Archive for the ‘Business’ Category
JACKSON, Wyo. May 10 (Reuters) – The Federal Reserve should
scale back U.S. bond purchases to reduce the risks of continuing
to expand its balance sheet, a senior central banker said on
Friday, noting that the Fed’s last statement explicitly stated
it could vary the pace of buying.
Kansas City Fed President Esther George, who has been the
sole dissenting vote against the policy at every meeting this
year, acknowledged that the markets paid most attention to the
prospect of the Fed boosting the pace of purchases.
“But the statement also allows for decreases,” she told the
Wyoming Business Alliance during a luncheon speech. “So it is my
hope, as my colleagues and I continue to discuss these issues
and consider what is happening in the economy, that that
opportunity will be there and we can begin to make this exit.”
The Fed on May 1 voted to keep buying bonds at a monthly
pace of $85 billion, but tweaked the statement announcing this
decision to spell out it was “prepared to increase or reduce
the pace of its purchases to maintain appropriate policy
Fed officials, including Chairman Ben Bernanke, had stated
this on previous occasions, but inserting it into the statement
gave it greater weight in the eyes of Fed-watchers.
Recent mixed signals on the U.S. economy, and particularly a
decline in a measure of inflation which the Fed watches closely,
had led to speculation the U.S. central bank might be ready to
buy even more bonds as extra insurance to keep the recovery on
U.S. growth picked up to 2.5 percent in the first quarter at
an annual rate, from 0.4 percent in the previous three months,
and added an unexpectedly solid 165,000 new jobs in April while
unemployment edged down from a still-lofty 7.5 percent.
Inflation, however, which the Fed aims to keep near 2
percent, is only half that pace on its preferred gauge, the PCE
price index. Some warn this is dangerously low and could risk a
damaging deflationary spiral if the economy weakened, though
market-based measures of future inflation have remained well
above 2 percent.
George was wrapping up a tour of local businesses and
communities in Wyoming, a state which has benefited from robust
energy markets, which dominate industry in the region.
She said she expects U.S. growth to run around 2 percent for
the year, and noted that job creation had averaged 200,000 per
month over the last six months, a level which would begin to
reduce slack in U.S. labor markets.
Growth had faced a headwind, notably from tax hikes and
automatic cuts in government spending inflicted because of the
failure of lawmakers in Washington to agree on steps to reduce
the deficit. But this fiscal drag will be felt mainly in the
second and third quarters, she said, and will then begin to
The Fed has held interest rates near zero since late 2008
and bought around $2.7 trillion worth of bonds and has vowed to
keep rates ultra-low until the jobless rate reaches 6.5 percent,
so long as the outlook for inflation stays under 2.5 percent.
George, one of the Fed’s more hawkish officials, also said
she favored taping bond purchases because she worried that
continuing to expand the balance sheet could cause future
financial instability and quickening inflation.
In particular, the prolonged period of near-zero U.S. rates
has already caused investors to “reach for yield,” exposing them
to significant risk when rates begin to rise as the Fed starts
As a result, U.S. policymakers must make a very careful
policy transition to avoid spooking markets, and George made
plain that she viewed this as a tricky challenge to successfully
“My concern is we do that in a fashion that does not create
sharp increases in rates, backing up mortgage rates, when we
announce that we’re going to stop bond purchases (or) we are
going to adjust those in some way.”
By DENNIS NISHI
Lots of grumpy customers take potshots at companies in forums, review sites and social networks. But what happens when a rival makes anonymous digs at you?
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Experts say these situations don’t come up often, but when they do, they need to be handled with an especially light touch. Rivals may be trying to draw you into a nasty public fight that could alienate your customers. Their advice: Avoid those kinds of showdowns, and don’t try to be sneaky by posting anonymous comments of your own. Both approaches are likely to backfire.
Here’s the smart way to handle the situation.
Be alert for signs a rival is hounding you.
In most cases, they’ll simply cut and paste the same messages across multiple online venues. If they don’t do that, they might use similar phrases from site to site, as well as the same links or photos. On forums, they might show up as a collusive gang of brand-new posters, without a track record on the site.
Take your suspicions to site administrators.
Creating a fake identity for deceptive purposesâsockpuppetingâis against the terms of service at most forums and review sites, and most administrators will be willing to work with you. If the overseers can trace the posts back to a rival’s Internet-protocol address, you can ask them to remove the posts, shut down fake member accounts or evenâin extreme casesâblock the IP address.
Once the posts are gone, follow up on forums to dispel any lingering suspicions.
