Archive | April 23, 2013

Spain Continues To Face Economic Crisis

Countries in the Euro-zone have not been doing so well recently, and Spain has seen yet another economic downfall for the first quarter of 2013 compared to the last quarter of 2012. Demand rates in Spain are low, and their housing industry is facing a crisis as well. Not only is the housing industry doing poorly but many people are in debt (both corporations and consumers) and unemployment rates are high. Many believe that Spain’s economy will see little recovery this year, and would continue to shrink.

The Euro-zone is in very bad shape right now as Cyprus recently tried to get itself out of bankruptcy and as Germany is seeing a large crunch in their once strong automobile industry. The Euro-zone covers so many countries, and as these countries that have a large impact on the European economy do not do well, neighboring economies in the Euro-zone take the hit as well. As more countries in the Euro-zone begin to suffer, the rest of the world will also be impacted.

Written by: Jessica Ho
Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887323551004578440511162706572.html?mod=WSJ_economy_LeftTopHighlights

House It Goin’

For the month of March, home resales crept downwards which means a slowdown in the housing market and overall economic activity as well. According to the National Association of Realtors, existing home sales fell 0.6 percent last month to a seasonally adjusted annual rate of 4.92 million units. This was disappointing, as economists polled by Rutgers had expected home sales to increase to 5.1 million units. Plus, insight from Millan Mulraine, a senior economist at TD Securities in New York included “The disappointing pace of home sales provides some evidence that positive momentum in the housing sector is beginning to leak lower,”. However, the slight decrease in the housing market could possibly just represent supply constraints or not enough houses to go around instead of lack of demand, of course lack of supply being preferred.

Sales in March were 10.3 percent higher than the same month compared to  last year in 2012, and the median price for a home resale was up 11.8 percent, the biggest increase since November 2005, to $184,300. Ms. Mulraine also remarks ‘The report suggests that the overall thrust of the sector remains positive, with the demand and supply dynamics continuing to favor further price gains,”.

 

Written by Kevin Zhang

Source:

http://www.reuters.com/article/2013/04/22/us-usa-economy-housing-idUSBRE93L0LW20130422

Falling Interest Rates in Europe Aren’t Great News

Because of the loss of confidence in European political leaders, interest rates have dropped drastically in countries like Italy, Spain, Ireland, and Portugal.  A couple of years ago, the high yields on government bonds in Europe were a sign that there was a belief that governments would default on their debts.  However, guarantees made by the European Central Bank to back the bonds issued by countries in the European Union caused a decline in interest rates.  Now, the interest rates have fallen because the economy is weak, thus people are less interested in borrowing money; yields on two-year notes issued by the Italian and Irish governments have fallen to the lowest levels recorded by Bloomberg.

While investors are beginning to lend money at affordable rates in countries like Italy and Spain, the guarantee made by the ECB makes this recent development less encouraging.  Unfortunately, bond rates don’t directly correlate to the “creditworthiness” of a nation, as evident by this situation in Europe.

Written by: Constantine Kostikas

Source: Businessweek.com

Yum Profit Tops Estimates as Taco Bell Bolsters Sales

Amidst turmoil in China, Yum! Brands is experiencing much better growth in the domestic market as sales of Taco Bell are up in America. The increase in sales was enough to offset losses in China. China recently has been facing a drop in sales due to a scare in the chicken supply and the current environment involving bird flu.

Although the net income of Yum! Brands has decreased from a year ago, it was still able to beat analysts in terms of profit per share, hitting 70 cents per share versus the average estimate of 60 cents. The stock rose 5.7 percent, off-setting losses from the incident in China, but the stock is still down an overall 3.4 percent for the year.

I feel that the increase in sales in the domestic market is a strong indicator of the confidence the consumer has in America, especially considering that Yum! Brands was still able to top estimates with China dragging down total sales overall. However, although Yum! Brands is working to introduce new products that will boost sales in America, I think it is very important that they resolve the problems that plague the brand in China, or else sales will continue to drop and hurt total sales to the point where the domestic market alone will not be enough to pull up the average.

Source:
http://www.bloomberg.com/news/2013-04-23/yum-profit-tops-estimates-as-taco-bell-bolsters-sales.html

Tobacco Industry’s Challenge to Law Requiring Graphic Labels Is Rejected

A 2009 federal law requires that there are graphic warning labels on cigarettes and an expanded marketing restriction on tobacco products was challenged by the tobacco-industry, but rejected on Monday. This federal law was challenged because it was argued that it violated the constitutional free-speech rights of the tobacco companies such as R.J. Reynolds Tobacco Co. and Lorillard Tobacco Co. The law specifically claims that half of the space on the front and back of the cigarette packages has to account for the graphic health warnings, as well as their marketing practices such as cigarette-brand sponsorships of sporting or cultural events are also banned.  Although many producers argue about the FDA rule, consumer groups actually support the actions of the Supreme Court because it keeps the federal tobacco law in place.

