Archive | April 24, 2013

Housing Industry Not Key To Recovery

Home sales have been seeing increases and has hit the highest in terms of first quarter sales since the housing crisis in 2008. Many people are hoping that this increase in housing sales can lead to the further recovery of our economy. Many people believed that the increase in house sales can improve the economy by encouraging spending as the worth of their homes begin to increase, but Amir Sufi says that those who were spending large amounts of money during the housing boom are not the ones that are causing the increase in housing sales, in order words, they are not the ones buying these houses.

I agree with Sufi that the housing industry may not be the key to economic recovery, since there are also many other factors that also have a large impact on the economy. The U.S. economy is very complex, so it is difficult to say that one specific factor would help push our economy back up. Even if housing sales show a large increase, investors may not begin to take larger caution into investing in this industry due to the past crisis.

Written by: Jessica Ho
Source: The Wall Street Journal

http://blogs.wsj.com/economics/2013/04/24/why-housing-wont-save-the-u-s-economy/

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Karma’s A Bitc*

At Fisker Automotive, things are looking dead as its visionary founder had called it quits, employees had either been laid off or furloughed, and they stopped all production of their hybrid car, the Karma. After millions of dollars invested in the company by the government,  the company is now on the verge of bankruptcy. People are saying that this was a shaky investment from the start, back in 2009, a $529 million federal loan was granted to them. Two years later, after Fisker repeatedly missed production targets and other deadlines, the Energy Department suspended their loans. After the company missed a large loan repayment on Monday, the federal government uncharacteristically seized $21 million from their cash reserves.

Others government officials, including members of the Senate and the House, complained that standards for awarding federal loans were overlooked in the rush to promote the advancement of green technology. Senator Charles Grassley, a Republican from Iowa. “How did the Energy Department determine Fisker’s potential before writing a check?” and “Was there due diligence, or instead a blind hope that Fisker would produce something useful?”

 

Written by Kevin Zhang

Source:

http://www.nytimes.com/2013/04/24/business/fisker-broke-down-on-the-road-to-electric-cars.html?ref=business&_r=0

Coke Refreshes Aging Board

Coca-Cola has a very powerful and influential company board over the past decade and a half, as they are able to replace chief executives and influence company strategies successfully. Their board has also been among the oldest as over half of the seventeen elected in 2012 were at least seventy years old. There is going to be drastic changes for the future as two of the oldest directors, the former president and the chairman of investment firm Allen & C o., and James Williams, the former chairman of SunTrust Banks Inc., are retiring. Not only are the oldest of the board stepping down, but the other Coke directors also plan to do so by the year 2015. The new and younger board members plan on directing their money towards smaller but faster drink categories, as well as more acquisitions.

I believe that this will have an effect to all Coca-Cola consumers because now that there will be a new “refreshing” board, they might not know the company and what Coca-Cola represents and is. Although this may be a negative, there are also positives to this change in board as Coke wants to redirect their targets to a larger market of young people, in which younger directors would be needed for. A change in the age of the directors can bring new reinvented ideas as well as keep up with the changing times. The company has also not advertised as much in social media, which hopes to change with the new, younger board of directors.

Written by: Samantha Chin

Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887323551004578441192135940694.html?mod=WSJ_business_LeftSecondHighlights

Ford Profit Rises on Strong North American Sales

The Ford Motor Company announced a 15% increase in first quarter net income as the company continues to thrive in the American economy. Sales are up by 11 percent in the first three months of the year alone with a bright future ahead. Alan R. Mulally, Ford’s Chief Executive Officer says that the company’s One Ford Plan is working, possibly contributing to the success of Ford in the American market. Despite how well Ford is doing in the American market, Ford is struggling in other markets, specifically in Europe. The company reported losses of $426 million and expects to lose up to 2 billion by the end of the year. Compared to the American market, the European market is weak and the demand for cars is low.

The demand for cars in both the American and European market is a good tool to compare and contrast the two markets. The high demand of new car models in the American economy shows signs of recovery, where people are more willing to spend money in comparison with the weak European market where people are a bit more reluctant to spend their savings on a quickly depreciating asset.

Written by: Wilson Tang

Source:

http://www.nytimes.com/2013/04/25/business/ford-profit-rises-on-strong-north-american-sales.html?ref=business&_r=0

The Emergence Of Smartphones

The emergence and popularity of smartphones has eliminated the need for some products; the device gives you the ability to surf the web, play games, take pictures, and utilize countless applications on top of making regular calls and texting. “Cellphones are [now] cloaked mobile-gaming devices that you always have in your pocket” and are eating into demand for “compact point and shoot [cameras]” according to an article in the Wall Street Journal. This technological innovation has been problematic for companies like Canon and Nintendo who have found themselves on the wrong side of the shift.

Nintendo’s operating loss increased to 30.55 billion Yen last quarter; a net loss of 7.45 billion Yen compared to their profit of 5.15 billion yen last year. Canon posted a 34% decrease in quarterly profits and has seen a decline in digital camera shipments to 70 million units this year from 121.8 million in 2010. These two companies need to revamp their products to appeal to a wider audience; perhaps they should look into making smartphones.

Evan Chang

Source: The Wall Street Journal

online.wsj.com/article/SB10001424127887324474004578442290959547764.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Ackman-Backed CEO Pushes CP Rail Profit Above Estimates

In recent news, Bill Ackman has not been the most favorably viewed activist investor, facing criticism for his announcement of a major short in Herbalife and personally announcing why he thinks J.C Penny, a company he owns a large stake of, failed to turnaround its sales. However, things are looking up for Ackman since he was vital to changing the CEO of Canadian Pacific Railway, which just posted profits that beat analyst estimates. Canadian Pacific Railway is working to remove its name as the “least efficient North American railroad.”

