Archive | April 9, 2013

Obama Intends To Slow Down Social Security

Barack Obama will be trying to cut the budget for social security by decreasing the rate of its growth. Those pushing for the policy want to lower calculations for the cost of living, but many libertarians are disagreeing with this because they believe that it would be very difficult for senior citizens to take care of themselves.

Though I do believe that the government should provide social security and some forms of benefits for the elderly I do think that slowing down the growth of social security is a good idea. The United States is in a large amount of debt, and it would be difficult to map out a budget to cover these expenses especially when there is even more people retiring now as a result of the baby boom. The government would have to cover a large amount of elderly if nothing is done about social security, and money is not something the government should be easily handing out.

Written by: Jessica Ho
Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887323820304578411020455295746.html?mod=WSJ_economy_LeftTopHighlights

Greek Banks Suspend Merger Talks

The National Bank of Greece and Eurobank have failed to raise the capital required to merge, causing their shares to drop 30% on Monday.  The merger would have resulted in the biggest bank in Greece with assets valued at 180 billion euros.  The Bank of Greece, the country’s central bank, revealed on Sunday that it was notified by the two banks of their inability to ensure that 10% of their share offerings would be taken up by the private sector.  Talks about the potential merger are expected to resume, with a state banking support fund expected to decide on whether or not the merger should proceed by the end of April.

The decision on a merger like this should be huge news for Greece.  The country is still working on the negotiation of its compliance with the terms of its 130 billion euro international bailout.  Meanwhile, Finance Minister Yannis Stournara has guaranteed that there would be no further austerity such as cuts to salaries and pensions.

Written by: Constantine Kostikas

Source: The New York Times

Oshkosh To Cut 900 Jobs In Defense Division

Oshkosh Corp. announced today that 900 positions will be cut from its defense division this summer due to an expected decrease in demand for its military vehicles this year. The company, which specializes in manufacturing trucks, further specified that its defense-division’s workforce will shrink by about 700 hourly and 200 salaried positions through July. Oshkosh will have around 2,800 defense employees after these layoffs. The company’s daily production volumes are projected to decline approximately 30% this summer; the recent sequester cuts are the source of such speculation since it has caused a 10% decrease in the defense department’s budget.

Many articles published recently about the monthly $85 billion across-the-board cuts spoke of how government job would not be lost but acknowledged the imminent decrease of government contracts. The effects of this are now becoming evident as the private sector begins tightening its belt on hiring new employees; it’ll be interesting to monitor the labor market in the upcoming months.

Evan Chang

Source:

The Wall Street Journal

On Sale: The $1,150-Per-Hour Lawyer

After analyzing the billing rates compiled from public filings, some tax and trial lawyers are commanding hourly fees of $1,150 or more. Although these hourly rates seem high, law firms offer many discounts and write-offs that lower the amount compared to the standard rates that they have actually had in recent years.  These prices should not scare of customers because the client’s are ultimately the ones who are able to determine how much they are going to pay. Haggling is common between clients and big law firms because they continue to push for a lower price due to the current recession.  Besides haggling, many of the other clients choose not to work with firms who do not offer discounts.

For many of the lawyers their arguments include that some clients are not worried about the overall price tag, but how many people are working on the project as well as the overall total cost. The idea of having a large gap between the prices listed of a law firm compared to the actual bill that they collect from their clients is not a positive thing. I believe that high billing rates will actually have the clients not be interested or as eager to give their business to law firms due to such high rates.

Written by: Samantha Chin

Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887323820304578412692262899554.html

Sketchy KPMG Officer

A recent push by securities regulators and prosecutors in an effort to contain insider trading, has resulted in 180 civil actions and 75 criminal prosecutions. Possibly among them is a senior executive officer from accounting firm KPMG who allegedly leaked insider information about Herbalife and Skechers to a stock trader. Herbalife is a nutritional supplement maker and Skechers is a sneaker company, both of which KPMG has now withdrawn from as an auditor.

Senior executive Scott London remarked that he was ” embarassed” plus regretted  “my actions in leaking nonpublic data to a third party regarding the clients I served for KPMG.” He claimed that it was to help a friend who’s business was struggling and no one else at the firm knew what he was doing. Although he has not been charged or entered any pleading, his admittance to wrongdoing was evident in his resignation from the company, which ends his almost 30th year with the company.

 

Written by Kevin Zhang

Source:

Lattman, Peter. “KPMG Cancels Audits Over Insider Trading Inquiry.” The New York Times. The New York Times, 09 Apr. 2013. Web. 9 Apr. 2013. <http://dealbook.nytimes.com/2013/04/09/kpmg-said-to-resign-as-herbalifes-auditor-over-investigation/?partner=rss&emc=rss&gt;.

