Free for All

It was probably anticipated that during OPEC's meeting in Vienna today that they would decide to keep on pumping out oil.  However, few probably anticipated that this would be an individual effort. At their chaotic meeting today the members decided to toss aside the idea limiting production to control prices. Instead, the organization decided to not work as a cartel and instead make the oil market an every man for himself competition. The result of this will be that countries will pump immense amounts of money as long as they can still turn a profit. The leaders in this will be the countries who can produce with the lowest costs, mainly the Saudis. Their goal will be to produce as much as possible as fast as possible in order to push rivals out of the market and gain market share. They will most likely push Russia and U.S. shale producers who require higher margins to stay profitable out of the market. It has been said that "OPEC is dead." Since the countries within OPEC account for roughly 40% of the world's oil production, there will be extreme repercussions of limitless production. What do you think will happen to the global economy? Clearly companies like EOG and Exxon won't be able to compete. Do you think the U.S. will have to push for some sort of agreement?

Low gas prices boost SUV and pickup sales

The sale of large gas guzzling SUV's and pickup trucks has increased by 10% this year with the direct correlation coming from that of low oil prices. As stated by CNN money, "Buyers seem quick to respond to changes in gas prices, both up and down" which has translated to an increase in these styles of vehicles and away from the more environmentally friendly options such as the Prius. The logic behind this shift deals with how as the economy strengthens with low interest rates and reduced gas prices, consumers are wanting to "buy as much car as they can." The lower fuel prices are making more room in consumers budgets to be able to afford more expensive vehicles, despite the reality of how gas prices could spike at any time, ultimately posing the idea that they may not be able to afford to drive these vehicles in some time to come. 

One thing that is beneficial to this shift in vehicle purchasing behaviours is how majority of these SUV's and pickups are made by American car producers. Companies such as General Motors and Ford, with their extensive product lines, clearly dominate this car sector which has increased domestic car production and purchases. 


http://money.cnn.com/2015/12/04/autos/gas-prices-suv-pickup-sales/index.html?iid=hp-stack-dom

Wall St. sharply higher on upbeat jobs data

   All three major U.S. indexes were up more than a percent on Friday after stronger-than-expected U.S. jobs data built the case for the Federal Reserve to raise interest rates this month for the first time in nearly a decade. All but one of the 10 major S&P 500 sectors were higher. The energy index fell after sources told Reuters that OPEC would maintain its production in an oversupplied market. Nonfarm payrolls increased 211,000 in November, the Labor Department reported, while September and October data was revised to show 35,000 more jobs than previously reported.

The unemployment rate held at a 7-1/2-year low of 5 percent, even as people returned to the labor force in a sign of confidence in the jobs market.

   This news mirrors the analysis Ben Ayers, George Mokrzan and Mark Shweitzer  delivered at the economic outlook conference, several weeks ago. From a regional perspective, the perennial losers in terms of overall economic growth had included states in the midwest including Michigan, Ohio, Indiana, actually have above average growth as well as decreased unemployment. Although the current climate can be seen from a glass-half-full perspective, it is important to note like several audience members at the conference explained, that economic conditions in the midwest haven't return to what they were in the beginning  part of the decade. Additionally, job growth in the midwest had been driven by manufacturing job opportunities, many of which have been eliminated as the midwest moves out of the manufacturing sector.

http://www.reuters.com/article/us-markets-stocks idUSKBN0TN19520151204#peRxyqsoVxlEMyrv.97

Terrorism and Fear May Spur Economic and Social Change

Yesterday in San Bernardino, California, tragedy struck at the Inland Regional Center, who provides services for people with developmental disabilities. Fourteen people were killed, and others injured. The attacks were taken out by two sick and stupid terrorists, who are deranged and do not deserve for their names to be put into this article.

Mass shootings come a dime a dozen nowadays in America. Nothing is happening. Gun control isn't as simple as taking away guns from people who have them, or preventing mentally unstable people from getting them. People are still able to get guns illegally, as well as create terror with other weapons, like knives, baseball bats, etc.

But this senseless terrorism has touched a nerve this time. It's bad enough to do it to any group of people, but to people with autism and disabilities? That's when you cross the line. The fact that this couple had been in touch with radical Islamic views too is disturbing.

What does America do? Where do they go from here? Legislators have yet to put into place anything rationale that can stop these mass shootings from occurring. Both parties can't agree on any issue, let alone this. It's time to make a change and crack down on psychopaths and moronic terrorist wannabes who want to do nothing but get on a few newspapers at the cost of American lives.

Security in America will spike up in response to fear and worry of future attacks, anywhere. I just pray that it stops, because it is truly sickening to read about, and I feel for the families that were involved in that situation.