Since Hunter Harrison, the new CEO, took over, the stock of the company has seen a 72 percent gain. It is expected that the company will continue to cut and become a lean efficient railroad, utilizing its current momentum to further reduce costs. So far, Canadian Pacific Railway has only cut three-fourths of the total jobs planned, and the total is expected to reach 4,000 by 2013. Also, the better economic environment will help all companies involved with transportation of goods. Revenue growth is expected to grow at a very rapid pace in Canada due to crude oil. “Demand for oil is such that Chief Marketing Officer Jane O’Hagan said today that Canadian Pacific may be able to achieve a run-rate of 140,000 crude carloads by the end of 2015. The railroad carried 53,500 carloads of crude oil last year, a 19- fold increase from 2010.”

Source:
http://www.bloomberg.com/news/2013-04-24/ackman-backed-ceo-pushes-cp-rail-profit-above-estimates.html

S&P’s Outrageous, Clever Fraud Defense

Standard & Poor filed to a motion to dismiss the U.S. Department of Justice’s fraud suit, which accuses the rating agency of forging ratings on investment options, resulting in the 2008 financial crisis.  The Obama administration filed the multibillion-dollar civil suit in February, and S&P has hired two of the best known attorneys in the U.S. for their defense.  The motion filed by S&P notes that other agencies like Moody’s and Fitch gave similar, often identical, ratings, and yet were not including in the lawsuit.  In response, the Justice Department has pointed out that S&P is the self-proclaimed “leading provider of independent opinions and analysis on the debt and equity markets” of the world.  However, S&P has responded by claiming that the statement is simply puffery.

This lawsuit should ultimately assign responsibility to the parties involved in the 2008 financial crisis.  Many blame the rating agencies for misleading investors, and S&P is the one that is front and center.  This case should create legal precedent for future cases, making it an important one for future government regulation.

Written by: Constantine Kostikas

Source: Businessweek.com

Apple Snaps Growth Streak

For the first time in a decade, Apple Inc. posted a decline in profit. The feeling of fear in investors are slowly rising as Apple’s stock, one of the most widely held stock in the United States, dropped nearly 40% since their historical high in September of the year 2012. With the recent bad signs of Apple’s shares, Apple has planned to return cash to their shareholders with stock buybacks and more quarterly dividends through the next few years.

Meanwhile, Apple’s executives are still extremely confident in Apple’s performance in the near future and their C.E.O. has mentioned that Apple’s new products are going to amazing. Maybe this is a good time to stock up some Apple’s stock, or it could the worst decision of your life. As the smartphones slowly becoming commodities, it will be interesting to see how Apple will differentiate themselves again.

Apple’s main competitor, Google, has a stock price that is nearly doubling Apple’s stock. Maybe it’s time for Apple to look at a new direction in their products if their latest inventions will disappoint the company and their shareholders this coming Fall. Nearly two-third of Apple’s revenue came from their international sales, this could be a direction that Apple aims for in the future and try to compete in a larger market share globally.

-Derby Ng

http://online.wsj.com/article/SB10001424127887324874204578441153601139278.html?mod=WSJ_business_LeadStoryCollection

Corporate News: FedEx Fends Off Rivals for U.S. Postal

The U.S. Postal Service has been through various structural changes. With recent news about reducing delivery days from six days per week to five days per week, the future of U.S. Postal Service (USPS) is questionable. There are various private competitors in the market today that offer more services and attention to customers. An example would be United Parcel Service (UPS). Amid all efforts to cut operation costs, USPS has managed to form deals with other companies, such as FedEx Corp. to expand its operations. They agreed to a $10.5 billion contract that requires FedEx to ship Express and Priority mail from one U.S. airport to another.

While UPS is a main competitor, FedEx will be able to continue to improve its express air operations. In addition, USPS will also be able to continue its services because they are able to transport mail through a fast, reliable medium such as FedEx. Internet advances have changed the way mail delivery services operate. People are less dependent on delivery of physical mail now that they are able to convey messages through various mediums online. Because of these changes in people’s expectations, delivery contracts are important to USPS and FedEx because the business is not expanding. Fortunately, more jobs may be created as a result of this contract.

 

Written By: Melody Mark

Source:

Sechler, Bob. “FedEx Fends Off Rivals for US Postal Service Contract.” Wall Street Journal. Dow Jones & Company, 23 Apr. 2013. Web. 24 Apr. 2013.

Corporate News: CBS Makes Inroads in TV Streaming With Syncbak Stake

As time passes we see more and more of a consumer interest in things on the go. For example food, news, games, and even movies and television shows are all becoming mobile. However, many of the television shows we have on our mobile devices are streamed illegally or without the permission of the broadcast TV station. Despite the loss of sales and overall negative effect of streaming, major TV stations like CBS Corp. are taking a different spin on the subject. They are trying to integrate the consumer demand of streaming into their service to create future growth opportunities.

CBS Corp. has recently invested in Syncbak which is a company that allows TV stations to stream programming to consumers over the Web. With this technology, “broadcasters can fight unauthorized internet distribution of their content.”

I believe this technology if implemented correctly will be a big selling point for major television shows. All of us have a favorite show or series and most of the time we are never up to date. This technology can enable us to stream directly from the provider insuring its quality, and legality.

URL: http://online.wsj.com/article/SB10001424127887323735604578438801962307318.html

-Jonathan Chan