Archive | April 29, 2013

Consumer Spending Sees Little Increase

Although consumer spending increased in the month of March, it is expected that not much increase will be seen for the next few months due to the fact that income has not seen much growth as well. With less income, consumers are less likely to spend as much money since they do not have much to spend in the first place. Many believed that the increase in spending for the month of March came mainly from its cold temperatures. Consumer spending on products such as health care and clothing increase by a slight 0.2% last month.

This minor increase in consumer spending is not healthy for our economy, and most definitely would not lead to further growth. Investors will see this as a sign to not make many investments since they see that the public is not willing to spend, which in turn will yield a smaller profit margin for investors. The economy is currently being negatively affected by many factors, and this low increase in consumer spending is one of them.

Written by: Jessica Ho
Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887323528404578452602437259228.html?KEYWORDS=Consumer+Spending+Rises

Apple Lays Groundwork for First Debt Sale Ever

In order for Apple Inc. to fund their $100 billion capital return program for their shareholders, they will be selling their debt for the first time. They also plan to buy back $60 billion shares so that the company will have more capital to invest with in the future. Apple is a technology company that is known for its large amount of cash available, unlike other companies.  However, fairly low interest rates and tax responsibilities are some reasons why Apple is choosing to sell debts in some form of currency. Because of this news, rating agencies such as Standard & Poor’s and Moody’s have given Apple an AA+ and Aa1 rating, respectively. Analysts have deduced that technology companies like Apple are not as safe to invest in because of the constant shift in consumer taste. They see Apple as a mature company, where growth is beginning to slow down.

In every business cycle, there will be times when the company reaches the mature state. Apple’s growth has been slowing down ever since the release of the iPhone 5.  It has also been relying on older products to boost their sales, even though there does not seem to be a purpose behind some of their older products. In this society, people are always demanding for new developments. For Apple to continue to be one of the biggest technology companies, it will have to be able to compete in the market that is constantly changing.

 

Written By: Melody Mark

Source: Cox, Josie. “Apple Lays Groundwork for First Debt Sale Ever.” Reuters. The Thomson Corporation, 29 Apr. 2013. Web. 29 Apr. 2013.

Perth Mint Works Through Weekend as Gold Demand Surges on Price

It would seem that the drop in the price of gold was only a temporary occurrence, and investors are looking for a return to higher levels. Also, the demand for gold is on a global scale, even from the U.S. Orders were so high over the weekend, “the highest level in five years after prices plunged,” that the U.S. Mint had to suspend sales. Ron Currie, sales and marketing director of Perth, said that sales in April tripled in comparison to that of March.

Billionaire John Paulson has been an advocate of gold, maintaining a bullish stance on the market. He expects “central-bank buying and demand in Asia will support the metal in the near term.” “Central banks will buy as much as 550 tons this year after boosting holdings by 534.6 tons last year, the most since 1964, the World Gold Council estimates.”

If there is a bubble in gold, it isn’t going to be popping anytime soon. Investor demand is clearly still present, and the drop in price must have been a temporary sell off. The devaluation of money is definitely a strong motivator to invest in gold. I think that the sell off may have resulted from talks about the Fed tapering off their policy by the end of the year, but since it has reaffirmed continued economic stimulus, confidence in gold must be rising.

Food Magazines Feast on New Ads

In the first quarter, many popular food magazines have noticed a large increase in their ad pages, since food magazines are broadening their traditional focus. Magazines such as Bon Appetit, Food Network, and Eating Well have broken away from the traditional recipe magazines where they now include popular destination restaurants, celebrity chefs, and travel.  This new change in expanding the topics within food magazines has been successful as there was an increase in the total paid circulation for most of the major food magazines even though there was a marginal drop for the overall industry. Before Food Network Magazine was launched, many of the spending on magazines had dropped around 21% whereas now it is revitalized and more people are interested in the food magazine genre.  Now that this change occurred, more non-food advertisers around the world are reaching out and are able to make titles less vulnerable to swings in a certain industry.

I believe that due to this change in the culture of food magazines, and how they present food as a lifestyle benefits many advertisers. This can bring more profits to agencies because now that there is a broader audience who read the food magazines, they will be able to reach out to a larger audience as well. There can also be a downside to this growth in food magazines because their rivals of other genres are struggling to capture the attention of other audiences and agencies.

Written by: Samantha Chin

Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887323798104578452943642168814.html?mod=WSJ_business_whatsNews

S&P 500 Notches a Record

It has been a few years since our 2008 recession, and signs that the market has been showing has been positive for our investors. Today, S&P 500, closed at a record high. S&P rose 11.37 points to their record 1593.61. NASDAQ and the Dow Jones had already been doing well in recent months. As for the S&P 500, tech companies had been performing extremely well. Blue-Chip companies such as Hewlett-Packard, Microsoft and IBM rose in a high percentage. Their success could be a result of their earnings meeting expectations if not exceeding them.

S&P 500 is usually as a standard measurement on how the market has been performing, since the companies on their index had been performing decently. If they continue to do so, the outlook of our economy could be extremely positive for our future. As an undergraduate like myself and my peers, hopefully this market would continue to grow and recover.

I hope not only do tech companies perform better but all of the companies. This will boost our economy and hopefully make it easier for me to get a job to when I graduate.

