Washington
Main Street Wins Over Wall Street
Obama To The Rescue With New Stimulus Proposal
Even as Japan approved $81 billion in stimulus money; reports in the U.K. and Germany showed manufacturing is still weak; ratings agencies warned about debt problems in Dubai and Greece saw its credit ratings downgraded to the lowest level in the Eurozone, world economists insisted that the Great Recession is over. An official declaration to this effect is expected to be made by the National Bureau of Economic Research shortly. But while economists are typically getting more optimistic, polls found evidence that the American public is getting more pessimistic
President Obama believes he has a rescue plan for that too. His new stimulus proposal will go towards projects aimed at ensuring that jobs’ growth “matches economic growth”. It will expand tax breaks for small businesses which have been hit hard by the drying up of credit over the past year; invest in infrastructure profits and give consumers rebates for making their homes more energy efficient. Obama also endorsed steps to extend unemployment insurance and extend Cobra, a programme that enables the unemployed to retain their health insurance.
Funds for the proposal would come from the $200 billion in unallocated bailout money. Fiscal watchdogs in his administration is, of course, not happy with the contours of the new proposal wanting to keep TARP funds dedicated solely for financial sector support. Any excess funds, they believe, could be used to pay down debt. However, in this round Main Street seems to have won over Wall Street.
New York
Wall Street Titan Frees Itself From Government Clutches
Bank Of America Repays Bailout Money
Amidst universal cheers, Bank of America Corp. paid back its $45 billion in TARP funds. It has been a long, hard journey not just in terms of the blow the bailout package took to its image but in the fact that to pay back the funds, Bank of America had to raise $19.3 billion in fresh capital. The Federal Reserve also requires the bank to increase equity by about $3 billion through asset sales. The Treasury continues to hold warrants to buy Bank of America common stock that the government demanded as part of the TARP investment.
Bank of America was among hundreds of banks that received taxpayer’s support through the government’s $ 700 billion TARP launched in October 2008. The bank received $ 25 billion dollars as part of the initial round of investments and a second round of $ 20 billion dollars shortly after it acquired the collapsing Wall Street investment bank Merrill Lynch. Bank of America’s exit from TARP will undoubtedly put pressure on other banks, that hold TARP funds, to announce exit plans of their own. Citigroup Inc., which accepted more than $50 billion, and Wells Fargo & Co. which accepted $25 billion, are the two largest banks by assets still in the government’s clutches.
By year end, the Treasury had received $116 billion in TARP repayments from American banks, which include the funds from Bank of America. It continues to forecast that TARP repayments will reach $175 billion by the end of 2010. The Treasury expects its fiscal year 2009 bank capital infusions to earn it a profit of $19 billion.
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Beijing
Government Attempts To Slow Property Market
Nationwide Real Estate Sales Tax Introduced
In a reversal of its stimulus policies, the Chinese government recently reintroduced a nationwide real estate sales tax in an attempt to reduce speculation and cool the bubbling property market after price rises accelerated across the country. This powerful signal to the market is the first concrete response from Beijing to growing fears that an unsustainable bubble has formed in the real estate market. Residential prices in China’s 70 largest cities rose nearly six per cent at the end of 2009 from a year earlier. Chinese banks extended up to Rmb10,000bn ($1,462bn) in new loans by the end of 2009, up from about Rmb4,000bn in 2008.
The new tax policy requires anyone selling a secondhand apartment or house within five years of its purchase to pay a sales tax of 5.5 per cent, extending the taxable period from the previous two years. It is intended to discourage “flipping” of apartments by speculators and will, in essence, return the market to the situation before the government introduced a series of preferential policies to stimulate the flagging property market.
The property market has been a driver of Chinese economic growth for much of this decade and the force behind such fast-growing industries as cement, steel, automobiles and home furnishings. Other stimulus-related policies, including smaller down-payment requirements and lower loan rates for first-time buyers, will remain in force for now.
Chinese leaders have also pledged to increase support for affordable low-end housing projects in big cities. Analysts say the government’s stimulus policies were helpful in reviving faltering property sales and prices but a more fundamental driver of potential bubbles is the rapid expansion of the country’s money supply, with ample liquidity finding its way into the equity and property markets.
Florida
Tiger’s Transgressions Threaten His Marketability
Will The Iconic Sportsman Survive The Storm?
As Tiger Woods announced his hiatus from professional golf following a sex scandal, questions were being raised as to the continued marketability of the iconic star. It took just two days after his well- chronicled car crash, reportedly following an argument with his wife, for Tiger Woods’ advertisements to be pulled off most American television channels. With golf traditionally being a conservative sport that attracts traditionalists, both as viewers and as backers, the world’s No. 1 golfer may face an uncertain corporate future. His transgressions, real or alleged, are certain to make sponsors very nervous. While most companies do have a morality clause, it is usually enforced because of drugs or criminal issues, but in a situation like this there’s a good chance that most companies will exercise their right to jump ship.
The 33-year-old was the highest-paid professional athlete in the last year, reportedly earning over $110 million. A large amount of this came, of course, from endorsements. Aside from Accenture which became the first firm to cut ties with the celebrity, Woods’ celebrity endorsement partners include AT&T, Procter & Gamble’s Gillette, Nike, Electronic Arts and Swiss watch maker TAG Heuer. Woods is credited with almost single-handedly ushering in the era of multimillion-dollar endorsements and lucrative appearance payments for athletes since going professional in 1996, becoming one of the world’s most marketable athletes.
