Monthly Archives: May 2011

Global Downturns

US Stock Investors: Increased Risks

Given what has been going on in economic terms globally, America is now stepping up its demands. Saying that there are so many more risks these days than there were just “a few months ago,” stock investors from the US are beginning to increase their demands. As well, things could get even worse since this week is when manufacturing and jobs data are due, causing investors who are already somewhat shy to keep mum about equity prices while they deal with limiting worldwide growth and a whole slew of other geopolitical risks “from the Arab Spring to debt defaults in the Eurozone."

Wall Street Bank Panic?

Actions from CitiGroup, Goldman Sachs and UBS indicate they feel investors are willing to pay less for a dollar of corporate earnings in 2011. This may seem somewhat ironic since according to New York UBS chief US equity strategies Jonathan Golub, while earnings are (surprisingly) going to continue to increase, simultaneous to that, investors will still be “reluctant to believe in the sustainability of earnings and, therefore, not give full credit to that.” Even in Golub’s case, the anticipated price-to-earnings ratio was far less than the amount investors have in the past been prepared to pay for S&P 500 earnings. The average earnings from this to last year increased $5 but still Golub’s year-end S%P 500 target remained at 1,425 which “effectively lowered [Golub’s] P/E ratio to 14.1” (a drop of .7). This means the expected equity yield increased from 6.8 percent to 7.1 percent. So, there is a way to go for US stock investors. But the news isn’t all bad and it still remains tough to predict exactly what will be in the coming months. Figures are changing but often very slightly, rendering the job of stock-market fortune tellers a tough one.

Royal Wedding: Financial Boom or Bust?

How Kate and Will’s Wedding Impacted GB’s Economy

The question being asked by economists following the fanfare of the recent Royal Wedding, is, was it a good thing for the country’s finances? And, how will it impact Great Britain’s economy in the future. So let’s look at analytics and first the possible negative implications. The country was given another day off due to the regal nuptials and according to some economists – combined with all the other bank holidays – this has been resulting in an “unusual amount of disruption to local businesses – especially smaller enterprises.” Indeed, if you take all the bank holidays for this year, the UK economy is a further £2.9b out of pocket. This might not be so bad if the country were to return to its regular amount of bank holidays next year but given that the Queen is set to celebrate her Diamond Jubilee, there will still be the additional day off.

<h3>Bank Holidays: Bad for Business</h3>

While everyone of course loves the idea of a day off – which is exactly what a Bank Holiday provides – it isn’t always so good for business. It is probably good for morale (which some might say is indirectly therefore good for business), but still has other problematic implications. Nonetheless, if you look at other parts of Europe, the UK really doesn’t have so many of these days. Still, when you look at it’s economy vis-à-vis bank holidays, it doesn’t fare all that well since a staggering 99.3 percent of all UK businesses are the small businesses (having less than 50 people) which are put under extra pressure because of the days off.

By careful planning though, small businesses are now being advised to try and work around these events – that clearly are part and parcel of British life – so that they are not so hard hit. For example, BNI Merseyside Area Director John Haynes commented, “as businesses now face yet another short bank holiday week at the end of the month, our advice is that they should simply start planning ahead now, to focus on the elements of their business which create the most profit and make them the biggest priority.”

Adjusting Bank Holidays

There is now the possibility that there will be an adjustment in Bank Holidays to help the situation. Indeed, a policy paper put out by the DCMS (Department for Culture, Media and Sports) proposing to move May Day to St. George’s Day which falls out on 23 April or even later on in the year in an attempt to “reduce the close clustering of bank holidays and extend the summer tourist.” The move is set to “ease the burden for many small businesses.”

Royal Wedding Good News

But Kate and Will’s nuptials – beautiful as they were – don’t need to spell bad news all around. There is actually some good – economic – news too. It has been said that the regal nuptials gave a “much needed boost to the weak economy.” There has been a real “feel good factor” created by the wedding with fashion sales increasing by 11.5 percent and an increase of 3.3 percent in home goods too. As well, there was a “10-point rise in the Consumer Confidence Index this month has been the sharpest increase since May 1993 and the second biggest since the survey began in 1974” alongside a “13-point increase in confidence about the economic situation during the past 12 months.” Yet this has to be seen in context and it is still only a one month figure.

So George Osborne probably can’t rush into a conclusion quite so fast as to whether Will wedding Kate is – long-term – going to be good or bad for his country’s economy. Only time will tell.

