Archive | April 5, 2013

Investor Confidence Goes Down

As the economy is starting to recover with the Dow setting new highs and increase in housing prices investors were becoming more confident, but this confidence is being tested as the news that only approximately 88,000 new jobs were added last month was reported. Investors are starting to worry about how the economy will pull through this spring especially since spring has not been a flourishing season for the past 4 years. Other news including the Cyprus bailout has also affected the investor’s confidence despite the fact that the federal bank is continually trying to pick the economy back up.

Investors play a major role on the economy, so it is important for the government to not only think about consumers and large corporations but those who are investing as well. Investors help improve our products, and although people may see them as sharks the money that they invest into certain corporations can have a positive impact on investors.

Written by: Jessica Ho
Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887324100904578404452829773108.html?mod=WSJ_Markets_LEFTTopStories

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Court Says UBS Must Face Mortgage Lawsuit

The federal regulator of Fannie Mae and Freddie Mac has brought a lawsuit against UBS over the sale of $6.4 billion in securities backed mortgages between September 2005 and August 2007. The lawsuit claims that the bank misled Fannie Mae and Freddie Mac about the quality of the underlying mortgages related to almost $200 billion in mortgage investments. Today, the appeals court rejected arguments by UBS on the grounds that they were filed too late and that the bank lacked standing to pursue the case since its acting directors were not properly appointed.

 

This rejection by the courts come as many banks are separately seeking to reverse a ruling by U.S District Judge Denise Cote, that limits their ability to collect additional evidence to bolster their defense in the lawsuits. UBS is currently trading at $15.26 a share, a large drop from the $36 it was valued at prior to the recession.  

 

Evan Chang

Source:

The Wall Street Journal

Fed Is Weighing a Reaction to Stirrings of Recovery

With the job market in America improving, the Federal Reserve is still wary about the sustainability of the economic recovery. An average of 187,000 jobs a month were added from September to February, the fastest pace in ten years. Some Fed officials suggest that if economic growth continues, the central bank should begin to ease back on its stimulus campaign by the middle of the year. However, Fed chairman, Ben S. Bernanke, and other like Janet L. Yellen, the Fed’s vice chairwoman, have expressed caution.

The Fed is likely to continue to hold short-term interest rates near zero and buy $85 billion a month in Treasury and mortgage-backed securities as planned. However, this monetary policy could come to an end sooner than expected, as we approach the 6.5% unemployment rate that the Fed has identified as its goal. Hopefully, a disappointing summer won’t impede the economy’s progress and allow the Federal Open Market Committee to return to normal monetary policy.

 

Written by: Melody Mark

 

Source:

Appelbaum, Binyamin. “Fed Is Weighing a Reaction to Stirrings of Recovery.” New York Times. The New York Times Company, 4 Apr. 2013. Web. 5 Apr. 2013.

Best Buy Deal Looks Smart For Samsung

Best Buy has announced that it will be opening “Experience Shops” 1,400 of its stores, which led to a 16% increase of the company’s stock.  This deal is in collaboration with Samsung with hopes that if customers can play with their devices, they will be more compelled to buy them.  Samsung is in dire need of a deal like this because it has no dedicated retail presence the way Apple does.  Apple products can be bought at the Apple store, but because Samsung does not have its own retail stores, the company must make deals like this with independent electronic stores.  These “Experience Shops” are also planned to provide technical support for the Samsung devices, which would be a major improvement from the current experience Samsung customers have of trusting their devices with independent electronic repair shops.  Also, mobile-communications devices are projected to account for 71% of Samsung’s operating profit in 2013, so this adjustment by Samsung has the potential to further the company’s recent success.

This new deal by Samsung shows that the company is taking steps forward to compete with Apple.  Samsung’s investment outside of development and marketing shows that it really understands what needs to be done to dethrone Apple.

Written by: Constantine Kostikas

Source: The Wall Street Journal

 

After Stagnation, a Revival for Mexico’s Financial Sector

The international competition is starting to heat up. Governments everywhere are creating a new world of quantitative easing, but there are also countries that are beginning to prosper for other reasons. Mexico, for one, has seized the moment of the European Union’s weakness and is taking advantage of its ability to finance major transactions.

