Archive | April 12, 2013

Fed Information leaked

A few days ago it was revealed that some of Wall Street’s major banks had received information on the topics of a Fed meeting before the Fed has the chance to release the information themselves. Officials say that the leak of this information was completely accidental. Though the information released had seen little impact on the market, concerns are rising due to the fact that the Fed is now considering cutting down on their bond-buying program. If news of their final decision on this topic gets out prior to any announcements, the economy will be shaken up.

The Fed has to figure out a way to keep this information confidential. It seems that institutions who have a large correlation to the economy always seem to have information leak in one form or another. Although the Fed claims that this incident was made accidentally, I still question the integrity of it, such information being leaked out is very similar to incidents of insider trading.

Written by: Jessica Ho
Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887324240804578414463643311692.html?mod=WSJ_economy_LEADStoryTop

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Bernanke Backs ‘Multiprong’ Approach to Aiding Low-Income Areas

The U.S. economy is slowing recovering from depression. Low-income communities, however, are recovering slowly than other aspects of the economy. Wages fell 30% when the economy was at its worse. This left a great impact on families who struggle to survive from one day to the next. Ben S. Bernanke, Federal Reserve Chairman, recognizes this problem and is determined to promote monetary policies that can relieve this issue. His plans will require local communities to work as a group to reshape the environment. The “multi-pronged” approach he describes involves improvement in education, jobs and health care sectors. In addition, he intends to pump more money into the market, in hopes of reducing unemployment rates.

The public is generally positive about the growth of the economy. There have been improvements in various industries. Reduction in unemployment rates also signifies the recovery of low-income families from their struggles. Bernanke’s support for low-income neighborhoods will also improve their lives.

 

Written by: Melody Mark

Source:

Torres, Craig, and Jeanna Smialek. “Bernanke Backs ‘Multiprong’ Approach to Aiding Low-Income Areas.” Bloomberg. Bloomberg L.P., 12 Apr. 2013. Web. 12 Apr. 2013.

Stuck In Limbo

Being in a country with a temporary work visa, wondering when one would get permanent residence is a common issue faced by guest workers from abroad. Silicon Valley, America’s high tech center,  is fighting to make the immigration process easier for thousands of people such as Mr. Sankhla, a electrical engineer from India. Having to remain in limbo in a sense, he remarks “It’s a constant distraction, you can’t really settle down because your visa status is uncertain.”

Surprisingly, the industry has shown intense focus on this national policy issue, even Mark Zuckerberg of Facebook and John Chambers of Cisco have taken part in advocating changes. It appears that their efforts have paid off because a group of eight senators have prepared negotiations for a new immigration deal that will be announced next week. The current law limits how many green cards can be issued to people from any single country, no matter how many people there are, so highly populated countries such as China and India wait longer for permanent residence, more so than any others.

Written by Kevin Zhang

Source:

Sengupta, Somini. “Tech Firms Push to Hire More Workers From Abroad.” The New York Times. The New York Times, 12 Apr. 2013. Web. 12 Apr. 2013. <http://www.nytimes.com/2013/04/12/technology/tech-firms-push-to-hire-more-workers-from-abroad.html?ref=business&gt;.

Corporate News: Heinz CEO Cut Teeth at Burger King

Bernard Hees, CEO of Burger King Worldwide Inc., will be moving to H.J. Heinz Co.  He is expected to take charge of the condiments maker with the same cost-cutting management style he has become known for over the years.  Hees is expected to take over after 3G Capital and Berkshire Hathaway Inc. complete their $23 billion buyout.

At Burger King, Hees fired half of the 600 employees working at the company’s Miami headquarters.  Offices were also replaced with tables seating four to six people, while Hees himself worked in the open with other top executives.  Since Burger King was acquired by 3G Capital in 2010, its operating costs have fallen by 30%.  However, an official at 3G has claimed that Heinz is in a better financial situation than Burger King was at the time of its acquisition.  Thus, layoffs may not be required, and a harsh cost-cutting strategy may not be needed.

Written by: Constantine Kostikas

Source: The Wall Street Journal

U.S. Consumer Spending Decreases

U.S. retail sales are currently at the lowest point they have been in the period of nine months, an indication of how consumers are cutting back on purchases of nonessential items. Higher taxes and government spending cuts are two major factors for the 0.4% contraction of retail and food service sales, as well as the 2.2% decrease of spending at gasoline pumps last month. These changes have also been influenced by the 0.8% increase of food prices, with nearly a 22% increase in the cost of vegetables alone due to recent weather conditions in the Southwest. The producer price index reported today that prices for intermediate goods fell by 0.9% in March and prices of raw materials by 2.5%.

The Federal Reserve has been purchasing $85 billion in bonds every month in order to keep long term interest rates as low as possible. Several participants of last month’s meeting at the Fed voiced their belief that the central bank should begin to taper the stimulus package, although most people still support the program. The Fed has specified their persistence with the current monetary policy until the unemployment rate dips to 6.5%; after the weak job report last month, who knows when that will happen.

Evan Chang

Source:

The Wall Street Journal

Wells Fargo Profit Rises 22%

The nations largest home lender, Wells Fargo has posted some positive numbers for their first quarter. Wells Fargo reported a 22 percent increase in their first quarter profit on Friday. According to the article, Wells Fargo is responsible for about one third of the the country’s mortgages. Wells Fargo’s performance relies heavily on how the housing market is performing and it is how important to see how they will perform in the future as housing market is showing signs of slow growth.

Wells Fargo is just another bank that has reported positive numbers during the first quarter. Along with JP Morgan, the positive signs from corporations shown in recent months has put hopes in a return of banks. With Citigroup and Goldman Sachs still have not reported, the banking industry looks at huge improvements.