You might provide company experts, for instance, who can clear up false claims. This is a vital step, since many forum messages will keep coming up in Google
searches, especially when specific terms are mentioned. If you respond after the fact, you can get the truth on record.
If any of the attacks gain traction with concerned customers, supply a response in a Q&A on your website or social-network page.
But don’t call attention to the false claims by referring to them directly. For instance, if a rival wrote falsely that your products are made in China, just make a point of saying that your goods are made in the U.S.
Whenever you counter claims, keep your tone helpful and neutral.
Don’t be as nasty as the company that slammed you. Discussion sites can be very close-knit places with peculiar social dynamics. If you come in and sour the toneâparticularly if you seem to have an agendaâusers will get turned off.
Before you run into trouble, establish a presence on forums and maintain goodwill there by answering questions without trying to give users a hard sell. If you build loyalty, users will be suspicious of random attacks on you and stick up for the company.
Mr. Nishi is a writer in Los Angeles. He can be reached at email@example.com.
A version of this article appeared April 29, 2013, on page R5 in the U.S. edition of The Wall Street Journal, with the headline: Pick Your Battles.
Mamas, let your sons grow up to marry female subsea petroleum engineers.
That is the advice Bob Dudley gives parents (though we’ve converted it to Houston vernacular). The oil and gas boom is real. It will last decades. Young people, especially young women who make up a large share of college graduates, would be smart to get on the bandwagon, says Mr. Dudley, who runs oil giant BP
â”they will have phenomenal opportunities.”
BP? If you follow the news, you might have thought that BP, rather than creating jobs, was getting ready to be pulled back into the hole it has been trying to escape ever since the disastrous Deepwater Horizon spill of three years ago. Mr. Dudley is in Houston (from London, where BP’s global headquarters remains) to attend a big annual energy conference. The meeting, sponsored by Dan Yergin’s Cambridge Energy Research Associates, is a one-stop canoodling opportunity for CEOs, energy ministers and deal makers. BP finds itself in an odd positionâcaught between the industry’s new golden age and America’s doghouse.
Mr. Dudley is bullish on oil exploration in the fracking age, the ultra-deepwater age, the oil-sands age. Now if his company could just get out from under the Macondo spill and the Gulf States’ (especially Louisiana’s) apparent desire to use BP as a bottomless cash register. Last month, a trial began in New Orleans that could saddle the company, in addition to $40 billion already spent or committed, with many additional billions in penalties if the company is found guilty of “gross negligence.” Waiting in the wings are further claims from Louisiana and other states, who say they’re owed as much as $34 billion for lost tax revenue and damage to property.
BP, since the spill, has become a much more American company. Its CEO is American, born in Queens, and grew up in Mississippi and Illinois. While some advised the company to remove its assets as far as possible from the U.S. judicial system, BP did the opposite. It doubled down on the risks and rewards of drilling in the Gulf of Mexico, committing to spend an average $4 billion a year for the next decade.
The company is spending billions and hiring thousands to upgrade its remaining “northern tier” refineries in Indiana, Ohio and Washington state to handle a gush of heavy crude from Canada’s tar sands. BP has started drilling in Ohio’s Utica shale. “Who would have thought 10 years ago we would be exploring in northeast Ohio,” says Mr. Dudley. “This is amazing stuff.”
And because oil exists under the North Sea and off Norway, BP is looking off Nova Scotia, where it recently scored drilling rights. Mr. Dudley believes the promise extends down the eastern coast of the U.S. The reason is plate tectonics. “People have realized that the source rocks, which is where hydrocarbons are generated, on the western Atlantic side are the same as on the eastern.” Oil in offshore Angola has meant oil in offshore Brazil; oil off Northern Europe likely means oil off the eastern shores of North America.
But there’s a problem. These opportunities compete with claimants who want to keep milking the spill. Louisiana Gov. Bobby Jindal was the key holdout from a settlement that would have made the current trial unnecessary. Mr. Jindal long ago unleashed his coastal adviser, Garret Graves, to tout claims publicly that have led Louisiana voters to expect a sum billions greater than the $16 billion in fines and penalties that the Obama Justice Department reportedly was proposing as a settlement just before the trial got under way.
BP, which has reserved large sums for other claims, has put nothing aside against Louisiana’s claims for lost tax revenue because the company apparently considers these claims not worth much. Louisiana weathered the late recession better than most other states precisely because of BP’s huge cleanup and compensation spending.
“We’ve settled a lot,” says Mr. Dudley, ticking off agreements with federal agencies, prosecutors and private litigants. “I think we’re known as a company that’s looking for a reasonable settlement. But if the demands are not tethered in reality, we’ll go through the court system.”