There are government policies in place that put Mexico at the forefront of increased investor activity. While wage inflation hits China, Mexico is there to reap the benefits of a once stagnant economy. The potential benefits of investing in Mexico outweighs the cost of potential risks such as crime and drug cartels.

Mexico has gone as far as creating their own types of investment vehicles to induce investment into their country. With the support of the government and Mexico’s stock market on the rise, there is a lot of reason to be optimistic about Mexico’s future.

I think, naturally, Mexico has benefited from the raised confidence in America. The increased amount of financial services in the U.S. have assisted Mexico in getting a boost to their economy as well. I think, even if the U.S. falters a bit, Mexico will still remain a viable alternative to diversify investments on the international level.

Source:

http://dealbook.nytimes.com/2013/04/04/after-stagnation-a-revival-for-mexicos-financial-sector/

 

U.S. Economy Adds Just 88,000 Jobs

Unemployment rate seems to be the main topic in most of our political campaigns and on the news. The Labor department reported that employers only added about 88,000 jobs in the month of March. The new unemployment rate is now 7.6% and although is the lowest since December of 2008 but many economists have stated the reason for the decline is because of the people who are dropping out of the work force. The important fact from this statistic of gaining 88,000 jobs is that it is the lowest amount since June of 2012, the Fed is suggesting although there is an improvement in the economy, the rate of growth is still very slow. Some of the officials in the Fed are inclining to continue hold the interest rate near zero until the unemployment rate falls to 6.5%. Until then the stimulus programs will not come to a stop.

I really hope the job market and the economy improves much more by the time I graduate. I have about two years left and hopefully by the time I graduate, the unemployment rate will no longer be an issue for all of us. I really hope these officials in Washington D.C. know what they are doing and I wish they will not let us down again.

-Derby Ng

http://online.wsj.com/article/SB10001424127887324600704578404271558802706.html?mod=WSJ_Home_largeHeadline

 

Wal-Mart Claims the Bond Market

Wal-mart once again gets the title of lowest cost not only in average consumer goods produce but also, named the lowest borrowing costs. Furthermore, the company that has a recognizable rating of AA by Standard & Poor and Aa2 by Moody’s Investors.

Wal-Mart has sold $1 billion notes, due on April 2016, that yields a .6 percent. This percent is larger than similar treasuries by 30 basis points. Longer term bonds also expands with higher prices; a 1.25 billion valued bond due for maturity on April 2018 yields a 1.125 percent rate; a 10 year bond debt yields 2.55 percent; lastly the 30 year debt bonds yields a 4 percent return rate. These numbers has attracts many bond savy onlookers. This has taken many potential clients away from shorter term bonds which includes GlaxoSmithKline Plc, PepsiCo Inc and Praxair Inc; while for the longer term bonds it competes against Medtronic Inc. and Anheuser-Busch InBev NV.

Despite being a strong competitor in bonds, the company maintains a good record of cash balance sheet which qualifies it for positive rating on both Moody’s and S&P rating.

Written by: Victor To

Source:http://www.bloomberg.com/news/2013-04-05/wal-mart-bonds-fly-off-shelf-as-shoppers-stew-corporate-finance.html

U.S. Adds Only 88,000 Jobs; Jobless Rate Falls to 7.6%

The unemployment rate has been slowly declining but does that really mean that the economy is improving and that jobs are being generated? The unemployment just dropped from 7.7% down to 7.6% but only 88,000 jobs were created compared to the 268,000 in February when the unemployment rate was even higher. Taking a closer look at the unemployment rate, 7.7% fell down to 7.6, not because more jobs were being created but because the number of people in the labor force fell. People who were actively looking for work also fell accounting for the slight decrease in unemployment rate. Another issue that arises is that most of the jobs being created are low wage paying jobs that are temporary while most of the jobs lost that were lost are middle wage paying. Although the economy is recovering, it is not doing as well as it seems and the high unemployment rate will continue to affect many people.

