Oil Glut Not Looking Pretty

There was some hope that the worldwide oil glut would be reduced as U.S. oil producers started to pull out of wells because of unfavorable margins. However, Russia has recently decided to ramp its oil production up to an all time high to take advantage of the weak ruble. As a result, speculators have reduced their net-long position bet on WTI crude by 9.1%, a seemingly dismal prediction. U.S. crude output is down 514,000 barrels a day to a low since an output high in June. Similarly, the number of rigs in the U.S. dropped to a 5 year low. Normally this would reduce the worldwide glut, but since Russia is pumping out more oil than it has in the past 20 years it is counteracting U.S. cutbacks. The U.S. currently has 100 million more barrels than its 5 year average in oil. The fact that Russia is pumping out oil is going to keep prices low and most likely spill over into other goods. This will more than likely help keep inflation low in the U.S., something that will deter the Fed from an interest rate hike.

Source: http://www.bloomberg.com/news/articles/2015-10-02/oil-bulls-lose-faith-in-recovery-as-russia-adds-to-global-glut

Automakers Ask Europe for Leniency in Emissions Testing

After the whole VW scandal, automakers such as General Motors, BMW, Toyota, and yes, even VW, are asking for some leniency when it comes to the amount of nitrogen oxide their cars can emit. They are requesting for there to be as 70% increase in the amount their cars can emit. Previously, European policy has allowed for there to be a 30% increase in nitrogen oxide.

Under this new plan, cars will not only be tested in labs, but also on the road, which is a first. The automakers are claiming that their cars cannot meet regulations once their cars are taken out of the labs and put into practical use. These new types of tests have been under development for months, preceding the VW scandal.

European lawmakers are not amused, saying these automakers haven't learned anything from the recent scandal and that they have no right to request leniency.

Do you think the lawmakers will relent and change the amount of nitrogen oxide these cars can emit? Will these new "practical" tests be successful, or will the automakers cry foul, saying the tests aren't reliable?

http://www.nytimes.com/2015/10/03/business/automakers-ask-europe-for-leniency-in-emissions-testing.html?ref=business&_r=0

Poor Labor Market Seems to Vindicate the Fed

On September 17, much of the world waited for the Fed to finally raise interest rates after nine years. However, the hike didn't happen, and the labor markets might be to blame. American employers did hire more workers but only about 70% of what was expected. Unemployment is just 5.1% but the participation rate is down as well.

In addition to the underwhelming figures, wage growth has remained virtually flat (likely a key factor in the low inflation figures). More than just publishing these figures, the article provides a cautionary point. Since The Euro zone is not the strongest and is heavily reliant on exports. These exports usually end up in Asia, who growth is slowing sharply.

If America is the only bastion of economic soundness at the moment, do you think the Fed should shift it's focus to include the rest of the world in its policy decisions or maintain a solely domestic focus?

Article Link

U.S. job growth stumbles, raising doubts on economy

American economy is not good enough right now for the increasing of interest rate, which means in the global market, other countries do not need to worry about cost increasing base on the appreciation of U.S. dollars. If the global economy become better, American economy will become better too. At that time, Fed may choose to increase the interest.

http://finance.yahoo.com/news/u-job-growth-seen-accelerating-041124701.html

New Limit for Smog-Causing Emissions Isn’t as Strict as Many Had Expected

http://www.nytimes.com/2015/10/02/us/politics/epa-to-unveil-new-limit-for-smog-causing-ozone-emissions.html?hp&action=click&pgtype=Homepage&module=second-column-region&region=top-news&WT.nav=top-news

The Obama administration on Thursday unveiled a major new regulation on smog-causing emissions that spew from smokestacks and tailpipes, significantly tightening the current Bush-era standards but falling short of more stringent regulations that public health advocates and environmentalists had urged.

The current E.P.A. administrator, Gina McCarthy, who served as Ms. Jackson’s assistant administrator when she drafted a standard of 65 parts per million, said that lobbying and political concerns had no impact on her decision.

“Our job is to set science-backed standards that protect the health of the American people,” she said in a statement. “Today’s action is one of the most important measures we can take for improving public health, reducing the costs of illness and protecting our children’s health.”

“Disappointing is too mild a term,” said Frank O’Donnell, president of the advocacy group Clean Air Watch. “The big polluters won this time, for the most part,” he added. “This decision will tarnish the president’s environmental legacy. The national clean air standards are the heart of the Clean Air Act. This decision is heart failure.”

Keurig's Kold : Is it worth the price?