Most of all, Mr. Dudley seeks finality, not agreements that leave parties free to keep coming back for more.
Mr. Dudley delivers all this without a trace of angst or anger. A product himself of Hattiesburg, Miss., he appreciates the damage done to the Gulfâbut also the benefits BP brings in jobs and investment.
He took over for British-born Tony Hayward, whose public performance during the spill was not a PR masterpiece. Mr. Dudley, who came to the British company via its 1998 Amoco acquisition, previously was newsworthy for his role in managing BP’s fabulously lucrative yet surreal joint venture with four Russian oligarchs. At one point, he was obliged to flee the country lest he become target for some of the more aggressive forms of Russian business persuasion.
Mr. Dudley, who looks a bit like the actor Michael Moriarty, without the hangdog foreboding, has made good use in his career of a thick skin. In the late 1970s, after studying chemical engineering, he joined the oil industry because, he says, “All I really wanted to do at that age was see the world.” Some friends stopped talking to him because of his career choice.
On his first day of work at Amoco in Chicago, he had to walk through a Jane Fonda rally. “I was given a little ‘Stop Big Oil’ button, which I wore up onto the floor until the first person I met said, ‘Uh, You should take that off.’ “
Many would have guessed that BP would be willing to pay just about any sum to put the Macondo spill behind it. This appeared to have been the company’s attitude too, when, in advance of any legal proceeding, it put up a $20 billion trust fund to compensate victims. Lately, though, the company seems to have awakened to political reality. As long as politicians sense BP’s willingness to pay, BP will have to keep paying. The company undoubtedly hoped its lean-forward approach would pay dividends by now. Instead it finds itself gently trying to correct a notion that, if BP is doing OK financially, it must mean the legal system hasn’t punished BP enough.
About all this, though, Mr. Dudley will only tell me that “justice,” not “affordability,” should be the measure of any final settlement.
BP was born as the Anglo-Persian Oil Co. in 1909, and even at the time of Macondo still accounted for one pound out of every six received by British subjects as corporate dividends. Yet faced with an existential crisis, BP discovered its greatest strengths were bound up with its worst headachesâRussia and America.
The TNK-BP joint venture in Russia that Mr. Dudley ran was a stupendous successâBP invested $8 billion and received $19 billion in dividends, plus another $28 billion in estimated value when a deal closes this month to sell the venture to Rosneft. Another CEO would take the money and run. Not Mr. Dudley. After some false starts and pratfalls, BP cut a deal that will leave BP owning 20% of state-controlled Rosneft, which will become the world’s largest publicly traded oil company.
“You should see the map of TNK and Rosneft assets,” Mr. Dudley tells me. “They’re peppered across the country right next to each other.” Great industrial efficiencies are ripe to be realized when the two start “hooking their pipes together.” Mr. Dudley says Russian President Vladimir Putin personally assured him: “We want you, BP, and other companies that are partnering with Rosneft to help increase the value of Rosneft” toward the company’s eventual privatization.
Cynics might hear famous last words but the BP chief is convinced that Russia has changed since the wild-east 1990s and that the “sense of unease” that minority shareholders once felt is no longer appropriate. Then again, more than a few international CEOs probably would also look upon BP’s travails in the U.S. as a reason not to invest in America too.
Mr. Dudley obviously does not agree, whatever his frustrations with the legal system. He goes out of his way to praise the “stable and predictable fiscal regime” established by the U.S. government for drilling in the Gulf of Mexico, which allows BP to undertake massive investments with confidence. He sees a great future for Alaska if the state will reform a problematic tax codeâand appears confident that Alaska politicians understand their interests clearly and will meet industry halfway.
Yet he’s also befuddled by America’s Hamlet act over the Keystone XL pipeline, which would help unlock Canada’s energy bounty. The decision has been so “shocking” to Canadians, Mr. Dudley says, “because it’s effectively bottled up their national resource,” forcing the country to accept below-market prices for Alberta crude. The damage is likely permanent: Canada “now will build pipelines and some of the oil will be shipped to Asia. Canada has realized they can’t depend on one customer.”
Though the “Beyond Petroleum” rhetoric of BP’s former chief, Lord Browne of Madingley, has been shelved, Mr. Dudley does not dismiss climate worries. On a wells-to-wheels basis, he points out, Canada’s oil sands aren’t worse for the environment than Mideast crude shipped to the U.S. on a supertanker. Still, the day is gone when BP wanted to be a leader in the carbon discussion. “We need to focus on other problems right now,” he says.
