Archive | May 1, 2013

Fed To Continue Bond-Buying Program

A few weeks ago many were saying that that the Fed was considering on pulling back on their bond-buying program, but it has been recently announced that they will not do so, and will instead increase the numbers of treasury and mortgage backed securities that they will be buying. The Fed believes that the government’s fiscal policy is doing little to help the economy grow. The Fed is willing to adjust the amount of bonds that they buy based on the shape of the economy in order to help with expansion. Investors are expecting the Fed to continue pushing out money to buy bonds until the economy shows that it is in better shape.

It is good that the Fed is willing to continue their bond-buying program in order to help the economy grow, but the Fed should not be the only ones who are trying to do so. It is important that the government and all those who are vital to the economy also help to expand the economy.

Written by: Jessica Ho
Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887324582004578457161695264402.html?mod=WSJ_Heard_LEFTTopNews

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Thats It In a Nut Shell

There is an increasing alliance on natural gas over oil and Royal Dutch Shell Company has more at stake than any other “petroleum player”. In order to obtain the gas more efficiently, more and more companies are supercooling it to turn it into liquid form and then transporting it on special ships. Shell has already invested about $40 billion in liquefied natural gas, or LNG, plus its production plants, storage terminals and related systems, and plans to continue investing their resources into the business.

Shell is placing its bets on locations like Qatar and focusing on bringing gas to energy-hungry destinations like China and Japan. Experts are expecting an initial decline in Shell’s successes because of disruptions in their natural gas reserves Nigeria, but eventually Shell may eventually show big benefits from its natural gas emphasis. S of right now, Shell holds 7 percent of the worlds LNG business, but ambitiously stated that they plan to double that amount through new projects and acquisitions.

 

Written by Wilson Tang

Source:

http://www.nytimes.com/2013/05/02/business/energy-environment/02iht-shell02.html?ref=business&_r=1&

Unilever Ghana Sees 10% Revenue Growth on Lipton Tea Exports

Similar to Procter and Gamble, Unilever is a multinational consumer goods company that sells personal care products.  Lipton is one of over 400 brands that they own and export. Unilever has expanded to developing countries such as Ghana. Their base in Ghana exports Lipton Tea to West African countries such as Mali, Benin, and Ivory Coast. Unilever’s investment on this base exceeds 7.5 million cedis. This factory plans to produce over 1,000 tons of Lipton tea because they have projected a 10% revenue growth in Lipton tea export. Unilever also plans to expand their base in India because they find potential to profit in developing markets.

By investing in these countries, Unilever is providing the nations with more job opportunities. As these nations develop beyond their specialties, they will be able to support themselves. Cost of labor is also lower in Ghana and India, which greatly reduces the company’s costs. Their economy will also improve as more companies invest in them.

 

Written By: Melody Mark

Source:

http://www.bloomberg.com/news/2013-05-02/unilever-ghana-sees-10-revenue-growth-on-lipton-tea-exports.html

Labor Shortage In China: Industrial Sector

Companies that offshore or outsource typically look toward China or Mexico to minimize costs; China has a population of over a billion people and no set minimum wage for the entire country. Years ago when factories opened in China, people from the surrounding regions would line up to find work, something which no longer happens. The service sector in China has become more attractive to workers since the quality of life in such jobs is much better. The service sector created 37 million new jobs in the past five years as opposed to the industrial sector, with just 29 million.

The labor shortage for the industrial sector in China is not a cyclic matter; the hours may be longer and the wages lower in service jobs but the jobs are more appealing. Success is very important in Chinese culture and telling “your parents that you’re working at reception, [just] sounds nicer.”

Evan Chang

Source: The Wall Street Journal

Pentagon Expected to Embrace Apple, Samsung Devices

Smartphone giants, Apple Inc. and Samsung are having their products utilized in our country’s department of defense. The pentagon are integrating new smartphones for their employees. In the coming two weeks, the United States government agencies  will be adding Samsung’s famous galaxy smartphones, along with Apple’s iconic iPhones and iPads. Both Apple Inc. and Samsung have been fighting to enter an industry has been dominantly owned by Research in Motion.

This move could be super beneficial for both Apple and Samsung, since more people will now be using their products and the smartphones will be used in more occasions now. Since the technology will be used in all areas in the U.S. government, it could a way of advertising for Apple and Samsung.

The move for Department of Defense could affect Blackberry and Research in Motion big time, as their sales have dropped significantly the past few years and now Apple and Samsung are taking an area that Research in Motion had the most success in. It will be interesting to see how Blackberry will do in the next coming weeks as their competitors are entering the market that they have been in.

-Derby Ng

http://online.wsj.com/article/SB10001424127887324582004578456940454210134.html?mod=WSJ_business_whatsNews

Biofuel Pioneer Forsakes Renewables to Make Gas-Fed Fuels

Since 2006, Royal Dutch Shell Plc. has invested $375 million a year into Codexis inc., a biofuel company whose C.E.O. had resigned and is now renouncing the use of biofuels. The former C.E.O., Alan Shaw, has stated ” it’s impossible to economically turn crop waste, wood and plants like switchgrass into fuel.”

Defendants of biofuels say that it is too soon to make judgments about the whole industry since it is still in its infancy. Compared to Wind and Solar energy, biofuels are very young. There are still many other methods that fall under the biofuel category that are being developed. Also, there seems to be a temporary shift of funding from biofuels to gas due to the recent boom in oil commodities, which may be reducing support for the biofuel industry.