Today marked a new era for the Keurig Company as they launched a new product in attempts to recapture lost sales due to the flop of the Keurig 2.0 during the 2014 fiscal year. This new product, the KOLD, is a do-it-yourself soda machine which carbonates beverages in less than 3 minutes utilizing a pod of syrup from brands such as Coca-Cola Co, Dr. Pepper, and Pepsi Co.  With this new machine, Keurig hopes to enter into the cold beverage market to compete with SODA CO. and their product the Soda Stream. The reasoning for this sudden change in product delivery is due to the fact that the cold beverage market accumulated over $50 billion dollars in sales last year, as compared to the hot beverage market that only acquired $10 billion dollars in sales last year.

Keurig CEO believes that given this new opportunity to enter into the cold beverage market, the market will allow for the machine to be priced at $350.00 due to the lack of competitors in the market. With our understanding of how a free market capitalist system works, do you think this price will be sustained or will Keurig be forced to lower the price of it’s new innovative machine?

http://money.cnn.com/2015/09/29/news/companies/keurig-launches-kold/index.html?iid=hp-stack-dom

Could Postmates be Amazon's biggest nightmare?

Postmates is a service similar to Uber and related services, except, instead of moving and delivering people to where they want to go, Postmate couriers pick up and deliver goods from restaurants and stores. Started in 2011 in California, the private company is starting to stir up thoughts that they could possibly take away business from Amazon. Users just go on the Postmates app and say what they want and where they want it delivered, and within an hour they have their good, even food delivery from food establishments that don't offer delivery.

I think this is a great way to equalize the playing field for small business, who can't really afford to be able to ship products to consumers, to be able to compete with lager establishments who have the means to do shipping. Now people can basically order anything and it will be delivered by a Postmate. Where I see this having a big impact is shipping and handling costs that are charged by online retailers. If there is a delivery service out there that charges a fractions of the cost, they would have the incentive to lower their rates in order to stay competitive.


Link: http://www.cnbc.com/2015/09/23/could-postmates-be-amazons-biggest-nightmare.html

China to Announce Cap-and-Trade Program to Limit Emissions

Article: http://www.nytimes.com/2015/09/25/world/asia/xi-jinping-china-president-obama-summit.html?ref=international&_r=0

President Xi Jinping of China will be making history by starting a national program in 2017 that will limit and put a price on greenhouse gas emissions in China. The program President Jinping is planning to implement is a called a cap-and-trade system. Cap-and-trade is a regulatory system that is meant to reduce certain kinds of emissions and pollution and to provide companies with a profit incentive to reduce their pollution levels faster than their peers. Under a cap-and-trade program, a limit on certain types of emissions or pollutions is set, and companies are permitted to sell the unused portion of their limits to other companies that are struggling to comply. This will greatly reduce the negative externalities that come with the high pollution emissions in China that has caused countless social issues across the country.

            Tension between the two nations is still heated caused by countless cyber-attacks over the past several weeks waged by China. But this program will bring about change and is the first step for China and America collaboration to achieve one ultimate goal of reducing pollution emissions in the two largest economies in the world. On the hand, the Chinese economy will be taking a bit hit when this program is implemented. China always strived on having high production output but with regulations in place, the expenses for various industries will increase and they will have no choice to reduce output. This might lead to a decrease in foreign investment and they will relocate to an area where there are fewer regulations.    

Saudi Arabia withdraws overseas funds

“Saudi Arabia has withdrawn tens of billions of dollars from global asset managers as the oil-rich kingdom seeks to cut its widening deficit and reduce exposure to volatile equities markets amid the sustained slump in oil prices.”

I think Saudi Arabia do not have any other better choice rather than withdraws overseas funds, since they are short of money. The low price of oil really hurts those countries who rely on oil output such as Saudi Arabia because they cannot control the oil prices like the old days.

http://www.ft.com/cms/s/0/8f2eb94c-62ac-11e5-a28b-50226830d644.html?ftcamp=traffic/partner/feed_headline/us_yahoo/auddev#axzz3mzsIzADV

A Giant Drinks Merger: Beer Monster

http://www.economist.com/news/business/21665074-ab-inbev-may-combine-sabmiller-flat-market-big-beer-brands-beer-monster

