Business & Finance

Iran Nuclear Deal is a Mixed Bag for U.S. and Global Economies

Global and U.S.- CNN, CBS, BBC, Al Jazeera

By: Rebecca Lee Robinson

August 2015

The Nuclear deal made with Iran is looking like a mixed bag for the U.S. market. Since making the deal, U.S. gas prices have declined and are expected to decline into the fall, making travel and basic expenses for the average American more affordable, at a cost to national oil production. While imports of nuts may decrease the cost of pistachios it could also hit U.S. pistachio farmers with more competition on the market.

Chico Harlan with the Guardian and Washington Post reported on July 21st that with Saudi Arabia and Iran selling oil at a cheaper price, the flooding of the market has taken a toll on U.S. oil production. Oil giant, Continental Resources lost more than one-third or $6.5billion of its company’s value in the last six months. Continental and other companies are behind the hydraulic fracturing industry in the United States, which was meant to remove U.S. markets from “Saudi Arabian control” and have dominated the market for the last 40 years.

Previously, when oil prices fell Saudi Arabia and other oil-rich countries would pull back on production, to allow prices to rise. In recent times an increase in U.S. production has only led to Saudi Arabia also producing more energy. This has created a plummeting oil value and putting U.S. drillers at risk due to their reliance on higher oil prices and has lead to mass lay-offs in the U.S. oil industry. Ryan Lance, chairman and chief executive of ConocoPhillips, stated at a recent conference in Huston, Texas, “The industry is in a bit of survival mode.”

According to Steven Mufson of the Washington Post, though gas may become less expensive, U.S. gas companies may be left behind as European and Asian companies explore the world’s fourth-largest oil reserves of Iran. Many of these companies will likely be returning businesses that left when sanctions were put into place, such as Italy’s Eni, Norway’s Statoil and France’s Total. Robert McNally, a former advisor to George W. Bush believes that “Barring a political moderation in Tehran, it is very unlikely the politics will improve enough to allow U.S. oil companies to go back in.”

The sanctions on Iran being lifted mean some perks for Europe, Asian and American markets. Some trade sanctions will stay in place, but others will be lifted on civilian aviation equipment (including passenger planes), food and carpets. The aviation equipment alone could be of huge benefits to Boeing.

Food imports will also decrease the cost of pistachios and caviar, two big Iranian exports. Yet even though pistachio prices could decrease, this may hit American farmers who have been producing and selling the nut in recent years.

 

Getting by in Fort Collins

Colorado and U.S. Media (due to popularity of Colorado nationally)- CNN, NBC, CBS, COLORADOAN, DENVER POST

By Rebecca Lee Robinson

July 26th, 2014

 

An average family of four needs to make $64,331 a year in order to be completely self-sufficient while living in Larimer county, Colorado, according to a new study. Meaning that two adults in the home need to make $15.23 an hour and work full time to support their family and a single parent would need to earn $26.94 per hour. This rate is 10.6% higher than the Larimer county average in 2011 and an increase of 54.6% since 2001. These self-sufficiency levels are three times the U.S. national poverty level, which determines federal assistance to families, which is below $24, 250 for a family of four and $20,090 for a family of three. These numbers reflect the cost of housing, food, clothing, childcare, small savings, and other necessities. They do not include entertainment or the repayment of debt.

About 14.1% of residents in Larimer County live at or below the national poverty line and a median household income in the county at $54,626. For Fort Collins it is $63,500 for two according to a May 2015 Coloradoan article. “With a Colorado 2015 minimum wage of $8.23 per hour…[a] parent with two children working full time earns just over a third (only 34%) of the income needed to meet her family’s basic needs if she/he is not receiving any work supports” according to The Self-Sufficiency Standard for Colorado 2015. Even with childcare assistance the average worker at minimum wage would also only make 50% of what would be needed to support the family. With other benefits such as food assistance and housing assistance the ability to reach 98% sufficiency is possible. Though assistance is there, there also come long waiting lists for affordable housing. Other programs, such as WIC, expire when children reach certain ages. Making it still difficult to get by in the long term.

“I have to live with my dad,” says Tara Soulen, who works in retail earning only $9 an hour. “I can’t afford anything in town, even with my partner working full time and making more than me. We even had to sell my dad’s house and downsize because of an increase on the taxes, and the loss of my mom’s income.” Tara’s mother died of stomach cancer in late 2013, and even though Tara has a Bachelor’s degree, she hasn’t been able to find a job outside of retail. “I made more 20 years ago when I worked for the Denver Post than I do today.”