Mr. Dudley has even less truck with “peak oil” pessimism. BP figures the industry will deliver an additional 16 million barrels per day by 2030. In many older fields, technology is rejuvenating production. “It’s like wringing paint out of a paint brush. You never stop getting paint out of a paint brush.” Resources long presumed to be unproducible are now being tapped or eventually will be through fracking, horizontal drilling and a BP-led project to develop materials and equipment capable of drilling at greater ocean depths.
“In most of the world,” adds Mr. Dudley, “if people are living on the land and there’s hydrocarbons underneath it, they will fight it.” America is different. Private ownership of mineral rights, along with a “lattice of pipelines” allowing new resources to find their way to market, have given the U.S. its big head start. But technologies and techniques developed in America will eventually be employed everywhereâespecially in Russia and China, where governments can issue diktats and make things happen quickly. “If the rocks are there, they’ll do it.”
Which brings us to “the great crew change.” Mr. Dudley and fellow industry veterans speak of a generational hole in their ranks. In the late ’80s and ’90s, nobody went into petroleum engineering, so now companies must rely on a cadre of aging graybeards plus an influx of newbies who can’t come onstream fast enough.
“When I go to Angola and around the world, there are many fantastic young women going into this industry. Employment is difficult in many places in Europe and [the U.S.], but anybody who goes through petroleum engineering, chemical engineering, any of these skills, there will be jobs for them.”
If Mr. Dudley has anything to say about it, many of those jobs will be with BP even before it has finally and honorably dealt with the legacy of the worst oil spill in history. Mamas, you have your marching orders.
Mr. Jenkins writes the Journal’s Business World column.
A version of this article appeared March 16, 2013, on page A11 in the U.S. edition of The Wall Street Journal, with the headline: Three Years After the Spill, BP Gets Bullish.
The cost of medical care for pets is rising as fast as it is for humans, and that’s helping to spur sales of pet insurance.
Pet owners are able to choose from a rapidly growing array of policies, featuring everything from high-deductible designs to coverage of alternative-medicine treatments like acupuncture. Some pet policies focus on accidents and illness, while others include wellness checkups and shots. And some things that traditionally weren’t included in pet insurance, such as hereditary conditions, are now paid for under many plans.
Consumers need to be careful, since many pet policies can be as confusing as coverage you buy for yourself. Pet insurance often places strict limits on how much it will pay for particular procedures. And policies can have tricky designs that can leave consumers with big out-of-pocket bills for their animals. Premiums vary from around $10 a month to $75 a month, depending on factors including the richness of the plan, your location and your animal’s breed and age.
This year, pet owners are expected to spend around $12.2 billion for veterinary care, up from $11.1 billion last year and $8.2 billion five years ago, according to the American Pet Products Association. Complex procedures widely used for people, including chemotherapy and dialysis, are now available for pets, and the potential cost of treating certain illnesses has spiked as a result.
Donna Oliver, in Austin, Texas, has shelled out about $32,600 since 2007 to care for two dogs who passed away earlier this year. Marley, a Labrador, got stem-cell therapy for his arthritis, surgery on his windpipe to deal with a condition that was choking off his breathing, and, at the end, medication to ease the pain of advanced cancer. Maddie, a corgi mix, suffered from Cushing’s disease, a hormonal disorder, and got treatment including surgery to heal ulcers on her corneas.
“It does cost a lot if you want to do the right thing by them,” says Ms. Oliver, a 38-year-old customer-service manager, who says she is still paying off the credit-card bills. To avoid a similar situation with her three remaining dogs, Chelsea, Jasmine and Runner, she recently bought insurance for them.
One Million Insured
Currently, around a million U.S. pets are insured, according to the North American Pet Health Insurance Association. The number is growing about 10% a year, the group estimates, though that still represents just a tiny fraction of all pets.
Around 90% of the insured are dogs, with about 10% cats and a small number of other animals. The biggest U.S. pet-insurance company, Veterinary Pet Insurance, or VPI, a unit of Nationwide Mutual Insurance Co., says it has written policies for hedgehogs, snakes, turtles and geckos, among other creatures.
Karen Becker, an art-school program director in Baileys Harbor, Wis., has insured her African grey parrot, Darwin, and blue and gold macaw, Big Bird, since she got them in 2001 and 2008, respectively. Treatments for birds can be at least as pricey as those for larger animals, she says, and the parrots may live for decades. Ms. Becker, 52, says she doesn’t want financial concerns to guide decisions about her pets’ care: “I want it to be because of quality-of-life issues.”
If you’re considering pet insurance, start by shopping around. It’s best to start when the animal is still young and healthy, since new policies won’t cover pre-existing health conditions and some insurers won’t take on pets over a certain age.
