Archive for Investment

France Debuts Bold And Innovative Plan To Jumpstart Economy (That They Already Tried in 2010)

The United States is far from the only country that is desperately trying to get back some of its former economic glory.  Out of all of the EU nations in economic turmoil France is far from the worst, but the country has been struggling to jump start its economy for decades.  Other European nations like Spain and Germany have been adopting polices that make their country’s much more business friendly since the 1990s, and now France is looking pretty expensive to businessmen in comparison to their neighbors.

Hindsight is 20/20

French labor costs are the highest of any major EU economy, and taxes have risen considerably over the past few years.  France recently lost the business of Michelin which closed its 52 year old factory in favor of moving operations to Spain, and it’s possible that other companies could plan on jumping ship to cheaper nations.  These events paired with the fact that the country’s economy has barely grown over the past few years spells an economic dry spell for France, but its president recently announced plans to bring some money back to the struggling EU nation.

President François Hollande is planning on jump starting the French economy by investing billions in up and coming technology.  When you look at the country’s past economic success with revolutionizing nuclear power and high speed trains Hollande’s plan seems practical, but some economists are doubtful that the investments will have much of a payoff.

Pictured: Not France

Pumping nearly 3.7 billion euros into industries that are working on 3D software, robotics, and other futuristic technology seems very similar to ex-president Nicolas Sarkozy’s plan to pump money into emerging technologies in 2010.  That plan was 5 billion euros worth of failure, nearly three years after his Hail Mary plan corporate profit margins in the country are the lowest they’ve been since 1985.  Corporations are already wary of settling down in a country where wages and business taxes are high, so for this to work France would need to not only keep the companies that are already in the country, but also somehow attract other companies that could easily do business in cheaper surrounding countries.  Only time will tell if the plan will work, but most economists are doubtful that it’ll help.

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NASDAQ Shut Down Caused By Computer Error, Jimmies Remain Rustled

Don’t cry my child, the jimmies will soon be back in order

Yesterday the global financial market had a horrifying scare when the NASDAQ was inaccessible and offline for three hours Thursday.  The shutdown didn’t happen because people were worried about a terrorist attack, nor was it shut down because of some sort of national emergency.  A “minor” computer error put the entire system on lockdown, and now people across the industry are worried about the security of one of the most crucial financial systems on the planet.

A three hour shut down may not seem like that big of a deal to you, but you need to keep in mind that the NASDAQ is the second biggest American market operator and is the trading home for 3,200 companies across 37 nations.  The mistake was so serious that President Barack Obama was notified of the shutdown shortly after it occurred, and now SEC chairman Mary Joe White wants to meet with exchange leaders in Washington to discuss vulnerabilities in the system.  Their alarm may seem suspicious, but they have a good reason to scramble the finance troops.  If a minor computer error was able to shut down the NASDAQ for a few hours, imagine what skilled hackers could do.

The IT specialists at the stock exchange are probably in for some trouble, but most people have their pitchforks and torches aimed at the NASDAQ’s chief executive Robert Greifeld.  Some people still haven’t forgiven Greifeld over last year’s Facebook IPO disaster, and this news has only added more fuel to the “Greifeld sucks” fire.  People are upset that Greifeld wasn’t reachable when people first noticed the trouble on the trading floor.  To be fair, Greifeld wasn’t available since he was at a wake in New Jersey, but for some death isn’t an excuse for not doing your job.  Greifeld attempted to do damage control on CNBC and Bloomberg TV this morning, but people still feel like they didn’t get a reasonable explanation for the catastrophic shut down.

It’s very likely that there will be more news about IT security issues in the stock market, and even more likely that Greifeld will do something to embarrass himself even more.  All you can do now is sit back, relax, and watch the financial sector have a good old fashioned freak out.

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Luluemon CEO Steps Down, Surprisingly Has Little To Do With Transparent Pants

Not pictured: The legions of perverts behind her taking pictures of her see through clothing

When you hear the name Luluemon, what do you think about?  If you’re like 99% of the population you probably think about tissue paper yoga pants, but the company has been making headlines for a different reason.  Earlier this week Luluemon CEO Christine Day announced that she would step down from her position at the company.  Even though some reporters are trying to say that the pants predicament caused Day to lose her job, Luluemon investors have a very different take on the matter.

