Archive for the ‘Economics’ Category

Good news or bad news?

Saturday, November 10th, 2007

The US trade deficit is shrinking which is good for US producers like GE. However, if the only reason is the weak dollar then this could be bad news for consumers who will have less spending power.

Even then, since imported goods will be relatively more expensive it’s not likely to be terrible news for US companies – foreign companies that rely on the US market may be the ones really at risk here.

The disaster or security bubble and investors

Monday, September 10th, 2007

This article talks mostly about politics but there is a message for investors. You can try to profit from the security bubble but like the dotcom bubble it may not last forever…

Like the dotcom bubble, the disaster bubble is inflating in an ad-hoc and chaotic fashion. One of the first booms for the homeland security industry was surveillance cameras, 30m of which have been installed in the US, shooting about 4bn hours of footage a year. That created a problem: who’s going to watch 4bn hours of footage? So a new market emerged for “analytic software” that scans the tapes and creates matches with images already on file.

What help should we offer homeowners with ARMs?

Sunday, August 26th, 2007

Bill Walsh wants the government to bail out homeowners in danger of defaulting:

Why is it possible to rescue corrupt S&L buccaneers in the early 1990s and provide guidance to levered Wall Street investment bankers during the 1998 LTCM crisis, yet throw 2,000,000 homeowners to the wolves in 2007?

The other side of it is, who wants to spend their tax money helping people who made bad fiancial decisions regardin ARM-type mortgages?

Warren Buffet on US tax unfairness

Sunday, July 1st, 2007

Something that Warren Buffet first said a long time ago (around when Bush first talked about not taxing dividends) is now making the news in a fairly big way: “Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent.”

It seems that democrats are more willing to take advice from Buffet than republicans considering that at least Bush and Schwarzanegger have ignored Buffet’s advice. Does anyone know of any republicans who have followed Buffet’s advice or democrats who ignored it?

Housing market balmed for slow economic growth

Thursday, May 31st, 2007

The housing market is being blamed for the sluggish US economy despite relatively strong consumer spending (strongest in a year). Clearly something is wrong with this picture. Economic growth slows, the value of our homes (for most people their most valuable posession) declines, and we continue spending…

Taxing private jets more and large airlines less

Wednesday, May 16th, 2007

I just read an interesting article on Bush’s plan to increase taxes on provate jets and decrease them on commercial airliners.

I’m all for paying less tax and have no trouble passing the bill onto corporations, but there are economic concerns, particularly the effect this will have on rural areas which depend on provate jets.

Warren Buffet’s NetJets and similar companies would also be adversely affected. The new taxes for private jets would be substantial:

Under current law, the government collects $2,015 in taxes every time a full Boeing Co. 757-200 jet flies between New York and Florida, according to the Federal Aviation Administration. A General Dynamics Corp. Gulfstream 4 business jet flying a similar route — and requiring the same amount of attention from air-traffic controllers — pays $236, agency figures show.

Under Bush’s plan, the operators of the Boeing jet would pay $1,298, and owners of the Gulfstream would pay $837.

Considering that each jet receives the same attention from air traffic controllers, it makes sense to me. And when I think of people flying around in private jets I don’t think of people who can’t afford to pay a little extra tax. My only concern would be the effects on rural states but I haven’t seen any estimates on that one.

Americans jailed in Indonesia and Kazakhstan = tough environment for investors

Tuesday, April 24th, 2007

Investors need to think about where their money is as Americans are running into legal trouble in places like Indonesia where Richard Ness is about to learn the outcome of his trial:

Foreign investors are already anxious about doing business in Indonesia, which boasts some of the world’s largest gold, tin, copper and nickel deposits but is also considered among the most corrupt nations. Red tape and rising prices add to their concerns.

