Archive | April 2013

Housing Prices See Large Increase

Housing sales have recently seen an increase in pricing, more people are willing to buy houses, but the amount of houses available for sale remain small, this is what is causing prices to see such large increases. The rate of increase of prices is the largest rate that the housing industry has seen since 2006, prior to the housing crisis of 2008. Some states have seen double-digit percentages in price increase of housing.

Although the housing industry is doing well employment is not. There are still many people who are unemployed, so although housing prices are beginning to increase again, this may not be a sign that our economy is going through large recovery. The price increase has little to do with the economy, and more to do with the amount of houses available on the market. It is necessary that people are aware that such signs do not indicate that the economy is healthy, but this increase in price can be looked at as a step to a recovering economy.

Written by: Jessica Ho
Source: The Wall Street Journal

A Rocky Rollout

President Barack Obama’s health care law is already showing signs of a “rocky rollout” as officials are rushing to prepare for it’s implementation. The main goal of this bill is to provide health care to uninsured Americans, a noble intention but one that has been vividly opposed by many republicans due to its associated costs. The main funding for this health care system has been federal grants which help states run their own insurance exchanges although this has created several issues. New York spends $27 million for its own exchange while Ohio does not run its own program; Ohio is set to receive $2.2 million in federal funding, a figure which will unlikely be sufficient to cover the state’s 1.5 million uninsured.

Republicans view Obamacare as “a politcal tsunami” and called it a “political nightmare for Democrats in the 2010 election.” There have been hiccups in its implementation which are not serious enough to derail it but has caused concerns of “a huge train wreck” if federal officials do not step up their preparations.

Evan Chang


The Wall Street Journal

China Manufacturers Survive by Moving to Asian Neighbors

The Chinese apparel company, Lever Style Inc. has declined by its workers and payroll, as they have chosen to move their production for a Japanese retail chain, Uniqlo to Vietnam. The company is also planning to shift to India as it will test to see whether or not the production will be as successful.  A former investment banker who took over his family business claims that operating in Southern China is just leading to break even as many other companies are shifting their manufacturing to other countries. The costs in China have rising wages and a labor shortage, which a move would allow to keep consumer prices in check. In order to maintain the manufacturing companies in China, it would have to expand its service sector and create a higher-skilled manufacturing job as well as embrace research and high-technology, similar to other countries as South Korea and Japan.

Overall I believe that the company is making the right decision by deciding to relocate their manufacturers and in order to actually earn profit. This affects the economy overall because companies such as Nordstrom and Uniqlo would have to pay different prices compared to how much they would have to pay for their factories in China. Therefore, these companies might actually see profit because their costs would not be going towards the wages, but rather they would see an increase earnings.

Written by: Samantha Chin

Source: The Wall Street Journal

Fewer, Bigger Travel Sites

The online travel search business is shrinking and shrinking as two main travel agencies, and, are buying out smaller companies. This is shocking because Priceline purchased the airline and hotel search engine Kayak, or when Expedia acquired the German hotel search site Trivago in order to show a more diversified selection.

What this does is creates a larger stream of consumers booking hotel rooms through travel agencies, which will bring more customers to the original hotel website. This provides advantages for both the hotel company and the consumers as it consolidates the range of prices for similar rooms.

There are a couple of problems when Priceline acquired Kayak as there is a conflict of interest for websites now. Expedia won’t advertise for Kayak now because they are now owned by their rival, Priceline.

This affects a large population as many people tend to take vacations or stay in a hotel at various times throughout the year. Expedia has had almost 21 million visitors in March alone. This stat shows that many visitors will be able to benefit from the vast amount of information provided by Expedia and the search engine.

Written By: Melody Mark


Detroit Three Zombie Slayers All Gained U.S. Market Share

There is a major shift occurring in the U.S. with the market share of automobiles, and the U.S. manufacturers are taking full advantage of it. After many years of painful turmoil and restructuring, the American vehicle manufacturers are new and improved, ready to win over a larger portion of their domestic markets. Ford, the only major car company spared from bankruptcy, is in the lead with a 17 percent increase in sales. A large portion of the sales are from the F-Series trucks. The Escape and Fusion are selling well also, and Ford is planning to expand its luxury line with the Lincoln.

Chrysler and GM have seen gains as well, which is significant, as this is the first time this has occurred in two decades. Chrysler had a net income drop of 65 percent, but they reaffirmed their long term forecast and put the blame for the drop on temporary issues.