The transparent yoga pants didn’t really help the company, but Day actually took the right steps in handling the problem and confronting it in the press.  If anything the whole scandal just showed how competent of a CEO Day was.  Instead of shuffling around employees and scapegoating, she fired the company’s Chief Product Officer and got started immediately doing damage control by offering customers refunds and discounts to get back in their good graces.

Stock shares grew significantly when Day was in control of the company.  They were just at $4 a share when she started, and they closed at $80 share before she announced her leaving the position.  The number of stores nearly tripled during the five years she was in charge of the company, and they’ve become an established household name during a time where economic growth was stagnant and people were quickly dropping brick and mortar retailers for e-tailers.

Day may have done everything right when she was in charge, but some people think that her departure could be a sign that there’s going to be trouble for the company that has experienced a meteoric rise to the top.  Her discounts may have helped some customers come back to the business, but Luluemon still hasn’t fully recovered the share of customers they lost after the big recall.  Since Day didn’t name a successor, shares dropped by $10 the day she announced her decision to leave the company.  Some also wonder if their expansion in men’s clothing is a logical next step, or a short sighted attempt to seem innovative when they’re out of ideas.  Either way, it seems like Luluemon will never be the same.

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Zynga To Lay Off Over 500 Employees, Exactly One Person Is Shocked

In the beginning of 2012  Zynga was hailed as the wiz kid company of the internet gaming age.  They had annoying and addictive games that millions of people were playing on Facebook, they had figured out a way to make the play-for-pay model affordable and addictive, and they were entering lucrative deals with Facebook and Hasbro.

Some people worried about the viability of company that shot to the top in such a short amount of time, but people were sure that the negative nancies would be drowned in the tidal wave of revenue Zynga was about to earn.  By the time they posted their first quarter earnings in March they had earned $329 million in just a few months, and they had long surpassed the market value of Electronic Arts.

By the time 2012′s second quarter rolled around the company proudly reported their revenue gain of $332 million, and quietly tried to downplay their net income loss of $22.8 million and their reduced bookings forecast for the year.  After their good news and not so awesome news hit the business world Zynga’s stock plummeted by 40% in just a few hours.  And since 2012′s embarrassing second quarter the company has been on a steady cycle of either being in danger of going out of business or sleeping on top of piles of money.

It looks like Zynga workers are going to have to trade in their money mattresses for bales of hay because the company announced that they were going to lay off about 1/5th of their staff (roughly 520 employees) and close some of their locations in Los Angeles, Dallas, and New York.  The company estimates that they’ll be able to save $70-$80 million with their cuts, which can really help make up for their projected second quarter loss of $28.5-$39 million.  Not much to say here, aside from the fact that there are a lot of investors and financial annalists doing the i-told-you-so dance.

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Detroit Homes Are Helping The Motor City’s Economic Woes

Either way it’s better than being America’s Crud Bucket

In geographic terms New Jersey may be America’s armpit, but when it comes to property value, safety, and human decency, Detroit takes the pit prize.  Out of all the American cities that experienced economic upheaval from the end of the country’s industrial days, Detroit has had it the worst.  They’re one of the poorest and most dangerous cities located in the Rust Belt, and Michigan’s State Treasurer Andy Dillon recently recommended that a financial review team be appointed to the city because of its massive economic problems.

Since the economic downturn in late 2008 people have heard very few encouraging stories about improvement in The Motor City.  We’ve heard about promising urban gardens and have seen many car commercials that have remixed Eminem’s “Lose Yourself” in order to highlight the city’s tough nature, but it wasn’t until recently that some people saw a chance for true economic revival in the city.