-Derby Ng

http://online.wsj.com/article/SB10001424127887323528404578452422289319726.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Ex-KPMG Partner London Will Plead Guilty, Lawyer Says

Scott London, the ex-partner of KMPG is going to plead guilty in his case involving insider trading. The recent scheme where Scott London committed insider trading could have had dire consequences but luckily London is willing to suffer the consequences of his actions. London’s plan to please guilty will save the trouble of carrying out hundreds of audits and potentially crashing the stock market. Information on Herbalife was passed on to a client saying that the company will go private and the client should start buying the stock in small blocks to avoid suspicion. London then assures his client that “that’s going to be where you make a ton of money”. If convicted, London could face up to 5 years in prison and he is currently on a $150,000 bail.

Based on London’s actions and consequences, insider trading is not only unethical but illegal. Although it is possible to make a ton of money with little to no effort, the chances of escaping with no consequences are close to zero.  I believe, as an accountant, being ethical is one of the higher priorities. The whole business world revolves around accountants and their practices, so without a public trust in the accounting field, the commercial world will not function.

Written by: Wilson Tang

Source:

http://www.bloomberg.com/news/2013-04-11/ex-kpmg-partner-london-will-plead-guilty-lawyer-says.html

Increasing The Stimulus Package

All recent discussion of the Fed’s $85 billion per-month stimulus package has been geared towards diminishing the amount, but now other factors have come into play that will potentially influence the Federal Reserve to increase it. The Fed has been using the consumer price index and the unemployment rate as indicators for its program; tapering would begin if unemployment hit 6.5% or inflation rose above 2%. Neither has happened yet and inflation has actually been well below the central bank’s target in the past 5 months, causing some Fed officials to consider supporting an increase in bond purchases if this trend continues.

The economy only grew 2.5% last quarter, falling short of the 3.2% projection by economists. Consumer spending increased 0.2% last march which is potentially a poor sign of coming months. The bond buying program of the Fed is meant to stimulate the economy by maintaining prices and keep interest rates low, its effectiveness has been offset by the recent sequester cuts which began March 1.

Evan Chang

Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887324743704578447301885433588.html

The Sequester’s Hidden Risks for the U.S. Economy

The sequester is already showing its negative affects throughout the country.  The across-the-board spending cuts, which took effect on March 1, have led to longer lines at airports and border crossings.  The decrease in staff at agencies like the Federal Aviation Administration could have serious effects on the economy, an unfortunate result that has been downplayed by the federal government and Wall Street.  The lack of flexibility of the sequester also poses serious threats. The terms do not allow funds to cross between different departments without special permission from the government subcommittees assigned to oversee the agencies.  Unfortunately, the situation is expected to worsen as lay-offs within these agencies must be accompanied by one-month notices.

The main question is whether or not these spending cuts will have a serious affect on GDP.  Some believe that the inconvenience of long lines should not be enough to have a significant influence on the U.S. from a macroeconomic standpoint.  On the other hand, there are those who disagree and, additionally, emphasize the severity of the 750,000 jobs cut by the sequester.

Written by: Constantine Kostikas

Source: Businessweek.com

Valley Much Money

On the plate of many venture capitalists of Silicon Valley is no longer just technology, but they are also making big bets on food. For some, their goals might be to create ready to make dinner sets such as those in the picture above, create on-demand delivery services from local farms, or even create entirely new meat, cheese, and egg substitutes from plants. Whatever their goals are, because this is Silicon Valley money, their vision is nothing short of grand: to transform the food industry. “Part of the reason you’re seeing all these V.C.’s get interested in this is the food industry is not only is it massive, but like the energy industry, it is terribly broken in terms of its impact on the environment, health, animals,” said Josh Tetrick, founder and chief executive of Hampton Creek Foods, a start-up making egg alternatives. With the money of V.C’s something can be done to improve upon what we have now.

In 2008, $50 million was invested into food projects, but this year around $350 million has been invested by venture capitalists.  In terms of sustainability,  “There are pretty significant environmental consequences and health issues associated with sodium or high-fructose corn syrup or eating too much red meat,” said Samir Kaul, a partner at Khosla Ventures, who has so far invested in six food start ups. “I wouldn’t bet my money that Cargill or ConAgra are going to innovate here. I think it’s going to take start-ups to do that.”

 

Written by Kevin Zhang

Source

http://www.nytimes.com/2013/04/29/business/venture-capitalists-are-making-bigger-bets-on-food-start-ups.html?ref=business

Corporate News: Valeant In Talks To Buy Actavis

The Drug Maker Valeant Pharmaceuticals International Inc is negotiating with Actavis Inc for a possible acquisition. Valeant is thinking about acquiring Acatavis for well over $13 billion dollars. This is significant because Valeant would be essentially taking over their main rival. If this happens it would count as one of the largest health care deals this year. Valeant is offering over $13 billion dollars because that is Actavis’s current market value plus a premium.

Acatavis is the third largest generic drug company and has generated revenue of close to six billion dollars last year alone. Most of their income comes from unbranded, generic goods however they also sell branded drugs specifically for women’s health.

On the other hand, Valeant produces both generic and branded drugs along with over the counter drugs. They also specialize in skin care.

Although this deal is very unstable, there is still a chance that the two companies will reach an agreement. This is extremely relatable to me because this acquisition could potentially lead to cheaper products. Just recently I had to purchase generic allergy medication.

URL: http://online.wsj.com/article/SB10001424127887324474004578447400849113088.html?mod=pls_whats_news_us_business_f

-Jonathan Chan