Archive | April 28, 2013

$2.2 Billion Lost To Unemployment Fraud

It is estimated that about $2.2 billion of unemployment benefits in the year of 2011 went to people who were actually employed. Unemployment benefits were made for those who need support after they have just been laid off, but for many, unemployment benefits have just become an extra source of income. A total of $108 billion was used towards unemployment benefits in 2011, and although $2.2 billion may only be a small percentage of $108 billion it is still a lot of money.

Since there is such a large amount of money being allocated towards people who are employed, people can expect that the amount of people employed is actually higher than what we know it as due to the fact that there are many jobs that pay under the books. But although the work force may be larger, this says little about the unemployment rate due to the fact that many people who aren’t looking for jobs are not factored into the unemployment rate. In order to decrease the amount of money spent on those who do no deserve unemployment benefits, the government should impose stricter regulations on such benefits.

Written by: Jessica Ho
Source: The Wall Street Journal

Chinese Industrial Profit Growth Slows

The overall increase in the profits of just 5.3% in March from the previous decline of 17.2% in the first two months of the year for the earnings growth in China, shows how the second-largest economy could slow down even further. Although there is an overall decline in China, some businesses continue to advance, while overcapacity, reduced government spending, and a difficult environment to operate their businesses in hurt others. Sports retailers show a decline with their massive growth in inventory as their earnings fell 20% from a year earlier. Auto sales have also declined due to a maturing market that is showing a weak recovery. The real-estate sector, instead, is the biggest contributor to the domestic demand, which might bring a decline to the overall economy of China when the government crackdown on bubbly housing prices could possibly slow the development.

The industrial profit can increase as China’s leaders want household consumption to play a larger role in reshaping the economy to encourage growth, but there has been an unpredictable market. I believe that as China’s markets shows a decline in overall growth; it can also affect the growth here in the United States. If companies are doing poorly overseas in China, such as YUM Brands, which is the owner of the KFC restaurant chain, it can affect the overall company and their sales. With a decline in profits for these companies, it may force them to bring changes to how they operate elsewhere and in the United States as well. It is important that the leaders in China, as well as businesses, figure out a way to resolve this issue and increase their growth in industrial profits.

Written by: Samantha Chin

Source: The Wall Street Journal

An Immoral World?

The conflict in Syria has been raging since 2011, leaving the death toll at approximately 120,000 and displacing over 1.2 million people. Over these two years of the Syrian conflict, there has been pressure for the US to intervene although many Democrats and Republicans in Washington are wary of entering another engagement. Sen. John McCain however has been critical of President Obama’s policy on Syria, voicing his opinion that the U.S. should “support a no-fly zone with unmanned aircraft to protect civilians and rebels.” Officials believe that any intervention would indubitably result in the loss of American personnel, especially after Russia assistance in the development of Syria’s air-defense system.

The lack of intervention by any nation in the Syrian conflict is a sad reflection of our world. U.S. officials believe that involvement in the conflict will lead to revocation of Russian air-space use, which would make it harder for the U.S. to access to Afghanistan. President Obama said that the use of chemical weapons by President Assad’s regime could “trigger” U.S involvement but there is already evidence this has already happened. No nation is willing to spend the money to intervene because there is nothing to gain; the world will sit by as it did during the Rwandan Genocide as the death toll continues to rise.

Evan Chang

Source: The Wall Street Journal

Regulating China’s Shadow Banking System Isn’t Easy

Throughout China, private lending services are seeing clients disappear as a result of the “shadowing banking system,” which provides borrowers with black-market loans.  Government-sanctioned loan brokers were established by former premier Wen Jiabao after more than 80 businessmen in Wenzhou committed suicide or declared bankruptcy.  The goal was to match businesses in need of cash with private loans, draft loan contracts for the resulting deals, and monitor payments.  However, the plan has had very little success as so many Chinese citizens opt for the informal market route.  According to a survey, 90% of families and 60% of companies participate in the shadowing banking system.  UBS values the system at $3.4 trillion, about 45% of China’s gross domestic product.  Ultimately, because of the Chinese economy, which is growing at its slowest pace in 13 years, many find themselves unable to pay off their loans.

The Chinese government is calling for regulation and increased transparency of this market.  It is important for records on loans to be correct in order to determine accurate credit ratings so as to not mislead investors.

Written by: Constantine Kostikas


Key Executive Said to Be Leaving JPMorgan Chase

First Data Corporation, a payment processing firm is set to have a new chief executive . Frank J. Bisignano said in a statement, that he will be leaving JPMorgan Chase. The now former co-chief operating officer took office back in July of last year and had faced many challenges since. The nation’s largest trading losses at about $6.2 billion happened to JPMorgan Chase and his departure is set to be voluntary. I would not doubt it if this statistic played a role in his decision of leaving JPMorgan.

The bank is now facing many investigations regarding misleading information given to investors and could face potential legal trouble. Bisignano himself has already testified before court for his mistakes at the bank and his regrets might ultimately be the decision to why he has chosen to leave JPMorgan.

These negative publicity could have many negative effects in JPMorgan Chase and their shareholders could take a hit in the near future. As for now, Matthew Zames will take over as the Chief operating officer and he will hopefully pick up the slack that has been left behind.