His palms are sweaty, knees weak, arms spaghetti
There’s vomit on his spaghetti already,
Mom’s spaghetti
He’s nervous, but on the surface he
looks calm spaghetti
To drop bombs, but he keeps on spaghetti

The city’s glut of foreclosed homes has made it an investment haven for people who are interested in purchasing inexpensive and foreclosed properties.  Tax-delinquent property auctions have attracted both American and international investors to the city to scoop up some extremely cheap real estate.  Some people have paid as little as $500 for foreclosed property in the city, and if current trends continue one of America’s most troublesome cities could have a chance for some true economic revival.

In 2012 Wayne County sold 10,461 of the 18,897Detroit properties that were up for public auction. More than half of the homes sold for peanuts, and many savvy buyers have been trying to snag as many properties as they can.  It’s important to mention that these cheap properties aren’t only going to rich foreign investors or even rich American buyers, many Detroit residents have used the cheap home sales to build their own real estate nest egg.  In the previous link a Detroit native named Jasmine McMorris bragged about the 332 Detroit homes she has purchased over the past two years.  McMorris and other Detroit residents have purchased and repaired homes for a few thousand dollars, and have been able to earn ridiculously high returns on their property investments.

Dead or alive, you’re revitalizing the city with me!

Usually a large scale home buying spree can hurt local economies, usually because of unscrupulous landlords who rent their new properties and refuse to properly maintain them.  So far the mass property buy outs in the city have been beneficial, home prices in Detroit have actually been slowly rising.  In November 2012 home prices were up 3.4% from the previous year, and since over ¼ of Detroit properties are currently vacant it’s very likely that property values could improve in some of the city’s worst areas.

High property values can’t rescue a city from economic destruction, but it certainly does help.  If you’re looking for some houses to flip check out Detroit, or any of the other cities where there is an alarming amount of houses up for tax-delinquent property auctions.

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Apple’s Perfect Closing Price Probably Didn’t Happen Because of a Conspiracy

On Friday January 18th Apple stocks closed out the week at a healthy $500 a share.  Some people see the unusually high amount as a sign that they invested in the right company, others see it as undeniable proof of a twisted conspiracy plot that Apple has been planning for months.

The notion of an Apple stock conspiracy is in no way new, people have been coming up with conspiracy theories about Apple since the company made its debut.  The reason people were riled up on Friday had to do with the suspiciously   perfect closing price.  It closed at $500 on the dot, not $499.99 or $500.0182487, but a neat little $500.  Their perfect price announcement also comes after Apple insiders have been discussing the relatively low demand for the latest iPhone.

Now we may not be able to complete debunk the rumor/theory that Steve Jobs and Steve Wozniak made a pact with Satan in order to ensure that their computers sell, but there is a simple explanation for their “impossibly perfect” closing price.

Friday the 18th was an option expiry day, that magical day when all of the calls and puts (guess/hunches about whether a certain stock will rise to the income heavens or crash and burn in bankruptcy hell) make it to put up or shut up time.  These puts and calls give owners the ability to make stock transactions on a certain date for a specific price (also known as the strike price because financial terms aren’t already difficult enough to learn).  When expiry day rolls around all of the puts and calls disappear to make way for new estimations, and on this day many investors go absolutely insane buying and selling.  The perfect $500 is probably the result of investors with high hopes, not an elaborate price fixing plan.

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Boeing Stock Crashing Like Their 787s

America’s favorite multination aerospace and defense corporation is in trouble again.  This time it isn’t about union strikes or disgruntled pilots, apparently one of the main airplane manufacturers in the world has been having some trouble keeping their massive 787s from not bursting into flames or dramatically cracking apart.  The flames of Boeing hatred started on the 7th of this month when there was an electrical fire on board one of Japan’s Boeing manufacturers GS Yuasa.  It only took 9 days for the Federal Aviation Administration top stop all flights of the 787 Dreamliner, and boy oh boy has it made their stocks plummet.

Good luck next time Boeing, sorry it didn’t work out man :(

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NYC’s Supervillan Gold Vault Escaped Sandy’s Wrath

Scrooge McDuck was unavailable for comment

People aren’t perfect.  We make mistakes, we (hopefully) admit our faults, and we try to learn from every situation in our daily lives.  Hurricane Sandy has caused a lot of people to re-think their business strategies, and the location of their businesses.  Citigroup’s building at 111 Wall St. will take months of work before it can be used again, and TWO of Verizon’s crucial facilities were significantly damaged from flood waters.

