Monthly Archives: May 2012

Stalled Economies Fueling Crashing Oil Prices

Oil Prices Coming Down

The deteriorating European debt crisis and the slowing United States economy are contributing to what is expected to be the largest monthly downslide in the price of oil in three years.

Demand for oil will plummet, analysts say, fueling a downturn in oil which resulted in oil closing yesterday 20 percent lower than the year’s high price of $109.77 a barrel.

“The problem is not only in Greece but several countries in Europe,” said Ken Hasegawa, at Newedge Group in Tokyo.  Hasegawa, a commodity derivative sales manager believes New York crude will fall to $75 a barrel by Q3. “Prices have fallen on the pessimistic expectations of the global economic recovery.”

Business and Economy Across the Globe

Business Day Live reviews the current economic situation in lands both near and far, revealing that RIM, the BlackBerry maker, has projected additional, significant losses. The company now struggles with tough decisions on whether to continue at its current pace, share, or just sell as its stock falls in value. Potential investment inclinations are marred by the illiquid nature of the market, the heavy competition and the fact that the hardware assets will be hard to exploit in a profitable way.

Meanwhile, India’s economy is facing a rough patch, revealed an abominable GDP of 5.3%, instead of the projected 6.1%. According to the finance minister, “GDP numbers have come down substantially because of poor performance in the manufacturing sector.” Farming also contributed less than expected.

And, in Greece, it seems most monetary aid passes over the citizens completely.

Fiat Industrial Merger to Create World’s Third Largest Capital Goods Firm

CNH Manufacturing Plant in Racine, Wisconsin

The subsidiary that Fiat SpA, the carmaker created in 2011, Fiat Industrial SpA, announced its plans to merge with its CNH Global NV unit and then move its primary stock listing to New York in hopes of attracting a larger base of worldwide investors.

Fiat Industrial has an 88 percent interest in CNH, manufacturer of tractors, and it was Fiat that proposed the merger to the CNH board. The proposal of this newly merged company states that there would be a share exchange but not a premium for either of the company’s investors.

If the proposal is followed through, the new company will be the world’s third largest capital goods firm, says Fiat Industrial. Products will range from Iveco delivery trucks, New Holland harvesters and FPT engines for ships. According to Chairman Sergio Marchionne Fiat Industrial is aiming for 25 billion euros worth of sales this year if the Amsterdam-based CNH is included.

“The deal makes sense as it simplifies the structure of the company,” said Emanuele Vizzini, chief investment officer of Investitori Sgr in Milan. “It’s is also a sign of Marchionne’s center of gravity moving to the U.S.”

Top Ten Business Schools of 2012

Bloomberg BusinessWeek recently listed the best business schools for 2012, with Notre Dame ranking #1 for the third consecutive year.

Many other schools, however, have shifted in the standings. Here are this year’s top ten:

  1. Notre Dame (Mendoza)
  2. Virginia (McIntire)
  3. Cornell (Dyson), up from 5th place
  4. Pennsylvania (Wharton)
  5. Emory (Goizueta), down from 3rd place
  6. MIT (Sloan), up from 9th place
  7. Michigan (Ross), down from 6th place
  8. Washington University (Olin), up from 14th place
  9. Boston College (Carroll), up from 16th place
  10. North Carolina (Kenan-Flagler), down from 8th place

Quote of the Day: Termination of Extended Unemployment Benefits

Today the unemployment rate is 8.1% down from 9.9% in November, 2009, but still not down to pre-recession unemployment figures. There are three job seekers for every one job available. Those who have been unemployed for lengthy periods are about to lose their unemployment benefits, about half a million losing their benefits sooner than they thought.

In some states the number of weeks which unemployment benefits will be paid is being reduced, and due to changes in the application process as many as half of people applying for benefits will be denied.

Those in favor of extended benefits say the cuts being made are coming too soon. The chief economist at the liberal Center on Budget and Policy Priorities, Chad Stone, said that Congress never curtailed extended benefits when the job market was so feeble.

“It’s moving in the wrong direction, and it’s occurring at a time when unemployment is very high,” said Stone.

The director of economic policy studies at the conservative think tank American Enterprise Institute, Kevin A. Hassett said,

“I haven’t liked the 99-week solution from the beginning because it creates an environment where people are subsidized to become a structural unemployment problem.”

Mark Webber on the Formula 1: Monaco Grand Prix

Mark Webber came in first at the Formula 1: Monaco Grand Prix this past week. After the race, he shared his immediate thoughts:

“An incredible day; this place gives you such amazing memories. There were different parts of the race where I had to be incredibly focused and make sure we really capitalised on the positioning we had. A good friend of mine sent me a text message this morning and said ‘You’re in charge, you’re in front and in charge’ and we were, but you can get bitten here very quickly. There were a few key stages around the stops that were interesting. Sebastian had his tyres very hot and was quick at that point and I couldn’t get mine going, but once he pitted I reverted my attention back to Nico and just looked after the rears until the end of the race. Then the rain came, which around here is very, very tough. But we had composure and experience and great team work on the pit wall. It’s a tough nut to crack this race, but we did it again. I had both hands on it today and I wasn’t going to let go.”

