unlike the company predicted, electricity prices have failed to rise, as energy sources like natural gas are becoming more popular. Struggles with debt come at a time when Texas is struggling to meet the electricity demand. Energy Future Holdings argues that certain regulation would increase revenue and allow the company to build more plants. The company has even donated money to candidates, such as Texas Governor Rick Perry, who promote favorable regulatory action.
Ultimately, those who oppose this type of government regulation argue that Energy Future Holdings will use its extra revenue to pay off its debt rather than satisfy the the electricity demand of the state.
Written by: Constantine Kostikas
Source: The Wall Street Journal
Dell Board Committee Insists Sale Was Best Outcome
It feels like it was just yesterday when Dell was one of the most wanted PC brands in America and even worldwide but it is actually almost a decade ago. Throughout the past few years, Dell has not been relevant compared to their past performances. Looking back at it, it didn’t really surprise me when I found out that Dell has been sold last month. And deciding to revamp their business strategy. Ever since I dumped my Dell desktop, I haven’t even thought about buying another Dell. Dell hasn’t really kept up with their competitors as far as catching up in modern technology, the fact that the demand for lighter laptops and creation of tablets has totally taken the market by storm and I guess Dell just has no answer for these rapid changes.
About a month after the execution of the deal, most of their board members has agreed that it was the best option and deal for the shareholders for their circumstances.
Only time will tell rather or not Dell will ever make a come-back to their technology prominence but as of right now, I am sure they are everything they can to change how their products are perceived and maybe change their brand image or they will even have innovate a product that no one has ever seen.
-Derby Ng
McDonald’s Posts Lackluster Sales
The world’s largest restaurant chain, McDonald’s, faced a decline in their store sales by 3.3% in the month of February. McDonald’s came up with a strategic plan for the month of February by promoting their new Fish McBites, for Catholics to eat during Lent. Although their sales declined, it was considered to be better than what they had expected because of the economy. Another contribution to the company’s decline in sales is because of their overseas stores, in Europe and Japan that had less customers. The company’s rivals, Burger King Worldwide Inc. and Wendy’s Co. have both suffered because the value of their advertising did not match up to McDonald’s. It is important for analysts to study the strategies that McDonald’s uses to remain as the leading chain for so long, having its competitors unable to surpass them even through their promotions and discounted prices. The chain restaurant is constantly tweaking their menu to adjust to the changing times as well as matching the consumer’s wants. It is apparent through their sales that their aggressive advertising values and change in menu, allows them to be a high standing company that will be successful over a long period of time.
Written by: Samantha Chin
Source: The Wall Street Journal
Gasparro, A., & Rubin, B. F. (2013, March 8). McDonald Posts Lackluster Sales. Retrieved March 10, 2013, from The Wall Street Journal: http://online.wsj.com/article/SB10001424127887323628804578348041586701244.html?mod=WSJ_earnings_LEFTTopHeadlines
Pound Falls to 2 1/2-Year Low Versus Dollar on Policy Concern
The value of a nation’s currency often reflects its economic situation and the government’s policies. Recently, the Great Britain Pound (GBP) dropped in value when compared to the United States Dollar (USD). The exchange rate is £1 to $1.48, which is the lowest in two years. This may be a foreshadowing of another recession in this nation. The prime ministry, David Cameron, argued that the government should not be cutting taxes or increasing spending to alleviate the economic status. Instead, he believes that the Bank of England should provide monetary support. Similar to the value of GBP, the value of bonds is also falling. Some critics claim that the nation does not have the ability to stimulate growth within the economy.
There seems to be distrust in the government when it comes to economic issues. As a result of a fall in value, there will be inflation in Great Britain. This situation is similar to USD’s fall in value several years ago. At the time, the U.S. also depended on the Federal Reserve Bank to stimulate growth rather than implement fiscal policies.
Written By: Melody Mark
Source:
Meakin, Lucy. “Pound Falls to 2 1/2-Year Low Versus Dollar on Policy Concern.” Bloomberg. Bloomberg L.P., 9 Mar. 2013. Web. 10 Mar. 2013.
The Misleading Unemployment Rate
The unemployment rate has recently dropped from 7.9% to 7.7% but this decrease is not as significant as people would like it to be. Though approximately 236,000 jobs have been added the decrease in unemployment rate has been significantly impacted by a shrinking work force. People have either stopped looking for jobs after being discouraged or have gone into retirement; the smaller work force may be a big attribute to why the unemployment rate has dropped. A large amount of people born during the baby boom, are now reaching retirement age, so large retirement rates should be expected for the next few years. A recent budget cut made to cut military spending is expected to cut over one million jobs between 2013 and 2014. Although some jobs have been added recently, those new jobs will not be able to cover for the jobs lost during this budget cut.
The economy has been giving false indicators of a road to recovery, but all these indicators such as the unemployment rate and the Dow Jones Index do not take into account the bigger picture. These numbers reflect what is going on now, but does little to reflect how our economy is doing as a whole. As opposed to getting their hopes up, the government should continue to think of ways to improve our economy.
Written By: Jessica Ho
Source: The Wall Street Journal
GOP Aims to Turn Sequester Ax Into Scalpel
My post yesterday dealt with the monetary policy the FED is currently using; $85 billion per month purchases of Treasury and mortgage-backed securities in an effort to lower long term interest rates. Today, there was an article in the Wall Street Journal which addressed the $85 billion across the board cuts in discretionary spending that began this month. Social security and Medicaid remain unscathed from these sequester cuts while Medicare’s budget was decrease by 2%.