New Airline Weights

It seems like when you speak of airlines and air plane tickets, you are always about your weight. But the weight you are accustomed to think of is usually the baggage weight because when you go over a certain amount number, you will be charged a fee to bring your luggage on to the plane. The weight that I will be talking about isn’t the one you are thinking of, it actually is your own weight. 

According to this article from New York Times, South Pacific airline Samoa Air provides is a system called pay by your weight system. So there is a cost depending on your weight range. So being skinny might actually have benefits outside of health benefits. 

This might mean a longer waiting time for people booking their ticket a few months before their trip and once they get to the airport they might not be the same weight. But I do think this new system will catch the attention of the consumers of the skinnier side. I guess we all have diet goal that we should be shooting for, if we want a cheaper flight.

-Derby Ng

Airlines Weigh The Pounds

It seems like when you speak of airlines and air plane tickets, you are always about your weight. But the weight you are accustomed to think of is usually the baggage weight because when you go over a certain amount number, you will be charged a fee to bring your luggage on to the plane. The weight that I will be talking about isn’t the one you are thinking of, it actually is your own weight.

According to this article from New York Times, South Pacific airline Samoa Air provides is a system called pay by your weight system. So there is a cost depending on your weight range. So being skinny might actually have benefits outside of health benefits.

This might mean a longer waiting time for people booking their ticket a few months before their trip and once they get to the airport they might not be the same weight. But I do think this new system will catch the attention of the consumers of the skinnier side. I guess we all have diet goal that we should be shooting for, if we want a cheaper flight.

-Derby Ng

http://www.nytimes.com/2013/04/09/business/airlines-weigh-costs-and-passenger-pounds-on-the-road.html?pagewanted=2&ref=business

Portugal Warns Citizens Of More Economic Pain

Portugal was one of the few nations that had strict budget cuts during the euro debt crisis. Unfortunately, citizens are tired of these spending cuts placed in the nation’s budget plan year after year. As a result, the constitutional court overruled multiple spending cuts listed in the budget, giving up $1.8 billion that would have been saved. The court’s argument is that the country should not single out “civil servants.” The government is challenged to create new budget plans for the next fiscal year and to resolve the euro debt crisis. Primarily, the Prime Minister Pedro Passos Coelho claimed that they will reduce spending in the healthcare and education industries.

This is an example of how government often have to sacrifice social services in order to balance the nation’s spending budgets. Rising unemployment and negative growth have also left an impact on the social programs available to the Portuguese. Other European nations are also expecting to revise their budget plans because of the numerous cuts that may seem unfair to their citizens. Portugal is known for sticking to their budget plans. The constitutional court’s move to change this tradition may be the beginning of more benefits for people living in this nation.

 

Written By: Melody Mark

Source:

Minder, Raphael. “Portugal Warns Citizens of More Economic Pain.” New York Times. The New York Times Company, 8 Apr. 2013. Web. 9 Apr. 2013.

Comptroller John Liu Urges for Transparency in Employee Diversity Data

Minority leader John Liu is taking initiative in ensuring that diversity in large corporation exists by requesting for documentations. Major banking industries are being pressured to reveal race and gender data according to John Liu’s office statement. Liu’s reasoning statement to initiate the upholding of this check is said to allow share-owners to evaluate the company’s effort to recruit and promote women and minorities.

Last year American International Group (AIG) did not openly disclose information on employees’ demographics, while other banking institution such as Goldman Sachs and MetLife did.

This year many banks along with AIG agreed to Liu’s request to disclose such data. AIG, U.S Bancorp and BNY Mellon stated that they were willing and pleased to support the effort of making the data more transparent since they are standing on the same belief of having a great diversity in the company. Goldman Sachs acknowledges diversity within the company by stating that their 20 percent of their senior officials and executives were female. Other similar operating banks also have a good ratio of women in operation: 17% at MetLife; 24& at JPMorgan Chase; 21% at Citigroup.

These companies are required to submit employee data to the U.S government but they have the option to not reveal the statistics to the public. However Liu’s attempt will urge many more companies to display the data’s to the public.

Written by: Victor To

Source: http://www.bloomberg.com/news/2013-04-09/aig-to-release-diversity-data-after-pressure-from-liu.html

 

Ford Focus Grabs Global Sales Crown as World Buys Small

CEO Alan Mulally entered Ford with dramatic changes in store, and the risk he took is now paying off. Ford made most of its profits off of their line of trucks and larger vehicles, but Mulally wanted to enter the global markets. He was unable to do that with trucks because most of the world was buying much smaller cars. Mulally then made the decision to focus on the Ford Focus, and now it is the number one passenger car in the world.