I believe that this ruling should be kept in place about the graphic danger warnings on the cartridges, will allow people to be more cautious and think twice before they purchase a pack of cigarettes. This new ruling will definitely decrease the sales of cigarettes because their marketing strategy will face a loss when they are not allowed to post sponsorships at events. This new federal law can change the way consumers spend on tobacco, as well as the amount of people who smoke.
Written by: Samantha Chin

Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887323735604578438594078101904.html

Corporate News: Hedge Fund Invests in Microsoft

Activists are able to change how corporations operate if they have enough shares of a specific company. Hedge-fund executives often claim that they have enough shares to take on a board position at specific companies. Jeffrey W. Ubben is the founder of ValueAct Capital Management LP, which is a hedge-fund that invests in a small number of companies. He was able to take a board seat at Acxiom Corp with its shares of the company because he disagreed with the decisions made by the director. ValueAct was also able to push Gardner Denver Inc to sell itself to KKR & Co., which is a private equity firm. Such activists also influence the stock’s market trend. At Ubben’s investor conference, he discussed the profitability of Microsoft and how investors seem to undervalue its true worth. This conversation sparked Microsoft’s shares to increase 3.6%. Unfortunately, it is unlikely that Ubben would be able to buy enough shares to change Microsoft’s operations and Board directors.

This trend exists among other investors and hedge-fund executives because they disagree with policies that various public companies adopt. The opportunity for shareholders to influence a company gives the public hope that a company does not have total authority over its company or even the market in general.

 

Written By: Melody Mark

Source:

Glazer, Emily, and Shira Ovide. “Corporate News: Hedge Fund Invests in Microsoft.” The Wall Street Journal. Dow Jones & Company, 23 Apr. 2013. Web. 23 Apr. 2013.

HSBC Cuts Jobs In The U.K.

HSBC Holdings PLC announced its intention today to cut approximately 1,150 jobs in the United Kingdom as it changes its business model of financial advisement to wealthy customers. The bank has been shifting its focus to specific locations and its wealth management sector. HSBC’s change has eliminated the role of commercial financial advisers; “moving financial advisers currently in the wealth division into retail” and effectively consolidating financial advisement into one department. The bank has cut 37,000 jobs from 2010 to 2012 to cut costs and remove itself from unsuccessful businesses; other banks in the United Kingdom have followed suit, Lloyds Banking Group PLC and Barclays PLC have cut hundreds of jobs since the start of this year.

Modern society has developed to an extent such that all economies are now intertwined. The private sector is cutting spending not only in the U.S. but other countries as well. This is not a promising trend and in my opinion is an indication for poor job growth in the U.S.

Evan Chang

Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887324874204578440494003166264.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Apple Averts Import Ban After Motorola Patent Case Win

Apple and Google have been disputing about patents rights to gain a competitive advantage over the smartphone industry. There have been plenty of legal cases targeted at each company and the latest one involves Apple using the technology of Motorola Mobility’s phone censor. If the claim was valid, Apple would have faced import issues with their iPhones but the judge has not found any violation from Apple. If the iPhones faced import issues, it could have been problematic for Apple since a large portion of their revenue comes from their iPhones. The iPhones generated $78.7 billion in sales last year. Even though Google has acquired over 17,000 patents, the senor patent was the only case left that involved Apple. Although Apple was not charged with infringement, Apple wants to appeal that a patent on over touchscreen technology is not valid.

Apple and Google being the two largest companies in the smartphone industry will inevitably come across problems with each other and rather than filing claims that end up being tossed out, they can use this fierce competition as motivation to innovate more than the other company. Judges know that iPhones are popular and are a large part of commerce so they usually pay more attention to the cases, making it more difficult for Google to win a case.

Written by: Wilson Tang

Source:

http://www.bloomberg.com/news/2013-04-22/apple-wins-case-brought-by-google-s-motorola-over-iphones.html

Apple Has an Identity Crisis

It feels like Apple, Inc. makes the news every day ever for the past decade and for the most part they have been involved with positive news. For much of recent weeks, the news for Apple hasn’t been anything to write home about. Their expected first quarter earnings is expected to show decline for the first time for a decade. Ever since their stock peaked late last year, Apple hasn’t seen much of success and now the company doesn’t even know what company they are trying to be.

Rather they are a hardware or software company, Apple has to distinct themselves again from their competitors. Their best sellers, iPhones and iPads could die out as fast as they came, as more of their competitors are trying to make similar products and eventually iPads will be seen as a commodity.

It’s interesting to see when Apple will release their new phone and if that will help out their stocks and shareholders in the near future. Apple has been around for years and I am sure they could find a way to once again distinct themselves from the rest of the pack.

-Derby Ng

http://online.wsj.com/article/SB10001424127887323551004578439162453339122.html?mod=WSJ_hpp_LEFTTopStories

Corporate News: Japan’s Car Makers Hit the Gas in China

Japanese Car companies have been losing customers in China, therefore Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. have been releasing their new models in the Shanghai International Automobile Industry Exhibition. Toyota introduced two lower cost vehicles to appeal to current Chinese families while Nissan and Honda introduced new models never before seen in China. If the new sports vehicle or model wasn’t appealing enough, the Car manufacturers are emphasizing better warranties and customer service to build a stronger and more stable perception of their cars. The biggest problem that these Japanese Car companies face is their reputation. The Chinese populous does not like Japanese cars and will even revert to violence toward people that support Japanese companies. For example a Chinese man was beaten in front of his family for driving a Toyota. This strong social pressure has and will continue to lower Japanese exports of vehicles, unless the companies can alter their image for the better.

This affects us directly as Car companies export around the world like many other products and because of this the global economy is very intertwined. If the Japanese Car companies are suffering and lose profits, they could potentially go bankrupt and shift the car market/industry dramatically.  I believe by showcasing newer, more innovative models in China while increasing other incentives, they will sell more and eventually win over more of the Chinese population.

URL: http://online.wsj.com/article/SB10001424127887323551004578436133332632790.html?KEYWORDS=Corporate+News%3A+Japan%27s+Car+Makers+Hit+the+Gas+in+China

-Jonathan Chan