The problem with American society is that news stations like CNN and Fox News glorify the shooter's name, when the focus should be on the victims. Forget the shooter's name, that's only giving psychopaths more reason to try and commit mass shootings and destruction themselves. Reporting is also done to ensue fear in American lives: make them buy things, make them watch the news more so that ratings spike, and make people talk poorly about what America is or isn't doing.

The fact of the matter is, Donald Trump may be saying crazy things to get the attention of people, but if you look closely, that's what news stations have been doing their entire duration: saying crazy headlines and portraying certain aspects of stories to get higher ratings. Pardon my French, but that is f***** up.

American society can connect with each other so much quicker now thanks to social media, which is a blessing and a curse. With the internet increasing in information and globalization increasing exponentially, it is easier for terrorist groups and those of bad influence to get their two cents to people who will feed off of their senseless terror. Something has to be done to prevent this from constantly occurring, because honestly, I'm fearful of it happening in my own neighborhood, and I'm tired of seeing it the greatest country in the world, which is exactly the goal of these terrorist groups and crazy people.

http://www.nytimes.com/2015/12/04/us/san-bernardino-shooting.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=a-lede-package-region&region=top-news&WT.nav=top-news

ECB’s Stimulus Moves Fall Short of Market Expectations, Hammering Stocks

The European Central Bank's stimulus package, including expanding their bond purchasing program and lowering their already negative deposit rate, proved to be insufficient. Even with these actions in place the euro appreciated in value from $1.05 to $1.09. The moves the ECB made moved the stocks, the euro, and bond yield in the opposite direction that the ECB wanted them to go, as they seek inflation and lending. Paul Lambert, head of currency at London-based asset managers Insight Investment said, "The ECB had earned itself a reputation of late as an institution that understood markets and how to beat expectations." The euro surged more than 3% against the dollar, which is the biggest daily surge in six years. The Dow Jones and S&P 500 closed 1.4% lower than when they opened. Mario Draghi, president of the ECB, stated that their bond buying program will be extended by six months. One of the reasons he has for the lack of results they have been getting is that the plans have not had the correct amount of time to show results yet. They project increasing inflation rates in each of the next three years. With the ECB's current policies not meeting their Target's, do you guys believe that their targets will be met in the next couple of years?
http://www.wsj.com/articles/ecb-cuts-deposit-rate-draghi-to-announce-further-measures-1449147451

Russia punishing Turkey economically

Recently Turkey shot down a Russian warplane over Syria, and since then Russia is looking to punish Turkey. One of the first things it's doing is imposing trade sanctions on Turkey, and now it has resorted to suspending a pipeline project that would go through the Black Sea. This leaves gas pipes stranded on the shore with a value of almost $2 billion. The pipeline would come from Russia through Turkey, bypassing Ukraine, to bring gas to Europe. The pipes can only be used in the Black Sea so for now, the Russian Energy company Gazprom is forced to put the pipes in storage.

This will severely hurt Gazprom, who previously has spent millions of dollars ($10-14) Turkish Stream. Russian does not plan on moving forward with project until tensions have subsided, which they're not sure will happen in two years or in fifty years. Russia is one of the biggest steel pipe producers in the world.

http://www.businessinsider.com/spat-with-turkey-leaves-russia-stuck-with-abandoned-gas-pipes-worth-billions-2015-12

Tax on Sugar?

Earlier this year we discussed the state's role in externality management. Akin to a carbon tax, a tax on sugar seeks to make the private costs more equal to the social costs. Places in England, Mexico, and California have already implemented these taxes in response to obesity/diabetes. People who consume excessive amounts of sugary soda drinks often end up being diabetic or obese which warrants tremendous increases in healthcare costs.

Do you see this and other disincentivising taxes as a valid way to curb externalities or do they represent an overly controlling "nanny state"? What about offering incentives for proper behavior rather than disincentivising undesirable behavior?

http://www.economist.com/blogs/freeexchange/2015/12/money-talks

China yuan steps up to global stage

http://www.afr.com/news/world/china-yuan-steps-up-to-global-stage-20151201-glc7c8

IMF agrees to include China's RMB in benchmark SDR currency basket. This is really a big time for China's RMB. It makes Chinese assets become a bit more attractive. One analysis pointed out that China's RMB getting into SDR means China's RMB will depreciate to almost 7:1 USD. In the international business market, the depreciation would definitely bring benefits to Chinese export. And China's RMB may be more important in international trades.

The CEO Paying Everyone $70,000 Salaries Has Something to Hide

http://www.bloomberg.com/features/2015-gravity-ceo-dan-price/

Gravity Payments CEO, Dan Price told the company he was raising the minimum salary of all workers in the company to $70,000. It is said that this would double the wages of some of the employees. He planned to do this by cutting his own salary of $1.1 million.