There’s also trouble in Kazakhstan where Mark Seidenfeld, a 39-year-old American telecommunications executive who’s probably more innocent than Richard Ness was jailed in Siberia. Apparently in Kazakhstan the courts work to help locals with connections:

“Of course we have a judicial system that can be abused,” said Oraz Jandosov, co-chairman of Ak Zhol, an opposition political party, and the former chief of the central bank. “Our courts are not only corrupt but competence is an issue. Not only can Americans be squeezed but vice versa. It’s the natural result of the country’s current political system.”

Aftermath of Korea US FTA

Monday, April 9th, 2007

Before the US-Korea FTA I said that Korea would not and could not really allow free trade. Now that the agreement has been reached and the various industries have sounded off, I know I’m right.

While South Koreans are busy protesting in the streets and going on hunger strikes, American companies, especially the auto industry are complaining to anyone who will listen (but they aren’t in the streets). There are some who disagree:

Unfortunately, Ford and Chrysler don’t see the benefits. They, like the United Auto Workers, have said the South Koreans haven’t done enough. So have U.S. Sens. Carl Levin and Debbie Stabenow. General Motors is withholding comment.

Obviously, there must be a reson why Ford and Chrysler are lobbying against the FTA. Clearly they don’t think that business in Korea will pick up substantially even with the new tax system. Let’s say American car companies do twice as much business in Korea – they sell 10,000 cars a year instead of 5,000. Who cares?

Of course, GM might be in a better spot than Ford and Chrysler thanks to its acquisition of Daewoo:

GM Daewoo, created in 2002 after GM acquired the now-defunct Daewoo Motor, could be in a unique position to benefit from both ends of the deal. The company accounts for about 13 per cent of General Motors Corp’s total group production and exports some models, such as the Aveo, to the United States. The company exported 116,761 vehicles to the US last year.

The FTA doesn’ really change my stock strategy. It doesn’t turn me bullish on US automakers anymore than Ford and Chrysler are bullish on the agreement itself.

The US & Korea free trade agreement

Saturday, March 31st, 2007

Living in Seoul, I see articles on the free trade agreement (FTA) and protesters all over. The other day I was heading into a subway station and there was one guy with an anti-FTA sign shouting about the injustice of it all.

I don’t see what Korea could really gain from an FTA. Last year, 4,000 American cars were sold in South Korea, while South Korea exported 800,000 vehicles to the United States. I wanted to buy a Mustang here in Korea but a car that would cost me $22,000 in the US is close to $50,000 here in Korea. America sees a 13 billion dollar deficit and 80% of that comes from cars.

But the people who most oppose the FTA are farmers. Here in Korea where nearly everyone eats rice nearly every meal, you’d expect the people to demand good prices and more competition. That’s not the case, however. Rice here sells for 4x the international average. A 4 kg bag of plain white rice is at least $15 bucks in the supermarket.

Han Duk-soo, prime minister-designate of South Korea, said that if the United States insisted on including rice in the deal, “there will be no F.T.A.”

I think it’s clear that South Korea can’t afford free trade. It’s not really clear which path will be best for their economy. I suspect that the two sides will get something signed, but that it won’t be what American famrs or car manufacturers need to level the playing field.

China’s economy, foreign exchange reserves, currency, trade surplus problems

Tuesday, March 6th, 2007

Here’s an interesting article that say China’s economy is the world’s problem. However, I just finished reading an article that reminds us it creats problems for China as well as for the rest of the world.

It is common knowledge that China buys dollars in order to keep the yaun artificially low, making exports more competitive. Keith Bradsher in the Tues. March 6 International Herald Tribune (Joong Ang Daily group) writes that investing these dollars in US securities (like treasury bonds) helps keep interest rates low for US mortgages and the like.

Bradsher goes on to say that Chinese citizens are unhappy to see the money invested abroad. They would rather see the money invest in say Chinese education. However that would mean selling dollars for Yaun and allowing their currency to appreciate against the dollar. China can’t do this because they want to keep their export businesses as strong as possible.

China may be getting ready to diversify, possibly mimicing Singapore’s Government Investment Corporation. What effect will this have on China and the world?