Rental costs have increased around 39% in Larimer County, since 2001, with costs even higher in areas such as Fort Collins and Loveland. Vacancy rates sit between 1-2% per quarter making the demand versus availability of rental properties tedious. The cost of buying a home in Fort Collins is increasing at twice the rate of the rest of the United States, making it difficult for young buyers to afford to purchase a home even with good income, and good credit. In 2014 the average home cost was “$325,044, up 8.6 percent from 2013 and up 15.3 percent from 2012, a Coloradoan analysis of single-family home sales shows. The median, or midpoint, last year was $285,450.” According to a June 2015 Coloradoan article.

While Fort Collins business and jobs are booming there is a major lack of property and houses for the influx in population. This has increased property prices but there are not enough high-paying jobs to keep up with demand. Fort Collins is land-locked and can’t expand its borders, creating a land rush in the city limits. Along with an increase in population every year, the housing supply and demand is tight, making it difficult for an average working class person to get by. Some houses sell in less than 24 hours, with about 24% being sold as cash offers. For those seeking loans, there are few options and little leverage. This is compounded by what looks like inevitable mortgage interest increases from 4-6.5% in the next year. Overall housing costs are increasing 20% a year, while wages increase around 1%, pushing those that earn less out of town, while higher earners are able to stay.

“If you wanted to sell a house and move out of state, it’s a great time. But if you need to stay in town and if you are middle class, it’s terrible.” Explains Soulen. “Our house sold in less than 48 hours, and luckily we found something else before, on the edge of town. Not everyone is that lucky.”

 

 

 

 

 

Monsanto Pressures Merger with Syngenta AG

Ideal media: Global Media- BBC, CNN, Al Jazeera

By: Rebecca Lee Robinson

May 26th, 2015

Controversial U.S. based Monsanto Seed Company is waiting to hear on a $45 billion bid to buy Swiss Syngenta, which would make Monsanto the largest global seed and agricultural company in the world. This merger would give Monsanto control of 54% of the world’s seed and a third of the world’s pesticides. Even with such a compelling bid Syngenta has concerns over Monsanto’s motives and the price they are willing to pay. Syngenta declined a bid made a year ago for $35 billion and are pressuring Monsanto to offer even more to shareholders and the company.

In April it was released that American-based Monsanto would make this current and second bid to Syngenta, which currently holds a $35 billion market price. Monsanto made a bid of $45 billion to Syngenta nine weeks previous and waits to hear a reply from Syngenta. If Syngenta continues to reject the bid, Monsanto is looking to other options to make an offer to Bayer AG. Brett Bergeman, chief operating officer of Monsanto, has claimed that while they’re committed to buying Syngenta it won’t “stay at it forever.”

Monsanto’s goals in buying Syngenta is to attain more rights to agricultural chemicals in order to develop seeds to resist certain pests and weeds from crop development, increasing the ability to produce seeds and being able to spread them quicker to planters and consumers. Syngenta is the largest herbicide, insecticide, and other chemicals producer to control crop-pests. Some analysts are speculating that Monsanto also wishes to move its corporate base to Switzerland where corporate taxes are lower than in the United States. Syngenta is concerned over combining the companies, with anti-trust hurdles and failures to make a fair agreement.

Syngenta has been in discussions with shareholders about a fair-price counter deal to Monsanto. Stockholders, according to Swiss media, have been concerned over a lack of information about the possible takeover. Many stockholders feel that Monsanto needs to raise their bid 10% from $483.4 to $531.74 per share. Syngenta wants a fair price offer and feels Monsanto is trying to buy them “on the cheap”. The board at Syngenta rejected the initial proposal and would only consider the current proposal if Monsanto offered higher compensation and more certainty for shareholders if the deal fails for anti-trust or other reasons.

Syngenta chairman Michel Demare discussed in a video interview the future for his shareholders to gain a profit if Monsanto takes over. He discussed that Monsanto would essentially be dismantling Syngenta and building it new. Demare feels that Syngenta, though they have not met predictions in the last few years, are on track to have shareholder profits this year and continue to increase as an independent company.  Demare also stated concerns on making a giant agricultural company and its impact on integrated farmers that already work with Syngenta.

Many are concerned about the large mergers and take overs of these chemical companies. If Monsanto and Syngenta merged, it would leave only 5 large global seed and chemical players controlling a majority of agricultural supplies. As the economy is still rocky, Monsanto and other companies are merging and buying out others quickly. Monsanto’s recent actions also indicate its interest in other areas such as information technology around agriculture, as it has invested in weather monitoring equipment, and has made it a common practice to follow their seeds from planting to death. According to a May 2015 ETA article “When a single corporation sells the seed, knows the prevalence of pests and sells the pesticide, knows the local soil conditions, then divvies up the fertilizer, predicts the weather at harvest and sells the crop insurance, the notion of cross-sector (and antitrust) begins to lose meaning.” Monsanto has also been under fire for lobbying politicians while pushing out smaller agricultural businesses who can’t afford advertising and lobbying budgets.