Bill Booted from Billionaire Hotspot

New Top Billionaire for 2010

As wealthy as Mr. Gates is, according to the 2010 Forbes list of the World’s Billionaires, he is no longer the wealthiest man in the world. His position has been taken over by Carlos Slim Helu. It’s not surprising Slim claimed this position if you look at how the man has been raking in the bucks in the last year. His fortune increased by a staggering $18.5b, bringing his total to $53.5b. In addition, Movil shares increased 35 percent in the last year (the company in which he has a $23b stake.”). So Slim has much to be happy about.

No Slim Pickings for Slim

Since Slim now has these figures, Bill Gates is out on his ears, having “held the title of world’s richest 14 of the past 15 years.” Still, it’s not like Mr. Gates is going to be hitting the scrap heap just yet. He is still worth $53b, an increase of $13b from last year since Microsoft shares increased a staggering 50 percent in the last year. While Warren Buffet has had a good year, it’s all relative when you look at Slim. His wealth increased $10b, putting his total figure at $47b for “rising shares of Berkshire Hathaway.” Now he is number three but he made some smart moves with his $5b investments into Goldman Sachs and $3b in General Electric “amid the 2008 market collapse.” His Burlington Northern Santa Fe acquisition for $26b turned out to be a pretty good move too.

Bring Buffet a Bucket

You may not quite acquiesce Warren Buffet’s enormous wealth, but you could become a little richer if you follow some of his advice. He advises, “when it’s raining gold, reach for a bucket, not a thimble.” It seems like this advice was taken since a whole slew of the world’s richest people have actually witnessing a soaring of their fortunes in the last twelve months. Indeed, the average net worth of the today’s billionaires listed in Forbes as increased $500m in the last year. Only around 12 percent of billionaires from last year’s list “saw their fortunes decline.”

Additional Asian Affluence

Asia’s seeing some nice gains though. An additional 104 Asians joined the list, rendering it only a little behind Europe (which has 14 more) “thanks to several large public offerings and swelling stock markets.” Of these, there were 27 from China. Pakistan and Finland were probably quite happy as they now each have a billionaire in their countries. As well, for the first time ever, the Chinese count for billionaires is larger than that of America, totaling 89. Russia is up too. It had “62 billionaires, 28 of them returnees who had fallen off last year's list amid a meltdown in commodities. Total returnees to the list this year: 164.” China, India, Turkey and South Korea – along with seven other countries – have “at least double the number of billionaires they had a year ago.”

Plummeting Euro Tramples Asian Stocks

Euro-zone Worries

There have been increased worries about the Euro-zone, yet again. This has meant that the Euro has plummeted to an all-time low against the Swiss franc of 1.24 to 1.2345 which thereafter stabilized at 1.2360. This had an impact on Asian stocks which also “boosted safe haven investments like U.S. government debt and gold” yesterday. In addition, once the debt ratings in Greece was reduced by Fitch Ratings by three ratings at the end of last week, the Euro was plagued by increased selling pressure. Adding to this was the fact that Standard & Poor – Fitch Rating’s rival – also decreased its “outlook for Italy to ‘negative’ from ‘stable’.”

Asia Impacted by Euro Zone

Troubles in the Euro-zone have also been impacting Asia. Asian stocks have not been looking all that attractive due to the “weakening in U.S. stocks.” Asia’s bourses went “into the red, sparking a rush into safe-haven assets like government debt.” People are concerned about the ebb and flow of America’s stocks, together with the “global economic backdrop.” These factors combined are creating pressure and the situation is likely to remain the same for the next month or so. On the other hand, going for “safe-haven assets” did assist “U.S. Treasury notes build on Friday’s gains.”

Other Euro Worries

The euro has been encountering other worries too vis-à-vis the dollar, against which it slipped to $1.4095. Some traders even thought that the euro could plummet further than that in the near future. Experts believe this could be due to the fact that “investors have since swung from cheering the ECB's rate hikes to worrying about the impact of rising interest rates on peripheral countries.” It is just not a good enough reason to “buy the single currency” because of the possibility of a hike in ECB rates. Indeed, such increases might be viewed as “EUR-negative should peripheral concerns intensify.” So there is much work ahead for the euro. It is certainly far from being out of the woods yet. But there is also hope and as we see that this situation is pretty normal given the general ebb and flow of today’s less-than-stable financial world.

Goldman Sachs Expansion in India

This spring, Goldman Sachs announced that it would be acquiring the Benchmark Asset Management Company, which is an asset management company in India.  While the terms of the transaction were not disclosed, this is certainly interesting information both for Goldman Sachs, and for business in India.

