US GDP at the Slowest Growth in More Than 3 Years

October 27, 2006 at 9:28 am (Economics, US)

Even the Fed holds the interest rates stable, the economy growth still slows to the lowest, mostly driven my the shrinking investment on property. Investment on homebuilding fell by the largest since 1991.

Depending on the inflation rate and the unemployment rate, the Fed might have to consider to act on the opposite direction–raise the rate to avoid a possible stagflation.


From AP

Stocks fell Friday after the Commerce Department reported that the economy grew at the slowest pace in more than three years.

While investors expected the reading on gross domestic product would show growth to be slowing, the report stirred concern that a cooling in the housing market would spill over into other parts of the economy.

The GDP, the broadest measure of the economy, showed growth slowed to 1.6 percent in the third quarter; economists had been expecting a 2.1 percent expansion. The report identified the slowing housing market as a significant drag on growth, as money pumped into homebuilding fell by the largest amount since 1991.

“The fact that there is a moderate pullback tells you that the overall market risk is not extreme,” said Subodh Kumar, chief investment strategist for CIBC World Markets, referring to the strength of the market’s ability to digest the GDP news.


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The Discipline Inspection Committee’s Report on Shanghai Corruption and Chen Liangyu

October 26, 2006 at 4:14 pm (China, Politics)

From My CDT Post


According to sohuxiaobao blog, the Central Committee for Discipline Inspection recently submitted to the central Party leaders the fourth report on Shanghai corruption Investigation.

The report said the committee found 1322 inappropriate accounts (including 355 foreign-currency accounts), with savings amounting to 98,643 million yuan. Those accounts were owned by some Shanghai party officials, government officials, and their spouses and relatives, and were under pseudonyms.

The report said Chen Liangyu, together with his spouse and relatives, owned 53 accounts (9 of them are foreign-currency accounts), which were also under pseudonyms. Chen’s deposits in those accounts were as much as 274.1 million yuan.

The report said Chen Liangyu and his spouse and relatives owned nine houses and three companies in Shanghai. They also held 25 passports, 17 of them were under pseudonyms. The committee also found 19 flight tickets to Europe, Australia, and other countries. Those business-class tickets were for whole year travel.

The report also said Chen Liangyu had improper relationships with 11 women (some of them were married) in Shanghai, Hangzhou, Nanjing, Nantong, and other cities. Between September of 2001 and October of 2002, Chen was sued four times for swindles and rapes. Chen privately settled those cases with economic compensations (as much as 500,000 yuan), job offers, and project contracts.

-Click here to read more (Chinese)

-Also read CDT post The Aftershocks of the Shanghai Political Earthquake

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Ex-Chief of G.E. May Want Newspaper

October 25, 2006 at 10:15 pm (Media, US)

From The New York Times:


Ex-Chief of G.E. May Want Newspaper

By Andrew Ross Sorkin


Some retired executives take up golf or gardening. John F. Welch Jr., the former chief of General Electric, has been looking into what would be a far less relaxing pursuit: running a newspaper.

Mr. Welch and Jack Connors, the co-founder of the Boston advertising firm Hill Holliday, are exploring the possibility of making an offer to buy The Boston Globe from The New York Times Company, according to people briefed on the plan.

Mr. Welch is not the only multimillionaire thinking of becoming a newspaper baron. David L. Geffen, the music impresario and a co-founder of DreamWorks SKG, and Eli Broad, a real estate developer, have explored making bids for The Los Angeles Times. Robert C. Embry Jr., president of the Abell Foundation in Baltimore, has made repeated efforts to buy The Baltimore Sun. David Chase has expressed interest in The Hartford Courant. All three of those papers are owned by the Tribune Company.

But newspapers, perhaps the ultimate trophy asset even as the industry appears to be in a free fall, may be too much even for previously successful business executives.

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Lenovo Hunting for Brand Exposure, Using NBA

October 23, 2006 at 7:51 pm (China, Companies)

From The Wall Street Journal, Lenovo is now scrambling to borrow exposure from NBA. Unfortunately, brand is not something that NBA can bring to Lenovo, brand is a long time accumulation of, most importantly, quality and reliability. Even if everybody hear about Lenovo, still few will buy Lenovo computers. Considering Lenovo’s dire profit margin, this marriage with NBA can only pull Lenovo to the red.


Lenovo Signs Deal With the NBA In Bid to Build Brand Awareness


By Jane Spencer

Chinese computer maker Lenovo Group Ltd. signed a multi-year marketing partnership with the National Basketball Association, as the company takes steps to build global brand awareness.

The deal comes as Lenovo is in the early stages of weaning itself of the IBM brand name. Last year, Lenovo emerged as the world’s third largest personal-computer maker behind Hewlett-Packard Co. and Dell Inc., after purchasing International Business Machines Corp.’s PC division for $1.25 billion.

As part of the deal with IBM, Lenovo earned the right to use IBM’s brand name until 2010 on its products. But the company isn’t allowed to use IBM’s name in marketing campaigns. As a result, the company is ramping up its efforts to build Lenovo’s name recognition in the U.S. and Europe, where most consumers are still far more familiar with the IBM name. Outside of China, more than 80% of Lenovo products still carry the IBM brand name.

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China Posts Rules on Index Futures

October 23, 2006 at 7:31 pm (China, Economics, Investment)

From The Wall Street Journal, China Posts Rules on Index Futures


The China Financial Futures Exchange published draft rules on stock-index futures on its Web site, setting a minimum-access threshold that analysts said could deter some investors.