From an investment perspective, this announcement is very good for Ford, in that their sales are now much more diversified and reaching into global markets. Ford will continue to build upon its established larger car strengths, but also seems to be making strides in improving their smaller car lines. Their developments in fuel efficiency and smarter technologies will further boost their small cars and, overall, aid all of their lines.

I think that the move to smaller cars is a wise move by Ford, since they would be missing large portions of the market if they only sold large trucks. By entering the global market, Ford has the potential to increase profits immensely, but they still have to manage costs of entering new markets and ensure that their truck line is not neglected.

Source:

http://www.bloomberg.com/news/2013-04-09/ford-focus-grabs-global-sales-crown-as-world-buys-small.html

GE Buys Lufkin for $3.3 Billion as Immelt Adds to Energy

CEO of General Electric, Jeffrey Inmelt, has decided to take advantage of the oil drilling boom and GE’s rapid growth in the gas and oil sector. While moving towards more manufacturing, GE Capital is simultaneously shrinking.

The acquisition of Lufkin is one of the three largest within the past decade for oil machinery companies, and in order to finance such a purchase, Inmelt has reached into the cash reserves gained when GE sold NBC to Comcast. In fact, the sale of NBC has allowed GE to expand greatly, and the funds are going to be allocated specifically towards new deals.

Lufkin had been reduced to very low valuations recently, and GE took advantage of the price drop in order to seize a 15 percent market share of oil lift machinery. “’As high as 94 percent of existing oil wells are going to require some form of artificial lift,’ Daniel Heintzelman, CEO of GE Oil & Gas, said in a telephone interview.”

I feel with all of the developments involving oil, GE has a good position to continue growth in the oil industry. They can continue to expand and might even consider other forms of energy such as natural gas. By diversifying, GE is setting itself up for major growth in the long run.

Source:

http://www.bloomberg.com/news/2013-04-08/general-electric-to-purchase-lufkin-industries-for-3-3-billion.html

 

Penney CEO Out, Old Boss Back In

J.C. Penney Co. has made the decision to fire Ron Johnson, the chief executive they hired from Apple Inc. They are firing him due to the drastic fall in sales and revenue. Penney’s board met this past Monday and decided to replace Ron Johnson with the former CEO of J.C. Penney, Myron Ullman. Myron Ullman is now in a very tough position as few retailers have rebounded from declines as deep as 25% drop in sales. This is largely due to Ron Johnson’s strategy to reinvent the stores. Rather than improving profits, Johnson’s strategy alienated bargain shoppers as he stopped clearance sales.

J.C Penney Co. is not looking too good due to the major losses in revenue and turmoil when it comes to management. The biggest problem they currently face is how to regain customers without burning through all their cash. Last month, Steven Roth’s Vornado Realty trust, who was Penney’s second-largest shareholder, has dumped more that 40% of its stake.

URL: http://online.wsj.com/article/SB10001424127887324504704578411031708241800.html

-Jonathan Chan

Exxon Mobil Knew Gas Additive Was Risky, N.H. Jury Told

Exxon Mobil is responsible for $236 million in damages after New Hampshire jury said that the company contaminated drinking water with MTBE. MTBE is an additive that Exxon Mobil added to their gasoline to reduce air pollution. The additive allows gasoline to burn more thoroughly reducing the air pollution from car emissions. While the additive helps reduce air pollution, it also poses a great health risk, studies by the American Petroleum Institute says that MTBE can increase the risks of brain tumors, liver cancer, and kidney cancer based on their experiments with animals. The total damage from MTBE in New Hampshire is $816 million but the states are seeking 30% of Exxon’s sales in NH from 1988 to 2005. In conclusion Exxon Mobil is responsible for $236 million to clean up and fix their issues regarding MTBE pollution.

It is a good thing that Exxon Mobil is doing what they can do reduce air pollution but they must evaluate the other risks associated with their method. At the time when Exxon Mobil was mandated to reduced emissions and air pollution, MTBE was the common answer, but today, Exxon Mobil can use other chemicals to help burn gasoline more thoroughly such as ethanol. This is not the first case where Exxon Mobil is responsible for damages caused from MTBE. The company should really evaluate the risk more to see if the risk outweighs the outcome.

Written by: Wilson Tang

Source: http://www.bloomberg.com/news/2013-04-08/exxon-mobil-denies-mtbe-liability-to-new-hampshire-jury.html