The industry has grown in recent years, with new competitors such as Pets Best LLC, Petplan Inc., Embrace Pet Insurance Agency LLC and Trupanion, a unit of Vetinsurance International Inc., entering the market. In the past, a number of startup pet-insurance firms have gone out of business, so it is worth checking with your state regulator about companies’ age and record.
Consumers may also be able to buy pet insurance through their workplace, which can often be cheaper than buying on your own. Around 19% of employers offer the policies as a voluntary benefit, according to a survey conducted this year by the International Foundation of Employee Benefit Plans. That includes firms such as Colgate-Palmolive Co. and Chipotle Mexican Grill Inc.
To learn about policies, you can start with overview Web sites such as petinsurancereview.com, dogtime.com and petinsuranceguideus.com. For definitive information, though, you should click through to the sites of the individual pet insurance firms, which can offer premium quotes.
Once you’ve narrowed down the list, get full policy documents, which are often posted online or available through a phoned request. Use those, in combination with phone calls or emailed inquiries to the companies, to delve into the details of the plans.
Tips on Buying Pet Insurance
If you’re considering pet insurance, here are some resources to get you started
Here are some sites that include overviews:
Here are industry and veterinary group sites that have background:
- American Animal Hospital Association
- North American Pet Health Insurance Association
- American Veterinary Medical Association
Here are sites for pet insurance companies:
You will want to check how the company will raise premiums as you renew the policy. Often, they go up with age and veterinary inflation. They may also be linked to your animal’s claims historyâso a pet with a lot of health issues in a given year could see a heftier increase the following year.
You also want to take a close look at what you would have to spend out of your own pocket if your pet got injured or ill. Pet-insurance firms tend to limit what they reimburse for various treatments. And you’ll generally have to pay the bills up front, then seek reimbursement from the insurer.
When Elizabeth Pannill’s Labrador, Crystal, needed back surgery a few years ago, the insurance covered less than half of the nearly $4,000 total bill. Then, when Crystal got a tumor removed from her rib earlier this year, spending 10 days in an animal-hospital intensive-care unit, the plan paid about $1,700 of the nearly $5,500 total, which already included a professional discount for Dr. Pannill, a veterinarian who isn’t currently in clinical practice.
Dr. Pannill says that despite the limited payouts, she also has purchased insurance for two other dogs and a pair of cats. “It just gives you a little peace of mind that you would have some financial help when an illness came along,” says the 56-year-old, who lives in Staples, Texas.
VPI pays flat amounts for various treatments. Other pet insurers pay a percentage of vet bills, although some limit payouts to a percentage of what they consider “usual and customary” fees, which may be lower than what vets actually charge.
As with insurance for people, consumers need to look closely at how the out-of-pocket charges on pet insurance are structured. Pet plans offer a range of deductibles, some as high as $1,000 a year. These may be levied on an annual basis, or charged anew for each illness or incident.
Congenital conditions, behavior modification and pregnancy-related costs are often not included, in addition to pre-existing health issues. VPI is beginning to introduce a cat-focused plan that offers limited payouts for certain common feline issues, like chronic kidney failure.
At least two companies, Embrace and Petplan, offer coverage of alternative treatments such as acupuncture and chiropractic.
Many policies now include coverage for hereditary conditions. It’s often worth paying for this, particularly for pure-bred dogs. Each insurer has its own lists of genetic illnesses, and they vary somewhat, says John Albers, executive director of the American Animal Hospital Association.
Looking Out for Your Pet
Some things to consider when shopping for pet insurance:
|QUESTION||WHAT TO CHECK FOR|
|On what basis does the policy pay claims?||Insurance plans may pay flat amounts according to a benefits schedule. Or they may pay a percentage of what the insurer considers “usual and customary” fees, or a percentage of the vet’s actual bill. “Usual and customary” may fall short of vets’ actual charges. If the payments are based on the actual bills, check for any exceptions in the fine print.|
|What does the policy cover?||Typically, policies start with “blackout” periods during which nothing is covered. They also don’t include pre-existing health issues. Many don’t cover congenital, or inborn, conditions, behavioral issues or pregnancy costs. Some include hereditary conditions, while others don’t.|
|What’s your out-of-pocket cost going to be?||Deductibles may be paid on an annual basis, or levied anew each time your pet gets sick or injured. Total benefit payouts may be capped on a per-year basis or a per-incident basis.|
|What happens when you renew the policy?||Your premiums might rise based on the age of your pet, veterinary inflation, or possibly the claims filed for your pet. You’ll also want to know if chronic illnesses the pet develops while it is insured will be covered after you renew the policy, or if they will be considered pre-existing conditions and thus not included going forward.|
Write to Anna Wilde Mathews at firstname.lastname@example.org
The Department of Municipal Affairs organizes real estate diploma course for the Municipal System Employees
Published May 8th, 2013 – 10:47 GMTPress Release
In a move aimed at enhance staff development and their professional capabilities and skills, the Department of Municipal Affairs (DMA) organized a diploma training course for employees in the Land & Property Management Sector in the DMA and the Emirate Municipalities, Abu Dhabi City, Al Ain City & the Western Region.