I think this is great news for the banking industry and the economy as a whole, I hope that many more banks will report positive earnings and show signs of improvements from the past few years. There is finally hope.

-Derby Ng

http://dealbook.nytimes.com/2013/04/12/wells-fargo-profit-rises-22/?ref=business

 

 

 

JPMorgan Switches Risk Model Again After Whale Loss

JPMorgan is unable to escape the “London Whale” incident that highlighted headlines everywhere with billions of dollars lost for the company. Even now, the company is trying to move further away from the incident by removing the supposed model that is to blame for the faulty calculations in the trade. The losses that resulted from understating risks in the formula amounted to more than $6.2 billion last year.

JPMorgan has been under investigation for their constant swaps of their models, specifically the January 2012 swap that is being investigated by the SEC. Of course, CEO Jamie Dimon is stating that the models were merely faulty in predicting changes, and that they can never be fully accurate.

In the long term financial sense, it seems a bit ridiculous that JPMorgan is still getting criticism for the trade losses when it was actually a minor portion of their total portfolio in comparison. However, I understand the need to truly investigate JPMorgan’s disclosures to prevent any possible misleading information that could be abused for the company’s own advantage. Also, I think the incident raises awareness of just how powerful some of these investing firms are, as they are capable of moving entire markets with their own trades.

Source:

http://www.bloomberg.com/news/2013-04-12/jpmorgan-switches-risk-model-again-after-whale-loss.html

JPMorgan 33% Profit Jump Beats Estimates on Reserve Releases

Despite JP Morgan Chase & Co. battle over chairman position, the company seems to be doing very well. JP Morgan has recently announced that their first quarter profit rose 33 percent, much better than most analysts have anticipated. Although some sacrifices in the company had to be made, the final outcome for the company was for the better. The current company structure under Dimon has shown that he is best fit to stay as chairman of the company; directors are urging investors to keep Dimon as the chairman of the company despite his responsibility over the trading loss of 6.2 billion. Since the last year JPMorgan has picked up their slack and generated 10.1 billion in revenue, a 9 percent increase from the year before.

The current company structure under chairman Dimon is proving to be the most effective when Dimon is working under chairman position. He has done what was necessary to help improve and grow the company to where it is today, despite the bad publicity from the trading loss, JPMorgan was able to turn around the company and do better than their competitors. Their first quarter profits is a sign that the company will continue to thrive while restoring more confidence in investors and clients.

Written by: Wilson Tang

Source:

http://www.bloomberg.com/news/2013-04-12/jpmorgan-profit-increases-33-beats-estimate-on-mortgage-fees.html

JAB to Buy Coffee Maker for $10 Billion

The investment firm, Joh. A. Benckiser GmbH, continues to expand in the $75.8 billion global coffee market by recently buying Douwe Egberts Master Blenders. The agreement now sets the value of the coffee and tea maker at 12.50 euros a share including dividends, which is approximately $16. Joh. A. Benckiser, also known as JAB, already owns a 15.05% stake in D.E. Master Blenders, which discouraged other bidders from the deal. D.E. Master Blenders is number three in the global coffee roasting sector, as they have about $4 billion in annual sales. The company is currently looking for future possibilities in other countries for acquisitions that would complement the company’s current portfolio. They recently bought U.S.-based Peet’s Coffee for around $1 billion then signed a $340 million deal for Minnesota-based Caribou Coffee.

Although D.E. Master Blenders owns the Douwe Egberts coffee brand, which is a spin off of the former consumer conglomerate, Sara Lee, the company seems to be expanding their markets. They have acquired many other coffee companies and they seem to know in what place they want to promote their products to increase theie sales and gain profit.

Written by: Samantha Chin

Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887323741004578417862075507062.html?mod=WSJ_business_whatsNews

U.S Reports Lower Than Expected Retail Sales Data

The potential growth in the retailing business in the United States has been a slump since report of retail sales index has fallen 0.4 percent. Economists has expected the report to have a near neutral, unchanged report for march retail sale. The .4 percent decrease in retail sales has brought shock since this decrease is the lowest since June of last year.

Among the categories of retail sale, the lowest performing sectors were department stores and electronics. There was a 1.2 percent drop for merchandise outlet along with a 1.6 percent decrease in electronics dealer.

Employment in the United States has picked up in job employment but at a too slow of a rate. According to the Labor Department, payroll only grew by 88,000 last month, which is also the smallest increase in payroll increase since June. The Stock-index futures has also taken an impact on this new; Standard and Poor 500 index, set to mature in June, has dropped .3 percent to 1,582.4.

Written by: Victor To

Source: http://www.bloomberg.com/news/2013-04-12/retail-sales-in-u-s-dropped-in-march-by-most-in-nine-months.html

Bieber Backs A Debit Card For Teenagers, From Parents

Understanding the value of a dollar is crucial in one’s life. It can teach you to be responsible, mature and can elevate your decision making skills. To alleviate this growing phenomenon, SpendSmart Payments Company is offering a prepaid debit card specifically for teenagers. They believe this card will teach the value of money and will show the importance of managing your money. SpendSmart Payments Company was originally named BillMyParents, however that name was misinterpreted by a large amount of people. Many people interpreted that parents were ATM’s and that they could spend freely while their parents pick up the bill. This of course is not the message they are trying to get across.

To really put their company on the map, SpendSmart Payments Company hired superstar Justin Bieber to create videos advertising the prepaid debit card. SpendSmart and Bieber are planning on using social media to promote the product. Bieber will post the advertisement videos on his Youtube, his Facebook Page, and also his Twitter. Justin Bieber has millions of subscribers on all 3 of those social media platforms.

URL: http://www.nytimes.com/2013/04/11/business/media/bieber-promotes-a-debit-card-with-high-fees.html?_r=0

-Jonathan Chan