Beyond corporate control the World Health Organization is suspicious of Monsanto’s Round-Up weed killer being a possible carcinogen. Along with many Monsanto Genetically Modified seeds, which are meant to decrease the use of chemical fertilizers, pesticides and labor, are proving to be less effective than in previous years. As diseases and pests become more resistant to the seeds, farmers are having a hard time producing and therefore are buying less seed form Monsanto. The Union of Concerned Scientists list many of these concerns as also causing more environmental damage and creating more problems for already fragile ecosystems around the world.

 

 

Official Figures Predict Improvement in UK Economy

By Taye Obateru
Figures from the Office for National Statistics released this week indicate an improvement in the economy of the United Kingdom with increase in retail sales, lower inflation and a stable unemployment rate.
The volume of retail sales in May 2015 was estimated to have increased by 4.6 per cent compared with May last year, thus continuing a year-on-year growth. The volume was the 26th consecutive amount of year-on-year growth and the largest period of sustained growth since 2008 when there were 31 periods of growth, according to the official figures.
The non-food retail sector made the highest image image

contribution to the volume from May 2014 to May 2015 out of the major four retail sectors.
The inflation rate in the UK also returned to a positive trend, rising 0.1 percent after an unexpected fall in the previous month, a situation attributed to the increase in air and other transportation fares.
Similarly, UK unemployment remained stable at 5.5 per cent, while the wage growth also steadied at 2.2 per cent. Employment increased with more 114 thousand people at work than the three months to January, this year. Wages also rose to a near four-year high.
Employment Minister, Priti Petel said the figures “confirms that our long-term economic plan is already starting to deliver a better, more prosperous future for the whole country, with wages rising, more people finding jobs and more women in work than ever before.”
Ian Steward, Chief Economist at Consultants Delloitte predicts a relatively steady outlook in the coming months despite the possibility of up or down movements. “The big picture if of very weak pressures. Inflation is unlikely to rise significantly above the zero mark for the rest of the year”, he said.
Similarly, the situation in the Eurozone is seen to be fairly stable despite the 0.3 per cent inflation index for May released by Eurostat. The rate dropped from the 0.6 per cent recorded last year.
However, negative annual rates were observed in eight member states in May 2015, with the lowest rates recorded in Cyprus (-1.7%), Greece (-1.4%) and Slover (-0.8%).
According to the statistics, annual inflation fell in two member states of the Eurozone, remained stable in three and rose in 23.
Moody’s Analytics believe that with the released figures, the deflation worries in the zone are lessening but predicts a higher inflation index in the coming months with improving economy weaker euro and higher oil prices.
Tomes Holinka, an economist at Moody’s Analytics projected a 0.4 per cent growth in the second quarter as low oil prices is expected to boost domestic demand while exportation from the zone is likely to benefit from a weaker euro.
In the United States of America, manufacturing did not rise as expected, but rather fell 0.2 per cent month-on-month. The Wellsfargo Securities Economic Group described the development as the most disappointing part of the statistics released during the week.
US Federal Reserve announced that industrial output fell by 0.2 per cent, six months in a stretch as against 0.2 per cent growth earlier predicted. This was blamed on the challenges of a strong dollar and the drop in energy prices,
Activities in the mining sector also declined with output falling 0.3 per cent compared to oil and gas extraction which rose 0.5 per cent in May indicating a possible fall in extraction in the second half of the year as a result of pull back in new investment.
Some analysts also said there are indications that activities in the manufacturing sector might remain sluggish in the near term.
Inflation rose by 0.40 per cent in May, short of the 0.50 per cent predicted. Notwithstanding, the Labour Department figures showed that inflation over a 12-month period was at zero per cent level and the record for May is the fastest gain in over two years.

Krispy Kreme First Quarter Results Brightens Hope for Double-digit Full Year Earnings

By Taye Obateru

With adjusted earnings rising to $16.6 million per share from $15.8 million last year, hope for a 10 per cent growth in earnings per share brightened as Krispy Kreme Doughnuts (KKD) announced first quarter results for 2016 on June 10.