The course was presented by the Institute of Dubai real estate and covered different areas in the real estate sector including the international best practices used in the management process of this vital sector including best practices applied in the marketing, sales and leasing operations.
At the end of the five day training course, His Excellency Dr. Abdullah Ghareeb Al Baloushi, Executive Director of the land & Property Management Sector at the Department of Municipal Affairs handed over certificates for participants who stressed the importance of this course in promoting the principles of working in the real estate sector and the adoption of best practices in the management of real estate market,
The course comes in the context of the continued pursuit of the Department of Municipal Affairs to regulate the real estate sector and improve services provided by the municipal system to the public and investors in one of the most important sectors contributing to the economic development taking place in the emirate of Abu Dhabi.
Japan’s stock market has been on a tear, with the benchmark Nikkei index posting its best April in two decades to cap nine straight months of gains. The rally, fueled by the new government’s stimulus policies, has been a boon for short-term investors. But could Japan, with two decades of economic stagnation behind it, again be attractive for long-term investors as well?
Skeptics abound. David Breuhan, a portfolio manager at Bloomfield Hills, Mich.-based Gregory J. Schwartz & Co., dismisses the rally as a result of a government “sugar shot” and warns the long-term-minded to stay away. But fund investors are plowing in — to the tune of $10.4 billion over the six months through April 24, according to Lipper. And some international fund managers have gradually been adding Japanese stocks. The Columbia Pacific/Asia
fund (ticker: CPAWX) has increased its Japan holdings to 35% of the portfolio, from 29% in recent months, says manager Daisuke Nomoto.
The optimism about Japan flows from the December election of Prime Minister Shinzo Abe, swept into office after promising economic shock therapy. “Abenomics” includes aggressive monetary easing, stimulus spending, and a push for reforms.
Much attention has focused on plans to weaken the yen and nudge inflation to 2%. Campbell Gunn, who runs the T. Rowe Price Japan
fund (PRJPX), hopes the falling yen creates a tail wind for holdings like Toyota Motor
(TM) already up 23% for the year. Fund managers say that real-estate shares and banks are good inflation plays. Sumitomo Mitsui Trust Holdings
(8309.Japan), one of Nomoto’s larger holdings, has returned 63% this year.
The falling yen is a concern for investors in U.S.-based funds since returns are diminished when translated back into dollars. Hedging strategies are sometimes used to address that risk, but many fund managers say the strong returns from Japan outweigh the currency drag.
As investors flooded in, stocks have risen to what Gunn describes as fair levels, with the Nikkei’s price-to-current-earnings ratio around 14. Finding good values from here is getting tougher, says William Kennedy, manager of the Fidelity International Discovery
fund (FIGRX). “We’ve had the beta rally, but there’s still a lot of alpha to generate by getting earnings [prospects] right,” he adds.
Japan continues to face serious risks. It’s burdened with an enormous debt. Its population is graying rapidly, and there are too few workers to support the elderly. And some worry that letting the inflation genie out of the bottle is courting disaster. Charles Lewis Sizemore, chief investment officer at Sizemore Capital Management in Dallas, warns of hyperinflation that will “crush Japanese equities.” He, like Breuhan, advises long-term investors to give Japan a wide berth.
BUT SOME FUND MANAGERS see a solid case for Japanese stocks.
Says Taizo Ishida, lead manager of the Matthews Japan
fund (MJFOX): “I would argue that fundamentals of Japanese companies are even better today than five years ago, since they went through very tough times mainly because of the strong yen.” Kennedy adds that Abe’s program is much more than monetary stimulus. It includes increasing the number of female workers, developing tax-free zones, and lowering corporate taxes. “Abe is doing a lot of structural reforms, not just throwing money at the problem,” he says.