Although statistically shown that the unemployment rate is decreasing, jobs aren’t really being generated. The low paying and temporary job replacement of middle class people will have a large impact on the economy. The shift from middle paying to lower paying will widen the wealth gap creating more inequality although unemployment rate is going down. The unemployment rate has many factors built into it and we cannot assume that the economy is doing better just being the numbers are showing that.

Written by: Wilson Tang

Source:

http://www.nytimes.com/2013/04/06/business/economy/us-adds-only-88000-jobs-jobless-rate-falls-to-7-6.html?hp&_r=0

No Chucklin’ Matter

Recently, many Pentagon employees have been furloughed, meaning they have to take a temporary unpaid leave. This is due to the fact that the Pentagon is falling short on operating funds and they plan to furlough employees for 22 days in order to save around $4 billion. On Tuesday in Washington, Defense Secretary Chuck Hagel decided to pledge a return of part of his salary to the Treasury for each day Pentagon employees are out of work.

Interestingly, this has started a trend among politicians. The day after, President Obama decided to return 5 percent of his $400,000 annual salary to the Treasury and on Thursday, “Cabinet secretaries practically tripped over themselves to hand over parts of their paycheck”. Of course, politicians can afford to do this, some of them are millionaires and all cabinet members earn at least $200,000 annually. While it looks good symbolically, these petty donations to the Treasury will not really help the $85 billion in budget cuts. However, according to fitting words of  Thomas E. Mann, a scholar of Congress at the Brookings Institution, “It’s all symbolism, but symbolism is often important.”

Written by Kevin Zhang

Source:

Peters, Jeremy W. “As Federal Furloughs Loom, Administration and Congressional Officials Take Pay Cuts.” The New York Times. The New York Times, 05 Apr. 2013. Web. 05 Apr. 2013. <http://www.nytimes.com/2013/04/05/us/politics/as-federal-furloughs-loom-administration-and-congressional-officials-take-pay-cuts.html&gt;.

As Web Search Goes Mobile, Apps Chip at Google’s Lead

As we venture further and further into the future we see the populace moving toward time efficiency and quality. This is especially noticeable when it comes to searches on the Internet. Specific apps such as Yelp, Amazon and Kayak all take away customers that would of normally used Google. This movement toward clean cut and straight to the point answers are starting to affect Google. Google is now being used less because consumers don’t want a list of relevant websites due to the keywords they typed in. Consumers want simplistic answers so they can easily move on with their daily lives.

This shift in demand has opened Google’s eyes. Google is trying to adapt in a number of ways. They now give answers to questions, along with relevant links to Web sites. They also introduced “the knowledge graph”. This knowledge graph is unlike its other search engine as it doesn’t just match keywords to Web sites, it understands correlation among people and other references.

URL:  http://www.nytimes.com/2013/04/04/technology/as-web-search-goes-mobile-apps-chip-at-googles-lead.html?pagewanted=all&_r=0

-Jonathan Chan

St. Jude Hit by New Suits

St. Jude Medical Inc. is facing many suits in both Los Angeles Superior Court and in the Central District of California due to the manufacturing of the Riata defibrillator that has lead to injuring and killing more than 30 patients. The defibrillator is claimed to have faulty leads and deliver blasts of electricity and zap irregular heart rhythms. If these cases are successful, it can bring up the past cases where many people were injured due to medical devices, and lawyers who had earned a large amount of fees. In the past cases such as this one, would have to go through the Food and Drug Administration’s premarket approval process, where the companies had to follow the standards that included those for manufacturing, labeling and device monitoring. Companies would even be protected if their devices would be found defective later on.  It is generally considered difficult for lawyers to find state laws that would address the FDA’s requirements.

It is important that the past cases will be brought up again and that there should be protections from the state law that will lead to a central standard for device safety. Since there are patients’ lives at risk, it is important that there is a standard made for the effectiveness, testing, labeling, and marketing of the devices used on them.

Written by: Samantha Chin

Source: The Wall Street Journal

Weaver, C., & Smith, J. (2013, April 4). St. Jude Hit by New Suits. Retrieved April 4, 2013, from The Wall Street Journal: http://online.wsj.com/article/SB10001424127887323916304578402930543579870.html?mod=WSJ_business_whatsNews