” Codexis fell 4 percent to $2.15 at 12:39 p.m. in New York, down 83 percent from the IPO price.”

The fact that there has been a huge boom in the amount of oil available makes a big difference to the energy industry. If oil is so prevalent  there is no need to panic for finding new energy sources. Of course, environmental factors are still being considered, but in terms of profits, the need for new fuel sources doesn’t seem as immediate if the oil is available.

Source:

http://www.bloomberg.com/news/2013-04-30/biofuel-pioneer-forsakes-renewables-to-make-gas-fed-fuels.html

L-MAO

Imagine you are a car dealer and someone comes in to buy a brand new BMW 5 Series Gran Turismo in cold hard cash. While this may seem strange in America, this is not altogether bizarre in China. Lin Lu, who works in a car dealership in China amusingly recalls the day when” He drove here with two friends in a beat-up Honda,” and “One of his friends carried about $60,000 in a big white bag, and the buyer had the rest in a heavy black backpack.” Although China is very much modernized, it still prefers doing business the old-fashioned way with even potential homeowners making down payments with trunks of cash.

The reason why doing business in China requires so much cash is because Chinese officials have never printed any bills larger than a 100 renminbi note, which is equivalent to $16. Although Chinese officials and economists point to inflation as being a reason as not to print bigger bills, the true reason is because of corruption. With all the corruption and bribery present in China, having smaller bills makes it harder for people to bribe. For instance, if there were bigger bills, instead of having trunks of cash for a bribe, people could get away with just an envelope.  “In large parts of China, it still looks like the U.S. in the 1950s: most everything is in cash,” said Jeffrey R. Williams, executive director of the Harvard Center Shanghai and a former bank executive who has worked in China for more than 30 years.

 

Written by Kevin Zhang

Source:

http://www.nytimes.com/2013/05/01/business/global/chinese-way-of-doing-business-in-cash-we-trust.html?ref=business

Billionaires Suffer as Tax Shelters Go Away

Billionaires are having a hard time finding tax shelters to hide their money, as countries are making their banking systems more transparent and are even raising tax levels.  Cyprus, for example, is required by the European Union, as a result of the bailout, to tax bank accounts of more than 100,000 euros.  Singapore has also passed legislation that will make laundering profits from tax evasion a crime starting on July 1.

While many are pleased that billionaires will not be able to avoid paying taxes on large bank accounts, some argue that this crackdown will hurt the economies of these countries.  Businessmen will move their money to countries with more favorable policy, and a country like Cyprus can ill afford to lose investors as it is still experiencing economic struggles.  Also, at the prospect of attracting foreign investors, small countries do not overtax, which encourages investment and ultimately helps the international economy grow.

Written by: Constantine Kostikas

Source: Businessweek.com

Would-Be Buyers of Organix Naturally Hesitant on Name

Many private-equity firms are second-guessing their decisions when deciding whether or not they should risk investing money behind a product called Organix, by the company, Vogue International. The hair-care products are being criticized for not being what its name may assume to be which is organic. The products fail to meet California’s standards where in order to market products that are considered to be organic must contain 70% organic ingredients by weight that excludes water and salt. The company can resolve this issue if the products are renamed to OGX with formerly Organix written in the back. Goldman Sachs currently advises the company and has been reaching out to private-equity firms to invest, but many withdrew because of the controversy over the branding issues. Goldman Sachs originally priced one billion dollars on Vogue but after corporates placed their bids, many were targeting the price range of $700 million to $800 million due to the branding concerns.  The founder of the company claims that he might have to sell to a bidder that is not the highest because he prefers to participate with an enterprise that wont have payments tied to the company meeting future performance targets.

As I have learned from this article, branding a product can lead a company to face many legal issues, and plays a huge role in determining profits as well. Although the distribution of the Organix shampoos have increased the sales of chains such as Wal-Mart, Walgreens, and CVS Caremark increase, for other products, it can decrease the amount of profits the company takes in. In this case, many corporate bidders are failing to make offers due to the brand name that is misleading and has attracted litigation. Many corporate bidders do not want to invest in products that have “baggage.”

Written by: Samantha Chin

Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887323798104578455134230275820.html

Corporate News: SoftBank Attacks Rival’s Sprint Bid

Sprint Nextel Corp has two offers to get taken over by either Dish Network Corp. or SoftBank Corp. Due to this dispute, the two companies are bidding and are bitter. Masayoshi Son who is the chief executive of the Japanese Internet and telecommunications company Softbank Corp, has made the roughly $20 billion acquisition of 70% of Sprint. However, since the deal is not fully through the approval process, Dish submitted a competing offer that would pay more in cash to Sprint shareholders.

Even though Dish has a higher monetary offer, Softbank still believes it has the strongest offer. This is because the deal will be done quicker, leaving shareholders with less debt and will provide Sprint with better leadership and mobile-industry expertise compared to Dish Network Corp.

However, Dish believes its offer is superior as it will lower costs because of the ability to offer combined wireless and video services.

At this point it could go either way or even end up as a three way deal. Where Dish would have a rented space on Sprint’s network as long as Softbank’s deal goes through. I personally believe Sprint will be acquired by Dish due to the monetary bonus and the appeal of diversifying their products.

URL:http://online.wsj.com/article/SB10001424127887323528404578454101810242638.html

-Jonathan Chan