SHANGHAI—China cut the capital-reserve requirement for securities firms and expanded the range of financial products they may invest in, as the government works to boost the sector amid a sluggish domestic stock market.
Lowering your risk cushion by 50% and being able to buy more illiquid products? What could possibly go wrong with that?
Sunny times ahead. Please pay no attention to the man behind the curtain.
(Source: The Wall Street Journal)
Amazon.com passed many milestones in 1997: by year-end, we had served more
than 1.5 million customers, yielding 838% revenue growth to $147.8 million, and
extended our market leadership despite aggressive competitive entry.
But this is Day 1 for the Internet and, if we execute well, for Amazon.com. Today,
online commerce saves customers money and precious time. Tomorrow, through
personalization, online commerce will accelerate the very process of discovery.
Amazon.com uses the Internet to create real value for its customers and, by doing so,
hopes to create an enduring franchise, even in established and large markets.
Amazon’s 1997 Letter to Shareholders (emphasis added)
Going back through the archives of annual reports has not dimmed my view of Jeff Bezos as one of the most visionary CEOs around. I’m constantly in awe of Amazon’s ability to go off in random directions almost haphazardly only to find them tying it back to their core business foundation years later.
The ceiling test requires the Company to use tax effected discounted cash flows using a
present value technique. The sales prices used for the ceiling test were $103.52 per barrel for oil and $4.54 per thousand cubic feet of natural gas. Based on the calculations under the first step of the ceiling test, the Company determined that its oil and gas interests are recoverable.
Just a little tidbit in the footnotes of a random annual report I was reading. As of today WTI crude is hanging at ~$90/barrel, and Henry Hub’s natgas price can be obtained for around $3.39/Mcf and dropping.
Caveat Emptor!
International Business Machines Corp. (IBM) agreed to acquire Kenexa Corp. (KNXA) for $1.3 billion in cash as IBM bolsters its offerings to clients looking to use data from social media to enhance their recruitment processes.
You’ve got to admire Big Blue’s chutzpah. It’s not every stodgy tech company that’s willing to pay a 42% premium for an HR SaaS vendor with an unprofitable history.
I wonder how Uncle Warren feels about this one?
(Source: news.morningstar.com)
The Fed debated a variety of tools for boosting growth, including extending its commitment to ultra-low federal funds rates past 2014, linking those rates to economic indicators, launching a new round of purchases of Treasury and mortgage securities, and initiating a plan to encourage bank lending.
It would be comical if it weren’t so sad.
(Source: Washington Post)
Still, customers living paycheck-to-paycheck “remains pronounced” in the U.S, said Chief Executive Mike Duke. There are “continuing economic pressures.”
Wal-Mart has been challenged recently as its core lower-income customers in the U.S. contend with high gasoline prices and persistently high unemployment levels. The company also expects inflation to rise in the back half of the year, particularly on food and drought-related items like corn and soybeans.
Wal-Mart cautioned that it is now seeing in international markets the same “paycheck cycle” it saw in the U.S., where customers buy immediately after payday and then make smaller purchases as money runs out.
I think we can safely say that the consumer is not participating in the great recovery.
(Source: The Wall Street Journal)
Hedging—a strategy used to lock in the price at which they can sell their gold in the future—is common among producers of commodities ranging from copper to natural gas seeking to protect themselves from fluctuations in the market. But it has largely fallen out of favor among gold miners after an almost uninterrupted rise in the precious metal’s price over a decade.
WSJ: After Gold’s Climb, Few Miners Look Down
One of the benefits of working in the manufacturing industry (in the past) is that you get to spend a lot of time dealing with commodity prices. And you learn a lot about human behavior in the process. Time and time again you see the same behavior. In the face of rising prices, purchasers I dealt with would insist that the price rise was an aberration that would soon fix itself. They would have already reduced price hedges because they were losing too much money and it was impeding margins.
Then after several years of rising prices they would capitulate and begin stockpiling commodities in inventory. They also would start hedging almost 100% of production because the sky high prices were impeding margin. Then, like clockwork, prices would start to fall and they would be sitting on top of lots of purchase agreements to buy commodities at higher prices.
These were all people who got up every day and worked very hard to get their company an edge. I would hire any one of them in a second to run a purchasing organization. The trouble is not one of them ever internalized that when your business is dependent (either long or short) commodities, your hedging program is designed to hedge, not make money. The goal of the program is to stabilize margins…not maximize them.
Regardless of what you think gold prices are going to do from here, I’d be concerned about investing in gold producers, because they are no longer sticking to their knitting.
Commonwealth Bank of Australia reported an 11% rise in profit in fiscal 2012, helping support the reputation of Australia’s banks as a relative safe haven amid the turmoil roiling global markets.
WSJ: Commonwealth Bank Profit Climbs
I know next to nothing about Commonwealth Bank, but let me just say here and now that if China continues to slowly implode, the last place I want to invest my money is an Australian bank. A Chinese bank may be a worse investment, but there’s a chance that the political connections in China could bail you out.
Bloomberg article
Just in case you had any doubt that the consolidation in the manufacturing industry was far from over.