Under the draft rules, each investor would deposit funds equivalent to 8% of the value of the derivatives contract, which analysts said would put the minimum threshold at about 34,400 yuan, or about $4,350.

The rules also stipulate that a single investor can hold no more than 2,000 lots of single-month futures contracts at one time.


According to the draft rules, published yesterday for public comment, China’s first stock-index futures will be based on a unified index that groups 300 large-capitalization stocks on both the Shanghai and Shenzhen exchanges. The rules also stipulate that the price of stock-index futures can’t rise or fall by more than 10% in one day from the previous close.


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What a Bleak Era

October 21, 2006 at 7:58 pm (Media, US)

What a bleak era for printing media. After the publisher of the LA Times was sacked, three former Knight Ridder newspapers are planning layoffs.


Read the news story from The New York Times:


The new owners of three former Knight Ridder newspapers announced layoffs, expected layoffs and abrupt changes in management yesterday as they painted a bleak outlook for the newspaper industry.

The San Jose Mercury News said it planned to lay off 101 people from its work force of 1,260 employees. The cuts are to include 40 workers from the 280-member newsroom.

The new owner of The Philadelphia Inquirer and its sister paper, The Daily News, said in a memo to the staff that “some layoffs are unavoidable.” Both papers underwent significant cuts last year.

And at The Contra Costa Times, the editor was abruptly made “redundant” as the paper consolidated many of its functions under its new owner, according to a memorandum to the staff.

Owners of all the papers said that most newspapers across the country were facing the same situation, largely because of significant drops in advertising revenues.

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Michael Bloomberg Not to Sell His Company

October 20, 2006 at 5:22 pm (Companies, Media, US)

Michael Bloomberg, founder and the largest share holder of Bloomberg LP, denied that he is about to sell his company, which is estimated to be worth as much as $12 billion.

It was said that potential buyers include Blackstone Group, the manager of the largest buyout fund, and Kohlberg Kravis Roberts & Company. McGraw-Hill and Thomson were also said to be interested.

Forbes magazine estimated that Bloomberg had $4.1 billion in revenue last year. The company has about 9,000 workers world wide.

In the over $10-billion financial market, Bloomberg seizes about 31 percent share and its rival, Reuters, takes about 23 percent, estimated an editor of the trade publication Inside Market Data Reference.


Read the news story from NYT.



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Hong Kong is Set to be the Largest IPO Market

October 20, 2006 at 5:03 pm (China, Economics, Investment)

Fueled by the IPO frenzy in mainland China, Hong Kong is set to surpass London and New York to become the biggest market for initial public offerings, said the New York Times. The bulk of new listed companies in Hong Kong are from mainland, including the mammoth ICBC, which is to set a new world record on IPO value.


Read the NYT:


In a reflection of China’s growing prominence in international finance, Hong Kong is set for a banner year in global markets: More money will be raised by companies selling shares to the public here than on the biggest exchanges in New York and London.

And on Friday, pricing will be set for the world’s largest offering ever, that of China’s biggest bank, Industrial and Commercial Bank of China.

This week, long lines of individual investors showed up at downtown stalls to grab prospectuses for the bank’s initial public offering, while institutional investors have swamped the underwriters with orders. (continue)


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Good News from Silicon Valley

October 20, 2006 at 4:43 pm (Companies, Economics, Internet, US)

EBay‘s third-quarter profit grew by 10 percent, helped in part by a lower tax rate and strong sales at its online payments unit.

Apple Computer‘s fourth-quarter profit increased 27 percent rise in its fiscal fourth-quarter profit.

The biggest winner is Google, whose third-quarter profits nearly doubled.

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Additional Reading on China’s Foreign Exchange Reserves

October 18, 2006 at 12:05 pm (China, Economics, Finance, US)


Following the preview post on China’s foreign exchange reserves, here is a comprehensive story on how China’s financial policy will shake the world economy.


From the Wall Street Journal By Andrew Browne

China’s Reserves Near Milestone, Underscoring Its Financial Clout

from WSJfrom WSJ

Sometime in the next few days, China’s holdings of foreign currencies and securities will top $1 trillion — a sum greater than the annual economic output of all but nine countries. The rapid growth in these so-called foreign-exchange reserves has made Beijing a colossus in the financial world, cushioned against shocks at home, but potentially able to trigger them abroad.

How China manages its growing pool of wealth has major repercussions for the global economy. Beijing’s reserves totaled $987.9 billion as of Sept. 30 and are growing by roughly $20 billion a month. That total compares with the about $1.2 trillion in assets under management at U.S. mutual-fund giant Fidelity Investments.


As the pot grows, the secretive and sophisticated portfolio managers at China’s central bank are trying gradually to boost their country’s returns on its foreign-exchange holdings, at least in part by making somewhat riskier but higher-yielding investments. Last spring, an unsuccessful effort to divine their intentions sparked a steep run-up in the price of gold.

For the U.S., how China deploys its reserves is a question of some consequence. Most of China’s currency reserves are invested in U.S.-dollar-denominated debt, such as U.S. Treasurys, which are considered the world’s safest investment. That has kept demand for U.S. Treasury notes high — and interest rates low. A change in that pattern could affect how much Americans pay for mortgage loans and other borrowings. Read the rest of this entry »

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