When some businessmen saw the destruction Hurricane Sandy unleashed, some of them thought, “Oh *#&! Is the gold I had in the city safe?!”  Some people believe that the bulk of the nation’s gold is held in the heartland in Fort Knox, but that’s just what they (aka-the man) want you to think.  There are over 15 million pounds of gold stored in the New York Fed, and when those who knew about it learned about the hurricane they had a justified freaked out.

Miraculously the gold bullion stayed safe and dry during NYC’s great flood.  The Fed won’t be telling us any time soon how they were able to keep everything safe, but it may have something to do with the way the building was built.  America’s gold bullion isn’t stored in some rinky-dink above ground facility, it’s 80 feet below the street level, 50 feet below sea level, and it all sits safely on Manhattan’s famous underground bedrock.  The underground construction isn’t the only thing that the kept the bullion safe.  The vault is airtight and water sealed, it would take a lot of destruction to even make a nick in the vault’s casing.

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Low Earnings Cause Problems for Investors

The stock market sure is unpredictable.  I don’t even think it’s been 24 hours since I wrote that stocks may be safer than bonds in the long run,  and I get to work and see a news story about the stock market taking a nose dive.  Companies in the S&P 500-stock index are expected to report low earnings for the month of October.  McDonalds and DuPont have already reported some dismal earnings, but experts are expecting October’s earnings report to be the lowest its been in three years.  Around 60% of the 145 indexed members missed their initial estimated revenue, and if these trends continue the American economy will be in a lot of trouble.

It’s difficult to predict what will happen in a system where everything is more or less determined by chance.  So many bizarre things can affect how well certain stocks do, anything from an upcoming election, a natural disaster, or even a weird internet rumor have the potential to turn a stock completely upside down.

Some analysts are blaming the terrible market on the upcoming elections.  So many states (and even the nation itself) could fall under the control of a different political party, and one election win or loss could change certain economic policies.  A new senator could decide that they want to pour state funds into a privately owned solar energy provider, and another new senator could decide that they want to put a heavier tax on businesses that decide to outsource work out of state.  Others think that the poor market is a direct result of excessive mutual fund selling and the devaluation of bonds.  Either way some investors won’t be sleeping easy tonight.

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The True Bond Risk

If financial terms were like a family, stocks would be the wildly unpredictable teenager, and bonds would be stocks’ surprisingly well behaved twin brother.  People who wanted to make money without having to take a lot of risks would put their money in bonds.  They would put money into a bond (usually issued by the government, even though there are other institutions that issue bonds), let it gather interest over a few decades, and eventually they would cash them in.

The interest gathered in bonds is the only feature of the financial note that could be considered risky.  Even though you never know what state the economy will be in when you decide to cash them in, most bonds will have a considerable amount of interest gathered to make a good enough profit.  After millions of people lost thousands from their retirement funds after the 2008 financial crisis, people were scrambling to get their money out of the stock market and into bonds and bond funds.  In the short term it seemed like the only way to keep their money safe, but now the current state of the market could have made that bond move a big mistake.

Some of the people who moved their money from stocks to bonds may have been kicking themselves after they got a look at the S&P last week.  As of October 16th the S&P stock index gained a whopping 115% since March of 2009, and if some people chose to keep their money in the market they could have seen some substantial returns.  Unfortunately the stock market isn’t the only think threatening bond holders.  Many people don’t truly understand the risks that come along with putting money into bonds, the interest rate on your bond could end up losing you a lot of money.  Usually if people hold bonds until the mature they don’t lose money unless the issuer decides to default, but if the issuer decides to raise interest rates the bond prices go up and the bond profits go down.

Explaining in-depth the risks behind bonds and bond funds is complicated, but this website does a very good job of accurately summing up the problems that come along with putting all your eggs into the bond basket.  Some people (the author included) are still very wary of putting any money into the stock market, but if you want to have a better chance of having a comfortable retirement it may be time to look to Wall Street.

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