All of this seems a tad counterproductive to me; $85 Billion in Federal funds being used in keeping interests rates low and spending in the private sector high to combat unemployment, yet $85 Billion being cut per month in the Discretionary budget, which will probably do more to facilitate unemployment. This monthly cut in the budget is to be distributed evenly throughout programs under discretionary spending, which hardly seems fair when you take into account that military spending makes up approximately half of the budget. Frivolous spending such as the use of a National Science Foundation grant to research a robotic squirrel “designed to help researchers understand squirrels’ interaction with rattlesnakes” should be cut so programs such as Head Start, an early childhood education program can continue to operate.
Evan Chang
Source:
http://online.wsj.com/article/SB10001424127887324034804578346742350627464.html
Food For Thought
Recently, Whole Foods Market, a well known grocery chain, has mandated that all genetically modified food products sold in their stores be labeled as such. Labeling these genetically modified organisms or G.MO.’s has benefits and risks. While some customers may appreciate the honesty that food retailers have and continue to buy their products or buy even more, some may be deterred by the labels. Interestingly, some people will buy more of it because of the peace of mind that they obtain by knowing what they’re buying even if it is genetically modified, while others who see these labels would actually not buy it even though they would have before. President of Whole Foods, A.C. Gallo finds that customers are reacting favorably to new labels, “Some of our manufacturers say they’ve seen a 15 percent increase in sales of products they have labeled.” This shift by Whole Foods can be seen as a stepping stone for the food industry and many more grocery/food retailers may soon follow suit creating an overall increase in the sales of properly labeled food products. There is opposition to this, mostly coming from companies such as Coca- Cola who has spent millions trying to combat it, and some customers are showing their disapproval of them by putting warning stickers on products suspected of having genetically modified ingredients from food companies who oppose labeling.
Written by: Kevin Zhang
Source:
Strom, Stephanie. “Major Grocer to Label Foods With Gene-Modified Content.” The New York Times. The New York Times, 09 Mar. 2013. Web. 10 Mar. 2013. <http://www.nytimes.com/2013/03/09/business/grocery-chain-to-require-labels-for-genetically-modified-food.html>.
Sinopec to Raise $3.1 Billion in Hong Kong
The China Petroleum and Chemical Corporation, also known as Sinopec is Hong Kong’s dominant refiner. With a recent decline in profits in the refining business they are looking to offset the refining losses with their oil and natural gas production. To expand their company, they are selling 2.85 billion new shares worth up to 24 billion Hong Kong dollars or 3.1 billion in US dollars which accounts for 17% of shares. The new shares offered will be used to fund the business that involves oil and natural gas production. As the country’s most dominant refiner, Sinopec buys oil at international market prices and sold for china market prices. This makes it difficult for Sinopec to make large amounts of profits, during the first nine months of 2012, the company has reported a loss of 15.5 billion dollars but the oil and natural gas production part of the business made enough profits to offset this loss. The booming profits from this part of the business have played a crucial role in the company’s decision to offer more shares to fund business development.
As Hong Kong’s most dominant refiner, it is important for Sinopec to take appropriate measures to ensure that business operations continue. Taking profits from one part of the business to cover losses in another is a good short term approach. With new shares offered, Sinopec should be able to quickly improve the development of their business. Refiners are important part of the everyday operation of the economy.
Written by: Wilson Tang
Source:
China’s Decrease on Gold Importation
China importation of gold from Hong Kong has slowed down after the seasonal gold demand for the Chinese Lunar New Year. According to the Hong Kong Census and Statistics Department, China has only purchased 51,303 kilograms of scrap gold and coins this month when compared to the greater number of 114,405 kilogram of gold in December.
Despite this decrease, the amount of gold purchased by china from Hong Kong has risen by 56 percent compared to last year’s import. The result of this near two time increase can be a result from China’s income per capita increase.
Aside from the increase in the amount of gold that has been purchase by China compared to the previous year, gold prices has fallen about 6.5 percent this year. The speculation for the result of the gold price per ounce decrease, are undermined from the U.S. Federal Reserve stimulus, which lead to a recovery from the typical safe haven assets.
The closing for gold price indexes for March 8th is 1,580 (Kitco).
Written by: Victor To
Source:
Yes, We’re Confident, but Who Knows Why
There have been several indicators that the markets are on a road to recovery, with the ever important housing market growing and the stock market hitting new highs. But some make the case that this turning point is merely a side effect of confidence. New York Times writer Robert J. Schiller has performed tests that try to measure the most difficult aspect of the markets, the people and their emotions. He has been gathering opinions from investors as well, through surveys, and the current amount of confidence is quite high. “Using the six-month moving average ended in February, it was running at 72 percent for institutional investors and 62 percent for individuals.” To put that number in perspective, both were at 80 percent before the market crashed in 2007.
Confidence means nothing when it can evaporate so quickly. I feel that the community has become jaded; tired of markets receding every time a potential crisis arises. From the fiscal cliff and sequestration, to the collapse of the whole European Union, investors simply don’t believe it can happen anymore, or that some issues won’t even matter. When something does occur, however, it could very well create another traumatic collapse of the economy as the confidence slips between our fingers.
Source:
The Small Street Journal 