He was criticized by some of the hgher paid workers saying that some of their wages are being taken away and some commentators have called him a socialist. He was praised many for the move and has been offered to go to many conferences to speak, write a book, and appear on TV shows. Now his brother who owns 30% of the company is suing him, claiming that he had paid himself too much from the beginning. Allegedly this lawsuit was brought about from his actions to raise the minimum wages. A move that was so praised has now caused a huge rift between him and his brother.

For company's of similar size, the CEO's have been paid significantly less. He refutes the claims that he was paid to much as the board, including his brother, have approved his pay raises.

UK interest Rates

UK Interest Rates Expected to Stay Constant

            Mark Carny, the Bank of England governor stated that United Kingdom interest rates are likely to remain low for the near future. The Bank of England expects interest rates to be held at 0.5% until 2016. Carny believes that if interest rates are gradually increased it will still result in a relatively low interest rate environment. Carny stated that interest rates is strongly related with the strength of the domestic economy. The Bank of England is closely monitoring study groups of households that aim to find the impacts of an interest rate increase. Productivity of the UK economy is expected to exceed expectations, eliminating the pressure of inflation on prices.

            Andy Haldane the chief economist of the Bank of England expects more downside risks to growth and inflation than indicated by Carny. He believes that an interest rate decrease may be the most effective move. Haldane stated, “I see the balance of risks around UK GDP growth and inflation as skewed materially to the downside, more so than embodied in the November 2015 Inflation Report.”

            The UK Pound continues to devalue relative to the U.S. dollar and the Euro. This is concerning as the Bank of England continues to hold off on an interest rate change. I believe the UK needs to make interest rate changes sooner than later so the implications are made fully aware. Adjustments then can be made so that the economy can fully recover from its current downfall.

http://www.bbc.com/news/business-34910401

Kohl's Ivests in The Beatles for the Holidays

Kohl's approaches the holiday season with a new tactic this year: incorporating The Beatles' iconic song "All Together Now" into 15-30 second commercials. These commercials will feature the idea of members of a diverse extended family gathering for the holidays. Kohl's will have short clips of cover artists singing the infectious tune throughout the commercial. This way, the company saves some money on featuring cover artists rather than using the original song which would double the cost. However, considering the popularity of this song, the process took five months to finalize production. The article also discusses that there will be online components of the idea including heart warming stories of families reunited. Customers will also be encouraged to share their own personal holiday traditions, which will be translated into animated clips. There will also be two pop- up events in New York City featuring a story booth where customers can share their holiday traditions.

Kohl's idea for the holidays is strategic because they will be tugging at the heart strings of their customers, making the individual customer feel important in sharing their personal stories. This will make customers feel apart of the Kohl's family. Also, the idea of showcasing a diverse extended family in commercials will appeal to every type of person - an identity for each age, race, and sexual orientation. Moreover, Kohl's has pretty much incorporated family, diversity, holiday traditions, and a super catchy tune into one big campaign for the holiday season.

If there are no hiccups in the plan, it seems as if Kohl's will have a great profitability turnout for the season. What do you think? Will their marketing tactics work?

http://mobile.nytimes.com/2015/11/30/business/media/kohls-invests-in-beatles-tune-for-holiday-campaign.html?referer=https://www.google.com/

When will UK's interest rate rise?

'Mild' deflation has continued with the cost of living falling again for British households, the latest ONS figures show.

CPI came in at -0.1 per cent for October, the same as September. This was spot on expectations and is unlikely to shift the outlook for rates.

Bank of England deputy governor Ben Broadbent warned at a Reuters event this week that investors should not rely on the money market's expectations for when and how rates will rise, with the outlook drifting further out once more. 

Interest rates will not move until mid-2016 and may not even rise for the whole of next year, economists have suggested following the latest Bank of England inflation report.

A big shift back in the markets outlook for rates had preceded the second Super Thursday combination of an MPC verdict, minutes and Inflation Report.

The Bank's report suggested once more that this most likely path for rates should see inflation return to target without risking the economy's recovery.

That has widely been taken as meaning that there will be no shift in Bank Rate until well into 2016 - even if the US Federal Reserve raises rates next month.

 

http://www.thisismoney.co.uk/money/news/article-1607881/When-UK-rates-rise.html

A longer paternity leave: is it good for the U.S. economy?

Facebook CEO Mark Zuckerberg is changing the face of social media once again. Beginning in January, 2016, Facebook will offer up to four months paid paternity leave to its full-time male employees around the world. This coupled with a $4,000 “new child benefit” option will affect 34 international offices and nearly 12,000 employees – making Facebook’s parental benefits among the best in the U.S.

Facebook is not the only company looking to offer better paternal benefits. Spotify, Netflix, and Amazon have also begun to strengthen their paternal benefits. For example, Netflix has begun to offer unlimited paid time off until a child’s first birthday to all male and female employees. While this phenomenon is not uncommon to countries outside of the U.S., it is a very drastic change for U.S. companies who in the past have not offered paternal benefits and only offered a maximum of 8 weeks’ maternity leave for new mothers.