On September 16, 2015, SABMiller, the worlds second largest brewing company, announced that it was being courted by AB InBev, the worlds largest brewing company. This comes at a time when craft breweries are gaining traction while the large beer companies are loosing customer.  InBev, the worlds largest brewing company began back in 1989 when Jorge Paulo Lehmann and his two partners bought a Brazilian beer company called Brahma for $50 million. Brahma acquired one of their rivals, Antarctica ten years later and became AmBev.. Then in 2004, AmBev merged with Interbrew, a Belgian company that owned Stella Artois and Beck’s and InBev was created. In 2008, InBev acquired Anheuser-Busch, a United States company, for $52 Billion and their expansion did not stop there. In 2012, InBev paid $20 billion for Grupo Modelo, a Mexican company, fortifying their position as the largest brewing company in the world. Now there is talk of a merger between the two largest brewing companies in the world, which would bring the beer industry closer to a monopolized industry. If the two firms do merge, they would account for roughly half of the industries profits. Because the two firms would be so dominate in the beer market, antitrust regulators are a barrier for the merger. One way that to appease regulators is for each of the companies to drop some of their smaller acquisitions. This would make it more of an even playing field.The merger is not for certain, but relatively likely. InBev has been able to increase the profitability of the companies that it has aqucired and SABMiller has been having problems recently. A merger might be what SABMiller needs to heal itself. But if the merger goes through, the massive conglomerate would gain more market power and might be able to drive prices up, increasing the producer surplus while decreasing the consumer surplus. 

Capitalism and Cultural value

There is a general argument among those who seek to debunk capitalism that the system is morally atrocious and causes the loss of traditional cultural values and practices. The basic premise of the argument is that competitive markets destroy notions of culture and value as the world becomes more and more intrinsically involved in the capitalist way of life. One of the ways that the market may do this is innovation. Capitalism is a competitive system where in order to make super normal profits firms attempt to innovate their products so as to be able to charge a higher price for their products. It is not an untrue assumption to make that innovation has changed not just what we may buy but the way we work, live and function in our daily lives. Traditions may be lost forever in the hunt for advancement and that which has cultural value may be deemed obsolete in the inherently evolving capitalist system. And yet, can the opposite be true? Can Capitalism actually help preserve cultural values?

In his book "creative Destruction" Tyler Cowen notes that in Ghana, local musicians now own 70 percent of the local music market in terms of market share and attributes this growth to the advent of capitalism, because capitalism is an inherently free system that is open to outsiders and thus all that is within the capitalist economy is potentially open for the outside world to explore. Global markets have given producers of traditional goods the oppurtunity to sell their wares to the entire world and even take advantage of economies of scale, The author of the article that I based this blog off of interviewed  entrepreneurs in Indonesia and Ghana who insist that their traditional products have become a popular attraction in stores all over the world, including Macys. There are examples that clearly point to the opposite, global capitalism can in fact aid cultural transformation and advocation. Is it truly the culturally obsolete that gets thrown away while that which has cultural and monetary value that gets preserved? Any thoughts?

UK economy to outperform world economy

          The Great Recession had such a lasting effect on the economy that most countries are still recovering even today. In the UK, business investment fell over 20% during the Great Recession. This is important because investment drives growth in an economy.
          Economists from around the world and the International Monetary Fund believe that the global economy faces secular stagnation, when low investment holds back growth in the economy. A forecasting group believe the UK will destroy the trend because in 2015 business investment hit 11 percent of national income, the highest point since 2000. The point of the large spending on investments is to create new technology that boosts efficiency and therefore drives growth in an economy.
          The interest rates are also very low in the UK, at only 0.5%. Some experts predicted the bank of England's base rate will remain at this point until the middle of 2016. This rate is a record low and some experts believe the rate increases will be very gradual, with expectations of 2% in 2020.

http://www.dailymail.co.uk/news/article-3251414/UK-economy-grow-world-slows-Report-forecasting-group-predicts-Britain-buck-trend.html

Economic Impact of Pope Francis' US Visit

Pope Francis' visit to the United States, the first since Pope Benedict briefly visited Washington DC in 2008, has certainly had an extreme economic impact on this country, particularly in DC, New York City, and Philadelphia. Although there are a ton of economic boosts a visit from the pope brings to these cities, there a lot of costs brought up with increases in security, changes in transportation and sanitation schedules, as well as additional management. It is a lot of work for these cities to take in a pope to their cities for an extended period of time, nonetheless. 

Revenue for the city of Philadelphia will exceed over $500 million according to the World Meeting of Families. This will benefit local businesses, restaurants, and hotels immensely. Similar impacts are also expected in New York City and Washington DC as well.