Founded in 2001, Benchmark Asset Management Company is the number one Exchange Traded Funds provider both by market share and assets under management located in India.  It includes about $700 million AUM.

As Oliver Bolitho, the Head of Goldman Sachs Asset Management Asia explained, “India is one of the world’s largest growth markets and a strategic priority for our firm. The acquisition of Benchmark illustrates our commitment to expand in India and we look forward to working closely with Benchmark to accelerate the growth of the business. We are also pleased to announce that we will bring on-shore funds to India – building on the strong expertise that Prashant Khemka’s team has established.”

Certainly, Eric Coutts, Walter Jackson and James Donovan, Goldman Sachs managing directors, are tuned in to this news.

In response to the news, Sanjiv Shah, the Executive Director and Co-Founder of Benchmark Asset Management Company, said, “As index and ETF product demand continues to grow significantly in India, Goldman Sachs’ local expertise and global platform will provide us the opportunity to grow further and enhance our offering for clients.”

This information is one more example of the merging of global financial markets today and the excellent that top executives like Oliver Bolitho, Sanjiv Shah, James Donovan, Goldman Sachs, and others in the company strive towards at all times.

 

Taking a Glance at Economic Recovery

World Trade a Winner

Somewhat surprisingly, world trade in South Carolina enjoyed some really impressive results last year irrespective of what has been going on with financial recovery in other areas. A report put out by the Los Angeles County Economic Development Corp. found that the increase in trade was “so sudden,” many industry sectors were totally unprepared for it! According to the report, “virtually everyone in the business was caught short — from steamship lines to railroads and truckers to manufacturers and distributors around the world…after spending much of 2009 worrying about sheer survival, concerns about the ability to provide adequate service rose to the forefront in 2010.”

There was an increase of 19.3 percent in container traffic through LA and LB ports with a jump of 17.2 percent for loaded import containers. Two-way trade through the LA Customs District also increased by 21.8 percent last year. This nice surprise was probably spurred significantly by the world’s economic recovery since LA’s top five trading partners all “returned to growth mode, and the expanding economy will also act as a tailwind in 2011.” In addition, international trade was also said to have been responsible for “516,000 jobs thus far in 2011…up 2 percent from 2010.”

Predictions also abound for more development this and next year. This year has witnessed a “mixed opening,” but there has been a continued expansion of the world economy, “suggesting international trade flows will expand further.” Predictions for global trade increases this year range between 6 and 9 percent.

Northland Expanding Holdings in Austin

During the five years from 2005 until 2010 Northland Investment Corporation became Austin, Texas’ largest owner of multifamily housing. With the acquisition of a development containing almost 4,500 units, Northland became a major player in the Austin real estate market.

In August of 2010 Steven P. Rosenthal, Northland President and CEO, added to their already substantial holdings with the purchase of Northland at the Arboretum Apartments. (Formerly Jefferson at the Arboretum.) The purchase was made up of an apartment community in Austin with 348 units. Including the latest acquisition the Austin holdings represent an investment of $400 million for Northland.

“This acquisition follows one of our core strategies of building a significant presence in select information technology markets where we can apply our management skills to enhance value for our investors”, said Steven P. Rosenthal. “The Austin economy is bolstered by three key economic drivers – state government, the University of Texas and one of the largest high-tech clusters in the United States. These dominant employment groups will allow Austin to continue its stellar job growth over the next five years, and beyond, and our portfolio is well positioned to benefit from that growth.”

Northland at the Arboretum is centrally located in the high-end Arboretum neighborhood of Austin. It is adjacent to six other Northland-owned communities, and is within a short drive from some of Austin’s best shopping, theaters and restaurants.

Global Growth

Which Countries Are Participating?

It seems like there are some countries with all the money and others that have none. That might not be so far from the truth; at least, until recently. Currently, there are six “emerging economies” which are likely to “account for more than half of all global growth by 2025.” These are not necessarily the ones we might have expected though. They are: “Brazil, China, India, Indonesia, South Korea and Russia.” It thus looks like Asia has much of which to be proud. This news further indicates how there has been a definite shift in economic power. This will result in these six economies being able to assist the “lower income countries,” via “cross-border commercial and financial transactions.”

Global Impacts

What affect will all of this have on the world monetary system? Apparently it is unlikely to face domination of just one currency and in an unprecedented move, expenditures have “eclipsed” in developed economies. There has also been an increase in expenditure on infrastructure which could help “propel global economic growth and contribute some 24 percent of the world gross domestic product in 2012,” according to chief European economist from Citigroup, Michael Saunders. Developed countries can now also do well vis-à-vis this year’s investment boom but they will be slightly negatively impacted by the success of the emerging economies which has led to a shift in which “the centers of economic growth are distributed across developed and developing economies – it's a truly multipolar world.” In addition, there is the opinion that “multinational companies from developing countries are becoming a force in reshaping global industry, with rapidly expanding South-South investment and FDI inflows.” This is going to require fast action from international financial institutions if they want to keep up with these ebbs and flows.