If you’re invested in Japan, keep an eye on Abe’s progress in areas like cutting business taxes and loosening immigration restrictions. His results may determine whether the country’s economy — and stock market — thrive after the stimulus wears off.Â
For American Express (ticker: AXP), it was a matter of making official its intention, disclosed in March, to raise its payout. It will disburse 23 cents a share quarterly, up 15% from 20 cents. When the travel and financial-services giant hiked its dividend by two cents in March 2012, it marked the first increase since November 2007.
American Express stock, a Dow Jones industrial component, set a 52-week high Friday above $71, so it now yields a modest 1.3%. Dividends have been paid without interruption since 1870. The new payout will put an additional $132 million in investors’ accounts annually. The company is moving ahead with plans to repurchase enough common shares to return up to $3.2 billion to holders during the rest of 2013 and another $1 billion in 2014′s first quarter.
In announcing a 2% advance last month in first-quarter net over the year-earlier total on a 4% revenue gain, CEO Kenneth Chenault said that the company is off to “a strong start in 2013, thanks to our ability to grow revenue in a slow-growth economy, control expenses, and maintain a strong balance sheet.”
For its part, IBM (IBM) enhanced its quarterly dividend for the 18th year in a row, raising it 12%, to 95 cents a common share from 85 cents, which is worth an extra $443.5 million to stockholders annually. This is the 10th consecutive year of double-digit boosts, and Big Blue has increased its payout by more than 600% since the start of 2000. Continuous dividends date back to 1916.
IBM also added $5 billion to its stock-repurchase program. That’s atop the $6.2 billion remaining at the end of March from a prior authorization, and directors will consider upping the buyback ante again when they meet in October. The Armonk, N.Y., company has cut its share count by one-third over the past 13 years. Since 2000, it has returned more than $150 billion to investors through cash payouts and share repurchases.
The dividend and buyback were welcome news, in contrast to IBM’s report that first-quarter profit had dropped 1% on a 5% revenue decline. The tech giant blamed a disappointing performance by its sales force. Another Dow Jones industrial stock, Big Blue set a 52-week high of $215.90 on March 15. It was recently quoted at about $205, for a 1.9% yield. Barrons.com income-investing editor Michael Aneiro noted in an April 30 blogpost that IBM’s bonds due in August 2022 were yielding 2.314%.
Moody’s Investors Service senior vice president Richard Lane says that IBM’s Aa3 senior unsecured credit rating and stable outlook remain supported by its strengthening business profile, which includes “a growing emphasis on higher-margin software and services businesses (88% of total pretax profit) in lieu of more commoditized hardware offerings.”
PepsiCo (PEP) sweetened its common dividend for the 41st consecutive year, at an additional cost of $185.5 million annually. The new quarterly will be 56.75 cents, up three cents, or 5.6%. Yield: 2.7%. Dividends have been paid since 1952. (Archrival Coca-Cola
[KO] hiked its quarterly in February to 28 cents from 25.5 cents, also for a 2.7% yield.) Since 2002 began, PepsiCo has returned more than $58 billion to stockholders via dividends and share repurchases. This year’s expectation: upward of $6 billion.
Purchase, N.Y.-based PepsiCo earned 69 cents in the first quarter, down from 71 cents. However, excluding the effect of Venezuela’s currency devaluation, commodity hedges, and restructuring charges, the 97-year-old maker of sodas, Tropicana juices, and Frito-Lay snacks, to name a few of its products, earned 77 cents a share, helped in part by price increases. That topped a FactSet analysts’ poll forecasting 70 cents. Revenue also surpassed estimates, growing 1%, to $12.58 billion. PepsiCo set a 52-week high of $84.32 on April 23 (Coke hit a 12-month high of $42.96 the same day).
BEATING WALL STREET’S first-quarter consensus profit estimate by 19 cents a share, for a 52% jump on a 39% sales surge, gun maker Sturm, Ruger
(RGR) announced an increased quarterly common dividend of 49 cents, up from 40.4 cents. The company pays a variable dividend based on the size of its earnings. At its current price of about $51, the stock yields 3.9% with the new payout.Â
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* S&P 500 coming off three days of gains, record close
* S&P 500 coming off three days of gains, record close
* Investors looking for catalysts after rally
* Apple shares dip after gaining for 3 days
* Indexes: Dow up 0.2 pct; S&P up 0.1 pct; Nasdaq off 0.2
By Angela Moon
NEW YORK, May 7 (Reuters) – U.S. stocks were little changed
on Tuesday following yet another record close on the S&P 500 as
investors booked profits from a recent rally in the technology
The tech sector, which was among the gainers in early
morning trade, turned negative with a decline in Apple
weighing heavily on the Nasdaq index.
First Solar and Netflix shares were also
down, weighing on the tech-heavy index.