President and Chief Executive Officer, Tony Thompson said at a conference that the company’s revenue improved during the first quarter which ended in May with profit rising by nineimage.                      image

per cent to $10.7 million or $0.16 per share. Last year’s figure for the same period was $9.7 million or $0.14 per share.
He said operating income from the company’s now over one thousand shops around the world increased by 6.8 per cent while adjusted income grew by five per cent. He was optimistic of higher growth rates in the next three quarters.
According to Thompson, “our results exceeded our expectations and, in our estimation, we’re well positioned to achieve our annual outlook.”
Based on the results, the company projects full year earnings per share of at least 10 per cent and plans to extend operations to six more countries in the course of the year. In line with this, the company has adjusted full-year expected earning to between $0.080 and $0.85 from the initial $0.79 to $0.85.
The results which surpassed Wall Street estimates saw the company’s share gaining 5.75 per cent in after-hours trading session. Analysts had predicted $0.22 earnings per share for the quarter.
Reacting to the results, Roth Capital Capital Partners said it re-affirms her buying rating of KKD’s shares adding, “several initiatives now underway seem likely to generate incremental store traffic as well as increase profit margins.” It predicted sustained earning growth in the years ahead.
KKD, a Wiston-Salem, North Carolina, USA-based company is a leading branded retailer and wholesaler of doughnut, complementary beverages and other sweet treats with over four thousand employees in 24 countries.
It was listed on the New York Stock Exchange in April 2000 and rose to a 500 per cent peak in three years before running into trouble waters in 2004 when her share price crashed to less than five dollars following a financial scam. It regained some ground since 2013, rising to above 25 dollars with recent growth boosting optimism of further improvement in her fortunes by analysts.

Japanese Yen Remains Bearish Against US Dollar

By Taye Obateru
The Japanese Yen continued its bearish trend against the United States Dollar in the second straight week oscillating between 124.38 and 124.41 as at Friday morning.
The dollar/yen pair traded 0.11 per cent higher scillating in a 20 pips narrow range.
The continuous gain of the dollar against the yen is hinged on positive United States fundamentals which make traders to favour the dollar against the yen.image image image
With the expected positive report on the May’s nonfarm payrolls by the US Bureau of Labour Statistics due to be released later Friday, market watchers predict that the upward trend of the dollar against the yen might increase to 124.69 and 124.93 in the weeks ahead.
The market volatility is also expected to be impacted by the on-going Greek negotiations especially with the latest reports that it plans to bundle debt repayments by June ending.
The rise in volatility portends downside risks for the dollar/yen, according to Eric Theoret, a currency strategist at Scotiabank who saw the trend as a response to sentiments relating to the instability in bond and similar factors.
“JPY is flat, consolidating within a narrow range for a second consecutive session, with limited movement in response to BoJ Gov. Kuroda’s speech in which he maintained a focus on longer-term policy objectives.

“USDJPY short-term technical bullish to neutral-momentum signals are fading and the RSI is flirting with a break below 70. USDJPY has been unable to break back above Tuesday’s high near 125 and appears set to test its 9 day MA at 123.74, beyond which we see limited support until 121.50”, he explained.
Other market experts predict that the relative dynamics would continue to exert on the yen with projections of a fluctuation between 120 and 125 in the last two quarters of the year and possibly even weaker in 2016.
Scotiabank Foreign Exchange Outlook, for instance, said the expected implementation of aggressive monetary stimulus by the Bank of Japan could prompt competitiveness among other international currencies.
It noted that despite the moderate recovery in the Japanese economy which saw a 0.6 per cent increase in real Gross Domestic Product (GDP) in the first quarter of 2015, the variance between consumer outlays and production, muted investment and government spending gains, as well as, the effect of the net exports on overall growth remain challenges likely to sustain the yen’s bearish run.
However, there is a call for caution in predicting a continuous slide in the value of the yen to the dollar as other factors are likely to moderate the impact of other market fundamentals.
An efxnews team analysis published on Thursday speculated that those looking into a further sharp yen decline in the coming weeks “may be disappointed”.
“While further widening in yield differentials and/or gains in Japanese stocks could have some bearing on USD/JPY, there are a number of countervailing factors that would limit the decline”, the report said adding, “even if the current USD move extends further as we expect, it doesn’t necessarily mean that USD/JPY will move with it.”
Former Japan’s Vice Finance Minister, Eisuke Sakakibara shared this sentiment, noting that the Bank of Japan’s acceptance of yen’s fall and the Federal Reserve’s tolerance for dollar strength are wearing thin.
Further sharp weakening of JPY is also reported to be unpalatable to Japanese officials as it appears already very cheap based on current valuation matrics.
The yen weakened past 125 per greenback for the first time in 12 years this week and market watchers predict a return to lower levels around 123 before the resumption of an uptrend.