With this new benefit being offered to new fathers in companies across the U.S., what do you think will happen to the current work force? Since this new benefit is only offered to full-time employees, do you think a hike in part-time employment will occur in the coming future?

Link: http://money.cnn.com/2015/11/25/pf/jobs/facebook-international-paternity-leave/index.html

For a Growing Africa, Hope Mingles with Fear of the Future

A century ago there was only one city in Africa with a million people or more and now there are 50 housing more residents than most European nations.  It is projected that in the next 10 years, cities in Africa such as Lokoja are projected to increase their populations by 78% which is quicker than any other sizable town in the world.  The biggest human population increase is happening right now in Africa, where everywhere else populations are beginning to level out.  With these predictions, four out of ten people will be African, 2.5 billion in the world, and 25% percent of the world's population by 2050.

By 2050 a fourth of the population will exceed 60 years old, while the average African will only be 28.  With this increasing baby boom it will lift one of the poorest countries in the world and make them a global powerhouse.  However, this will not be an easy feat.  Currently only 9% of the available workforce in Africa are employed.  This high unemployment has proven to be a very trying part of the African Economy for quite some time.  In addition, the African population is growing too quickly for infrastructure such as roads, electricity, schools and businesses to be developed in order to support them.

While over the past twenty years have declined from 6.8% to 6% it is evident that it will take a much longer time to see this decrease even further.

What do you think needs to happen in order for Africa to reach its potential and use its youthful society to become the dominant country it is capable of becoming?


http://www.wsj.com/articles/for-a-growing-africa-hope-mingles-with-fear-of-the-future-1448632865

Chinese Cash Floods U.S. Real Estate Market

http://www.nytimes.com/2015/11/29/business/international/chinese-cash-floods-us-real-estate-market.html?hpw&rref&action=click&pgtype=Homepage&module=well-region&region=bottom-well&WT.nav=bottom-well

In London, Chinese investors are purchasing high-end apartments in wealthy neighborhoods and big skyscrapers in the financial district. In Canada, they are paying $1 million for modest Vancouver bungalows. In Australia, a Chinese sovereign wealth fund bought nine office towers, one of the biggest real estate transactions in that nation’s history.
In the United States, the home-buying spree began on the coasts, where Chinese buyers snapped up luxury condos in Manhattan and McMansions in Silicon Valley, pushing up home values in big cities. It is now spreading to the middle of the country, where prices are more modest and have room to run.
The great property rush is part of the tidal wave of Chinese money that is pouring into the global economy and reshaping financial markets. In residential and commercial real estate, the new flow of cash is upending the traditional dynamics of buying and selling.
“The price of property in Beijing is very high, the stock market is crashing, and the real economy is not stable,” Mr. Du said of the environment in China. “The people here have some money, but they don’t have enough good ways to invest their money.”

Black Friday Shopping Shifts Online as Stores See Less Foot Traffic

It seems that this Thanksgiving, many consumers chose to enjoy more family time while still capitalizing on some of those great Black Friday deals from the comfort of their home. All over the country, malls, for once, weren't crawling with crazed shoppers. Adobe stated that "shoppers spent $1.73 billion online on Thursday, 22% more than in 2014" a statement made after having tracked 180 million visits to more than 4,500 US retail websites. 60% of the shopping traffic this season came from mobile devices. Between midnight an 11am Friday morning, online sales grew by 15% than that of last year. Adobe projected that online sales for Black Friday will generate $2.6 billion in sales, that's a 14% increase compared to last year. Some of the top selling, hot-ticket online items included the Samsung 4K TV, Sony PlayStation 4, iPad Air 2, and Xbox One.

This year, discounts averaged out to be 26% off, increasing both brick and mortar and online sales, of which rose by 5% from last year to an average of $126. Doorbusters made up the other 40% of sales this shopping season.

For the last few seasons, it had been a trend to only brows on ones phone then make the purchase in person, but this season more purchases were made with mobile devices, instead of just browsing. About $0.37 of every dollar spend on Black Friday was spent online. The influx of purchases made on phones is due to the fact that in previous years consumers didn't have their credit card information in their phone, or didn't trust to put it there. Seeing as how the technology that enables the purchase of goods from a mobile device has now been around for a few seasons, consumers now readily have their credit card information ready to make a buy.

Something I wonder about, is as the years go on, following this increasing online shopping trend, could this provide stores incentives to lay off and hire less workers, especially around the holidays? In some stores I visited there appeared to be more workers than customers during the "frenzy shopping period".
Link: http://www.nytimes.com/2015/11/28/business/black-friday-shopping-shifts-online-as-stores-see-less-foot-traffic.html?ref=business