The S&P has risen for three straight sessions, extending its
rise for the year to more than 13 percent and eclipsing all the
gains made in 2012.
The gains so far have come on strong corporate results and
accommodative policies from the Federal Reserve, two factors
that may now be priced into markets. Last week’s jobs report was
unexpectedly strong, helping to fuel market gains.
“Every rule needs an exception. The age old mantra that says
‘Sell in May and go away’ is at least giving investors a good
opportunity to set up positions in the event this year it
continues to hold true,” said Andrew Wilkinson, chief economic
strategist at Miller Tabak & Co in New York.
“Naturally, it is early days for the month of May, yet we
continue to invite fate by suggesting that 2013 will be the
exception that proved the rule.”
Equities this year have gone without a sustained pullback as
investors use any market decline to add to positions. Many
analysts expect markets to trend higher, but some see a
near-term pullback, citing a lack of positive catalysts and
mixed economic data.
The Dow Jones industrial average was up 33.98 points,
or 0.23 percent, at 15,002.87. The Standard & Poor’s 500 Index
was up 2.24 points, or 0.14 percent, at 1,619.74. The
Nasdaq Composite Index was down 2.03 points, or 0.11
percent, at 3,389.33.
On the Nasdaq, Apple shares fell 1.2 percent to $455 in
volatile trading, after rising for the past three sessions.
First Solar shares were off 8.5 percent at $43.69 after
reporting quarterly report late Monday. Netflix shares were off
1.4 percent at $207.57.
Both Fossil Inc and DirecTV reported
earnings that surged past expectations. Fossil jumped 8.4
percent to $107.32 as one of S&P 500′s top percentage gainer,
followed by DirecTV, up 3.8 percent to $60.18.
Earnings have largely been positive, with 68.5 percent of
S&P 500 companies surpassing estimates so far. At the same time,
revenues have been disappointing and second-quarter estimates
have fallen as outlooks remain more negative than positive.
Recent gains have come on strength in technology and banking
share, two groups that are closely tied to the pace of growth.
“If this rotation into cyclical stocks from defensive ones
continues, that will be a very healthy sign for us,” said Art
Hogan, managing director at Lazard Capital Markets in New York.
A second proxy advisory firm has said that JPMorgan Chase &
Co should have an independent board chairman over its
chief executive officer and should have some new directors. The
stock was up 0.5 percent at $48.43.
In this edition of my column I would like to put lumber into the spotlight. A commodity like oil is a good indicator of the state of the economy, but perhaps the price developments of random length lumber futures can give us also a clue as to where the economy is heading. Random Length Lumber futures are traded on the Chicago Mercantile Exchange (CME), with the ticker symbol LB. A graph of the price development is shown below.
The futures are traded in dollars per 1,000 board feet (mbf). One Random Length Lumber futures contract on the Chicago Mercantile Exchange has a lot size of 110,000 board feet. That is information you should be aware of once you start to trade them. Next, always be aware of the margins. The current margins at CME are: Initial Margin $1816.00 and Maintenance Margin $1,210.00 per contract. The (minimum) tick size is 0.10 ($11 per contract), thus 1 full point fluctuation means a profit or loss of $110 per contract.
Lumber futures rally
After hitting a low in November, CME lumber futures advanced sharply on firming cash prices and support from the latest monthly housing starts data. Market participants stated that improved buying interest in cash markets set the market in motion for a rally.
Also the (US) October housing starts were better than expected, which were down 0.3% month on month albeit above the expected -8.1%. Housing (building) permits rose 10.9%, the highest since March 2010.
Traders said that short covering also aided the gains. The January futures contract hit a three-week high and closed up the daily limit of $10/1,000 board feet to more than $241.70. If lumber manages to construct a decent uptrend, this might indicate that the US housing market picks up again.
A bullish trading strategy
The chart of the CME group illustrates the rally from the $225 level towards $245. At this level we might expect resistance. Once it will be broken, technical analysis shows you an expected rally to the minimum target of $265. Although not going in a straight line, Lumber might rally to $300, which is the peak of September. That is why I look for a bullish strategy: for instance buying the futures or selling put options.
An alternative is to sell a call against one long future. For instance the Jan 250 call is traded @ 10.50 with $244 in the future. So, the maximum profit would be (250.00-244.00) + 10.50 = $16.50 (or 110×16.50= $1815.00 per contract).
On last Friday (18th of November), the Jan 220 put could be sold @ 7.30 (x110 = $803 received per contract). That means that (on expiration the break even level would be 212.70. In any case, I would cut the loss and reverse the bullish position if LB would break below the November-low of approximately $224.