Increased Cooperation

Due to these changes that are happening, it is going to look more and more crucial that economies around the world will simply have to work with each other in order to “reduce the risks of economic instability.” So there is work to be done. It’s no longer the case that just a couple of top western economies are running the show. Emerging economies are fast learning the tricks of the trade and battling for top global monetary positions.

New York Energy Budgeting

Finding the Right Utility Company

For those living in New York, there are many energy choices available so it’s important to research all options ahead of time.  News today reported that there was an increase in oil in the Big Apple, which may have been surprising following prices over the last three months.  There was a decline in gasoline stockpiles as well as crude inventories “in the world’s biggest consumer of the fuel.”

Looking into prices before signing up with an energy company, it is important to do a comparative check between the different options as well as their priorities in all areas of utility delivery.  One commitment from HIKO Energy, LLC, for example, is reducing energy prices for consumers “all across New York State.”  Check out different savings plan and see what can work particularly well for your business or personal needs.  Utility companies have all sorts of deals which could assist your particular needs.

In addition, you need to keep abreast of news in the energy field.  According to the American Petroleum Institute, there was a substantial drop of gasoline supplies by 676,000 barrels.  But that was last week.  Today the news is different.  A survey undertaken by Bloomberg News today indicates that there has now been an increase of 950,000 barrels. This constant ebb and flow will likely have an impact on pricing, but each company will have a different way of responding to these trends.   For example, while most energy companies seek to make it a top priority to always be there in an emergency as well as ensuring delivery of the energy you need, you might want to find a company that commits to giving savings for loyal customers too.   Doing a price comparison before committing to a utility company is thus essential.

Global News Impacts Energy Prices

Of course, all utility companies will be impacted by what is happening politically (and thus economically) around the world.  With trouble in the Middle East, along with the worst nuclear crisis Japan has ever endured, according to CEO of JPMorgan Chase and Co.’s commodities business in Asia Ray Eyles, this is bound to have a “significant effect on long-term energy prices.”  So it is vital to also look at HIKO Energy or other utility companies and their commitment to your long-term energy-supply delivery vis-à-vis pricing.

There will always be problems around the world that is going to impact oil prices and thus your utility bill.  But there will also be good news too.  For example, the water from the Mississippi River that was “pouring through 15 gates on Louisiana’s Morganza floodway” had substantially lowered flooding risks on oil refineries that make up around 14 percent of US capacity.  So when there’s good news for oil, see if your utility company offers prices reflecting that too.

 

British Homes in Slump

Bad News for British Housing Market

While Scotland may be doing well in the economic recovery sphere vis-à-vis employment, the picture doesn’t look quite as pretty when you turn to Britain’s housing market. Indeed, just since 2007, prices have dropped by £40,000 and there isn’t expected to be any improvement until around 2015. Just in the last year and a half there has been a 1.4 percent decline and since April 2009, the average price for a home in Britain is at an all-time low.

Homeowners Deal with Negative Equity

These figures have led to homeowners falling into “negative equity,” which is basically when “the size of a mortgage is higher than the value of a property.” According to a spokesman from the Halifax Bank, the decline in house prices however, has only been “modest,” and anyway is due to a weakened confidence in workers due to increases in taxes and inflation, simultaneous to reduced salary increases as well as insecurity in the public sector job market. Although Halifax’s owner Lloyds recently estimated that approximately 150,000 of its customers now “have a mortgage bigger than the value of their home,” and are thus officially facing the negative equity issue.

London Not Impacted

Of course however, the country’s capital – London – remains immune to the drop in property prices. In fact, there, house prices are on the up. Those trying to sell in the north east for example, might be kicking themselves that a few years ago they didn’t buy in the capital. Their house that may have been valued at £130,000 in October 2007, would now only have a market value of £101,000, which is a drop of 22 percent. Those in Kensington might be laughing all their way to the bank however, as an average property there valued at £835,000 and is now worth £876,550 in the same time frame.

No Tunnel Light

Unfortunately we don’t even seem to be able to report a light at the end of the tunnel since all estimates are predicting that this is unlikely to change for Britain in the next five years, marking “the longest slump for at least half a century.”