However, while Woods may have retreated temporarily, bad publicity has not always meant an end to the earning power of sport stars. Even the legendary bad boy of golf John Daly found that his less than wholesome image paid dividends in 2005 when the American teamed up with restaurant chain Hooters, known for its scantily-clad waitresses, in what seemed a mutually beneficial arrangement. Of course his drinking problems were so severe that after he was found drunk outside a Hooters restaurant, the chain quietly relinquished their contract.
European golfing legend Nick Faldo too proved that everyone loves a winner. Despite two divorces and a number of well-documented affairs, sponsorship has never eluded him and he even captained the European Ryder Cup team in 2008. Even National Basketball Association star Kobe Bryant bounced back after he was charged with sexual assault in 2003.
The golfing world needs Tiger as much as he needs it. Ratings for tournaments dropped nearly 50 percent in the eight months he was absent in 2008-2009, as he recovered from knee surgery. In the course of the next few months, the world will watch and wait to see if the first sportsman to earn $1 billion weathers the storm or if despite losing some sponsors he finds new more lucrative revenue sources to exploit.
United States
Tech Titans Step Onto Each Other’s Turf
Google And Apple Battle It Out
Google Inc. and Apple Inc. have for long steered clear of each other’s turf. For years, the two giants focused on different parts of the tech market. While Google was dominant in Internet search, Apple starred in making computers and consumer electronics devices. Now the gloves are off as they indulge in a bout of shadow boxing. Both companies have, in recent months, attempted to acquire some of the same Silicon Valley start-ups and developing products. Both have won some and lost some.
Google was in discussions to acquire online-music company La La Media Inc. before Apple sealed the deal for $85 million. Apple then lost a mobile-advertising company AdMob Inc. that Google agreed to buy for $750 million. Apple also tried to buy AdMob which sells ads inside applications and has access to data about the mobile marketplace.
Google is developing an operating system that would run on computers that compete with Apple’s Macintosh machines. It has also released a Web browser that competes with Apple’s Safari. Phones using Google’s Android software are in competition with Apple’s popular iPhone. Google is also talking to handset manufacturers about building phones with more prominent Google branding and more preinstalled Google applications and is also getting more ambitious about digital music, an area where Apple’s iTunes has been dominant. It recently launched a music search and listening service with La La as one of several partners. With La La now being part of the Apple stable, the company is exploring adding a similar Web-based music offering to iTunes.
Both companies are, of course, cash rich. While Google has nearly $22 billion in cash, Apple has $34 billion. Both companies, too, are keen on making acquisitions while the country is coming out of the recession. In addition to AdMob, Google bought display-ad company Teracent Corp. and Internet-phone provider Gizmo5 Technologies Inc. as well as AppJet Inc., a maker of online collaboration software. Apple, on the other hand, has been exploring buying iPhone-related technologies.
California
Paper Batteries Come Of Age
Stanford Scientists Use Nanotechnology Successfully
In the latest incidence of scientists using nanotechnology to further battery research, researchers at Stanford University have used nanotechnology to create lightweight and even bendable batteries out of paper. Last year, IBM launched a multi-year battery research project using nanotechnology, materials science and supercomputing. Shortly after, researchers at MIT reported that they are combining nanotechnology with genetically engineered viruses to build batteries that could power hybrid cars and cell phones. Earlier another team of researchers at Stanford used silicon nanowires to enable lithium-ion batteries to hold 10 times the charge.
The paper batteries are designed to be folded, crumpled or even soaked in an acidic solution and still work. The Stanford team created the batteries by coating a sheet of paper with ink made of carbon nanotubes and silver nanowires. The most interesting aspect of this new technology is how paper can be used as a substrate to make functional conductive electrodes by a simple process. Scientists have applauded it as using nanotechnology to enhance daily life.
The nanotubes used in the paper batteries and supercapacitors are one-dimensional structures with a small diameter, which enables the ink made from them to stick tightly to the paper. The paper supercapacitors may be able to handle 40,000 charge-discharge cycles, which is an order of magnitude more than lithium batteries can take. The nanomaterials make better conductors than traditional materials because they can move electricity more efficiently.
Tokyo
Bank Of Japan’s Survey Sends Mixed Signals
Double Dip Recession Likely
The Bank of Japan’s quarterly tankan survey has sent mixed signals on the outlook for the country’s fragile economic recovery, showing better-than-expected sentiment but deteriorating capital-outlay expectations among Japanese companies. The survey’s “large manufacturers’ diffusion index,” which measures sentiment among those companies’ top executives, stood at negative 24, a figure that is better than the consensus forecast of negative 27 of economists surveyed by Nikkei and Dow Jones Newswires. Negative readings clearly mean that companies that are pessimistic about the outlook outnumber those that are optimistic. This suggests that a majority of companies still lack confidence in the economic recovery. Moreover, all large companies said they plan to cut their capital spending by an average of 13.8 per cent for the current fiscal year ending March 2010.
The tankan showed Japan’s large manufacturers expect the dollar to trade at an average rate of 92.93 yen in the fiscal year through March 2010, weaker than their forecasts of 94.85 yen in the September survey. The growth revision highlights the risk of a ‘double dip’ recession with the economy turning down again by the second quarter of 2010.
To fight deflation, the bank has had to resurrect a policy tool it tried to bury long ago that of quantitative easing. In a half-hearted attempt to reflate the Japanese economy and weaken the yen, the Bank announced that it would make available ¥10 trillion ($115 billion) in three-month loans fixed at a 0.1% interest rate. The loans can be exchanged for a broad array of collateral such as Japanese government bonds, corporate bonds, commercial paper and other assets and are aimed at boosting the economic recovery by providing liquidity to banks.
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