A major macroeconomic issue to observe is how Japanese car companies are going to utilize the change in the Yen’s value to increase their competitiveness. Also, Toyota is currently leading as a major competitor with the Camry. It has held the spot for top sold car in the U.S. for twelve consecutive years.


The Federal Debt Is … Shrinking?

Although the U.S. debt is still outrageously high, a surplus is expected to be achieved over the course of this second quarter.  Tax revenue is higher than projected, and spending, as a result of the sequester, is down.  Unfortunately, the surplus won’t last for long, as the second quarter is generally the best of the year for balancing the budget.  The Treasury Department has predicted the borrowing of $223 billion in the third quarter.

Overall, we are seeing an improvement in fiscal policy.  The budget deficit as a share of gross domestic product fell from 10.4% to 6.7% between 2009 and 2012.  At that pace, it should fall to 3.7% in 2015.  Therefore, while the government has not completely solved the country’s debt problems, it is on the right track.  The fact that this should be the first quarterly surplus for the U.S. since 2007 speaks volumes about the progress we’ve made since the 2008 economic crisis.

Written by: Constantine Kostikas


Apple to Sell $17 Billion in Bonds

Apple Inc. set a record amount for a U.S. investment-grade corporate offering on Tuesday. Apple Inc. sold $17 billion of bonds, people familiar with the offering said this offering generated more than $50 billion in new orders. The largest investment-grade corporate offering before Apple Inc.’s move today was a $16.5 billion offering back in February of 2009. Apple’s stockpile of cash is now extremely large and most of their money are overseas. 

From the many investors that Apple has, Goldman Sachs Group Inc. and Deutsche Bank AG are leading the sales of the offering. One of the top reasons that has influenced Apple to make this move is that the move will now put them in debt and by being in debt, Apple Inc. could escape some of their tax duties. 

This may be a smart move for Apple and hopefully the sales of their products will be a huge success in the next coming few months. I can’t be picture Apple doing poorly after their success in the past few years.

-Derby Ng

Price Matching Criticized From Wal-Mart to Toys ‘R’ Us: Retail

In the weak economy today, many businesses are forced to turn to price matching policies to attract new customers or just keep customers loyal. Despite promoting ads that price matching is guaranteed, many businesses have been heavily criticized for it. The price matching program is definitely not easy to follow through because of the many factors that need to be accounted for but that is no excuse to only execute the program when wanted. The price matching program should have a standard so that it is fair for all customers. Customers of Wal-Mart and Toys“R”Us have complained that the policy is very inconsistent and that even workers don’t fully understand the price matching program. Answers could vary from store to store and even one day from another.

In the current economy, it is extremely important to keep your customers loyal. People are always seeking for the lowest prices and with the internet, low prices are everywhere. There should be a established standard so that all stores with price matching programs are executing it the right way. The current price matching program is not only not effective but also turning some loyal customers away.

Written by: Wilson Tang


Folks Wagen Their Tails

Although Volkswagen is Europe’s leading automotive company, this protected them from feeling the effects of Europe’s troubled market where car sales have dropped to the lowest point in decades. Up until now, Volkswagen had not really felt the full force of Europe’s financial crisis compared to other companies because of their size and  strong presence in China and the United States. Their shrinking profit margins are an indication of the steep decline in car sales as well as intense price competition. Thus, Volkswagen joins the list of foreign and United States automakers that are struggling in Europe, where car sales dropped 10 percent during the first quarter, the big hit being double-digit decreases in France, Germany and Spain. Now most automakers are wagging their tails relying on sales in the United States in order to make up for their losses.

VW’s chairman, Martin Winterkorn noted ““The coming months will be anything but easy,” and “The current environment is definitely a tough challenge for the entire industry. Suprisingly, its after-tax profit fell 38 percent, to 1.95 billion euros ($2.5 billion) in the first quarter even though their revenues only fell 1 percent to 46.6 billion euros.

Written by Kevin Zhang


Corporate News: ‘Iron Man 3’ Dominates Overseas Box Office

Iron Man 3 created by Walt Disney Co. opened internationally this past weekend. Overall, the movie grossed roughly $195 million on Sunday alone after opening in most countries. Although Iron Many 3 has yet to open in the United States, Canada, Germany, China and Russia it is expected to have a huge opening night in their given countries. Specifically in the U.S and Canada, it is projected they will have an opening of well over $100 million.

These earlier openings in foreign countries are largely due to the May Day holiday on May 1st. The May Day holiday is when many foreign adults and children have days off of work and school. Disney also used this strategy last year when they came out with The Avengers.