-Derby Ng


Mitsubishi UFJ Said to Seek $4 Billion of Morgan Stanley Assets

Recently, there has been news of foreign banks acquiring U.S.-based banks. This is a good opportunity for them to gain influence in the states. One example would be Mitsubishi UFJ Financial Group Inc.’s plan to purchase Morgan Stanley’s $4 billion trust-banking assets. They are also paying $3.7 billion for Deutsche Bank AG’s property lending assets. Decrease in assets is able to relieve these banks’ burden, but also shrinks their market share. Currently, Mitsubishi UFJ is a Japanese bank with the largest market capitalization. Through these purchases, their net income has surpassed their projected net income of ¥670 billion.

This growing trend signifies a shift in power in the banking world. U.S. banks are no longer as influential due to the financial crisis. Another reason for Mitsubishi UFJ’s expansion is Japan’s shrink in demand for loans. As people in Japan age, they are less willing to borrow loans from big banks. As Japanese banks acquire more assets from U.S. banks, it will be interesting to track how other banks react to their expansion into foreign markets.


Written By: Melody Mark

Source: Bloomberg

Apple Returning $55 Billion to Investors as Forecast Trails

Apple whose growth has been slowly declining over a period of time said they will return $55 billion to shareholders to compensate for the declining stocks. Rated as AA+ by Standard & Poor’s the stock is not doing as predicted. Based on the reported financial figures, Apple stocks have dropped 24% since this year. Apple sales are also lower than anticipated especially with the release of the Galaxy S4 which has stolen a portion of the market share. With Investors worried, Apple plans to release new products later this year. Compared to Samsung which has a wide variety of products, Apple is much more limited. Apple has reported that the company is currently working on new products such that involve televisions and watches.

One of the fastest growing companies is now on the path of decline. With the release of new and more innovative products by competitors it is a lot more common to see customers are switching over to Samsung and Google operated devices. Investing into a wide variety of unique products is definitely a smart investment on Apple’s part because having options and variety is what’s driving customers away from Apple to Samsung and Google operated devices.

Written by: Wilson Tang


Lazard’s Profit Falls 17% in First Quarter

When it comes to the mergers and acquisitions market, investment banks often go through unstable quarters due to the unpredictable nature of the deal timings. Unfortunately for Lazard, profits fell 17% this quarter when compared to the same time a year ago. Total revenue fell 17 percent as well.

A surprising detail is that Lazard had a decrease in revenue for both deals and restructuring. “The two are meant to be counters to each other, one waxing as the other wanes, as the economy does.” In contrast, Lazard’s asset management arm saw revenue rise by 14 percent and compensation expenses fell roughly 2.7 percent.  Lazard’s rivals saw strong growth in the advisory practices.

The M&A market is difficult to use in predicting the economy’s future, in that the health of the market is never consistent. While Lazard claims that a surge of deals earlier in the year created a dearth of deals now, that does not explain how Lazard’s rivals were able to maintain revenue growth. Also, the fact that compensation is down could be considered a sign of weakness, although C.E.O. Kenneth Jacobs has advocated for more restraint concerning pay. Overall, however, I still remain positive about the M&A market, and I feel that the growth overall of deals can still be used as evidence that the economy headed in a positive direction at least for the corporate side.


That Ain’t Gonna Fly Around Here

After a harrowing weak of air traffic slowdowns, today the Federal Aviation Administration finally announced that it would end the furloughing of its employees. By furloughing, I mean the unpaid leave the employees had to take while President Obama duked it out with Republicans to see who was to blame. On Friday, Congress finally approved legislation that would relieve the nation’s air traffic control systems from the big spending cuts that result in big consequences such as the aforementioned furloughs, which lead to widespread flight delays.

According to the FAA, normal service should resume by Sunday evening which is good, but on the other hand, President Obama and Republicans could not reach an agreement as to how to minimize the damage caused by budget cuts. Noted by President Obama, passengers were rightly frustrated by the delays and “Maybe because they fly home each weekend, the members of Congress who insisted these cuts take hold finally realized that they actually apply to them, too.” Lastly, the legislation passed by Congress would allow the  transportation secretary flexibility to shift as much as $253 million to the air traffic control system in an effort to return all staff.

Written by Kevin Zhang


LivingSocial Hack Exposes Data for 50 Million Users

LivingSocial which gives users daily deals has recently been hacked. During this breach the hackers have gained various data on over 50 million users. These online criminals stole e-mail addresses, user names and dates of birth for many users. Fortunately for all the users and the company, none of the credit card or banking information was stolen. This however, does not mean the information stolen was not valuable. The various passwords, usernames, and birth dates still have value. A single password even though encrypted can sell for twenty dollars on the black market.

LivingSocial is not the only website that has recently experienced a cyber attack. Popular websites like Twitter, Facebook and even Apple have been under attack by various hackers.

LivingSocial have been resetting the passwords and alerting consumers of the recent attack. Also they hashed and salted the customer’s passwords which means they scrambled the passwords and added random digits to make hacking harder. I think this is extremely important as the various information that could have been obtained is very valuable and could be abused if in the wrong hands. That corruption could affect the lives, credit, financial stability of many people.