During his visit to the United States, the pope commented on several issues, commending President Obama's initiative for global climate change, but also asking for more religious tolerance and the elimination of abortion. Pope Francis definitely sounds in agreement with some liberal policies as well, including relief and helping the poor strongly. He also emphasized not partaking in the "idolatry of money" in the American society. In other words, as Professor Skosples has said in class, about firms and individuals doing things for profit and their best self-interest, Pope Francis, instead, wants the motif to not be profit first, but the betterment of all people and societies. 

http://www.ibtimes.com/pope-visit-2015-economic-impact-papal-visit-2093924

Export-Import Bank Expiry Prompts Loss in U.S Jobs

With the recent expiry of the Export-Import bank in the U.S, General Electric has stated that is will now be sending a minimum of 500 jobs overseas as a result. GE's head of global operations stated that whether or not the bank becomes reauthorized, they have to move forward as a company, even if it means potentially sending thousands of jobs overseas.

Congress let the Export-Import Bank expire this summer which served as a way for companies to finance and insure foreign purchases of American made goods. General Electric, Boeing, and Caterpillar all served as major beneficiaries to this. GE has been lobbying and trying to get congress to re-authorize the bank because it creates American jobs. There is significant opposition to the bank because it to some degree inhibits the free market economy, as well as providing subsidies to major corporations. If congress is not able to reauthorize the bank, it will result in a loss of thousands of jobs at GE and within many of their suppliers. 

http://www.cnbc.com/2015/09/15/ex-im-bank-expiry-prompts-ge-to-ship-500-jobs-overseas.html

China’s Output Declines

            The Chinese manufacturing index called Caixin/Markit (PMI) fell short of predicted forecasts in August and then again in September. This survey comes out just a day after the Asian Development Bank said they are lowering their growth forecast for China, which is below the government’s intended target.

            The United States Federal Reserve not lowering interest rates was the first response to concerns of the growth slowdown in China. Janet Yellen announced that the Federal Reserve had planned to raise the interest rate, but began to pull back as the U.S noticed China’s weakening market. The was very smart of the U.S to pull back because the Chinese economy is accelerating in shrinking of production, which causes export orders to decline, and more people to be laid off and unemployed in the near future. China, one called a production conglomerate, is now shifting to an era of complete economic slowdown. In my opinion it is mainly due to the fact that there are still state-owned firms. State-owned firms are proven to be extremely less productive and inefficient. If China were to change their views and allow the people to have more say in the government rather than rich political officials, the Chinese economy would flourish once again. With a country that has continual political corruptness and an unstable infrastructure the only way to make change is through revolt.

            Although the Chinese economy is looking more dim and faces “structural drags on growth,” according to economist Julian Evans-Pritchard at Capital Economics. He believes that fiscal spending and credit growth will stimulate the economy to a cyclical recovery in economic activity. This is from that fact that Chinese policymakers have cut interest rates five times since November. This aims at stimulating the economy by boosting lending and consumption through consumer spending.

            Even with this large growth and production slowdown, the Chinese government has made appropriate accommodations by cutting interest rates to stimulate the economy. If the economy does not make a full recovery by the next business cycle, however, it could mean a major economic downfall for the country and the world. I believe the Chinese economy can make a full recovery if the government backs off the market and allows innovation through private enterprises rather than state-owned enterprises. With a free capital-market system I believe China could once again become the world’s biggest economy.

http://www.bbc.com/news/business-34332806

Is Hillary Clinton tweet a sell signal for biotech?

Former hedge fund manager, Martin Shkreli, bought a biotech company and raised the price of a drug used to help people with HIV from $13.50 to $750 almost overnight. This outrageous 5,000% increase in price was instantly met with some incredibly harsh criticism namely from presidential hopeful Hillary Clinton who said that something needed to be done about price regulation in the pharmaceutical industry.
Many investors saw this possibility of impending regulation as a huge red flag and many biotech companies have seen a large decrease in stock price since. Some experts are saying that this is an overreaction because Clinton isn't even the Democratic nominee, but others cite this as a sign that this issue is going to be addressed.
In the meantime, however, this is an excellent time for long term investors to purchase biotech stock.

US final Q2 gross domestic product 3.9% vs 3.7% expected

http://www.cnbc.com/2015/09/25/us-final-q2-gross-domestic-product-39-vs-37-expected.html

The U.S. economy rose .2% more than expected in the second quarter of the fiscal year. The growth from April-June rose a total of 3.9% and was expected to only grow at 3.7%. The growth was believed to have surged due to increases in consumer spending and the transportation industry.

Consumer spending, which is 2/3 of the U.S. economy grew from 3.1% to 3.6%. Reuters believes this happened because of the cheap gasoline prices and an increase in the housing market.

It seems that the U.S. economy is gaining strength but currently the fed is debating on raising the interest rate to encourage saving which would ultimately effect consumer spending. Do you think with a stable unemployment rate and the current growing economy that the fed should raise the rate? I personally think that with the current economic conditions improving, we should keep the rates the same to continue the encouragement of consumer spending.