Formula 1, officially the FIA Formula One World Championship, is the most esteemed one-seater auto race in the world. Founded by Bernie Ecclestone in the 70s, the race transformed the sport into the billion-dollar business it is today.

Company Focus: Devon Energy

Oil Well

Devon Energy ranked 28 among the best companies to work for in the US, it also ranks quite high among the country’s top-paying firms. The average salary for an engineer on staff at Devon is $178,305, giving it the distinction of ranking 6th among the country’s top-paying firms.

Devon Energy has 2.9 billion barrels of oil in reserve and spent over $6 billion on exploration and development in 2011, making it prepared for just about any glitch in the industry.

Devon is one of the United States’ largest independent producers of oil and natural gas. In 2010 they paid their employees median bonuses of more than $9,000. The firm offers a Super 401(k) program which contributes as much as 22% of the employee’s cash compensation, dependent on the employee’s own contribution and longevity.

About half of the employees at Devon get long-term incentives, including restricted stock. It is clear from the low full-time employment turnover of less than 5% that workers there are happy. An added bonus is that Devon will match one for one employee donations to United Way.

U.S. Economy to Lessen Summer Travel Rates

Tourism experts and economists have both agreed that the situation in the U.S. will lessen the travel rate throughout the nation this summer.

Though the gas prices are relatively low in many states, employment and economic concerns will undoubtedly discourage many vacationers, especially on the West Coast. The job market struggles and high household debt are also strong contributors to the trend.

“Travel is about security,” explained John Larson of IHS Global Insight. “If you feel less secure about your future, you may be less willing to take this trip.”

According to AAA, the auto club, people who are still inclined to embark on road trips are likely to cut their travels short, while spending significantly less money on things like food and entertainment, as well.

Explaining that the weekend is a good indicator for future summer travel, AAA projected that Memorial Day would see 34.8 Americans on trips of at least 50 miles. Though the number is greater than that of last year’s Memorial Day, it is equal to that of travelers during that time in 2010. They added that around 88% of the travelers will be driving.

 

Top 20 Business Books

In a project for Amazon, Scott A. Lingle listed the top 20 business books on the market. He explained that he has read and listened to hundreds of such books, and that his favorite authors include Jim Collins, Marcus Buckingham and Patrick Lencioni.

The list includes:

  1. Good to Great: Why Some Companies Make the Leap…and Others Don’t– by Jim Collins
  2. The One Thing You Need to Know… About Great Managing, Great Leading, and Sustained Individual Success– by Marcus Buckingham
  3. The Five Dysfunctions of a Team: A Leadership Fable– by Patrick Lencioni
  4. First, Break All the Rules: What the World’s Greatest Managers Do Differently– Marcus Buckingham
  5. Driv: The Surprising Truth About What Motivates Us– by Daniel H. Pink
  6. The Little Big Things: 163 Ways to Pursue Excellence– by Tom Peters
  7. Winning– by Jack Welch
  8. Built to Last: Successful Habits of Visionary Companies– by Jim Collins
  9. Endurance: Shackleton’s Incredible Voyage– by Alfred Lansing
  10. Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money- That the Poor and Middle Class Do Not!– Robert T. Kiyosaki
  11. The Contrarian’s Guide to Leadership– by Steven B. Sample
  12. Leadership and Self Deception: Getting Out of the Box– by Arbinger Institute
  13. Crucial Conversations: Tools for Talking When the Stakes Are High– by Kerry Patterson
  14. The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich– by Timothy Ferriss
  15. Next Generation Leader: 5 Essentials for Those Who Will Shape the Future– by Andy Stanley
  16. The Four Obsessions of an Extraordinary Executive: A Leadership Fable– by Patrick Lencioni
  17. Who: The A Method for Hiring– by Geoff Smart
  18. The Three Signs of a Miserable Job: A Fable for Managers (And Their Employees)– by Patrick Lencioni
  19. Success Built to Last: Creating a Life That Matters– Jerry I. Porras
  20. Axiom: Powerful Leadership Proverbs– by Bill Hybels

 

Hopes for Housing Recovery Spurred by Increase in New-Homes Sales

April’s figure for new-home sales was up by 3.3 percent from March’s number, according to information released by the Commerce Department on Wednesday. That translates into a seasonally adjusted annual rate of 343,000. The entire country experienced this rise with the exception of the South.

Analysts are hopeful that this could signal that the US housing market is starting a recovery as the increase represents an annual rate of sales the second-highest in two years. Economists are quick to mention that although this is a positive sign, the increase is still only half the rate found in a healthy housing market.

"Housing could be a pleasant surprise this year," said Ellen Zentner, a senior economist at Nomura Securities.