This movie premiere affects many people indirectly and directly as it employs hundreds if not thousands of workers to help make the movie possible. I am personally excited about this movie as I enjoyed both Iron Man and Iron Man 2.


-Jonathan Chan

Consumer Spending Sees Little Increase

Although consumer spending increased in the month of March, it is expected that not much increase will be seen for the next few months due to the fact that income has not seen much growth as well. With less income, consumers are less likely to spend as much money since they do not have much to spend in the first place. Many believed that the increase in spending for the month of March came mainly from its cold temperatures. Consumer spending on products such as health care and clothing increase by a slight 0.2% last month.

This minor increase in consumer spending is not healthy for our economy, and most definitely would not lead to further growth. Investors will see this as a sign to not make many investments since they see that the public is not willing to spend, which in turn will yield a smaller profit margin for investors. The economy is currently being negatively affected by many factors, and this low increase in consumer spending is one of them.

Written by: Jessica Ho
Source: The Wall Street Journal

Apple Lays Groundwork for First Debt Sale Ever

In order for Apple Inc. to fund their $100 billion capital return program for their shareholders, they will be selling their debt for the first time. They also plan to buy back $60 billion shares so that the company will have more capital to invest with in the future. Apple is a technology company that is known for its large amount of cash available, unlike other companies.  However, fairly low interest rates and tax responsibilities are some reasons why Apple is choosing to sell debts in some form of currency. Because of this news, rating agencies such as Standard & Poor’s and Moody’s have given Apple an AA+ and Aa1 rating, respectively. Analysts have deduced that technology companies like Apple are not as safe to invest in because of the constant shift in consumer taste. They see Apple as a mature company, where growth is beginning to slow down.

In every business cycle, there will be times when the company reaches the mature state. Apple’s growth has been slowing down ever since the release of the iPhone 5.  It has also been relying on older products to boost their sales, even though there does not seem to be a purpose behind some of their older products. In this society, people are always demanding for new developments. For Apple to continue to be one of the biggest technology companies, it will have to be able to compete in the market that is constantly changing.


Written By: Melody Mark

Source: Cox, Josie. “Apple Lays Groundwork for First Debt Sale Ever.” Reuters. The Thomson Corporation, 29 Apr. 2013. Web. 29 Apr. 2013.

Perth Mint Works Through Weekend as Gold Demand Surges on Price

It would seem that the drop in the price of gold was only a temporary occurrence, and investors are looking for a return to higher levels. Also, the demand for gold is on a global scale, even from the U.S. Orders were so high over the weekend, “the highest level in five years after prices plunged,” that the U.S. Mint had to suspend sales. Ron Currie, sales and marketing director of Perth, said that sales in April tripled in comparison to that of March.

Billionaire John Paulson has been an advocate of gold, maintaining a bullish stance on the market. He expects “central-bank buying and demand in Asia will support the metal in the near term.” “Central banks will buy as much as 550 tons this year after boosting holdings by 534.6 tons last year, the most since 1964, the World Gold Council estimates.”

If there is a bubble in gold, it isn’t going to be popping anytime soon. Investor demand is clearly still present, and the drop in price must have been a temporary sell off. The devaluation of money is definitely a strong motivator to invest in gold. I think that the sell off may have resulted from talks about the Fed tapering off their policy by the end of the year, but since it has reaffirmed continued economic stimulus, confidence in gold must be rising.

Food Magazines Feast on New Ads

In the first quarter, many popular food magazines have noticed a large increase in their ad pages, since food magazines are broadening their traditional focus. Magazines such as Bon Appetit, Food Network, and Eating Well have broken away from the traditional recipe magazines where they now include popular destination restaurants, celebrity chefs, and travel.  This new change in expanding the topics within food magazines has been successful as there was an increase in the total paid circulation for most of the major food magazines even though there was a marginal drop for the overall industry. Before Food Network Magazine was launched, many of the spending on magazines had dropped around 21% whereas now it is revitalized and more people are interested in the food magazine genre.  Now that this change occurred, more non-food advertisers around the world are reaching out and are able to make titles less vulnerable to swings in a certain industry.

I believe that due to this change in the culture of food magazines, and how they present food as a lifestyle benefits many advertisers. This can bring more profits to agencies because now that there is a broader audience who read the food magazines, they will be able to reach out to a larger audience as well. There can also be a downside to this growth in food magazines because their rivals of other genres are struggling to capture the attention of other audiences and agencies.

Written by: Samantha Chin

Source: The Wall Street Journal